[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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