    [House Hearing, 116 Congress]
    [From the U.S. Government Publishing Office]

                       CHINA'S GROWING INFLUENCE IN ASIA
                             AND THE UNITED STATES

    =======================================================================

                                    HEARING

                                   BEFORE THE

            SUBCOMMITTEE ON ASIA, THE PACIFIC, AND NONPROLIFERATION

                                     OF THE

                          COMMITTEE ON FOREIGN AFFAIRS
                            HOUSE OF REPRESENTATIVES

                         ONE HUNDRED SIXTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                  MAY 8, 2019

                                   __________

                               Serial No. 116-34

                                   __________

            Printed for the use of the Committee on Foreign Affairs

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                          COMMITTEE ON FOREIGN AFFAIRS

                       ELIOT L. ENGEL, New York, Chairman

    BRAD SHERMAN, California             MICHAEL T. McCAUL, Texas, Ranking
    GREGORY W. MEEKS, New York               Member
    ALBIO SIRES, New Jersey		     CHRISTOPHER H. SMITH, New Jersey
    GERALD E. CONNOLLY, Virginia         STEVE CHABOT, Ohio
    THEODORE E. DEUTCH, Florida	     JOE WILSON, South Carolina
    KAREN BASS, California		     SCOTT PERRY, Pennsylvania
    WILLIAM KEATING, Massachusetts	     TED S. YOHO, Florida
    DAVID CICILLINE, Rhode Island	     ADAM KINZINGER, Illinois
    AMI BERA, California		     LEE ZELDIN, New York
    JOAQUIN CASTRO, Texas		     JIM SENSENBRENNER, Wisconsin
    DINA TITUS, Nevada		     ANN WAGNER, Missouri
    ADRIANO ESPAILLAT, New York          BRIAN MAST, Florida
    TED LIEU, California		     FRANCIS ROONEY, Florida
    SUSAN WILD, Pennsylvania	     BRIAN FITZPATRICK, Pennsylvania
    DEAN PHILLPS, Minnesota	             JOHN CURTIS, Utah
    ILHAN OMAR, Minnesota		     KEN BUCK, Colorado
    COLIN ALLRED, Texas		     RON WRIGHT, Texas
    ANDY LEVIN, Michigan		     GUY RESCHENTHALER, Pennsylvania
    ABIGAIL SPANBERGER, Virginia	     TIM BURCHETT, Tennessee
    CHRISSY HOULAHAN, Pennsylvania       GREG PENCE, Indiana
    TOM MALINOWSKI, New Jersey	     STEVE WATKINS, Kansas
    DAVID TRONE, Maryland		     MIKE GUEST, Mississippi
    JIM COSTA, California
    JUAN VARGAS, California
    VICENTE GONZALEZ, Texas

                        Jason Steinbaum, Staff Director
                   Brendan Shields, Republican Staff Director

                                    ------

            Subcommittee on Asia, the Pacific, and Nonproliferation

                      BRAD SHERMAN, California, Chairman,

    DINA TITUS, Nevada                   TED YOHO, Florida, Ranking Member
    CHRISSY HOULAHAN, Pennsylvania
    GERALD CONNOLLY, Virginia
    AMI BERA, California
    ANDY LEVIN. Michigan
    ABIGAIL SPANBERGER, Virginia

                                         SCOTT PERRY, Pennsylvania
                                         ANN WAGNER, Missouri
                                         BRIAN MAST, Florida
                                         JOHN CURTIS, Utah

                         Don MacDonald, Staff Director

                                C O N T E N T S

                                  ----------
                                                                       Page

                                   WITNESSES

    Chaudhary, Shamila, Senior Advisor, School for Advanced
      International Studies, Johns Hopkins University, South Asia
      Fellow, New America............................................     7
    Kliman, Dr. Daniel, Senior Fellow, Asia-Pacific Security Program,
      Center for a New American Security.............................    20
    Mattis, Peter, Research Fellow in China Studies, Victims of
      Communism Memorial Foundation..................................    30
    Shullman, Dr. David, Senior Advisor, International Republican
      Institute......................................................    51

                                    APPENDIX

    Hearing Notice...................................................    84
    Hearing Minutes..................................................    85
    Hearing Attendance...............................................    86

                RESPONSES TO QUESTIONS SUBMITTED FOR THE RECORD

    Responses to questions submitted from Representative Wagner......    87
    Responses to questions submitted from Representative Sherman.....    89

                       CHINA'S GROWING INFLUENCE IN ASIA
                             AND THE UNITED STATES

                             Wednesday, May 8, 2019

                           House of Representatives,

            Subcommittee on Asia, the Pacific, and Nonproliferation

                         Committee on Foreign Affairs,

                                         Washington, DC

        The subcommittee met, pursuant to notice, at 2:15 p.m., in
    Room 2200, Rayburn House Office Building, Hon. Brad Sherman
    (chairman of the subcommittee) presiding.
        Mr. Sherman. I thank everyone for attending. Members will
    have 5 days to submit materials into the record. We will depart
    from precedent a little bit here and hear the opening statement
    of our ranking member and others who would want to give short
    opening statements, and then I will give my opening statement,
    then we will hear from the witnesses.
        Mr. Yoho.
        Mr. Yoho. Thank you, Mr. Chairman.
        Thank you all for being here. Good morning and thank you,
    Chairman Sherman--good afternoon--for calling this hearing. And
    I appreciate the opportunity to address the mounting political
    and economic aggression by China and discuss ways the United
    States and our allies can challenge their aggression.
        In recent years, China has experienced rapid economic
    growth and is currently the world's second largest economy.
    While this level of economic success would typically deserve
    praise, we must not forget that this growth was achieved
    through predatory practices that have drastically harmed other
    nations, including the United States. As a preeminent world
    leader, the United States is now engaged in a great power
    competition with China as the Chinese Communist Party under Xi
    Jinping attempts to challenge American influence and erode
    American security and prosperity.
        Xi's leadership seeks to advance China's interests, not
    within the prevailing global order but added expense. For now,
    it is working. China has no peer competitors along its
    immediate periphery to be concerned about and plenty of cash to
    advance its interests in other parts of the world.
        An example of this expansion is China's Belt-Road
    Initiative, an effort to boost infrastructure development and
    economic connectivity and expand China's influence. On surface
    value, it sounds OK among more than 65 countries on three
    continents, but if you look deeper, you find predatory lending
    practices that have beholden other countries to give up
    strategic ports, land, and infrastructure.
        In speeches given by Xi, the leader often associates the
    BRI with the idea of building a community of common destiny.
    The party believes it is their mission to achieve a great
    rejuvenation while spreading socialism with Chinese
    characteristics, otherwise known as communism, to poor and
    vulnerable nations around the world.
        Xi regularly promotes this massive westward infrastructure
    program as a win-win undertaking that will fill infrastructure
    gaps in less developed countries for mutual benefit. But major
    components of the BRI have proven to be debt traps, predatory
    lending practices that endanger participant sovereignty and
    increases China's political influence while benefiting the
    corrupt officials and bringing few opportunities to the average
    citizen.
        Through these projects, China gives large unviable loans to
    poor countries. When the loans are not repaid, China seizes
    physical infrastructure or commodities for their own gain. In
    some places, it also is apparent that the BRI is a cover for
    military expansion. Data from Centers for Global Development
    suggest that China has already left eight countries drowning in
    debt.
        If we do not address this situation and help other
    countries realize this, the countries in the Indo-Pacific
    region and around the world, and if we do not offer viable
    alternatives, more countries will be held financially beholden
    to China.
        In response to China's economic rise, Congress and the
    Trump administration has been focused on tailoring American
    defense and economic policies to counter China's growing
    influence in the Indo-Pacific region and show Beijing that the
    international community recognizes China's imperial ambition
    and is determined to stand against it.
        American investment alternatives, such as the BUILD Act,
    which received wide bipartisan support and was signed into law
    by President Trump in 2018, will advance U.S. influences in
    developing countries by incentivizing private investments as an
    alternative to State-directed investment projects like the BRI.
        It is important that developing nations around the world
    are given investment alternatives that do not leave them
    economically and politically indebted to China. We must
    continue to craft policies that create environments conducive
    to democratic ideals and free market economic growth that are
    resistant to aggression by communist powers like China.
        I look forward to hearing from these witnesses today and
    discussing solutions to counter China's aggression and
    preserve, not just American influence in the Indo-Pacific
    region, but to empower nations to empower their people to grow
    economically and have free will in their nations.
        Thank you, Mr. Chairman. I yield back.
        Mr. Sherman. Does anyone else seek time to make an opening
    statement?
        My God, I have never seen such a shy group of members. Yes,
    well, I have got a few things--I know this will shock you--a
    few things to say.
        The trade deficit we have with China is the largest trade
    deficit in the history of mammalian life. For several decades,
    we had administrations telling us to ignore it, not worry about
    it, and that it did not matter. But we have lost 3.4 million
    jobs as a result of it, and it puts China in a tremendous
    position of power over the United States. Although we have
    power over them, we could deny them access to our markets,
    something that we have, up until now, been reluctant to do.
        My record is not one of unwavering support for the current
    occupant of the White House, but I want to commend the
    President for at least focusing our attention on China's unfair
    trade practices and the horrific results to the United States.
    Unfortunately, one would expect that in areas of national
    security, the powerful interests at the Pentagon would control
    our policy, and they see a real opportunity. Fan the concerns
    about the South China Sea, exaggerate them, and justify
    multibillion dollar, multihundred billion dollar increases in
    the Pentagon budget.
        There are literally dozens of disputes involving sea
    territory and control. There is a major one between Timor and
    Australia that somehow the United States does not get concerned
    with; but somehow, those affecting China are matters of great
    principle while we ignore all the others.
        These islets in the South China Sea, et cetera, have not
    been inhabited, although they are off the shores of the most
    teeming populated continent in the world, for a good reason.
    There is no reason to be there. They are useless. There is no
    oil. If there was oil, it would not be ours, and there is no
    oil. Trillions of dollars of trade go close to those islands,
    yes, in and out of Chinese ports. And if China were to control
    these islands, they could blockade their own ports. There may
    be a few oil tankers that get close to these islands that could
    easily not get close to these islands on their way to Japan or
    South Korea.
        But we are told the way to get tough with China is to
    ignore the devastation done especially to our Midwest by their
    trade policies, and instead, spend a few hundred billion
    dollars fighting over islets that are both useless and, in any
    case, not ours.
        Wall Street has tremendous power over our economic policy.
    They would like us to do a few things to increase their
    profits, which coincidentally might create a few jobs, but they
    basically want us to go back to the policies of ignoring
    China's wrongdoing altogether.
        We had a policy all of last century never to grant most
    favored nation status to a managed economy, because we
    understood that a managed economy will manage to exclude our
    exports in so many different ways that just getting them to
    agree to reduce their tariffs is a fiction. But this fiction
    turned out to be useful, and many hundreds and hundreds of
    billions of dollars have been made as a result of granting most
    favored nation status to China, which I might add, 65 percent
    of all Democrats voted against at the time. We were right then.
    We should not change now just because Trump also seems to be
    interested.
        So, for example, if we want to sell airplanes to a Chinese
    airline, that airline can--if the government said, you have to
    build a factory here, that might violate WTO. We would never be
    able to prove it, because he would say it orally. But instead,
    the airline says it. Pretty much the same thing as government,
    they are in government control. That may not even be a
    violation of WTO. Still cannot prove it, it is done orally. So
    what happens? Boeing is forced to move a factory to China in
    order to have access to those exports.
        So even in those cases where we have some exports, they
    have got control. And so that is one way they control us. They
    control us because they are a substantial market. That market
    is not open. To the extent they accept American exports, they
    do so only by demanding a chance to turn American businesses
    into their pawns.
        Another example of this is Hollywood. We do not have access
    to their market. They limit us to 35, 40 different pictures. So
    every studio is turning over trying to figure out how to get
    one of their pictures in. So which studio is going to make a
    movie about Tibet? I think Richard Gere may go a long time
    before he makes a sequel. No Hollywood studio dares offend
    Beijing, because Beijing controls access to their market and we
    accept it.
        A couple of narrow areas to focus on. One is the Uighurs.
    The ranking member and I have introduced the UIGHUR Act of
    2019. Not only does this focus on the use of U.S. technology to
    commit violations of human rights, but it also focuses on the
    Chinese Government's surveillance of the Chinese diaspora in
    the United States, especially the Uighur diaspora. And, of
    course, I introduced the U.S.-China Economic Security and
    Review Act, along with Congressman Gallagher, to examine
    Chinese influence on the United States.
        But China is one of the biggest markets in the world. That
    is what we are told over and over. It happens to be true. They
    control access, and any American company that does not do their
    bidding can be cutoff from access. That is what we are up
    against, and that is why we do not need a rules-based system
    with China. We can never enforce those rules.
        We need a results-based system, where for every billion
    dollars of goods they send us, they have to accept a billion
    dollars of U.S. exports. If they are not willing to do that,
    then they will simply prove to us what we knew all of last
    century, and that is you cannot have a rules-based system with
    a managed economy. If you do that, they will control trade,
    they will control access to their markets, and they will
    control your companies. We have spent 20 years proving how
    right we used to be.
        And, with that, I will once again ask to see if there is
    anyone else who has an opening statement.
        Seeing none, we will go to our witnesses. The first is
    Shamila Chaudhary, a senior South Asia fellow at New America
    and a senior adviser at Johns Hopkins University School of
    Advanced Studies.
        Please give us a 5-minute summary, and we will move on to
    the next witness.
        And your entire statement, without objection, for all
    witnesses will be put into the record.

      STATEMENT OF SHAMILA CHAUDHARY, SENIOR ADVISOR, SCHOOL FOR
    ADVANCED INTERNATIONAL STUDIES, JOHNS HOPKINS UNIVERSITY, SOUTH
                        ASIA FELLOW, NEW AMERICA

        Ms. Chaudhary. Thank you, Chairman Sherman, Ranking Member
    Yoho, members of the subcommittee. I appreciate the opportunity
    to testify today.
        Mrs. Wagner. Is your mike on?
        Ms. Chaudhary. There it is. Thank you.
        Thank you for the opportunity to testify today. I will be
    discussing Chinese influence in Asia, with a focus on Pakistan.
    And the views I am expressing today here are my own.
        I am going to start with a quote from a contact of mine in
    Pakistan. ``Maybe about 10 years ago, America was an important
    voice. Today, America sounds like a very distant voice. There
    is a striking view over here that the sun is rising in the east
    and setting in the west.''
        And this view has multiple manifestations, which the
    chairman spoke about already, that we are seeing globally, and
    they are happening in Pakistan as well: The visible increase of
    Chinese nationals in the country, the arrivals desk at the
    airport in Islamabad designated for Chinese nationals, Chinese
    language schools, a Chinese-operated port, and Chinese
    participation in Pakistani security politics like they have
    never done before.
        All this takes place under the umbrella of CPEC, the China-
    Pakistan Economic Corridor, a collection of infrastructure and
    development projects intended to improve trade and investment.
    In Pakistan, a once dominant United States is now overshadowed
    by growing Chinese influence, for which CPEC is the primary
    vehicle.
        Should we welcome this as the United States? We should to a
    certain extent. China's intentions to fix Pakistan's economy
    and fight Islamic radicalism help us. After all, we attempted
    to do the very same thing in South Asia after 9/11, but did not
    accomplish such goals. During those years, the United States
    encouraged China to get more involved in stabilizing Pakistan.
    Those requests have been answered, and we must now contend with
    our consequences, in particular on geopolitics and security.
        While U.S. and Chinese security interests in South Asia may
    seem to overlap at the moment, they are by no means shared. The
    two countries view terrorism and terrorist actors differently.
    China remains singularly focused on militants that impact only
    their stability and their business interests. CPEC, meanwhile,
    hurts U.S. regional interests by disrupting fragile India-
    Pakistan ties, a nuclear-fueled dynamic that demands U.S.
    stewardship from time to time during times of crisis.
        China's provision of surveillance, data collection
    capabilities, and new hardware to the Pakistani military may
    seem like it improves security, but such tools also increase
    the likelihood of invasive data collection, misuse of
    information, and violations of privacy.
        The notion that the Pakistani military might start to mimic
    Chinese authoritarianism is no longer theoretical. Pakistani
    civil society and media report more aggressive tactics by the
    military to silence critical voices. They share a common
    refrain, that the military is more powerful than ever and that
    is because of China.
        China plays a game familiar to the United States, which
    also strengthened Pakistan's military after 9/11. However, it
    did so alongside an international community that shared an
    understanding of the threat, values, and burden associated with
    fixing the problem.
        Today in Pakistan, Chinese influence stands alone, changing
    the rules of the game for everyone else. For example, Pakistan
    no longer publicly discloses the terms of its loans from China.
    Indeed, CPEC pretends immense geoeconomic and geopolitical
    advantages for China and Pakistan, but its repercussions will
    dwarf any comparable American influence.
        At present, the Trump administration has tough rhetoric and
    a collection of policies that address aspects of China's rise,
    but it does not have the political will, financial resources,
    ability to assume risks, and interest-based vision of South
    Asia needed to compete with Chinese influence a la CPEC.
    Instead, the United States has reduced its policy to a singular
    thread, ending the war in Afghanistan. And while it is
    appropriate at the moment, over time, that singular focus will
    lock the United States out of productive channels of engagement
    with Pakistan that China will have already strengthened.
        Countering this means going beyond Afghanistan and even
    complementing CPEC's economic efforts. To protect U.S.
    geopolitical options in the future, the U.S. should also
    support Pakistani and regional actors most threatened by
    Chinese influence. Ultimately, countering China's rise will
    require the United States to create policies that both address
    and benefit from the needs of other countries.
        To be clear, a revitalized American approach to Pakistan
    and South Asia should not aim to replace China, instead, follow
    its example. China's engagements in the region show it is not
    playing a zero-sum game, and neither should the United States.
    Otherwise, America will isolate itself from a historical
    process of regional economic integration.
        And by the way, the door is not shut in Pakistan, where
    government officials and political leaders still privately hope
    for sustained American attention in the country and,
    ironically, are using China to get it. The U.S. should take
    note and start to make policies that ensure it does not become
    an afterthought in South Asia's new competitive geopolitical
    environment.
        Thank you.
        [The prepared statement of Ms. Chaudhary follows:]

        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Sherman. Thank you.
        Dan Kliman--Dr. Dan Kliman, when we invited him, was with
    the Center for a New American Security. I believe just
    yesterday, he became director of the Asia-Pacific Security
    Program at CNAS.
        Dr. Kliman.

    STATEMENT OF DANIEL KLIMAN, PH.D., SENIOR FELLOW, ASIA-PACIFIC
          SECURITY PROGRAM, CENTER FOR A NEW AMERICAN SECURITY

        Mr. Kliman. Thank you very much, Chairman Sherman, Ranking
    Member Yoho, distinguished members of the subcommittee. I am
    grateful for this opportunity to be here today to speak to
    China's expanding influence in the Indo-Pacific. Today I will
    focus my remarks on Southeast Asia.
        If Southeast Asia succumbs to China's vision of a world
    defined by might makes right--might makes right, State-driven
    economic interactions, and creeping authoritarianism, America's
    approach to the larger challenge posed by China in the Indo-
    Pacific and beyond will encounter a significant setback.
    Conversely, if most nations in Southeast Asia can chart their
    own freedom of choice and move toward more democratic types of
    governance, the United States will demonstrate in Beijing's
    periphery that a rules-based order can still endure. The stakes
    could not be higher.
        I want to now make five quick observations about the
    regional State of play. First, Beijing has adopted an approach
    to Southeast Asia that leverages every instrument of national
    power. Second, physical and digital connectivity has emerged as
    a key component of China's approach to the region. Third, China
    is corroding democracy in Southeast Asia. Under what it now
    calls the Digital Silk Road, China is exporting technology to
    the region for surveillance and censorship, and also promoting
    its model of online governance.
        Fourth, Southeast Asia generally perceives that China has
    momentum on its side, which brings me to my fifth point, that
    the reality is more nuanced. The United States retains
    significant strengths in the region, both diplomatic and
    economic, and most countries in Southeast Asia do not want to
    see a Chinese sphere of influence extended over their region.
        Today, America's approach to Southeast Asia contains a
    number of promising areas, but falls well short of matching the
    scope and scale of the China challenge. Here are 10 steps that
    Congress could take to strengthen America's approach going
    forward. First, Congress should appropriate resources to
    establish a new U.S. digital development fund that would
    support information connectivity projects across the developing
    world, including in Southeast Asia. This fund, potentially
    through leveraging lines of credit, could drive down the price
    of American digital infrastructure to the point where they
    could compete with Chinese companies like Huawei.
        Second, Congress, through its oversight function, should
    encourage the executive branch to come together with U.S. ally
    and partner governments around an international certification
    for high-quality infrastructure. A clear set of criteria
    defining high quality would both help U.S. firms differentiate
    what they offer and also serve as a basis for countries in
    Southeast Asia to evaluate potential Chinese projects.
        Third, Congress should convene a hearing to weigh the
    merits of future high-quality, multilateral trade and
    investment agreements.
        Fourth, Congress should host U.S. industry executives to
    explore the possibility of opening a wing of a marquee U.S.
    hospital in the Philippines or Indonesia. Given the lack of a
    world-class health system in these countries, a U.S. medical
    presence would deliver significant diplomatic payoffs.
        Fifth, Congress should appropriate additional funds to
    enhance youth engagement with Southeast Asia as people-to-
    people ties are fundamental to U.S. engagement with the region.
        Sixth, congressional delegations to Tokyo, Canberra, and
    New Delhi should emphasize the importance of cooperation with
    these countries in Southeast Asia.
        Seventh, Congress should send a letter to the Secretary of
    Defense requesting a classified briefing on U.S. military
    options to supplement freedom of navigation operations in the
    South China Sea. During this briefing, Members should encourage
    the Department to deploy new types of capabilities to the
    region that demonstrate the flexibility of America's military
    presence.
        Eighth, Congress, recognizing Vietnam's strategic
    importance, should exempt it from CAATSA sanctions, and also
    hold a hearing on how to strike the right balance between
    advancing America's relationship with Hanoi and also upholding
    human rights.
        Ninth, Congress should submit a letter to the Secretary of
    State to request an update on the U.S. Government's efforts to
    help countries in Southeast Asia both detect and counter
    Chinese disinformation campaigns.
        And then tenth and finally, Congress should appropriate
    additional resources to strengthening civil society, rule of
    law, and freedom of the press in Southeast Asia. Even a modest
    increase in U.S. funding would go a long way toward shoring up
    these countries against China's influence.
        I will end there, and thank you again for this opportunity.
        [The prepared statement of Mr. Kliman follows:]

        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Sherman. Thank you. And I am particularly interested in
    the idea of the U.S. Government setting standards for a high-
    quality infrastructure. That was perhaps the least expensive
    but I think one of the most intriguing of your suggestions.
        We will now go on to Peter Mattis, who is a research fellow
    in China studies at the Victims of Communism Memorial
    Foundation.

     STATEMENT OF PETER MATTIS, RESEARCH FELLOW IN CHINA STUDIES,
                VICTIMS OF COMMUNISM MEMORIAL FOUNDATION

        Mr. Mattis. Thank you, Chairman Sherman, Ranking Member
    Yoho, and distinguished members of the subcommittee. It is a
    pleasure and an honor to return to the subcommittee today to
    speak on this particular topic.
        I will make a few points before going on to the impact on
    the United States. The first is that the Chinese Communist
    Party attempts to build political influence on a global scale
    to bring about, first, the great rejuvenation of the Chinese
    nation, which essentially means China's rise on its terms and
    its way while maintaining its own political system. And the
    second is to keep the Chinese Communist Party in power to do
    that.
        The party's view of threat is defined by its absence, the
    absence of threats to the party's ability to govern, which when
    you think about that is a very expansive definition. We think
    of national security as being our ability to manage threats and
    resilience in the face of catastrophe. The absence of threats
    is a never-ending goal that forces them to look outward.
        The second aspect of it that is important is that threats
    to the party's ability to govern includes the world of ideas.
    What does the party say that those ideas that are threatening?
    It includes freedom of press, freedom of association, academic
    freedom, rule of law, constitutionalism, among many others. So
    as long as these are practiced somewhere and can be translated
    or transmitted into the PRC, then there is going to be conflict
    and there is going to be an effort by the party to reach out.
        This effort to shape the world beyond the party is part of
    the party's day-to-day routine. It is not an influence
    campaign. It is not a one-off operation. It is simply what the
    party does. It is visible in the structure, it is visible in
    the resources, it is visible in the staff. Wherever you see a
    party committee, whether it is at the center of the Chinese
    Communist Party itself, whether it is in a ministry, whether it
    is in a State-owned enterprise, or whether it is in a joint
    venture, you are likely to find a piece of this influence
    effort being bureaucratically designated inside that apparatus.
        So since, again, wherever the party is, this is something
    that you are going to find and see, how have these efforts
    affected us? We have been persuaded that the Chinese Communist
    Party is not ideological, it is not Marxist or Leninist, but is
    really some variation of capitalist. We have not responded to
    violence, coercion, or intimidation by or instigated by PRC
    officials against U.S. citizens and residents on U.S. soil. We
    often debate our China policy in binary terms, engagement
    versus containment, a trade war versus negotiation,
    accommodation versus war.
        And last, we are persuaded that China's rise is inevitable,
    not something that is contingent, meaning we do actually have
    choices and we do have options and we have not given up our
    agency.
        What is the harm of not dealing with these kinds of
    operations? The most obvious one to me is that when elected
    representatives in a democracy go through the Chinese Communist
    Party proxy groups that are operating in the U.S. or Australia
    or wherever else, and that is their access to their ethnically
    Chinese constituents, you are becoming a tool of the party,
    because those images that are transmitted back into China paint
    the picture that the West cares about liberalism and protection
    of human rights for themselves, but it does not matter for
    Chinese people. They are becoming political props that the
    party can hold up and say, see here, they could rescue you,
    they are on our side.
        The second major piece of harm is that they distort the
    marketplace of ideas, whether it is the kind of examples that
    Chairman Sherman pointed out with Hollywood, or it is the
    effort to control Chinese language media platforms, or to
    influence what think tanks and research institutes and
    universities are doing and saying. It is not that they are
    necessarily just turning these things into propaganda
    platforms, but they are ensuring that critical voices and the
    full spectrum of views are not aired, thereby distorting the
    debate.
        A key part of this influence effort is not about the
    dissemination of disinformation or propaganda. It is about the
    medium and controlling the medium before dealing with the
    message. How should we deal with this going forward? I would
    offer a couple of principles. The first is that we need
    transparency, a conversation/discussion about what the party is
    doing, what people's interactions with the party are, what kind
    of money they take and for what purpose.
        The second is that consequences create risk. Beijing has
    not overstepped. It has not gone too far, because it has not
    faced consequences. Until there are real consequences for these
    issues, there will never actually be a risk that they have to
    take into account.
        And the third and final one is simply that if you think
    about a foreign political party operating in our communities
    and on our streets, this is as much a civil liberties issue as
    it is a national security one, and so we should use the full
    toolkit of the U.S. Government to protect our citizens and to
    preserve the integrity of our democracy.
        [The prepared statement of Mr. Mattis follows:]

        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Sherman. Thank you, Mr. Mattis. And I will point out
    that while today we are told that the world domination of China
    is inevitable, 25 years ago, when I was just beginning to run
    for Congress, I could find 12 books that told me that Japan
    would be dominating the world right about now.
        David Shullman is a senior adviser at the International
    Republican Institute, where he focuses on China and other
    autocracies' influence on democratic institutions and
    governance around the world.
        Dr. Shullman.

          STATEMENT OF DAVID SHULLMAN, PH.D., SENIOR ADVISOR,
                   INTERNATIONAL REPUBLICAN INSTITUTE

        Mr. Shullman. Thank you.
        Chairman Sherman, Ranking Member Yoho, distinguished
    members of the subcommittee, thank you for the opportunity to
    testify today and for organizing a hearing on this topic
    critical to U.S. interests and the future of democratic
    governance across the Indo-Pacific.
        I want to begin with a description of China's expanding
    interests in developing Asia and a key means by which the
    Chinese Communist Party is increasing its influence to advance
    those interests. First and most basic, China and its $14
    trillion economy are trading and investing more than ever
    before across Asia.
        Beijing seeks to use this growing economic leverage to
    establish dependency on China across the Indo-Pacific. Such
    dependence helps China advance geostrategic goals, such as the
    protection of critical sea lanes and the establishment of
    military facilities to protect China's growing global
    interests. The party also seeks to legitimize its autocratic
    system of governance and development, looking to achieve
    acceptance as a great power without democratizing. Since this
    prospect is not welcomed by the developed West, Beijing hopes
    to first popularize China's model in the developing world.
        The party is using multiple means of influence to advance
    these expanding interests. I will focus my remarks on China's
    influence in the economic and the information domains. First,
    Beijing is expanding trade and investment with countries hungry
    for both. However, there are malign aspects to China's growing
    economic engagement.
        As has been discussed, many projects undertaken and
    financed by China saddle countries with unsustainable debts,
    creating a cycle of dependence. Corruption is also rampant in
    these deals. Corruption is not a bug of the Belt and Road
    Initiative but an inherent feature of the program, with the
    goals to ensure China's companies secure contracts to carry out
    projects at inflated costs, and also to cultivate elites to
    ensure a country's dependence, otherwise known as elite
    capture. In some countries, the resulting leverage has created
    significant Chinese sway over domestic legislation to suit
    China's interests.
        In the case of the Maldives, China's pervasive influence
    and corrupt ties with the former Yameen regime resulted in a
    change to the Constitution to allow the sale of land, including
    entire islands, to foreign parties passed without public
    consultation within the space of 3 days. The China-Maldives
    free trade agreement, consisting of thousands of pages, was
    passed through parliamentary committee in just 10 minutes.
        The party is also exerting influence over countries'
    information space, manipulating the narrative through what the
    National Endowment for Democracy has termed ``sharp power.''
    China is stepping up efforts to shape countries' internal
    debates about their engagement with China, including by
    suppressing criticism of China's activities.
        The party has a large and expanding set of tools it uses to
    shape foreign media coverage of China and cultivate thought
    leaders, including through some of the united front tactics
    that Peter just described. China's simultaneous influence and
    the country's economic and informational domains is a toxic
    mix.
        Beijing's information manipulation ensures the neutering of
    institutions, such as civil society and a free media, which in
    a healthy democracy would expose the negative consequences of
    China's economic influence tactics. Beijing's efforts are
    encouraging a trend toward authoritarianism in Indo-Pacific
    countries. China's no-strings investments bolster the fortunes
    of illiberal actors eager to take credit for delivering much-
    needed infrastructure projects. The party also provides
    authoritarians training on China's repressive cybersecurity
    policies and offers sophisticated surveillance and monitoring
    technology.
        Beijing's influence efforts are only likely to intensify
    throughout the Indo-Pacific. As China's domestic challenges
    continue to grow, Chinese leaders are even more likely to seek
    quick profits abroad and use sharp power to protect China's
    interests. A continued decline in U.S.-China ties is also
    likely to intensify Beijing's influence efforts. In a potential
    bifurcating global economy and technological landscape, China
    would view developing countries' dependence on China as
    ensuring that if they must choose, they choose Beijing.
        So how can the United States respond? China will not change
    its aggressive approach to developing countries unless it has
    to. To achieve this goal, Washington should focus attention on
    the countries targeted by China. This does not mean forcing
    countries to choose and side with the United States or reject
    Chinese investment even implicitly, because such efforts are
    destined to fail.
        But throughout the Indo-Pacific, there are stakeholders
    determined to protect their democracies from the malign
    consequences of Chinese influence. The United States and its
    partners should empower these actors, investing resources and
    bolstering the resilience of countries targeted for influence.
    This can be accomplished through two complementary efforts.
        First, as mentioned, the United States, along with its
    allies and partners, should offer developing democracies
    alternatives to China's investment and financing practices and
    technical assistance on project negotiation and evaluation.
        Second, the United States must dedicate resources to
    bolstering the capacity of civil society, political parties,
    and independent media. Transparency is critical to countries'
    resilience against Chinese influence efforts, permitting broad
    public debate about how to engage China in a way that protects
    a country's interests.
        For our part, IRI is working directly with our partners in
    the Indo-Pacific to shine a spotlight on China's influence
    efforts and give them the tools to protect their institutions
    and their independence. It will not be possible to counter
    China's malign influence without a sustained U.S. commitment to
    bolstering democracy. Doing so is critical to preventing the
    spread of authoritarianism and defending U.S. interests in the
    Indo-Pacific.
        Thank you.
        [The prepared statement of Mr. Shullman follows:]

        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Sherman. Let me point out that China's policies are so
    extreme, so outrageous, that they have done the impossible.
    They have gotten Democrats and Republicans to agree. In 2019,
    they got me to say something nice about the Trump
    administration. They are more powerful than the mega wattage
    necessary to reduce the temperature to refrigerate Hades to
    below 32 degrees. Think about it.
        We have got a great firewall in China, and one might--and I
    probably want to get some technical experts to respond to this.
    I realize that is almost another committee. You know, for way
    less than the price of one aircraft carrier group to cruise
    within 6 miles of an uninhabited islet, we might very well be
    able to blow a lot of holes in the great firewall of China and
    make sure that every Chinese citizen could see anything the
    world had to offer. I am going to have that be a question for
    the record.
        And I want to ask our witnesses, why are Muslim countries
    so silent with regard to the Uighurs? Anybody have a comment?
        Yes.
        Mr. Shullman. I can comment on that. I mean, part of what
    we have discussed here today with the influence and the
    leverage that China achieves through the Belt and Road
    Initiative and its growing just gravity, center of gravity as
    an economic powerhouse has an impact, obviously, on a lot of
    these Muslim countries. I believe 50 percent----
        Mr. Sherman. And it is universal. It is not like Mali has
    done something, or Indonesia or, you know, Morocco. The only
    Muslim country to say anything--and they were kind of forced
    into it--was the Turkish Government, and that is just because
    the Uighurs are not just Muslims but also Turkic.
        Mr. Shullman. And that was a change.
        Mr. Sherman. So you are saying this fear of China exceeds
    Muslim solidarity from North Africa through Southeast Asia?
        Mr. Shullman. I think that China is the No. 1 trading
    partner for over half of the countries in the Organization for
    Islamic Cooperation, yes.
        Mr. Sherman. Legitimacy, governmental legitimacy is
    critical, because the question the people always ask is, why
    are those folks running things? Monarchy answers the question,
    worked for several millennia. Theocracy works. In Iran, it
    answers the question why are these folks running things.
    Marxist-Leninism was a theocracy. But nobody in Beijing is the
    vanguard of the proletariat. It is as if what happens to Iran
    if the ayatollahs are still running things, but they become a
    group of pork-eating atheists. So they have to delegitimize
    democracy in order to prevent themselves from being relatively
    delegitimate, and they have to support authoritarianism in its
    many forms as an alternative.
        I want to turn the attention of the panel and my colleagues
    to a bill that I am working on. I call it the China Debt Trap
    Act. And what it would do is just tell countries that have,
    like Sri Lanka, signed these deals where they owe a huge amount
    of money for an infrastructure project that will not pay for it
    and just say, renounce the debt. Now, why do not countries
    renounce the debt? Well, 100 years ago, they did not renounce
    the debt, or 150 years ago, because the Marines would land and
    take over the port and make the country pay its debt. We do not
    do that anymore. You do not have to pay your debt if you are a
    country, unless you worry about your credit rating.
        So what this act would provide is that no U.S. person could
    give somebody a lower credit rating or fail to make a country a
    loan just because they had renounced Chinese debt trap debt,
    which would be defined as debt where--we would give the Chinese
    a chance to bring the deal to us for evaluation in advance. So
    if we certify that it is a fair deal, that is it, but any other
    time, if there is this debt, we could look at the deal, decide
    it was unfair, and invite the country to renounce it.
        Any comment?
        Mr. Shullman. Sir, I will----
        Mr. Sherman. It would serve them right, by the way.
        Mr. Shullman. I will take a stab at that. I think it is a
    good idea. I think I would point out two thoughts, which is,
    one, in a lot of these countries, including Sri Lanka and
    others where they have gotten into serious debt to China, part
    of the problem is that once they get into this cycle of debt,
    they need to continue to finance these projects that have been
    started, and unless there are alternatives, they feel like they
    have to go back to China. So in the case of Sri Lanka, once the
    Rajapaksa regime is kicked out----
        Mr. Sherman. Fine. Borrow the first, then borrow the
    second, then borrow the third. Raise your debt to $10-, $20
    trillion, and then renounce it all, and then still have
    complete access to all the Western financial institutions.
    Sounds like a plan.
        Mr. Shullman. If there are alternate institutions that are
    willing----
        Mr. Sherman. Well, yes. I mean, not that we would build
    another harbor for them for free, but they would be no worse
    off for wear. They could take all the money China extends in
    tranche one, two, three, and four, and then not have to pay and
    still have total access to us.
        Ms. Chaudhary. May I respond, just to piggyback off of Dr.
    Shullman's comments. I think any avenues for countries that are
    working with China to talk about China in multilateral settings
    or in other bilateral relationships are welcome. And I will
    give you the example of the IMF in Pakistan as something to
    follow.
        We do not have a lot of information on Pakistan's loans
    with the Chinese; they stopped sharing it. But they are cash-
    strapped and they needed to approach the IMF, because they are
    in a foreign exchange crisis. And the IMF said, we will not
    give you a deal unless you share information about these loans.
    And the deal is almost complete, and it is my understanding
    that that information has actually been shared. And so, you
    know, what Pakistan will not share publicly as part of a
    bilateral deal with the Chinese, I think it is more willing to
    share when it needs it.
        Mr. Sherman. I think you have got a good focus on
    disclosure. I want more. I want disclose the bad deal, borrow
    more in a second bad deal, borrow more in a third bad deal, and
    then renounce all the debt.
        With that, I yield to the ranking member for 5 minutes.
        Mr. Yoho. I want you to be my banker. Debt forgiveness. But
    it is a strategy. And I want to applaud the chairman for giving
    credit to this administration. I think--no, I hope that does
    not go--I hope it does go public for you, because I think it is
    a good thing, because it shows that we are focused on what is
    best for America.
        And I think the chairman brings up an important point about
    the Spratly and Paracel Islands in that it is a worthless piece
    of real estate I think you said. But I think of it differently,
    in that it is a strategic area for China for the Indo-Pacific.
    When you have a country like China that lays claim to their
    historical nine-dash lines, and they said that this is where we
    sail so it is our land, even though the World Court has ruled
    against China and they make claim. And I think, Ms. Chaudhary,
    you brought this up, or it might have been Dr. Kliman. Nobody
    has challenged them.
        You know, the Philippines sued them in the World Court.
    China lost. They built. The world stayed idle. They have
    imprisoned, you know, 1-to 3 million Uighurs with concentration
    camps, possibly crematoriums. The world has stayed silent.
        And if we do not challenge them, they are going to continue
    to grow, and they have got their eyes on the Arctic now. And so
    the Paracel Islands is what I see as a second line of defense
    for mainland China. Then they are going to move to the
    Micronesia countries or Oceania, and then that will be a third
    line of defense. And I think it is important that we as a
    Nation, not just us, but the free world stands up to China.
        And I have got a question here about the ASEAN bloc of
    nations. What can countries in the Indo-Pacific do to curtail
    Chinese influence and deter interference, specifically the
    ASEAN bloc of nations? Does anybody want to talk about that?
        Mr. Kliman. Sure. I am happy to jump in on that. I mean,
    China has made a systematic effort to divide ASEAN through
    cultivating certain leaders in countries like Cambodia to
    torpedo the organization from having unity.
        I think from a kind of U.S. perspective, I mean, this often
    gets back to the kind of funding journalists on the ground and
    trying to create societal conditions that will make it harder
    for China to capture elites in places like Cambodia and
    elsewhere, and essentially be able to use ASEAN members against
    the larger organization. So I think, to me, I mean, ASEAN,
    until we can get at some of these members having been co-opted,
    it is not going to be a terribly effective organization as a
    whole pushing back on China.
        Mr. Yoho. All right. And what we have seen is a very
    aggressive China buying off influence or buying influence,
    breaking diplomatic ties with other countries like Taiwan, and
    they are going to continue to do this until we push back.
        And we have been very vocal on this committee and
    individually. When I have talked to the ASEAN leaders of their
    bloc, you know, we know that the original 10 blocs said that we
    do not interfere with the politics of another nation. But we
    are at a different time and place in history, with world powers
    juggling for preeminence. And China has got a very clear Stated
    position that they want--it is time for China to take the world
    center stage, according to Xi Jinping.
        And we have implored the chairman of the ASEAN bloc of
    nations that you need to come together as a bloc of nations to
    resist the aggression of China, especially in the South China
    Sea or the East Sea, and understand it is not just you. It
    would be us, Canada, Great Britain, France, Japan, South Korea,
    India, and Australia. And if we collectively stand up against
    China, China will get the message in one sense, militarily. You
    know, that is a formidable force.
        The other thing is--and nobody wants a kinetic conflict. I
    think we need to have economic repivoting in manufacturing in
    the world, and I like to refer to it as ABC, manufacture
    anywhere but China and encourage our manufacturers to go.
    Because we are feeding the very machine that is having this
    aggressive nation--or aggressive actions, and the only reason
    they can do that is because so much is made in China. And so I
    think we need to repivot the manufacturing hubs of the world so
    that we are not indebted to a China that produces pretty much
    everything.
        And we had the AmCham come in. And we have said this to
    multiple organizations that do manufacturing in China, and they
    all freak out. Oh, it is such a big market, 1.3 billion people
    in China. We have got to have this market. But they sell their
    souls for profits for the boards, you know, for the
    stockholders. I want to take them by the shoulders and point
    them to the rest of the world. There are 6-point-some billion
    people over here. Let's focus on this market and move
    manufacturing over there, because if we hit China
    economically--and I do not want to damage China. I want the
    Chinese people to be successful but not at the expense of my
    Nation or our allies. And I want countries free to choose the
    system they want.
        And what are your thoughts on that, to get manufacturers to
    leave, or how realistic is that, if I may?
        Mr. Kliman. I think it is a very interesting idea. I mean,
    you could even think about with supply chains now anecdotally.
    Anecdotally, we have heard of companies now rethinking about
    the tariffs. Do you keep your manufacturing in China, because
    suddenly people are hoarding key supplies with the tariffs? You
    could even imagine, for example, legislation that would
    essentially give tax breaks to companies that are U.S. in
    China, but then are taking their supply chains there and slowly
    moving them to, essentially, whether it is here or other
    regions. So I think it is a very intriguing idea.
        Mr. Yoho. I am out of time.
        Mr. Sherman. Thank you.
        I would point out that America does not seek a $300 billion
    trade surplus with China. We would be fair. You know, fair and
    balanced is fine with us, although the fair and balanced slogan
    may already be taken.
        And we give 5 minutes to the gentlelady from Pennsylvania.
        Ms. Houlahan. Thank you, guys, for coming. I have a couple
    of questions. I had the opportunity of meeting with some
    businesspeople in my community last week who have been working
    for the better part of a decade with outreach to Asia and
    specifically to China to bring joint ventures together, to find
    sister city relationships; and they were very excited and
    enthusiastic about the opportunities that they saw in sort of
    growing businesses with a very large market.
        And this was not necessarily in the manufacturing space. I
    personally have a great deal of experience in the Asia and
    particularly China manufacturing world. But this had to do with
    farming and agriculture, it had to do with tech transfer and
    that kind of thing.
        So my question to you all is, I recognize, as a
    businessperson, I recognize for my community that growing your
    businesses and expanding to newer markets, large markets is
    really essential; but I also approach this with a degree of
    cynicism and a little bit of uncertainty about how we can
    educate the folks in our communities, the businessmen and women
    in our communities to be cautious in their outreach. And how
    should I bring that message without seeming as though I am
    depressing the economy of my community? Anybody who can answer
    that for me?
        Mr. Kliman. I am happy to jump in on that. I mean, there
    are probably a few ways. I mean, one, I think more and more
    businesses are going to see they are producing within China for
    China, and thinking about essentially segmenting your business.
    Where China is a big market, of course, companies will need to
    be there, but really having kind of your presence there for the
    local market, not using it as a basis for your kind of global
    supply chain, not necessarily putting your best technology
    there.
        And so I think that would be how I would frame it and just,
    I mean, all the sort of cautions up front. With technology, I
    mean, going eyes in, knowing that, ultimately, China wants to
    keep its market for its own companies. It will take technology
    if they are putting it there, try to squeeze it from these
    firms, and ultimately they will find the Chinese competitor
    here. So being cautious. But I fully understand your point,
    which is it is a large market and so companies are going to
    have to navigate it, but I think with a lot of care.
        Ms. Houlahan. I guess would you recommend that I maybe even
    have roundtables such as this where experts are kind of
    communicating the cautionary tales? It feels as though the
    conversation has been sort of Belt and Road and at the level of
    other countries and their relationship with China. And we need
    to be bringing it, in my opinion, down to the everyday of my
    community. Is there something that I could be doing to be
    helpful in educating my community?
        Mr. Kliman. I would imagine more so certainly than myself
    here but, I mean, business experts who have been there for a
    long time are navigating the market, understand it. I mean, I
    think there would be a lot of benefit. I am sure you would find
    folks who could give kind of a best practices who have been
    there for a while.
        Ms. Houlahan. Does anybody else have anything to add to
    that?
        Mr. Mattis. Yes. If you want to do business in China, do
    business in China. Go there and make the relationships
    yourself. If it is coming through one of these organizations,
    whether it is a Chinese chamber of commerce, whether it is a
    tongxiang hui, the hometown association, whether it is a sister
    city type of relationship, this is actually controlled by the
    influence bureaucracy.
        If a foreign country was thinking about doing business in
    the United States and CIA was sort of the vector for making
    that happen, people would sort of say, ah, maybe not. So why
    should it be any different when we are dealing with the PRC?
    And so if you want to do business, do business.
        But, as you said, you know, some of these are about tech
    transfer. This influence system is as much about building
    talent recruitment and tech transfer and making sure that that
    expertise is available.
        You mentioned in agriculture. Dutch security officials,
    Spanish security officials, Australian security officials,
    Taiwanese security officials have all told me about how they
    were kind of puzzled how agricultural products, seeds, also in
    the United States, that these have been targets for the
    intelligence system, for the influence system, to bring that
    expertise back.
        So it is a question of are you seeing an opportunity that
    is genuinely there or is it an opportunity that is being given
    to you to sort of suck you into the PRC so that you can be
    exploited.
        Mr. Shullman. Just quickly on that too, to bring it back to
    the developing Asia perspective. This is the same thing that is
    happening in all these countries, in these developing
    countries. In Asia, where people will think that they are
    engaging with the friendly business association.
        And so part of what IRI and others are doing is, you know,
    trying to educate on, you know, this is not exactly who you
    think you are dealing with. This is related to the party, to
    the united front sort of work, and you need to go into this
    with eyes wide open, perhaps; and, as Peter said, perhaps go to
    China and create those relationships on your own as opposed to
    letting these organizations with this background come to you.
        Ms. Houlahan. Thank you. I yield the balance of my time
    back.
        Mr. Sherman. The gentleman from Florida I guess has left,
    so we will go to the gentlelady from Missouri.
        Mrs. Wagner. Thank you, Mr. Chairman, for hosting this
    hearing, and thank you to our witnesses for their time.
        With tensions over trade escalating and the Chinese Vice
    Premier headed to Washington Thursday for resumed talks, I
    appreciate this timely opportunity to learn more about China's
    attempts to erode America's influence. I come from a trading
    State, the State of Missouri, where exports support 88,000
    jobs. That is 18 percent above the national average.
        I strongly believe that China must be held accountable for
    its malign trade and investment policies, but we must be
    targeted. American consumers and businesses should not be the
    ones shouldering the consequences. I believe our trade policy
    toward China should be aimed at curbing the predatory behavior
    of China's State-owned enterprises, these SOEs.
        Dr. Kliman, how should U.S. negotiators address this issue
    in talks?
        Mr. Kliman. That is a great question, certainly very
    timely. I mean, my view is that, ultimately, U.S. and Chinese
    economic objectives are squarely nonaligned, that China
    ultimately wants to dominate kind of the key industries of the
    future. And if you look at sort of any deal on the table
    already this week, it became apparent the Chinese were walking
    back from their commitments. To me, that is deeply
    unsurprising.
        I think any deal, if one is struck, will be unsatisfying, I
    think, to the House, to the Senate, to the American people,
    given the nature of what China wants relative to the United
    States.
        So I do not think there is a straightforward sort of answer
    to your question. I mean, I think at the end of the day, it
    will be about sort of protecting the industries here where
    China is going to exploit us trading in select areas that
    perhaps are not as competitive with them. But I do not think
    there is sort of a very easier painless path forward.
        Mrs. Wagner. Oh, clearly. And, obviously, the Vice Premier
    is on his way, and the President is saber-rattling. So we will
    see if we make any inroads here this week. I want to make sure,
    though, that my farmers and my consumers are not inadvertently
    and overly affected by this.
        Beijing allows its State-owned enterprises to borrow at
    extremely low interest rates from public financial
    institutions. As a result, SOEs have dominated project bids in
    Southeast Asia, a primary target of the Belt and Road
    Initiative. I am co-chair of the congressional ASEAN Caucus,
    and I am deeply concerned that these policies are designed to
    draw Southeast Asian countries into Beijing's sphere of
    influence.
        Dr. Kliman, how should the United States work with
    Southeast Asian countries to prevent these State-owned
    enterprises from boxing out more responsible investors?
        Mr. Kliman. Congress has already taken an important step in
    that direction, passing the BUILD Act. I would say I am
    cautiously optimistic with our new development finance
    corporation that some of the tools it has, including new tools
    like equity as well as, of course, the new lending cap, if
    targeted, could help to move the needle. I think many of the
    countries in Southeast Asia understand what Chinese SOEs bring
    is not necessarily well-engaged with our economy. There is not
    the skill transfer they want. The debt issue.
        So I think the problem for the U.S. until now has been we
    did not have an alternative easily available. That may change
    with this new DFC. I think there is a critical role for
    Congress to make sure the DFC is lending in some of these
    countries in support of U.S. companies in competitive sectors,
    but I would say I am optimistic that we now actually have that
    tool.
        Mrs. Wagner. Dr. Shullman, the Xi regime faces internal
    pressure stemming from demographic issues, simmering dissent
    and high expectations regarding economic performance. Given
    these dynamics, I think it is important to remember that the
    Belt and Road Initiative was originally a domestically oriented
    initiative designed to spread economic growth to quickly
    growing cities in China's interior. Belt and Road Initiative
    has now evolved far beyond its domestic origins and threatens
    to undermine democracy and good governance in developing
    countries.
        Do you think the shift was opportunistic or accidental? And
    how should China's internal pressures inform our thinking on
    the Belt and Road Initiative?
        Mr. Shullman. Thank you for that question. I think it is
    absolutely right to point out the fact that the Belt and Road
    initially was very much domestically focused to benefit China's
    west in particular.
        I think it is important to note that, you know, in terms of
    why it has become such a big deal in terms of external economic
    engagement, China is looking to create external markets to be
    able to sell its goods elsewhere. They are also trying to
    export its overcapacity in a lot of industries. But it is
    important to note that, actually, you know, when you look at
    the data, the Belt and Road actually has not been very
    beneficial for China's domestic economy going forward.
        What I think we need to look to is, going forward, as I
    mention in my remarks, if China's economy continues to face
    mounting challenges, as we see that it is with the massive
    amounts of debt that they are taking on domestically, China is
    going to continue, I think, to look to the Belt and Road as a
    way to get them out of this problem, right, to create new
    markets and all, so to try to continue to saddle countries with
    these debts.
        And to come back to your question to Dr. Kliman, it is not
    just that SOEs are getting subsidized and, therefore, able to
    come in with lower bids. It is that the Chinese policy banks
    that are financing these projects are then going in with these
    governments and saying, OK, and there is going to be one bid
    and it is going to be from a Chinese SOE, or maybe two bids,
    both of them Chinese SOEs. And so you are going to have a
    situation where you have very inflated costs, with corruption
    inherent in all of these deals.
        So it is not just the subsidizing, it is also the opaque
    nature in the way in which these deals are done. And to expose
    that through civil society and investigative journalism is
    really critical.
        Mrs. Wagner. Thank you, Dr. Shullman. I know my time has
    elapsed.
        I have a really awesome question for you, Ms. Chaudhary,
    and I am going to make sure that it gets submitted to you--it
    is about India--that I would love if you could respond in
    writing. And I thank the chair for the hearing.
        Mr. Sherman. We all look forward to reading the awesome
    question and the even more awesome answers.
        Two items for the record. First, tomorrow China's Vice
    Premier Liu will be in Washington, DC. This subcommittee has
    invited him to either meet with the subcommittee or the full
    committee, his choice. He has not responded, and my fear is
    that if he watches this tape, he is even less likely to
    respond.
        And for the record, I will comment that while I have
    commended President Trump for not ignoring the problems with
    China--and I think Ted's got it right in some ways--there are
    other areas where I disagree with his policies. And if the
    committee demands that I spend 15 minutes explaining that, I
    will accede to that demand. But in the meantime, we will
    recognize for 5 minutes the gentlelady from Virginia.
        Ms. Spanberger. Thank you very much, Mr. Chairman. Thank
    you to the witnesses.
        I was struck by what you said, Mr. Mattis, in talking about
    the Chinese believe that national security is achieving the
    absence of threats, and further continued your discussion to
    say that there are really no consequences to China, so they
    take no risk in a lot of what it is that they are doing.
        So I was curious if you could expand upon that kind of
    premise of thought. What do you see are some of the
    consequences that the United States could put in place or could
    expand upon that could create risk for China that might impact
    their behavior and positively impact our national security
    situation vis-a-vis China?
        Mr. Mattis. So one of the easy ones that has been in the
    news for the last, I think, year and a half is the issue of
    visas and Chinese Government officials coming through the
    United States, whether in some cases to intimidate people or,
    say, education officials going to universities for the purpose
    of overseeing a party committee meeting or to directly send
    messages to students. That strikes me as activity that is
    inconsistent with diplomatic convention. In some cases, this
    may fall afoul of some of our civil liberties legislation, and
    these are clearly grounds for declaring a diplomat persona non
    grata.
        If it is someone who has come in without diplomatic
    accreditation, then you are talking about something that is
    akin to visa fraud. It does not mean that you necessarily have
    to arrest them and hold them. Maybe you charge them after. But
    making the point that this is something that is considered off
    limits is important. If it actually does involve sort of more
    direct criminal acts, as might have been the case in, say, the
    Olympic torch relay, then it does mean that we are going to
    have to bring those tools to bear.
        Four Chinese companies that have been on the receiving end
    of stolen intellectual property, they still have been able to
    do business in the U.S. and elsewhere. You know, whether it
    is--I know there is legislation being considered to punish
    those companies directly. Again, what is the possibility of
    using criminal indictments for the people involved and
    restricting their travel abroad?
        I think in many of these cases, when we try to make the
    issue about the PRC or the party writ large, we end up looking
    at this big complicated mess when the response might actually
    best be made to make it personal, so that the individuals that
    are involved have to make the decisions and have to calculate
    for themselves.
        Ms. Spanberger. Thank you.
        And my next question is for Dr. Chaudhary. You talked
    briefly about the counterterrorism efforts and the different
    pivot that China has versus Pakistan. And so I am curious, from
    a U.S. counterterrorism perspective, where do you see that our
    relationship with Pakistan working to address the threat of
    terrorism could be potentially impacted by the relationship
    that Pakistan continues to develop with China, and whether or
    not that might sway/change/impact their focus on the terrorist
    threat, and how that might impact our relationship with
    Pakistan in addressing that threat?
        Ms. Chaudhary. So, in general, I think that it has been a
    good thing for U.S. interests that the Chinese have gotten
    involved in Pakistan security issues. They always have been
    involved a little bit, but more privately.
        And what we have seen in the past decade, as the threats
    have expanded and become more amorphous and with, you know,
    also ISIS expanding, we have seen the Chinese become more
    interested in Pakistani stability. And that coincides with, you
    know, the State becoming increasingly fractured, relations
    between civilians and military not going well, as they do in
    Pakistan.
        And so I think the Chinese realize that they have to become
    a little bit more engaged and active, and also at the prodding
    of the United States. I mean, we really--and I was in the
    administration at that time. We really were curious why the
    Chinese we are not concerned about Pakistan stability. It is
    their neighbor, frankly speaking. They have much more skin in
    the game for the long term than the U.S. does, ironically, with
    the thousands of troops that we had.
        So, in the short run, I would say it is a benefit for us,
    especially because the Chinese have gotten involved with talks
    with the Taliban. They have different avenues into that
    conversation on the conflict in Afghanistan that the U.S. can
    benefit from. We really have lost a lot of influence and
    leverage in our relationships with everyone in the region. And
    so anyone else who shares or overlaps with those values, I
    think that is a benefit.
        Over time, it is going to be much more difficult to pursue
    our counterterrorism interests in Pakistan, and this is because
    we do not have the relationships with the institutions and also
    with the individual leaders that we had, say, 10 years ago or
    15 years ago. And that is simply because we are not putting
    that much money into the country, and we are not focusing
    beyond counterterrorism.
        And I am not here to argue that we should put more money at
    this point. I think that we really tried everything we could.
    But as the Chinese are pursuing a very specific focus on
    security related to the Uighurs, they are not concerned about
    overall stability for the country, only for their projects.
        And so with that, I think the U.S. has to think about the
    nuclear proliferation threats, the possibility of China and
    Pakistan working more closely together on that, and what do you
    do about anti-India militants in Punjab, which do destabilize
    the region. And China is not really doing anything about that
    yet.
        Ms. Spanberger. Thank you.
        Thank you very much. I yield back.
        Mr. Sherman. Thank you.
        I now recognize the gentleman from Florida.
        Mr. Mast. Thank you, Chairman.
        Listen, I just wanted to give you all the opportunity to
    sound off on this. If you have anything profound, anything
    mind-blowing that you would like to say about what you perceive
    some of the biggest--a biggest weakness of China to be that you
    might think we are missing. Do you have anything mind-blowing
    or profound to say about a weakness you think we are missing on
    China?
        I hear crickets, so I might have to move on.
        Mr. Kliman. I am happy to jump in on that. I think at the
    end of the day, I mean, the economic model they are pedaling,
    while it has gained some success, I mean, it ultimately has
    enormous downsides. And you have seen the backlash.
        I think if the U.S. takes advantage of the rising concern
    about Belt and Road investments and, again, emphasizes what we
    do best, which is skill transfer, things even like women's
    empowerment--we have an initiative for that run by OPEC--there
    is a real opportunity here.
        I think sometimes it is easy even here in the U.S. to be
    sort of dismissive of our ability to rise to the China
    challenge. I think ultimately China has great weaknesses,
    especially sort of the long-term appeal of their economic
    Statecraft. So I would definitely put that as a vulnerability.
        Mr. Shullman. I mean, I would just add, I do not know if
    this is something that anyone is missing, but it is really
    important to note whenever we talk about China and the party
    how insecure they are about their continued grip on power going
    forward.
        I think, you know, this is something that underlies
    everything that they do domestically, but also their approach
    to these issues internationally. And so even though we see a
    much stronger China on the world stage and a lot more
    aggressive rhetoric and a lot more aggressive programs and the
    Belt and Road in countries all around the world, it is
    important to remember that, you know, when China holds meetings
    at the Politburo level, they are frequently talking about what
    are the risks that we are facing long term in terms of staying
    in power and maintaining stability.
        Ms. Chaudhary. I would also add that something we have not
    talked about today is Chinese kind of people-to-people
    relationships, and that is something that I think is an
    inherent weakness if you compare it to the U.S. and our ability
    to use our soft power influence through our entertainment.
    Everything about American life that appeals around the world,
    the Chinese do not have that.
        And the Chinese nationals that are going to, say, Pakistan,
    for example, they are not there to become part of the culture
    or learn about the communities or have cross-cultural dialog.
    They are there to make money, and they live in enclaves and
    essentially what people call Chinese colonies and go to their
    own restaurants. And that is not something that is going to
    favor China, Pakistan, or China in cooperation with any
    country, for that matter, over the long run. Local communities
    will be very upset by those things, I believe.
        Mr. Mast. Interesting enough. I appreciate that. I wanted
    to go back to you for a question. I was interested by a lot of
    what you had to say, but I wanted to expand the scope of some
    of what you spoke about. Do you see any place specifically in
    your analysis that you see China wanting to change existing
    territorial borders outside of, let's say, the South China Sea?
        Ms. Chaudhary. I do not believe I could speak to that in
    the context of South Asia, no. I have not seen that.
        Mr. Sherman. If the gentleman would yield, I will point out
    that there is a significant territorial dispute between India
    and China, and in the 1960's, there was more than one armed
    conflict over that.
        Mr. Mast. Certainly. Is there any place that you are
    assessing this?
        Ms. Chaudhary. On that note, I would say so there is a part
    of CPEC that involves Gilgit-Baltistan, which is a disputed
    territory; and India takes claim to it, as does Pakistan. And a
    good chunk of CPEC activity will be conducted in that space. It
    is the beginning of CPEC, in fact, for China.
        There is some push to incorporate that part of Pakistan
    officially into Pakistan. It is now just an administered
    territory; it is not an actual province. So there is talk of
    that, which has made the Indians really upset. But this is a
    very complicated issue and it is not just connected to CPEC. It
    is connected to Kashmir. It is connected to other India-
    Pakistan relations.
        So I think specifically because China has involved itself
    in that particular kind of territorial dispute that it is going
    to delay the benefits of CPEC to anybody, especially local
    communities, but even for the Chinese.
        Mr. Mast. Chairman, I honestly have no idea. Has my time
    expired or not?
        Mr. Sherman. Your time has expired.
        Either I have such incredible love for the gentleman from
    Florida that I have let him go 5-1/2 minutes over or, in fact,
    he has actually only held the floor for 5-1/2 minutes and
    somebody hit the red button as opposed to the green button.
        But we will now yield 5 minutes to the gentleman from
    Virginia. And, yes, good, the green button has been pushed.
        Mr. Connolly. I thank the chair. And welcome to our panel.
        I want to ask about China's Belt and Road Initiative. We
    are seeing signs of backlash to that project in recipient
    countries. For example, I was in Sri Lanka 2 years ago and what
    was predicted occurred. The Chinese State-owned company had to
    take over or wanted to take over Hambantota, a brand new port
    on the southern tip of the island. And the government, of
    course, otherwise would have been insolvent, unable to pay back
    huge multibillion dollar loans to the Chinese.
        Malaysia's new prime minister questioned the value of these
    deals, Chinese deals signed by his predecessor and made it an
    issue in his successful election. In the Maldives, the new
    President strongly criticized his predecessor's decision to
    agree to more than a billion dollars to China for their
    projects.
        We do know locally, and I saw it not only in Sri Lanka but
    in Mongolia and Kyrgyzstan, resentment by local labor pools,
    because the Chinese are so insulated, so parochial, they do not
    use local labor. The ripple effects to the projects do not go
    far in the economy, and it is resented.
        Is this just anecdotal or is there reason to believe that
    this huge project actually is going to be a lot less than the
    Chinese think it is going to be, in terms of their foreign
    policy, their building friends and influencing people? And let
    me start with you, Ms. Chaudhary, and you, Dr. Kliman. And then
    if you would like to comment, feel free.
        Ms. Chaudhary. So it is a wonderful question, and I have to
    say during my last trip to Pakistan in February this year, I
    heard the same sense of resentment and anxieties coming from
    everyone, even people that I would not expect I thought they
    would be benefiting from Chinese involvement.
        Now, there are reasons, there are things behind that. Those
    things might be anecdotal, the experiences that people are
    sharing with you, but there are things that we can look at and
    say, that is why those people are feeling that anxiety. One is
    that, you know, we should not let these governments off the
    hook. China is doing a lot of things that they should not be
    doing, but these are, you know, Pakistan, Sri Lanka, elsewhere.
    These are governments that are weak politically and that are
    dominated by elites who have captured the economic system and
    are benefiting from those relationships with China. And then
    they get voted out of power or kicked out of power or there is
    a coup, and then the next government is able very easily to use
    the relationship with China as a political tool. And once it
    gets into that space, there is no going back, right?
        Now, there are some structural things as well. I mean, a
    lot of these countries, they have heavy borrowing from foreign
    lenders. They are cash-strapped. They are desperate for foreign
    exchange. And they have their own inefficient companies running
    these ports, for example. They are not bringing in outsider
    experienced companies that are doing it.
        So there are both kind of political and also structural
    factors that contribute to those anxieties, and people are not
    seeing the financial benefits in their pockets as they have
    been touted by their governments. And I think that is another
    reason why that everyday person----
        Mr. Connolly. I guess I would just say to you, though, in
    the case of Hambantota, I went there. It was a brand-new port,
    and it was pristine. Not a single ship had docked. There was
    not a single cargo unloaded. There was not a container in acres
    and acres and acres of a port. And I have been to ports. I was
    shocked.
        And so the Sri Lankan Government bought, an American
    expression, a pig in a poke. And the Chinese were only too
    happy to offer to take it over and manage it for the next 50 or
    90 years, and a strategic location where 30 percent of the
    world's shipping passes, and that ought to concern India and it
    ought to concern us.
        The backlash, though, it seems to me, from a foreign policy
    point of view, serves U.S. interests. So they are spending all
    this money and they are unhappy as recipients, or at least the
    successor government is. Maybe we let that unfold. I do not
    know.
        You wanted to comment, Mr. Shullman.
        Mr. Shullman. Yes, I would just like to jump in on that. I
    mean, I think the Sri Lanka example is a really important one,
    because I think when I have gone there, contrary to what I
    would have expected when we talk, you know, in the China
    community about what happened at the Hambantota port, you would
    maybe expect people to be clamoring and saying, oh, save us
    from China, but, in fact, you have a situation where China is
    actually quite still popular among the Sri Lankan public. And
    the new government has actually continued to take financing.
    They just got a $1 billion loan from China Development Bank
    recently from the Chinese.
        The Hambantota port deal was, yes, partially about the fact
    that Sri Lanka could not pay back. I have heard there was also
    some corruption involved with the new Sirisena government, not
    just the Rajapaksa government.
        Mr. Connolly. When I was there and this was being debated,
    you know, but it had not been resolved yet, there was open
    discussion by everybody, including at high levels of the
    government, about huge payments by the Chinese to win over
    friends and to get an agreement.
        Mr. Shullman. So you have that elite capture aspect, but
    you also have this information manipulation aspect, where China
    is now, it is rational, right, that they are going into Sri
    Lanka now and throwing a ton of money into Sri Lanka to try to
    shape the debate, because they know that Sri Lanka is now the
    poster child for the debt trap. It is sullying the BRI brand
    around the world.
        And so when I went in and tried to find a researcher for
    our project on Sri Lanka to talk, to just look into objectively
    the nature of Chinese influence in the country, it was quite
    hard to find someone, because all these institutions are now
    taking Chinese money and they know where their bread is
    buttered and they do not want to take that risk.
        So that just goes to the point that even though we see
    externally a lot of the downsides of BRI for these countries,
    internally, because of what China is doing and because of the
    relationships they form with elites, the message is not as
    widespread as you might think it is.
        Mr. Connolly. Thank you.
        Mr. Chairman, I do not know if you would allow--I am done--
    Mr. Kliman or Mr. Mattis to comment.
        Mr. Kliman. If there is time.
        Mr. Sherman. Briefly, very briefly.
        Mr. Connolly. Thank you, Mr. Chairman.
        Mr. Kliman. China is very much making tactical adjustments,
    whether it is--China is making tactical adjustments. So whether
    you look in Malaysia, essentially reducing the cost of their
    projects. They are also at the recent Belt and Road forum,
    trying to play out sort of new aspects of their investments,
    whether it is what they call high-quality, green, financially
    sustainable.
        I think a key emphasis of U.S. diplomacy has to be going
    forward to call China on it, that they are not making real
    changes, and emphasize what real change would look like. For
    example, massive debt forgiveness to countries, including those
    like Sri Lanka, that are strategic for China; or terminating
    some of these really problematic projects; or bringing in
    international partners to the point where they are reducing
    their ownership below 50 percent. So U.S. diplomacy could play
    a big role there.
        Mr. Sherman. Thank you.
        We will now recognize the gentleman from Pennsylvania.
        Mr. Perry. Thanks, Mr. Chairman. I would like to yield a
    moment to Mr. Mast, who has got a question for the chairman.
        Mr. Mast. Yes. Mr. Chairman, I just wanted to yield you a
    quick moment if you wanted to elaborate on you advocated for a
    policy of countries borrowing from China and then not returning
    those funds. Would you advocate for that for the United States
    of America?
        Mr. Sherman. We do not engage in debt trap financing. When
    a U.S. Government entity makes a loan, it is with the
    expectation that the loan is affordable, can be repaid, and can
    be repaid normally out of the project's revenues.
        Mr. Mast. Glad to hear you say that.
        Mr. Sherman. When China tries to get extraterritorial power
    over Sri Lanka through a debt instrument, we should respond
    appropriately.
        Mr. Mast. I just wanted to make sure.
        I yield the time back to the gentleman from Pennsylvania.
        Mr. Perry. Reclaiming my time. Thanks, Mr. Chairman, and
    thanks to the panel for being here.
        I just wonder, in this whole negotiation regarding trade
    and other things, do you think that China was watching very
    carefully the outcome of the special counsel's report? And do
    you see that as maybe affecting how they would have comported
    themselves in the continuing negotiations, depending on the
    outcome? Anybody?
        OK, nobody.
        Well, if you think about it and you have an answer, I would
    be interested in hearing it.
        Just watching, recently China has been accused again of
    intellectual property theft regarding military secrets at
    colleges. They have been delinquent in enforcing North Korean
    sanctions, continued unabated at their human rights violation,
    continued its incursions in the East China Sea, and abused the
    goodwill of America by encouraging intelligence collections of
    its visa holders in the United States.
        And I wonder, will China or would China view differently
    sanctions versus tariffs? I am not a fan of tariffs, but we
    have limited options, from my viewpoint, vis-a-vis China. But I
    wonder--sanctions has a different flavor, to me, as punitive.
    It is punishment for bad behavior. And the sanction might be a
    quasi-tariff, but I wonder if China would view it differently
    if it were a sanction, and I would like to get your view if
    anybody has.
        Mr. Shullman. Well, I would just say I think you are on the
    right track in terms of thinking that they would take a tougher
    view of sanctions. Obviously, they are not a fan of tariffs,
    but China traditionally has been very opposed to unilateral
    sanctions, whether it is related to the North Korea issue, when
    it has come up in relation to Chinese companies that are
    involved in the South China Sea.
        I think that would be something that they would react to
    very strongly and see as a direct attack and perhaps would take
    action to take some sort of retribution to show their
    displeasure and say that China is now, you know, at a certain
    level as a great power and cannot be treated this way. And that
    is how China tends to approach these things, especially when it
    is unilateral sanctions and not sanctions that come from a
    multilateral body, on themselves or others.
        Mr. Perry. So the sanctions, based on that, if they were
    going to have the positive effect the United States would be
    seeking, would be better served if it was not unilateral but if
    it was multilateral.
        And what kind of actions other than being dissatisfied and,
    for lack of a better way of saying it, crying like a bear that
    is sore, what kind of actions would they take vis-a-vis the
    United States if they were sanctioned? And I wonder too, even
    if it were fines, because, you know, China is known to be
    washing dirty money, dirty North Korean money through our
    financial markets, and we do not have to abide that. We can
    fine them for that. We can track that and source that and fine
    them for that.
        And I understand that administrations leave space for
    negotiation, but we could start there and the fines could be
    pretty robust. And then we could freeze out certain components
    of their society from our financial system. And there is a
    downside to the United States as well to that, but they are in
    it for the long haul here and we better get serious about it.
        So I am just curious what they might respond to in that
    regard, how they would respond, and if you think that that
    would have potential significant impact, the financial
    sanctioning, so to speak, or fining.
        Mr. Shullman. Well, I cannot speak specifically to, you
    know, how they would respond without knowing exactly which
    sanctions and which subject we would be talking about, but, you
    know, it is certainly entirely possible that they would take
    some action to even further restrict access to the Chinese
    market, to be even more difficult in any kind of diplomatic
    engagement or negotiations.
        But there is a whole range of ways in which China could try
    to take some kind of punitive action. Obviously, one of them,
    especially if it is related to North Korea, would be to play
    even harder ball in terms of allowing all sorts of things to
    be--oil and other things to reach its way into North Korea and
    not even trying to pretend that they are upholding sanctions.
    That is one way in which they might respond.
        Mr. Perry. Well, I have exceeded my time, but it almost
    seems like--with all due respect, it seems like we are in a
    position where--and I understand it is delicate regardless, but
    every day that goes by that we do not respond or act
    proactively regarding China, we are in a worse position. And so
    if we are going to do it, the time is now as opposed to later.
        Mr. Shullman. Yes. No, I agree. I do not mean to be giving
    the impression that I am saying it is necessarily the worst
    course of action. I am just laying out that I think that the
    reaction would be much stronger than to tariffs.
        Mr. Perry. Thank you.
        Mr. Sherman. And now, last but certainly not least, the
    gentleman from Michigan.
        Mr. Levin. Thank you, Mr. Chairman. Thank you all for
    coming.
        I want to turn back to the Belt and Road Initiative and
    focus on a couple particular aspects of it. First of all, human
    rights. There are several examples of Belt and Road projects
    that have had negative implications for human rights in Asian
    countries. Take, for example, the big dam project in Myanmar or
    Burma. Is it the Myitsone, or how do you say that?
        Mr. Shullman. Myitsone Dam.
        Mr. Levin. Myitsone, OK. So, as Human Rights Watch reported
    last month, critics say the mega dam would cause large-scale
    displacement, and I am quoting, loss of livelihoods, wide-scale
    environmental damage, and destruction of cultural heritage
    sites, significant to the ethnic Kachin people.
        Ms. Chaudhary and Dr. Kliman, in general, have Chinese
    authorities consulted with communities that would be affected
    by BRI projects like, for example, communities that might be
    displaced by major projects like this dam?
        Mr. Kliman. I am happy to jump on that. So we just did a
    global study in my think tank, the Center for a New American
    Security, on China's Belt and Road, looked at 10 projects
    globally. And there was a pattern of disregard for local
    economic needs, local environmental challenges, local people,
    that was not just in Asia and Latin America, Africa. So it is a
    global issue. So the answer is, broadly, no.
        Ms. Chaudhary. So we see the same pattern kind of unfolding
    in Pakistan as well. There are two areas of concern. One is in
    Gilgit-Baltistan, which I previously mentioned, and then two is
    in Balochistan. Both are these areas where the populations have
    not been well-served by their governments, both their local or
    their national.
        And so there are fears of land grab and abuses of local
    workers, not enough local workers being hired. And the
    government really has--my view is that in Pakistan, China has
    really outsourced its consultation to the Pakistanis. And
    because the Pakistanis do not really do any kind of extensive
    consultation, none of that has happened, and it just aggravates
    kind of all of the center-periphery kind of tensions that have
    already existed in the country for a long time.
        Mr. Levin. Right. So in the Myitsone Dam situation, my
    understanding is that there are protests of people opposing the
    project, including one in February, that drew an estimated
    7,000 people.
        So is this kind of opposition from the local population in
    an organized way like that unique? Did you find it elsewhere in
    your study? What have you found here? How have governments
    responded when people object like that?
        Ms. Chaudhary. When people object. So that is a very good
    question. And my comments earlier on kind of critical voices
    being suppressed speak to that. Rarely will you read an article
    that is critical about CPEC in the Pakistani media, very
    rarely. There has been a media capture, essentially. And there
    is only one CPEC narrative, because people are scared or they
    have been intimidated or threatened not to do certain pieces.
        At the very local level, people who critique CPEC are often
    labeled terrorists. There are antiterrorism laws that can be
    used against them. Worse things could possibly happen. So it is
    a very real threat and it has already done a lot of damage to
    civil society and democratic culture that is fairly vibrant,
    despite the country's history with democracy.
        Mr. Levin. And in other places?
        Mr. Kliman. So in general, the trend is in countries with
    less transparency, more corruption, you tend to, even if there
    are protests, they do not actually accomplish a lot. They do
    not slow the Chinese down. In places that had more rule of law
    accountability, you saw fewer of these kinds of actions.
        So I would say it really varies. In places like Indonesia,
    where there have been concerns about their high-speed rail, my
    understanding is civil society has played more of a role and
    maybe slowed that project down; but in other places where you
    do not, like Burma, it ultimately is going to not move the
    needle.
        Mr. Levin. So let's talk about the environmental
    ramifications of BRI projects. In Sri Lanka, the construction
    of the Colombo Port facility has faced criticism over the land
    reclamation needed for construction and concerns that result in
    coastal erosion might affect local fish populations, threaten
    fishermen's way of life.
        Have other Belt and Road projects posed environmental
    threats, and are there some examples of this, and how do you
    see this issue?
        Mr. Shullman. If I could comment on that. I think
    absolutely, that is an excellent question, because, you know,
    China is trying to paint itself as having the now green Belt
    and Road. No. 1, a lot of the projects that they underwrite are
    obviously in the energy sector and supporting lots of, you
    know, coal and other sorts of projects that are not beneficial
    for the environment in these countries.
        And then you also need to raise the fact that in a lot of
    these countries where China is financing projects that these
    countries cannot sustain, you ultimately get a result where the
    countries need to tear down or go crosscut more, cut into more
    of their forest. A perfect example of this is in Ecuador where,
    because China was able to get Ecuador into a situation where it
    owed a massive amount of debt and ultimately now needs to pay
    back that debt in oil--80 percent of Ecuador's oil is now going
    to China despite the fact that the dam they built for them is
    nonfunctioning--the Ecuadorians now are needing to go and cut
    into more of their rainforest to try to find more resources to
    pay back those loans.
        Ms. Chaudhary. So the reason why China is so welcome in a
    lot of these countries is because they do not have roads or any
    infrastructure in these areas where the government is
    essentially giving land to do these projects. And so, of
    course, there is always going to be the ecological damage. I
    think the problem is that the studies--or the feasibility
    studies or the assessments are not being done in advance. And I
    think that is a real opportunity for other countries like the
    United States to participate or just have their own kind of
    process of evaluating the damage of BRI to these countries.
        Mr. Levin. In advance.
        Ms. Chaudhary. Yes.
        Mr. Levin. Yes, great point.
        OK, I am sure my time is up. Thank you so much, Mr.
    Chairman.
        Mr. Sherman. Thank you.
        I want to thank our witnesses for coming, thank the members
    for participating, and we stand adjourned.
        [Whereupon, at 3:47 p.m., the subcommittee was adjourned.]

                                    APPENDIX
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                RESPONSES TO QUESTIONS SUBMITTED FOR THE RECORD
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