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


   SMART COMPETITION: ADAPTING U.S. STRATEGY TOWARD CHINA AT 40 YEARS

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

                                HEARING

                               BEFORE THE

                      COMMITTEE ON FOREIGN AFFAIRS
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION
                               __________

                              May 8, 2019
                               __________

                           Serial No. 116-32
                               __________

        Printed for the use of the Committee on Foreign Affairs
        
        
                [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]


            Available:  http://www.foreignaffairs.house.gov/, 
            http://docs.house.gov, or http://www.govinfo.gov
            
                              ___________

                    U.S. GOVERNMENT PUBLISHING OFFICE
                    
36-213PDF                  WASHINGTON : 2019



                      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 PHILLIPS, 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



                            C O N T E N T S

                              ----------                              
                                                                   Page

                               WITNESSES

Economy, Dr. Elizabeth, C.V. Starr Senior Fellow and Director for 
  Asia Studies, Council on Foreign Relations.....................     7
Sacks, Ms. Samm, Cybersecurity Policy and China Digital Economy 
  Fellow, New America............................................    19
Magsamen, Ms. Kelly, Vice President, National Security and 
  International Policy, Center for American Progress, and Former 
  Principal Deputy Assistant Secretary of Defense for Asian and 
  Pacific Security Affairs.......................................    37
Friedberg, Dr. Aaron, Professor of Politics and International 
  Affairs, Co-Director of the Woodrow Wilson School's Center for 
  International Security Studies, Princeton University, and 
  Former Deputy Assistant for National Security Affairs, Office 
  of Vice President Dick Cheney..................................    55

                                APPENDIX

Hearing Notice...................................................   114
Hearing Minutes..................................................   115
Hearing Attendance...............................................   116

             ADDITIONAL MATERIALS SUBMITTED FOR THE RECORD

Wall Street Journal article submitted for the record from 
  Representative Deutch..........................................   117

            RESPONSES TO QUESTIONS SUBMITTED FOR THE RECORD

Responses to questions submitted for the record from 
  Representative Sires...........................................   120
Responses to questions submitted for the record from 
  Representative Chabot..........................................   123
Responses to questions submitted for the record from 
  Representative Spanberger......................................   126
Responses to questions submitted for the record from 
  Representative Wagner..........................................   129
Responses to questions submitted for the record from 
  Representative Gonzalez........................................   131

 
   SMART COMPETITION: ADAPTING U.S. STRATEGY TOWARD CHINA AT 40 YEARS

                         Wednesday, May 8, 2019

                          House of Representatives,
                      Committee on Foreign Affairs,
                                                     Washington, DC

    The committee met, pursuant to notice, at 10:06 a.m., in 
room 2172, Rayburn House Office Building, Hon. Eliot Engel 
(chairman of the committee) presiding.
    Chairman Engel [presiding]. The committee will come to 
order.
    Without objection, all members will have 5 days to submit 
statements, extraneous material, and questions for the record, 
subject to the length limitation in the rules.
    Let me welcome our witnesses. Thank you for your time and 
expertise this morning.
    Welcome to members of the public and the press as well.
    Today, we will examine U.S. strategy toward China. China 
represents a profound strategic challenge all around the world 
economically, geopolitically, and even potentially militarily. 
At the same time, China is a necessary, if sometimes difficult, 
partner in certain areas.
    In 2019, we marked 40 years since the United States 
normalized relations with the People's Republic of China. We 
did so then because we recognized what remains true today: the 
U.S.-China relationship is one of the most consequential 
relationships in the world. In many ways, the nature of that 
relationship shapes the world we live in today, so we need to 
get it right.
    Over the past four decades, the United States has 
facilitated China's rise. We supported China joining the World 
Trade Organization in 2001, which opened the Chinese market and 
helped bring the country into the world economy. American firms 
and venture capital have floated to China over the years, 
including in the Chinese technology market, which has become a 
matter of strategic concern for our Government today.
    The United States made a gamble that, as China became more 
and move involved on the global stage, it would open up 
domestically and become a constructive stakeholder in the 
international system. It is pretty clear that gamble has not 
paid off in the way we hoped it would.
    While the United States had been embroiled in costly and 
seemingly endless conflict in the Middle East over the last two 
decades, China has grown into the second largest economy in the 
world, a fact that has propelled many of China's geopolitical 
ambitions. Our original hope was that this growth would come in 
tandem with China abandoning its authoritarian tendencies, that 
we could somehow shape Beijing's incentives to better fit our 
interests, but that just has not come to pass.
    China today under Xi Jinping is a powerful nation with a 
long-term agenda and vast resources. In global affairs, China 
often stands opposite the United States, and not just on 
democratic values or support for human rights. As the United 
States retreats from the world under a Trump Administration's 
policies, Xi Jinping is eager to present China as an 
alternative to the American model of global leadership. But it 
is a stark reality.
    Bullying China's neighbors in the South China Sea, 
exploiting corrupt officials to smooth the way for strategic 
investments in Africa and Latin America, building out a global 
technology infrastructure beholden to Beijing's interests, 
putting more than a million Muslims in western China in 
concentration camps--and managing to keep the world silent 
about it. There is no question that China is a determined actor 
that does not share our country's fundamental values.
    I am pleased that the Trump Administration's National 
Security Strategy identified China as a competitor and Chinese 
influence globally as a challenge that must be prioritized. But 
competition itself is not a strategy. The scale of these 
challenges demands that we put forward a cohesive, coordinated 
response to China. We should work with our allies to develop 
and implement that strategy. After all, our allies are the 
greatest advantage when it comes to advancing our interests and 
values around the world.
    As we sit here, the Trump administration is preparing for 
another round of trade talks with Chinese leaders tomorrow. Up 
to $200 billion in additional tariffs are possible, according 
to the Administration. Our negotiators should seek to get the 
best deal possible for American workers, but trade wars and 
bellicose rhetoric alone are certainly not a strategy.
    So, the question is, what does a smart competition with 
China look like? It starts with investment here at home to make 
the United States more competitive. That is what China has been 
doing for years, while we have poured energy and resources into 
costly wars and tax cuts for the wealthy, and spent far too 
little investing in our people, in the middle class, and in 
areas like infrastructure, scientific research, and education.
    We also need to double down on our strengths. The United 
States has long been a global leader that articulates our 
values, our commitment to democratic principles of openness, 
freedom, and human rights. We have not always lived out these 
values perfectly--and right now it seems like we can barely see 
them in the rearview mirror--but if we fail to hold them up as 
a global standard, we do ourselves a great disservice. This is 
certainly an area where we distinguish ourselves from China.
    And while doing all of this, we must work with China on 
challenges we all share. From non-proliferation, to climate 
change, to global health and pandemics, our interests often 
align with those of China. We must be able to work together to 
tackle these global challenges.
    I am eager to hear from our witnesses on how we should be 
orienting ourselves toward the next 40 years in the U.S.-China 
relationship.
    But, first, I will turn it over to Ranking Member McCaul 
for any remarks he might have.
    Mr. McCaul. Thank you, Mr. Chairman.
    The Chinese Communist Party is a clear and growing threat 
to the United States. Between their Made in China 2025 plan, 
Belt and Road Initiative, and forceful land grab in the South 
China Sea, they pose an active and serious threat to the United 
States economy, developing countries, global democracy, and 
human rights.
    After 40 years of engagement with China, we are at an 
historic inflection point in our relationship. And I want to 
thank you, Chairman Engel, for calling this hearing, so we can 
better highlight what China is doing today.
    When the United States established diplomatic relations 
with the People's Republic of China 40 years ago, our GDP was 
$2.6 trillion and theirs was $178 million, 14 times their size. 
Today, China is getting close to achieving economic parity with 
the United States, having reached $12 trillion in 2017 GDP 
compared to our $19 trillion.
    China has also grown in military strength, technological 
sophistication, and spread its Belt and Road influence well 
beyond its neighbors. Just this Monday, Secretary Pompeo 
detailed China's designs on the Arctic, including the 
development of shipping lanes in the Arctic Ocean.
    Next month will mark the 30th anniversary of the Tiananmen 
Square Massacre, when tanks rolled over pro-democracy 
protesters and crushed the dream of a freer society under the 
party's iron-fist rule. Today, as many as 3 million ethnic 
minority Muslims are imprisoned in what an Assistant Secretary 
of Defense characterized last week as concentration camps. And 
when Secretary Pompeo released this year's State Department's 
human rights reports, he said that China is ``in a league of 
its own'' when it comes to human rights violations.
    Under President Xi, the party's evils at home are being 
spread abroad. The party is seeking to establish dominance over 
neighboring countries, including Taiwan, and they are seizing 
maritime territories, developing military capabilities intended 
to hamstring American forces, and projecting authoritarian 
influence around the world.
    The party's malign agenda touches the United States as 
well. In 2014, it was revealed that Chinese hackers stole 22.5 
million security clearances, including my own. Today, the 
United States Justice Department is working to hold China 
accountable for their blatant intellectual property theft from 
U.S. businesses. Their economic ambitions have been achieved at 
the expense of American ideas and innovation, and this behavior 
is simply and completely unacceptable.
    At the Senate's Worldwide Threats hearing this year, the 
DNI testified that Chinese aggression was, quote, ``a long-term 
strategy to achieve global superiority''--closed quotes--
through domestic repression, unfair economic practices, and 
military expansion. If our views and actions toward China 
remain complacent, as they were in previous decades, not 
recognizing their true threat, in another 40 years the world 
will look very different than it does today for my children, 
our children, and our grandchildren. And that is why I was 
pleased that we took this bipartisan action.
    Just yesterday, the House passed my Championing American 
Business Through Diplomacy Act, which I introduced with 
Chairman Engel. This legislation makes the promotion of U.S. 
economy interests a principal duty of our missions abroad. It 
also requires economic and commercial training for our 
diplomats serving overseas.
    Promotion of American businesses abroad has never been more 
important. Where China brings their debt-trap financing, 
predatory lending, their companies, and their workers, America 
facilitates fair financing using local companies and workers. 
Our alternative fosters stability and security, while theirs 
brings just the opposite. If America does not step up its 
economic engagement in the world, this vacuum will be filled by 
others, with a potentially devastating impact on American 
national security.
    So, with that, I would like to thank the witnesses for 
being here today, and I look forward to this discussion.
    With that, Mr. Chairman, I yield back.
    Chairman Engel. Thank you, Mr. McCaul.
    And now, I would like to introduce Dr. Elizabeth Economy, 
the C.V. Starr senior fellow and director for Asia Studies at 
the Council on Foreign Relations. She is an acclaimed author 
and a leading scholar on Chinese domestic and foreign policy. 
Her most recent book addresses the impact of Xi Jinping's 
leadership on the Chinese State.
    Thank you for being here.
    I would also like to introduce Ms. Samm Sacks, 
cybersecurity policy and China digital economy fellow at New 
America and a recognized expert on the U.S.-China technology 
relationship and China's cybersecurity regime.
    Welcome as well.
    Next, Ms. Kelly Magsamen is the vice president for national 
security and international policy at the Center for American 
Progress, and formerly served as the Principal Deputy Assistant 
Secretary for Asian and Pacific Security Affairs at the 
Pentagon.
    Welcome.
    And finally, I want to welcome Dr. Aaron Friedberg, 
professor of politics and international affairs at Princeton 
University and co-director of the Woodrow Wilson School's 
Center for International Security Studies. Dr. Friedberg also 
served as Deputy Assistant for National Security Affairs in the 
Office of Vice President Dick Cheney.
    I will now recognize you for 5 minutes each to summarize 
your testimony, and we will put anything that you want to 
submit into the record that you do not say. That would be fine. 
Let's start with Dr. Economy.

 STATEMENT OF DR. ELIZABETH ECONOMY, C.V. STARR SENIOR FELLOW 
  AND DIRECTOR FOR ASIA STUDIES, COUNCIL ON FOREIGN RELATIONS

    Dr. Economy. Thank you, Chairman Engel, Ranking Member 
McCaul, and members of the committee, for inviting me here to 
speak this morning as part of such a distinguished panel.
    I would like to begin just by unpacking the concept of 
smart competition to frame my remarks. As I understand it, 
smart competition means that we know what we are competing for, 
that we have an objective in mind. It means that we know our 
competitor and we know our competitors' strengths and 
weaknesses. And it means we know what resources we have, what 
resources we need, and we know how to marshal those resources 
effectively.
    I think in this context, the U.S.-China relationship, that 
we are falling short. First, we have no clear sense for what we 
are fighting for. I think the Administration and Congress have 
done a very good job of understanding the challenges and 
potential challenges that China poses, but we are largely 
playing a defensive game. And a defensive game is not a very 
good strategy for competition.
    We need a positive and proactive vision of the United 
States, of where the United States stands within itself, where 
it stands in the Asia-Pacific region, and where it stands on 
the global stage_not just for today, but for 2026, when the 
United States turns 250 years old, or for 2050. China has such 
a vision, and it allows it to set its priorities, its policies, 
and to figure out how to allocate its resources.
    I think that the Administration's Free and Open Indo-
Pacific strategy offers a good starting point. It reflects U.S. 
values. These are values that are shared by our allies. And it 
reframes the competition away from the United States versus 
China_a competition that we are going to lose in many different 
ways_to our advantage. An advantage that is based and rooted in 
our essential values, and again, the values that are shared by 
our allies.
    Second, do we understand China? I think we are getting 
there. We are making progress. It is a complicated, complex 
country. I tried to lay out some thoughts in my written 
testimony. But we need a pipeline of expertise that begins in 
our secondary schools through our colleges, graduate schools, 
and into the U.S. Government.
    Reports that it is more difficult today for young experts, 
young people who spent their training and their time learning 
Chinese and studying in China, that it is more difficult for 
them now to enter the Government, are moving us in the wrong 
direction. We should not be penalizing people for developing 
expertise, and we certainly should not be penalizing Chinese-
Americans as well.
    We also need cooperation with China. And I was heartened to 
hear the chairman mention this in his remarks. Cooperation not 
only is essential for addressing many of the global challenges 
that we face and many bilateral and common interests that we 
have, but it is also essential for us to understand China. If 
we cutoff cooperation, if we cutoff exchanges, if we begin to 
develop a visa policy that is restricting our exchanges, then 
we are losing again because we lose our insight into this 
country.
    Finally, have we mastered or are we marshaling our 
resources effectively? I think there are some bright spots, and 
I think Congress is responsible for some of them. The Asia 
Reassurance Initiative Act, the BUILD Act, I think are both 
very important. I think we have people in our Government, Matt 
Pottinger, Randy Schriver, who are internationalists and 
multilateral in their orientation, who are working together to 
advance a proactive and positive policy.
    And I think our military gets it. They understand what Free 
and Open Indo-Pacific means, and they are trying to marshal 
their resources.
    But we do not have a coherent and constructive and 
coordinated approach across the various agencies of our 
Government, and we need that. We need a message to come down 
from the President that reaffirms our support of the Free and 
Open Indo-Pacific. We need our public diplomacy and our 
political capacity-building, and our trade and investment 
strategy, and our military all to row in the same direction.
    We need a calling card. It is not enough for us to condemn 
Chinese policies_the Belt and Road Initiative, or Made in China 
2025, or any of the other myriad policies_that we rightly find 
offensive and challenging. But what is it that we are bringing 
to the table?
    Vice President Pence announced an initiative on Smart 
Cities back in the U.S.-ASEAN meeting last fall, but I have not 
seen any evidence that we are truly developing this. Why not 
develop a smart and sustainable cities program, something, 
again, that would bring together various parts of our 
administration, and announce a positive and proactive role for 
the United States?
    Finally, I think Congress has an important role. In 
addition to writing, drafting, and passing legislation, it has 
a diplomatic role that it could play. For example, when we look 
at the Huawei discussion, I look around many of the countries 
that I visit in Europe and Asia, and there are a lot of 
divisions within these governments. Between the security 
elements and their equivalent to the State Department and 
foreign ministries, there are different perspectives. Congress 
should be engaging with their counterparts to help sort of 
energize the debate in a way that supports the U.S. 
perspective. We suffer a diplomatic deficit at our top-level 
leadership, and Congress needs to step up to help fill that.
    And Congress I think plays an important role, or a 
potentially important role, as a convener of the various parts 
of American society that need to get behind this effort. I 
spent the past three or 4 months out at Stanford University as 
a visiting fellow. Being there on the West Coast, I can tell 
you, you have got a very different perspective from a 
university in the tech community and in a very significant 
Chinese-American community. These are communities that need to 
be engaged. Congress needs to learn from them, and they also 
need to learn from Congress. So, I hope, through informal 
briefing sessions as well as hearings, that you are drawing in 
other parts of the community that are deeply invested in the 
U.S.-China relationship.
    So, I will just conclude by saying I think FBI Director 
Wray had it just about right when he said that this is a whole-
of-government and whole-of-society response that we need for 
China. I would just add that it needs to be a whole-of-the-
world response as well.
    Thank you.
    [The prepared statement of Dr. Economy follows: ]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Engel. Thank you very much, Dr. Economy.
    I would now like to introduce Ms. Samm Sacks, cybersecurity 
policy and China digital economy fellow.

  STATEMENT OF MS. SAMM SACKS, CYBERSECURITY POLICY AND CHINA 
              DIGITAL ECONOMY FELLOW, NEW AMERICA

    Ms. Sacks. Chairman Engel, Ranking Member McCaul, and 
members of the committee, thank you very much for the 
opportunity to testify today.
    I have worked on Chinese technology issues for over a 
decade, both with the national security community and in the 
private sector. The United States and China are locked in a 
deepening conflict over technology which is likely to continue 
for years to come, whatever happens with the trade agreement 
this week or soon. Beijing is doubling down on aspirations for 
China to become a cyber superpower. These aspirations manifest 
through a State-driven approach to cementing China's leadership 
in emerging technologies like artificial intelligence and 5G 
networks that will enable ubiquitous computing, as more 
physical systems rely on software.
    I refer the committee to my testimony from March before the 
Senate Commerce Subcommittee on Security in which I spoke about 
source code reviews, localization pressures, and restrictions 
on cross-border data flows that compel tech transfer and impede 
market access. I would be happy to answer any questions about 
this in the hearing. Additionally, there are national security 
and human rights dimensions.
    So, what is to be done? Overall, the U.S. policy position 
needs to be based on a ``small-yard, high-fence'' approach. 
This is a phrase from former Secretary of Defense Robert Gates. 
It essentially means being selective about what technologies we 
want to protect, but aggressive in protecting them.
    Overreach in the form of blanket bans, unwinding global 
supply chains, and discrimination against Chinese individuals 
is not the answer. The line between U.S. and Chinese 
technological development is not as clear as the political 
borders between the two countries, as it was during the cold 
war. We belong to an interconnected system when it comes to 
research, development, manufacturing, and talent. Not all 
Chinese students, researchers, and scientists are spies. 
Treating them as such is dangerous to U.S. national interests.
    So, how do we maintain the openness of the U.S. system in a 
way that is less vulnerable to exploitation? Is it possible to 
build a system that is both open and resilient? Yes, I believe 
we can and we must.
    Let's first talk about export controls. The Department of 
Commerce has issued a list of emerging technologies that may be 
subject to new export controls due to their importance for 
national security and has solicited feedback from industry. I 
would like to offer a framework that can help us arrive at a 
more specific list of technologies and their applications.
    Technology should be subject to greater control if it is 
essential to military technology, but not simply used by the 
military. Two, there is a scarcity of knowledge about that 
technology, and, three, that technology is developed 
exclusively in the United States or other countries that 
enforce similar export controls, so as to avoid designing out 
of U.S.-made components. Reviews should be conducted by both 
military and non-military stakeholders, and the findings must 
be regularly reevaluated and updated.
    A second issue, right now in Xinjiang the Chinese 
government is detaining large numbers of ethnic Muslims and 
using a range of technologies, like biometric scans, facial 
recognition, to enable mass incarceration and surveillance. 
There needs to be a process to systematically consider the 
ethnical harm that can result from seemingly benign open-source 
U.S.-China collaboration on basic AI research. But, to date, 
there has been no systematic study of this.
    Export controls may not be the best tool for this, but I 
recommend that the United States engage with international 
standards bodies to develop a guide for how we can think about 
ethnical collaboration on academic AI. It is not a simple task. 
First, many AI applications are inherently dual-use. So, it is 
almost impossible to determine at times what is military and 
what is civilian. Second, it is very difficult to prevent code 
from going across borders. Many state-of-the-art AI systems are 
openly published online. And third, the United States derives 
benefit from working with Chinese researchers who are, frankly, 
doing very cutting-edge work on similar problem sets as we are. 
There are also national security risks to losing visibility 
into China's advancements.
    I would suggest a process to evaluate how we can think 
about the nature of different collaborations, the possibility 
that the Chinese government may co-op private sector or 
academic projects, the level of technology diffusion and 
development toward application. This is just the beginning of 
the conversation.
    Last, the United States must play offense by investing in 
its own R&D, infrastructure, and STEM education. China will not 
abandon its technological ambitions. So, we must be able to 
compete in our own right.
    Thank you, and I look forward to your questions.
    [The prepared statement of Ms. Sacks follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Engel. Thank you, Ms. Sacks.
    Ms. Magsamen.

   STATEMENT OF MS. KELLY MAGSAMEN, VICE PRESIDENT, NATIONAL 
    SECURITY AND INTERNATIONAL POLICY, CENTER FOR AMERICAN 
 PROGRESS, AND FORMER PRINCIPAL DEPUTY ASSISTANT SECRETARY OF 
         DEFENSE FOR ASIAN AND PACIFIC SECURITY AFFAIRS

    Ms. Magsamen. Chairman Engel, Ranking Member McCaul, and 
distinguished members of the committee, I am honored to testify 
today about the challenge that China presents to the United 
States and what we should be doing about it. I also commend 
this committee for taking on this topic so comprehensively.
    I also want to thank my fellow panelists for their immense 
scholarship on China, which I turn to often to inform my own 
views.
    I have submitted for the record a written statement, as 
well as a recent Center for American Progress strategy on China 
that I coauthored with Dr. Melanie Hart. I hope our report and 
its recommendations will prove useful to the committee as you 
take this effort forward. I would like to offer four general 
observations.
    First, at the 40th anniversary of U.S.-China relations, we 
are entering a new competitive phase in our relationship that 
will need to be managed carefully by both sides. China has been 
in competition with us for a while, but we have been so 
invested in the Middle East and South Asia, and paralyzed 
politically at home, that we have failed to take adequate 
action for many years. Going forward, we will need to make 
better choices about where we place our strategic focus, not 
just overseas, but also here at home.
    And, yes, there will, indeed, by choices, and we will need 
to accept some risk in taking them, whether it is what defense 
and security investments we make, what diplomatic efforts we 
choose to pursue, and what resource tradeoffs we make across 
the national enterprise. The nature of this competition will be 
comprehensive.
    Second, in this regard, I believe that the competition with 
China will be defined as much by what we do to make ourselves 
competitive in Michigan and Ohio as what we do in the South 
China Sea. Whether we successfully compete will be more about 
how we invest in our greatest strength, the American people, 
than in how many aircraft carriers we have. And I say that as a 
former senior defense official.
    Over the past few decades, China has funneled trillions of 
dollars into public education, public infrastructure upgrades, 
high-tech research and development, and global diplomacy. At 
the same time, Washington has dialed back investments in the 
fundamental pillars of national strength and, most importantly, 
the American people.
    Third, the United States cannot compete with China alone. 
We need our friends, whether to confront China's unfair trade 
practices or to uphold international law in the South China 
Sea. Generating a U.S.-China competition on a purely bilateral 
basis does not leverage the collective strength of our allies. 
It also puts some countries in a position of feeling forced to 
choose, a dynamic we should scrupulously avoid.
    Finally, U.S. policymakers should be cautious about 
overcorrecting on competition. We cannot abandon our democratic 
values. In fact, we should see those values as our comparative 
advantage on the field. They are what make us different from 
China and more attractive to others. Likewise, we should avoid 
painting competition as somehow civilizational. That is not 
only wrong-headed, but counterproductive. And even as we 
compete, we should remember that U.S.-China relations have also 
yielded constructive results for mankind.
    With these observations in mind, I recommend the United 
States pursue a three-prong strategy with respect to China: 
limit, leverage, and compete.
    First, we need to limit China's ability to exploit our open 
system without sacrificing our values.
    Second, we need to leverage China's growing capabilities to 
advance collective interests where it makes sense for us.
    Third, we need to compete at full national strength with 
major investments in our comparative advantage, the American 
people.
    In conclusion, the United States can manage this new phase 
in our relationship with China. We should be confident in our 
abilities, but vigilant to what is necessary to compete 
effectively. And while much of the national effort required 
will go well beyond the jurisdiction of this committee, we must 
view this challenge comprehensively because that is how China 
views us. We can compete with China without sacrificing our 
values or driving ourselves into unnecessary conflict. But we 
have to change course now. We need to put in place some better 
fundamentals, both here at home and abroad.
    Thank you for the opportunity to testify, and I look 
forward to answering your questions.
    [The prepared statement of Ms. Magsamen follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Engel. Thank you, Ms. Magsamen.
    Dr. Friedberg.

  STATEMENT OF DR. AARON FRIEDBERG, PROFESSOR OF POLITICS AND 
 INTERNATIONAL AFFAIRS, CO-DIRECTOR, CENTER FOR INTERNATIONAL 
 SECURITY, WOODROW WILSON SCHOOL, AND FORMER DEPUTY ASSISTANT 
 FOR NATIONAL SECURITY AFFAIRS, OFFICE OF VICE PRESIDENT DICK 
                             CHENEY

    Dr. Friedberg. Chairman Engel, Ranking Member McCaul, thank 
you very much for giving me the opportunity to testify.
    I would like to touch on three issues. First, what is our 
strategy toward China. Second, what China's strategy appears to 
be. And then, third, how we might adjust our strategy in light 
of those insights.
    I would like to begin by endorsing a point that Chairman 
Engel made in his opening statement. The strategy of engaging 
with China that we have been pursuing for the last 40 years I 
think was not a blunder, but it was a gamble, and it has become 
increasingly obvious that the gamble has not paid off. China 
has clearly become richer and stronger, but the CCP regime has 
become even more repressive and more militantly nationalistic. 
It continues to deploy market-distorting, mercantilist economic 
policies, and its external behavior has become increasingly 
aggressive. The simplest explanation for the failure of U.S. 
strategy is that it underestimated the resilience, the 
resourcefulness, and the ruthlessness of the Chinese Communist 
Party and its determination to hold onto domestic political 
power.
    China's rulers appear to have three consistent strategic 
objectives. First and foremost, to preserve the power of the 
CCP. Second, to restore China to what the regime sees as its 
proper historic status as the preponderant power in eastern 
Eurasia. And third, to become a truly global power with 
influence and presence on par with, and perhaps eventually 
superior to, that of the United States.
    And the key point I think is that the last two goals are 
related to the first. As their power has grown, China's leaders 
have begun to reach out beyond their borders in an attempt to 
reshape the world in ways that they believe will make it less 
threatening and more conducive to the survival of their regime. 
In sum, they are trying to make the world safe for 
authoritarians or at least for perpetual CCP rule of China. And 
this shift toward a more assertive stance began to become 
visible in the aftermath of the 2008 global financial crisis, 
and it has intensified markedly since the rise to power of Xi 
Jinping in 2012-2013.
    There is obviously ambition here. China's leaders believe 
that the U.S. is in decline and that their time has come, but 
there is also a good deal of insecurity and a sense of urgency. 
Like his predecessors, Xi fears dissent, social instability, 
and political unrest. He knows that China faces serious 
difficulties in sustaining economic growth and dealing with the 
needs of its aging population, among other problems. And one 
reason the CCP regime is pressing so hard now may be that they 
see a window of opportunity that they do not think is going to 
stay open forever.
    In its own neighborhood, China is trying to use its growing 
military capabilities to undermine the credibility of America's 
security guarantees and push the U.S. away, while relying on 
political influence operations and the increasing gravitational 
attraction of its own massive economy to pull others toward it. 
And ultimately, they seem to envision a new regional system 
that would extend across much of Eurasia, linked together by 
infrastructure and trade agreements, with China at its center 
and America's democratic allies either integrated and 
subordinated or weakened and isolated, and the United States 
pushed to the periphery, if not out of East Asia altogether.
    As regards their global ambitions, they believe that in 
every historical period there is a dominant power that gets to 
set the rules and shape the institutions in ways that serve its 
own interests and reflect its ideology. And in the long run, I 
think the regime aims to surpass the United States in terms of 
material capabilities and to usurp its role in shaping the 
international order. Of course, it is one thing to have such 
ambitions, quite another, actually, to fulfill them.
    So, in light of these considerations, how should we adjust 
our strategy? The root of our problems with Beijing, in my 
view, is the character of the CCP regime. This is not a 
civilizational struggle, but it is a contest between two 
opposing political systems and two contending visions for the 
future of Asia and the world. And the history of the last 
several decades suggests that we have very limited capacity to 
encourage positive change in China, certainly not by offering 
yet more rewards and inducements. We need to deal with China as 
it is, not how we would wish it to be. But, for that reason, we 
need to acknowledge that, for the foreseeable future, the 
prospects for stable, cooperative relations are very limited. 
Beijing is going to continue to push, and unless we choose to 
give way, a period of intensifying rivalry is, therefore, 
inevitable.
    A second point that should be obvious, but bears 
repeating--and several have already said it--our prospects in 
this rivalry will be greatly enhanced if we can find ways to 
cooperate more effectively with our democratic friends and 
allies. Looking ahead, I think our strategy will have to be two 
parts defensive and one part offensive.
    First, and perhaps most obvious, together with our friends 
and allies, we need to counter Beijing's attempts to expand its 
influence through coercion and subversion, and in the Indo-
Pacific region that is, at root, a problem of military planning 
and collective defense. At the same time as we seek to block 
some of the many vectors of Chinese outward expansion, we, 
together with our friends and allies, have to take steps to 
better protect our own society's economies and political 
systems from exploitation and manipulation. And this is a 
difficult problem, and I think it is one that we have only 
begun to wrestle with.
    In the political domain, the question is how we can best 
protect ourselves against Chinese influence operations without 
sacrificing the openness that has historically been our 
greatest source of strength. And in the economic realm, the 
challenge will be to defend against China's predatory 
practices, protect our technological advantages, and avoid 
doing things that make it easier for Beijing to sustain its 
current economic model without imposing undue costs on 
ourselves.
    Third and finally, we cannot afford to remain entirely on 
the defensive in our evolving competition with China. We need 
to find ways to impose costs on Beijing for its egregious and 
harmful behavior, both at home and abroad. The proximate aim of 
our new strategy must be not to change the character of the CCP 
regime, but to protect ourselves against it. We need to 
demonstrate to China's current rulers that they cannot succeed 
if they continue along their present path. In the process, it 
is possible that we could help to set in motion forces that 
will lead eventually to meaningful change. But, in the 
meantime, to paraphrase George Kennan, we are going to have to 
look to our own defenses while we await the ``breakup or 
gradual mellowing'' of CCP power.
    Thank you very much. I look forward to answering your 
questions.
    [The prepared statement of Dr. Friedberg follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Engel. Thank you, Doctor.
    I will now recognize members for the purpose of questioning 
witnesses. I will recognize myself for 5 minutes.
    The Trump Administration has said that the U.S. and China 
are now in an era of competition. It is hard to disagree, which 
is why this is the first of five hearings on China in the 
Foreign Affairs Committee this week. But we want to make sure 
we get this right. Terms like ``new cold war'' are being thrown 
around, which concerns many of our partners who simply do not 
want to be forced to choose between the U.S. and China.
    Dr. Economy, in your written testimony you discuss how the 
U.S.-China relationship has been based in part on the mutual 
understanding that neither side benefited from letting the 
relationship deteriorate too much. Ms. Magsamen, your testimony 
also highlights some of the risks associated with focusing 
exclusively on competition with China. So, let me ask you both, 
under the leadership of Xi Jinping and Donald Trump, does this 
basic assumption about the importance of relative stability in 
the U.S.-China relationship still hold? As we adjust our policy 
toward China, are you concerned that the U.S. policy is 
overcorrecting toward competition? And finally, what do you 
think the U.S.'s strategy objectives should be in a competition 
with China? Whoever would like to start?
    Dr. Economy. So, I would say, certainly, with this 
Administration, there is much less interest in trying to 
identify areas of potential cooperation with China. But I think 
in this era of strategic competition, identifying those areas 
is more important than ever. We may not be able to find areas 
such as climate change, significant areas of global 
cooperation, but certainly technical cooperation on things like 
drug trafficking, refugee issues, and other areas, we should be 
able to identify a number of places where we can continue to 
work together.
    I think, again, civil society efforts should not be 
maligned. We should be looking to engage, working with our 
Chinese counterparts in environmental protection, areas of 
poverty alleviation. All of these things actually give hope to 
reformers within China. They still exist, and if we close off 
cooperation, we are actually closing off a lifeline for them. 
We need to be thinking not only at the level of government-to-
government cooperation but also in terms of maintaining the 
civil society contacts and dialogues. So, it is more difficult, 
I would say, but it is even more important.
    And we can do things in multilateral fashion as well. It 
just does not have to be about the United States and China. We 
can cooperate in third countries, as we have in the past. 
Public health in Africa was an important initiative that has 
become moribund. We should be talking about development finance 
standards. There are many different ways that we can go at 
issues that concern us about China through dialogue, not just 
through pushing back.
    Chairman Engel. Ms. Sacks.
    Ms.Sacks. So, I talked about the ethics of AI, and I think 
that this also is an area of potential collaboration. Not many 
people may be aware, but there is an important project underway 
in China. This week, actually, a new report was released 
looking at issues around AI safety and the ethics there. So, 
although there are areas in which I think we have significant 
disagreements, we are all struggling with what are the rules 
for these emerging technologies. How are they going to be 
deployed? What are important questions? And so, this is an area 
where it is in our benefit to work with counterparts in China 
that are also in the midst of writing standards around how 
technologies of the future will be used and the social and 
economic implications of that.
    Chairman Engel. Thank you very much.
    Ms. Magsamen, let me ask you this: the Swedish think tank 
SIPRI reported that the U.S. military spending in 2018 was $640 
billion, which is the highest in the world and more than almost 
the next eight top spenders combined. However, more spending 
does not necessarily mean better outcomes. And it is important 
to remember that, while the U.S. has been fighting wars in the 
Middle East, China has been investing at home.
    So, let me ask you, is the United States building the kind 
of military necessary to fight a potential conflict in the 
Asia-Pacific, or are we still primarily building a military 
that, perhaps due to bureaucratic inertia or entrenched 
interests, may not be as effective in such a conflict? Ms. 
Magsamen, would you like to try that?
    Ms. Magsamen. Thank you very much, Chairman. It is a very 
good question.
    You are right, China spends about $170 billion a year, and 
that is just publicly what we know they spend on defense, and 
we, of course, are about seven times higher than that. I will 
say, however, that the gap between China's military spending 
and the military spending of some of our closest allies in the 
region is pretty severe. For example, Taiwan only spends about 
$10.6 billion a year. Japan spends $47 billion a year, and 
India spends $60 billion a year. So, there is a significant gap 
in defense spending between China and our allies, which I think 
is an important consideration.
    I also think that it is not really how much we spend on 
defense; it is what we spend it on. I think that some of the 
investments we have made in the past with respect to surface 
vessels as our more traditional means of defense are going to 
be completely invalid potentially in a conflict with China. So, 
we are going to have to make some defense investments in areas 
where we have a comparative advantage, whether it is undersea, 
space, and cyber. I think we need to be thinking differently 
about how we spend on defense.
    But I also think, more importantly--and I say this as a 
defense official again--that what we do to invest in the 
American people is going to be more significant in terms of 
competition with China than anything we spend on national 
defense.
    Chairman Engel. OK. And finally, whoever would care to 
answer, talk about the Uyghurs. Randy Schriver, the Assistant 
Secretary of Defense, Asia, called the flagrant human rights 
abuses in Xinjiang concentration camps--he said there are at 
least a million, possibly as many as 3 million, Uyghur Muslims 
who have been arbitrarily detained in recent months. What 
should we be doing to address this crisis? And why have we not 
seen more leaders of Muslim majority countries condemning 
China's rights abuses in Xinjiang? Anyone care to do it? Dr. 
Friedberg, would you care to do that?
    Dr. Friedberg. Well, I think what we are learning about 
what China is doing to its Uyghur population should shock the 
conscience of democratic societies everywhere. I think we 
should--we have begun to do more to call attention to this, and 
note that a lot of the initial efforts to uncover what was 
going on were not done by government agencies, but by private 
scholars and think tanks, and so on. And that suggests, I 
think, one of the valuable roles that independent analysts can 
play in shaping our responses to what China is doing.
    I think there has to be, or there should be, a collective 
response from democratic societies, in particular, to this. 
There is, I think, an anxiety on the part of many governments 
about speaking out too strongly because China now wields 
considerable leverage through the threat of loss of access to 
its markets. As far as the response from the Islamic countries, 
I think there, too--I do not know in detail--many of the oil-
producing countries have strong interests in commercial 
relations with China, and the Chinese have been very effective 
in threatening and silencing people to not criticizing them.
    But this is something that we should be focused on really 
day-in and day-out because, in my view, it reveals something 
important about the true character of this regime.
    Chairman Engel. Thank you.
    And very quickly, Dr. Economy, do you concur?
    Dr. Economy. Yes, very quickly. So, I would say Congress 
already has pushed forward with looking at the Magnitsky Act. I 
think we need Secretary Pompeo/President Trump to raise this 
issue because they are not, near as I can tell. Europe is 
looking for potential areas of cooperation with the United 
States on this issue. This is someplace where Congress maybe 
should, again, take the lead with European allies.
    I will say there is evidence that, if you publicize 
companies that are doing business in Xinjiang, even Chinese 
companies like SenseTime has pulled out of a venture--it was 
very active in the AI facial recognition area--pulled its 
stakes out. I think it was worried about being embarrassed 
publicly.
    And then, finally, I think to Aaron's point, if we do not 
have a strong economic pillar engaged globally, then we are not 
able to compete with the kind of economic leverage that China 
exerts over other countries. And that is why you are not seeing 
that output from the other Muslim countries.
    Chairman Engel. Thank you very much.
    Mr. McCaul.
    Mr. McCaul. Thank you, Mr. Chairman.
    When the chairman and I met with Secretary Pompeo last 
week, he said that China is a primary threat to the United 
States. FBI Director Wray testified at Aspen, or spoke at 
Aspen, saying that it is the most significant threat that we 
face as a country. And the President's National Security 
Strategy named China as the top challenge in the modern era.
    As we traveled to Latin America, and I was in Africa as 
well, China is everywhere. I mean, this predatory lending 
practice, One Belt, One Road, it was amazing, it popped up in 
El Salvador. It popped up in Colombia. It popped up in Rwanda, 
all throughout the continent of Africa, the Western Hemisphere. 
They can take ports like Sri Lanka. They can have a port in 
Djibouti right next to our military base without one shot being 
fired. So, that, to me, how do you compete with that?
    We passed a bill yesterday that tries to advance our 
mission in the State Department across the world to advance 
American businesses through diplomacy.
    But, then, on the technology side--Ms. Sacks, you talked a 
little bit about this as well--I worry about the competition on 
the technology side, the technology transfers, the theft of 
intellectual property. So, I look at the four main areas. 
Artificial intelligence you spoke to. Quantum computing, we 
have not talked much about that today, but that is going to be 
the next race for the nuclear digital bomb, if you will. 
Whoever gets there first will control. Of course, cyber, and 
then, 5G. 5G, everywhere, every country we went to, China was 
opening Huawei up to 5G in these countries. As all four of you 
know, when 5G goes in, they control all the data. But the 
problem is, can we compete with their 5G? Are our Vertizons and 
AT&Ts competitive enough to compete with their 5G?
    So, this is a worldwide competition, as I see it. We talk a 
little bit about collaboration, and that sounds nice, but we 
are dealing with a country that likes to steal things and not 
invent necessarily. And I know this is kind of a broad-based 
question, but that is just the way I see China today.
    And when I have the top national security experts tell me 
it is the biggest threat we face--you know, it used to be 
Islamic terror. When I would get my threat briefings when I was 
chairman of Homeland Security, that was it. Now they are saying 
it is China. So, that speaks volumes, I think, in terms of the 
threat level.
    And I would just like to go down the panel, if there are 
any comments?
    Dr. Economy. So, I think you make the really important 
point that what we see China doing at home, if we are looking 
at things like the development of its internet policies, the 
way that it has developed in terms of its own economic 
development, human rights practices, it is now exporting those 
to all the countries that you mentioned, through the Belt and 
Road Initiative. The Belt and Road Initiative began as an 
infrastructure plan; it has moved to a digital Belt and Road, 
fiberoptic cables, e-commerce, and satellite systems.
    There is a security component, as you mentioned, with the 
ports. China is training officials in Tanzania and Uganda on 
how to manage the internet, how to do online monitoring. It is 
exporting political capacity-building for authoritarianism, and 
it is doing it at the global level in terms of global 
governance. So, the same values that we see in China at home, 
China is exporting to other countries. It is also negotiating 
those, in the United Nations.
    So, how do we address it? Again, we have to have our own 
proactive and positive policy and message. And we cannot do it 
alone. We are going to have to do it with our allies. It cannot 
be about condemning the Belt and Road. You cannot go to Rwanda 
and just say, ``Don't do this.'' We have to provide an 
alternative.
    One last point that I made in my written testimony I think 
bears mentioning that is that we do invest more in many parts 
of the world than China does, not just stock investment, but 
even investment last year. And we need to shape that narrative 
a little bit better than we do.
    Mr. McCaul. I think we have to offer a better alternative. 
I mean, they are offering a product. We have to compete with 
them.
    Ms. Sacks.
    Ms. Sacks. I agree with Ms. Magsamen that we cannot have a 
purely defensive strategy. We have to be able to compete. And 
so, let's talk about 5G for a moment. The U.S. has no viable 
alternative to Huawei. And we can talk about why that is, but 
at this point it is simply too late. This is a decade-long 
process.
    So, how can we look forward and make sure that that does 
not happen again? I think about companies like semiconductor 
companies that are in China right now. A lot of the profit that 
comes from that market in China is, then, plowed back into R&D 
in emerging technologies like 5G. So, it is not just as simple 
as let's get out of China. We need that as part of our own 
innovation base which underpins U.S. power.
    The other issue is on the resources and the role that we 
give cyber within our own government. Shortly after Xi Jinping 
took power, he set up an office which has become one of the 
most powerful organizations in the Chinese bureaucracy, focused 
specifically on cyber. Meanwhile, we have struggled to have our 
own--we do not have an equivalent of the Cyberspace 
Administration of China in our own government. The Department, 
the Cyber Coordinator position has been in flux. So, we need to 
make sure that we are matching toe-to-toe with the investment 
from the resources on the cyber front because their attacks are 
becoming increasingly sophisticated. So, again, the fundamental 
point here is defense is not the only way to go about this.
    Mr. McCaul. Ms. Magsamen.
    Ms. Magsamen. With respect to the Belt and Road Initiative, 
I do think it is important to distinguish between China's 
activities that are actually potentially good in terms of 
regional development--for example, like China building a road 
in Africa may be something that is in our interest as well. So, 
I think we need to be selective about where we decide to 
compete with the Chinese on the Belt and Road.
    I also think that the biggest weapon that we can wield with 
respect to China's economic engagement is transparency, working 
with regional platforms to establish transparency around these 
deals. Because once you have that transparency, China tends to 
change its own behavior in terms of what it is offering. So, if 
a country knows a deal is a bad deal, they are not going to 
pursue it with the Chinese. So, I think part of it is 
transparency, and part of it is offering an alternative, but 
being selective about how we do that.
    On the tech side on 5G, you know, one immediate idea on 5G 
would be to try to pursue a digital trade union with the 
European Union and 5i. I think that the Europeans, in 
particular, and many of our Asian allies are looking for the 
United States to offer that kind of leadership where we try to 
marshal a collective union around that. Now that is going to 
require some tradeoffs from the United States potentially 
around privacy rights with the European Union. But I think 
those are the kinds of things that we need to be doing in the 
immediate term with the Europeans.
    Mr. McCaul. Yes, I think the 5G for 5i in the EU is a great 
idea.
    My time is way expired, but if you have just a very quick 
comment, Dr. Friedberg?
    Dr. Friedberg. Just two very brief. On Belt and Road, I 
agree about being selective, the necessity of being selective. 
And as I said in my remarks, part of the reason for that is 
there may be positive effects from what China is doing, but 
there are also negative effects for China, which we should not 
be protecting them against.
    I also agree that transparency is critically important. And 
here, too, NGO's and scholars and others have played a very 
important role in bringing to light some of the harmful effects 
of Chinese investment. And that is something, for example, the 
National Endowment for Democracy and the International 
Republican Institute here in the United States have played a 
role in and deserve congressional support.
    The technological competition is, obviously, a huge 
subject. I would just say, I think we are headed toward some 
degree of decoupling and disengagement between our economy and 
China's, particularly in the high technology areas. That is 
already underway. It is really initiated, first and foremost, 
by things that China has been doing for some time. We are now 
trying to figure out how to respond. The question, in my view, 
is not whether we are going to do that, but how far and how 
fast it is going to unfold, and how we can shape it to better 
serve our interests. And there is a lot more to be said there, 
obviously.
    Chairman Engel. Thank you very much.
    Mr. Sherman.
    Mr. Sherman. I join the chair in regretting the shameful 
lack of comment from Muslim countries about the oppressors of 
the Uyghurs. Only Turkey has spoken, and that is only because 
the Turkish opposition party shamed the government into it 
because the Uyghurs are not only Muslim, but also Turkic. Every 
other Muslim country has cowered toward China. They do not 
cower toward the United States. They are free to criticize us, 
and often do.
    I join with the ranking member in support of his bill, 
which we passed, to have the State Department push America's 
economic goals abroad. I would share with you just how long a 
distance we have to go in changing the culture there. 
Ironically, our top diplomatic schools are dominated by those 
with the attitudes of Confucian scholars toward the messiness 
of business and trade.
    In one instance, I remember we had before my subcommittee 
one of the top diplomats in America who, in response to a 
question, said, yes, he did do something to support American 
jobs. He supported the sale in the country he represented of 
the Chrysler Crossfire, which is 99 percent made in Germany, 
not a mistake this diplomat would have made about anything he 
cared about.
    The WTO was not a risk; it was a blunder. Sixty-five 
percent of the Democratic Caucus voted no. Three point four 
million jobs is what we have lost as a result of this blunder, 
according to the Economic Policy Institute. And today, we have 
a President who at least is trying to do something about it. 
The reaction in my party is natural. We call it ``Trump 
derangement syndrome''. It is that we must reverse our position 
if Trump is anywhere close to where we have always been. I hope 
he does not tweet something in favor of Mother's Day; there 
will be pressure on me to come out against mothers.
    [Laughter.]
    The fact is we were right then; we are right now. We should 
not abandon our economic values and join the U.S. Chamber of 
Commerce just so we can be opposite of Trump. And we have got 
to beware that Wall Street funds most of the economic 
institutes in this country who, then, confer legitimacy on an 
ideology that is pro-Wall-Street and anti-jobs.
    One quick dovish statement: the islets in the South China 
Sea, there is no oil there, and if there was, it would not be 
ours. There is no people living there. Trillions of dollars 
worth of trade sails by there because it goes in and out of 
Chinese ports, and this would give the Chinese the capacity to 
blockade their own ports. It is not an excuse to tremendously 
increase the aggressiveness and funding of the U.S. Navy.
    People on this panel came of age during the last parts of 
China's great century of weakness, but we have got to remember 
that is an anomalous period. For millennia, China has been the 
hegemon in its whole world. Then, its whole world was East 
Asia. Now its whole world is the world.
    In the history of Rome, when a Roman leader made a 
political mistake and was on the wrong side, that Roman leader 
would get into a warm bath with wine and luxuries, soft music, 
and they would open their veins. And they would relax in 
comfort for a wonderful hour. We are at that hour. We are 
comfortable, surrounded by luxuries and $600 billion worth of 
goods, more than we actually produce. That is our trade 
deficit. We hear the soft music of economists telling us not to 
worry about the trade deficit, and in an hour we will expire.
    We are eyeball-to-eyeball with China, and in the Chinese 
view, they are going to win. They know they have the weaker 
economy. They are dependent upon American markets far more than 
we are dependent on them. They think they will win because 
their political system is stronger. They believe that if they 
lose a trillion dollars in GDP and we lose a billion dollars in 
GDP, we will fold; that they have the unity and patriotism to 
persevere, and that we have division, self-interest, and no 
willingness to endure even the slightest pain to achieve 
victory.
    We do not need to wage a trade war against China, but we 
have to be prepared to win a trade war against China. We will 
avoid that war and win if China thinks we will win. They now 
think we would lose. We cannot win a trade war with China if we 
do not have a plan to deal with a sharp decline in Sino-U.S. 
trade. They have a plan; we do not. Virtually no U.S. 
corporation has a plan to deal with a temporary cutoff in 
Chinese trade. That is a level of corporate malfeasance that I 
am not sure their errs and omissions policies will cover from 
shareholder lawsuits.
    And in my own hometown newspaper, the headline is, ``Trump 
Trade War Hurts American Consumers''. We are either going to 
endure a little bit of pain now or going to bleed to death 
slowly with unsustainable trade deficits.
    We have a question in here somewhere. I will say that we 
are going to have subcommittee hearings on this this afternoon. 
Everyone on the committee is invited, and you may actually see 
me ask a question. I promise it will happen.
    If I had more time, I would ask the panel, and maybe they 
would just respond. Obviously, zero trade would be balanced 
trade with China. Is there any other approach that would get a 
zero trade balance with China in the next decade? I do not know 
if we have time for that, but they should respond for the 
record.
    My colleague asked me, what is the question? Are you aware 
of any plan, other than a complete end of trade with China, 
that would get us to a zero trade deficit within 10 years?
    Dr. Friedberg. I will answer the question because I think, 
unfortunately, the answer is no. I mean, it is a simple answer. 
I do not think that the trade deficit with China is the 
principal manifestation of our problems with them. I mean I 
think the Administration is trying to address that by 
pressuring China to buy more products from the United States. I 
do not think that is a long-term solution to our deeper 
problems with them, which have to do with the structural 
industrial policies and technology promotion policies that they 
are pursuing.
    We have thought that, by including them in the WTO, we 
would encourage them to become more like advanced market 
economies. They have not, as you have noted.
    Mr. Sherman. If I can interrupt, the trade deficit increase 
has cost us 3.4 million jobs, according to the Economic Policy 
Institute. That does not matter to people in Washington. It 
does not matter to people in think tanks. But it got Donald 
Trump elected. And I think it matters to the country.
    I will yield back.
    Dr. Economy. Can I just say that----
    Chairman Engel. Thank you, Mr. Sherman.
    Oh, did someone----
    Dr. Economy. Sorry. Can I just say----
    Chairman Engel. Sure.
    Dr. Economy [continuing]. I think it does matter to people 
in think tanks, actually, but I do not think that the zero 
trade balance deficit is the issue at hand? We are going to 
have trade deficits with countries all the time.
    Mr. Sherman. No, actually, we should----
    Dr. Economy. Whether we have a fair and open playing field, 
with other countries. That is the issue.
    Mr. Sherman. What matters to people is whether they lose 
their jobs, get addicted to opiates, have all the health 
problems. They do not want to lose and be told it is OK you 
lost your job, but it is a fair system. The jobs matter, not 
just whether we meet the rules. But, if the rules were fair, we 
would have those 3.4 billion jobs.
    I yield back.
    Chairman Engel. Thank you, Mr. Sherman.
    Mr. Wilson.
    Mr. Wilson. Thank you, Mr. Chairman.
    And thank each of our witnesses for being here today.
    Dr. Economy--and then, we will go with each of you--the 
consequence of the U.N. sanctions that have been implemented 
against the Democratic People's Republic of North Korea, China 
has been assisted, but is there sufficient assistance to make 
every effort to denuclearize the Korean peninsula? Begin with 
Dr. Economy and each of you, what has been the level of 
cooperation in regard to the U.N. sanctions?
    Dr. Economy. I think we had very strong cooperation 
initially, the strongest that I think we have ever had over the 
past 2 years. But my understanding is that, over the past six, 
maybe eight, months or so, that there has been a little bit of 
a lessening of the sanctions, and that China and South Korea 
and Russia are all agitating for a slightly different approach 
where we loosen the sanctions. And I think that we are already 
seeing mean North Korean workers back in China, back in Russia, 
with the ability to repatriate profits, et cetera. So, I think 
we are seeing over time there has been a relaxation in some 
areas of the sanctions.
    Mr. Wilson. Ms. Sacks?
    Ms. Sacks. This is outside of my field of expertise. So, I 
will defer.
    Mr. Wilson. OK.
    Ms. Magsamen. I would agree with Dr. Economy. China uses 
its economic leverage with North Korea as a means to get to a 
political end, and they tend to toggle it back and forth, 
depending on the circumstances of the situation, where 
diplomacy stands, where they are doing missile tests. So, right 
now, I would agree with Dr. Economy, they are in the loosening 
phase because I think they are trying to get Kim Jong-un to 
actually engage diplomatically with the United States. So, they 
kind of go back and forth.
    Mr. Wilson. Thank you.
    Dr. Friedberg. Let me add that this is something they have 
been doing for a long time. And generally, I think the pattern 
has been, when the Chinese leadership feels under pressure, 
particularly from us, or becomes more concerned about what the 
North Koreans are doing, they will ratchet up sanctions, at 
least for a time. If they are less concerned, they will draw 
back.
    I do not think they have any intention or ever will do all 
that they could to put maximum economic pressure on the North 
Korean regime because they are afraid that it would collapse. 
Unfortunately, I think it is only if the regime were put in a 
life-or-death position that there is any chance they would give 
up their nuclear weapons. So, I do not think we can count on 
China to solve this problem for us.
    Mr. Wilson. And beginning with Dr. Friedberg and going the 
reverse direction, that is--Congressman Sherman has already 
referenced it--but the artificial islands which have now been 
converted to military outposts, the implications on that are to 
maritime trade?
    Dr. Friedberg. Yes, I hesitate to do this, but I disagree 
with Congressman Sherman on this issue. I think the islands in 
the South China Sea are actually quite significant in a number 
of ways. They enable China to better maintain a year-round, 24-
hour-a-day naval and air presence over these waters that they 
claim, and at some point potentially, if we do not oppose them 
in a satisfactory way, to constrict the use of this vital 
waterway by other countries, principally allies of ours, as 
well as our own shipping. So, that is a major concern.
    I think the second issue here is that, by doing what they 
have done since 2014, and getting away with it, effectively, I 
think they have succeeded in raising serious questions about 
our resolve and our capacity to oppose their expansion. And I 
think that was part of the point, to demonstrate our inability 
to act effectively.
    Ms. Magsamen. So, I think the South China Sea threat is 
less about the commercial shipping lanes and more about pushing 
the American military further out. You know, those islands 
allow them to project power in ways they could not before, for 
example, to what Dr. Friedberg said. And they also use that as 
a way to undermine confidence in America's resolve and ability, 
and they use it politically as well in the region, in 
particular, with the Philippines and other countries. So, 
China's objectives in this space are less about restricting 
commercial shipping and more about undermining the confidence 
in the United States' security guarantees.
    Dr. Economy. I would only add that I think it is stage one, 
and stage two is looking toward Taiwan. So, I think at every 
level we need to be pushing back in ways that seek to 
demonstrate that the United States does have the resolve to 
prevent China from moving forward in this way.
    Mr. Wilson. And I thank each of you for your responses, and 
we look forward to working with you in the future. Thank you 
very much.
    Chairman Engel. Thank you.
    Mr. Sires.
    Mr. Sires. Thank you, Mr. Chairman.
    And thank you for being here.
    First, I would like to agree with the ranking member's 
comments regarding the technology. And I will just share an 
experience that I had last month. In my district, I have 
Stevens Institute of Technology, which is a very fine 
institution. And they had been asking me for a long time to 
visit because they are doing some wonderful things, good 
research.
    So, I went and they were explaining some of the research 
that they just started on quantum physics. Well, I am still 
trying to learn about quantum physics. But what was really 
telling to me was that the person that was in charge of the 
research was Chinese. Of the 10 students doing the research, 
working with the professor, nine were Chinese. There was only 
one American.
    Now Stevens Institute of Technology does, also, a lot of 
defense work. My concern is how to deal with the fact that we 
do not get enough Americans to do some of this research in some 
of these areas. Why should we have an institution like the 
Stevens Institute that is one of the finest institutions in 
America, and yet, we do not have enough Americans? And it is 
not because they are not trying.
    So, can you talk a little bit about some of what I just 
said? Ms. Sacks?
    Ms. Sacks. So, colleagues at the University of Pennsylvania 
recently wrote an excellent op-ed in which they described a 
mismatch between what our declared national intelligence 
priorities are, focusing on quantum, 5G, and AI, and where 
investment and public funding is going. So, I think the first 
thing is we need to make sure that we are investing in basic 
research in these areas.
    The second----
    Mr. Sires. Yes, but the people that do the basic research--
--
    Ms. Sacks. Excuse me. I am not finished.
    The second issue is that there needs to be incentives to 
have Chinese researchers and scientists who are working in our 
labs and universities stay here. I think when we do not provide 
the right environment for them, if they feel targeted here, 
they will go back to China. And so, we want our universities, 
which are the best in the world, to continue to attract the 
best from around the world, but have them stay here and 
contribute to the U.S. economy.
    The third is in terms of STEM graduates and making sure 
that we are investing in that area as well. I also think that 
there needs to be more of a focus on inclusivity in that field. 
There has been a lot of focus on how can we better make a cyber 
work force, for example, that is representative, both from a 
gender perspective and others. So, there is a lot of focus, and 
this plays back into the idea of it is not just playing 
defense, but thinking really strategically in an offensive way 
about investing in our own capabilities in these fields.
    Mr. Sires. So, how do we recruit people that are from this 
country to take some of these courses?
    Ms. Sacks. That is probably a good idea.
    Mr. Sires. Oh, thanks.
    Dr. Economy. Can I just----
    Mr. Sires. Yes.
    Dr. Economy. Can I just ask--it seems to me, if I remember 
Stevens Institute of Technology, that it has often been a very 
welcoming place for first generation immigrants to come and be 
educated, right?
    Mr. Sires. That is because it is in Hoboken, New Jersey, 
and Hoboken has been an entryway into America for over 200 
years.
    Dr. Economy. Right.
    Mr. Sires. You know, forever.
    Dr. Economy. Right. So, in that context----
    Chairman Engel. And the birthplace of Frank Sinatra.
    Mr. Sires. That is right.
    [Laughter.]
    Dr. Economy. Even more importantly.
    [Laughter.]
    But in that context, I think Samm's point is well-taken 
that perhaps these are Chinese who should be welcomed, you 
know, and thought about in terms of developing, granting 
citizenship.
    Mr. Sires. Well, look, I am welcoming them. I just want 
more participation from our students. It is not that I am 
unwelcoming. I am concerned over the fact that nine out of 10--
and then, I went to another section of the college and it was 
very similar. You know, there were some of the students from 
India doing most of the research.
    Dr. Economy. Right.
    Mr. Sires. So, I am interested in getting our kids. And I 
am wondering, is it because of the cost, that it is 
prohibitive? Because Stevens is not--you know, whether that is 
a factor. I want our kids, our good kids, to participate.
    And, you know, interacting with students--I was a teacher 
for 10 years--OK?--and my wife for 37 years. Interacting with 
students helps a great deal understanding each other's country, 
but it cannot be so one-sided. That is my concern.
    Ms. Magsamen?
    Ms. Magsamen. So, I completely agree. And I think part of 
this challenge is that Chinese students often pay full tuition 
to many of these universities. And so, there is an economic 
incentive for these universities to seek Chinese students and 
sort of invest in them.
    I do think that there has to be some investment in post-
graduate science education, some tuition assistance for 
American students, so that we can continue to have a pipeline 
of American scientists and researchers. So, I do think that 
part of the answer is actually some level of tuition assistance 
for American students.
    But this gets back to the original point I made earlier. We 
need to be thinking about our human capital in this country in 
a different way than we thought about it before. We need to be 
making moonshot investments in science education and post-
graduate education in ways that get the American people 
competitive again, and they are able to actually get into the 
pipeline of competition. And until we take those steps and 
think strategically about this in the context of China, we are 
going to be behind the eightball.
    Chairman Engel. Thank you.
    Mr. Yoho.
    Mr. Yoho. Thank you, Mr. Chairman.
    I appreciate the panelists being here.
    China again. We have seen a rising China in the last, I 
guess, 40 years, but, most recently, in the last 10 years. I 
know you guys know the history real well. But if we go back to 
just with Mao Zedong, when he claimed in 1949 the chairmanship 
of the Chinese Communist Party after they fought the civil war 
and ran the KMT out, that formed Taiwan. And since then, he put 
a vision of 100 years of where China would be. It is estimated 
that, under his authoritarian rule, 80 million Chinese died.
    And I think you guys were talking about something that I 
hear over and over again. It was one of the reasons I ran for 
Congress: a lack of vision, a lack of leadership for America. 
We sit up here and we squabble over social issues; we squabble 
over, you know, border security; we squabble over these things, 
but you do not hear one politician, one leader of this country, 
of where America is going to be 100 years from now. And I am 
guilty of that myself.
    And so, we need to raise our bar. You were talking about 
education. Have we not dumped a lot of money into education? 
But we are not going in a direction. We just throw money into 
it without a vision. And until we have a vision of this 
country, we are going to have our clocks cleaned, as we see, by 
China.
    China entered into the modern world in the 1970's, and 
since that time, since Mao Zedong, they are 70 years into the 
100-year plan, and they have done remarkable. We should be 
envious. And I applaud them for their success and I want them 
to be successful, but not at the expense of us or other 
nations. Competition is good, but not to the point where it 
inflicts damage on another economy, another way of life.
    And then, we have Deng Xiaoping in the 1980's who said, 
``Bide your time; hide your strength.'' And they did. They 
cornered the rare earth metals market in the world. And I am 
sure you guys are aware, our F-35s, 10 percent of the weight is 
rare earth metals. Ninety percent of that comes directly from 
China. The other 10 percent comes from countries that get it 
from China. Does anybody see a problem here?
    And now, we have Xi Jinping who has declared himself--or 
voted in, in fair elections I am sure--Emperor for life for 
China. In the 17th Chinese Communist Party Congress, in October 
2017, he said: the era of China has arrived. No longer will 
China be made to swallow their interests around the world. It 
is time for China to take the ``world center stage''.
    We have seen what they have done in the South China Sea. 
When Xi Jinping was here in the Rose Garden with President 
Obama, he said, we will not militarize those islands. Yet, 
today they have airstrips, military barracks, military 
offensive and defensive weapons, and radar systems. And they do 
have a lighthouse. They claim that is for peaceful navigational 
purposes.
    We see them making claims to the Arctic Circle. And the 
international standard, as it was in the South China Sea, that 
is, if you do not have land touching those areas, you do not 
have any claim to it. China was sued by the Philippines and 
lost that lawsuit. Yet, they continue to build and militarize 
these islands. They are going to do the same in the Arctic.
    There is a saying; I do not know who gets credit for it. 
But it says, if you want to know the past, look at your 
present. If you want to know the future, look at your present 
activity. I think it is very clear what China is doing.
    I wish we could say, man, they are great players; we want 
to invite them over for lunch and dinner, and let our kids play 
with them. But we see them infiltrating our universities. They 
steal intellectual property from corn seeds to computer 
technology. Huawei came to my university and wanted to fund 100 
percent a cybersecurity program, which we nixed and said, ``I 
do not believe so.''
    And this is something, you know, I wish we could be--we are 
already naive--but not stupid. You know, they have an 
aggressive path forward, and their goal is to build five new 
deepwater aircraft carriers by 2030. And I bet they do. Yet, we 
have fed this monster--I do not want to call them an 
``enemy''--we have fed this economy by allowing our 
manufacturers to go over there. And it is time for America to 
wake up. We need to have a policy called the ABC policy, 
``Anywhere But China for manufacturing''. Our manufacturers 
need to get out of China and go ``Anywhere But China''.
    We do not want a head-on conflict with China. Nobody wants 
that in the world. And so, the only way we can counter that is 
economically. And if we starve the economic engine, Xi Jinping 
will have to turn and adapt to the policies in the world. Am I 
wrong in that? Has anybody got a comment?
    Dr. Friedberg. Just a general comment about our ability to 
compete effectively. I think, historically, as a country, we 
have been slow and reluctant to engage ourselves, to mobilize 
our resources to engage in international competition. We 
preferred to have a relatively weak government and to allow 
people to do the things that they want to do.
    What has tended to mobilize this country has been a shock, 
a setback, a crisis of some kind that galvanizes the American 
people and our leaders, and gets people pointed in the same 
direction. And I worry that it may take that to mobilize us 
sufficiently to address this challenge, in part, because the 
Chinese leadership has, I think very intelligently, sought to 
avoid giving us that Sputnik moment.
    Mr. Yoho. Right.
    Dr. Friedberg. And they have been successful----
    Mr. Yoho. I am going to cut you off because I am out of 
time, but I do appreciate it and I would love to talk to you 
longer.
    Thank you, Mr. Chairman.
    Chairman Engel. Thank you, Mr. Yoho.
    Mr. Espaillat.
    Mr. Espaillat. Thank you, Mr. Chairman.
    As part of the Belt and Road Initiative, China is investing 
massive sums of money in various countries, some of our allies. 
And, of course, this money comes at a heavy price, right? We 
have observed and heard from our allies about China's predatory 
loans that often lock these countries in many years of debt. 
Could you share with us some of the predatory practices that 
they are putting in motion, that they are engaging some of 
these countries in? For example, I know that in Ecuador that 
was the case, and several other countries in the Western 
Hemisphere and abroad, and in Africa. What are some of the 
predatory practices that China engages in with regards to these 
loans? Anybody?
    Dr. Economy. I think the challenge with the Chinese loans 
is, first, that they are not transparently done. So, we do not 
know whether, for example, there are deals being struck between 
Chinese companies and leaders of some of these countries, are 
payoffs being made? There are issues around the fact that China 
exports its labor to do most of these projects. So, the people 
are not getting the benefits. Basically, they are getting the 
loans to do the projects, but the benefits are not being 
realized by the people of the country.
    There are the terms. In some cases, if the loans are not 
going to be repaid, China puts in the contracts that there will 
be payment through natural resources or perhaps even through a 
port. Although in the Sri Lanka case, it is not clear. I have 
heard that the Sri Lankans actually offered up the port. It was 
not that it was part of the contract.
    Mr. Espaillat. Is there any evidence of corruption and 
bribery?
    Dr. Economy. Well, there are many, many cases. This is 
nothing new. Quite frankly, this goes back to 1999, when China 
began its Go Out strategy for natural resources. The Belt and 
Road is simply an amplified version of that. I mean, in Zambia 
and other countries, elections have turned on the corruption 
that was inherent in Chinese dealings inside the country.
    So, there is no problem coming up with cases of corruption 
at this point. I think the problem is really, what is the 
alternative? And to that point, focusing on transparency is one 
element of it, but the other element is, are we out there 
lending?
    And the last point I will make is, it is not actually all 
about investment. China only invests between $10 an $15 billion 
a year in these Belt and Road countries. Much more investment 
goes to Europe and goes to the United States, although not last 
year. But, in any case, China is more interested in investing 
in the advanced industrialized economies. What it is doing is 
lending. So, we should just change the terms of reference 
there.
    Mr. Espaillat. China has, further, been investing in ports 
and coastal land, lands across the region. In fact, the 
chairman and I just visited El Salvador, and we were told by 
the incoming President that the past administration there was 
engaging or engaged in a deal to sell vast parts of its coastal 
territory.
    Additionally, in the Dominican Republic, China is 
attempting to purchase or construct port infrastructure and a 
coal power plant, and they want to get their hands on the 911 
system, which we helped fund, to implement facial recognition 
measures in it.
    What are your feelings regarding China and coastal 
projects, ports, and facial recognition in this hemisphere? 
Anyone?
    Dr. Economy. Where are we?
    Mr. Espaillat. Yes, but we have an issue with fentanyl, 
right? Do you feel that the Chinese control of ports will 
further contribute to our opioid crisis here in the United 
States?
    Ms. Magsamen. So, the only point I would offer is that 
there is always a duality in China's strategy with respect to 
economic engagement overseas. And you see that manifest itself 
especially in the maritime space, where they do seek to have 
port contracts. Those are very strategic port contracts. It is 
about ensuring that they get free flow of energy, but also 
there is a security dimension to that in terms of what they may 
do, in terms of spying on the countries. Or, for example, in 
Djibouti with our military base. So, there is always a 
strategic dimension to much of what they do, especially in the 
maritime space.
    Mr. Espaillat. Thank you, Mr. Chairman.
    Chairman Engel. Thank you.
    Mr. Curtis.
    Mr. Curtis. Thank you, Mr. Chairman, for holding this 
hearing. I find it of great interest.
    To our witnesses, thank you for being here.
    Dr. Economy, you referenced a pipeline, and when you did, I 
thought about my district. I would wager we have the highest 
number of English-speaking students who speak Chinese as a 
second language as anywhere in the entire country. Our dual 
immersion programs really are exemplary, and there is a strong 
desire to understand and learn the Chinese culture. I, myself, 
speak passable Chinese. I have spent several years in the 
Orient. As the mayor of my city before I came here, we had a 
sister city in China, and I spent a considerable amount of time 
with that mayor learning and understanding that culture.
    When I was young, I think we tended to view China as, what 
I would say, dependent and needing our help. That changed along 
the way, and I think we started to view them as a friend and 
somebody like maybe our NATO country friends; we could both 
prosper from a mutually beneficial relationship. Somewhere 
along the line, that changed to a competitor. And since I have 
come to Congress, I have had a chance to travel and understand 
and learn a lot more. I am questioning this term as competitor 
as well. When I think of a competitor, I think of a level 
playing field, I think of an officiator, I think of two teams 
going on the field and working and performing to their best, 
walking off both better for their efforts.
    And so, I have heard terms today like rival. I have heard 
adversary. I have heard primary threat. I have heard predatory. 
It seems like all of you have kind of alluded to this 
frustration that we are not taking this serious enough or we 
are not doing enough. And I am wondering if that is because we 
have not yet really defined what our relationship is with 
China, and if we are really ready to say some of the words that 
might truly define that relationship. So, I would like to put 
you all on the spot and ask you, are they an enemy; are they an 
adversary; are they a competitor? What exactly are they? And 
who would like to begin?
    Dr. Friedberg. I think they are clearly a rival. They are 
competing with us across the board economically, militarily, 
for political influence. As I indicated, I think their ultimate 
objective or their hope is to displace the United States not 
only as the preponderant power in East Asia, but as the 
dominant power in the international system.
    Mr. Curtis. Can I freeze that comment for just a minute?
    Dr. Friedberg. Sure.
    Mr. Curtis. Because that is very aggressive and that is far 
more than a competitor. That is an adversary.
    Dr. Friedberg. That is my view.
    Mr. Curtis. OK.
    Ms. Magsamen. I will offer the more nuanced view. I 
actually think China is a rival in the context of the Asia-
Pacific. I think their aims there are more clearly defined in 
terms of trying to push the United States out from the security 
and political and economic dimension.
    I think global ambitions with China I think are still 
somewhat of an open question, but I do think that they are 
taking steps to put themselves in the strongest position 
possible to take us on at the global level.
    Mr. Curtis. So, interestingly, if we go back to the sports 
analogy, a rival tends to infer a heated--our rival across 
town, right, is usually the one that we hate to lose to, that 
we sometimes cheat, right? And so, to me, is it fair to say 
that rival is a step beyond a competitor?
    Ms. Magsamen. I sort of see that it is very similar, but 
potentially.
    Mr. Curtis. Right. But you mentioned that you were going to 
nuance it.
    Ms. Magsamen. Yes.
    Mr. Curtis. And you did do that.
    Ms. Magsamen. Yes, yes. But I do think that, for China, its 
global aims I think are a lot less defined than maybe they are 
being portrayed in this hearing. I think their regional aims 
are much more clear, and I think that is the place where we are 
going to have more significant challenges.
    Mr. Curtis. And, Ms. Sacks, before you comment, I might 
also try to bifurcate the Chinese people from the Chinese 
leadership. And I want to be careful, I think we find the 
Chinese people our friends and want to feel that way about 
them, but it is the leadership that perhaps falls into this 
category.
    Ms. Sacks. And I really appreciate that comment. It is very 
important.
    I would add the term ``interconnected,'' whether you choose 
competitor or rival. So, I think they are an interconnected 
competitor or rival with us, in which from a security, but also 
from a competitive and innovation standpoint, that 
interdependence is not going away and has to be a core part of 
our approach.
    Mr. Curtis. And, Dr. Economy, before I run out of time, let 
me have you comment. But, also, perhaps the question I have in 
mind, that I at least want to ask, if we do not have time to 
answer it, is what they are doing sustainable? I have been over 
there. I have seen the empty cities, right? I mean, it just 
does not seem sustainable to me, and that would be my second 
question.
    Dr. Economy. Very quickly, I would tend toward the 
adversary element in rival. I think, actually, their aims on 
the global level are fairly clear. Xi Jinping has said that he 
wants China to lead in the reform of global governance, and 
that means changing norms and institutions in ways that reflect 
Chinese values, policies, and priorities. So, I think we need 
to pay attention to what he says because what he says is what 
he does.
    Is it sustainable? You know, we have waited a long time to 
see the Chinese economy collapse. It has not done that. But I 
think there are so many pressures there, I think it is in for a 
sustained economic slowdown over the long term, and I think 
there are a number of pressures. And we should always be alert 
to the potential that one day we are going to wake up and Xi 
Jinping is not there.
    Mr. Curtis. Yes. Thank you. I am sorry I am out of time 
because I would love to explore that more. Perhaps the next 
time. Thank you.
    Mr. Chairman, I yield.
    Chairman Engel. Thank you very much.
    Mr. Phillips.
    Mr. Phillips. Mr. Chairman, may I yield to Mr. Levin who 
has to leave in a moment? I will go after.
    Chairman Engel. Yes, he was next, but you can switch. That 
is fine.
    Mr. Levin. Thank you, Mr. Chairman, and thanks, Mr. 
Phillips.
    I really appreciate you all being here. I just want to tell 
you, I want to focus my questions on Tibet actually. But 
yesterday I introduced the Advancing International and Foreign 
Language Education Act with my senior colleagues, David Price 
of North Carolina and Susan Davis of California. I am the kid 
of the trio. But I just want to emphasize our commitment. A lot 
of you have mentioned the importance of this.
    It comes from personal experience for me. I spent a year in 
India during my undergraduate days and studied Asian languages 
and cultures as a graduate student at University of Michigan. 
And my wife was an East Asian studies major and spent a year in 
China in like 1984, 5 foot 10, strawberry blonde, teaching 
English in Hangzhou at an engineering university. You can 
imagine how she stood out. I think you all have an idea of what 
it was like in those days.
    But I do want to ask you about Tibet. The Chinese 
government maintains that it alone will decide whether and in 
whom the Dalai Lama will reincarnate, even though His Holiness 
has implied he may not reincarnate at all and has rejected 
Chinese assertions that they have a role to play here. And it 
is a religious matter, essentially.
    As Foreign Policy fittingly reported earlier this year, 
``China will no doubt anoint some successor to the Dalai Lama, 
and Tibetans will no doubt reject that person's legitimacy.'' 
Dr. Economy, if this scenario plays out, what will it mean for 
Tibetans in China and outside?
    Dr. Economy. I think Tibet is already under so much 
pressure. Of course, this would be a devastating blow to Tibet 
and to the Tibetan culture. And I think we see what is 
happening in Xinjiang. And Tibet was both the precursor, but 
also could become now more like Xinjiang in terms of the level 
of repression and surveillance. So, I think it is devastating, 
frankly.
    And how we give voice to what is happening I think is 
difficult. One thought that I have had is that the Vatican, for 
example, has become very active in negotiations and discussions 
with the Chinese government. It seems to me that the Pope and 
other religious leaders should actually stand up and take a 
more active role in talking to China about the religious 
aspects, the religious and cultural aspects of Chinese 
repression. We can do some things, but I think there are other 
actors that also have a different kind of legitimate voice in 
this.
    Mr. Levin. Thank you. Well, let's followup on the Xinjiang 
connection. I mean, as you know, the Chinese created the Tibet 
Autonomous Region. It did not cover all of Tibet. Kham, as the 
Tibetans say, is in Xinjiang and Jiangsu provinces, and Amdo, 
much of Amdo was in Xinjiang. And there are a lot of Tibetan 
people there.
    The architecture of the security policy of forced 
assimilation in Xinjiang, Chen Quanguo, used to be the party 
secretary in Tibet. And during his tenure there, he installed 
roughly 700 convenience police stations and divided urban 
centers into grids to better surveil all activities. And we now 
see similar tactics, as you mentioned, being used more 
intensively in Xinjiang.
    So, I wonder if you or others on the panel want to comment 
on this. Is it likely that these so-called improved 
surveillance tactics will go back into Tibet from Xinjiang and 
be introduced in other parts of China as well?
    Ms. Sacks. The way that technology is being deployed in 
Xinjiang as part of tracking, surveillance, and incarceration 
is deeply worrying. I think that there are open questions about 
the extent to which this will remain in Xinjiang or expand 
further. Regardless, this is a moment where, as Dr. Economy has 
mentioned, it is very important for U.S. businesses and 
investors that are in China to take stock of what are direct 
relationships between what is going on there or not.
    Sometimes those lines are very clear, when Thermo Fisher, 
for example, decided to stop selling DNA sequencers. Sometimes 
it is very difficult. I have heard companies talk about the 
fact that there are very intense internal conversations going 
on, but how do you figure out what is an end-user, what is an 
end-use case in an expansive global supply chain? So, this is a 
conversation that needs to happen, whether it is through an 
international standards body, whether it is through targeted 
export controls, but the conversation needs to begin.
    Mr. Levin. Well, thank you.
    Oh, do you want to make a comment?
    Dr. Friedberg. Just quickly. It seems that Xinjiang is 
something of a testbed for the surveillance technologies. And 
my understanding is it is including DNA sampling.
    Mr. Levin. Right.
    Dr. Friedberg. I would expect that those techniques would 
be applied elsewhere if they are successful and if the regime 
feels that it has not really paid much of a price for doing 
what it is doing. And right now, it does not appear that they 
have that concern.
    Mr. Levin. Thank you. Well, my time has expired, but we 
will have to talk about this much more going forward.
    Thank you, Mr. Chairman.
    Chairman Engel. Thank you, Mr. Levin.
    Mr. Burchett.
    Mr. Burchett. Thank you, Mr. Chairman, members.
    I read your all's limited biographies, and I think we ought 
to be sitting down here and you all ought to be sitting up here 
asking us questions.
    A very impressive panel, Mr. Chairman. Thank you for 
assembling it.
    I have some really nice questions, but most of them have 
already been asked. But I guess what keeps going through my 
mind is, it is almost like we have this parasitic role with 
China. They do not want to kill us off, but they just keep us 
alive, and then, they just keep bleeding us.
    And my question to you all, in my east Tennessee candor, 
is, are they exploiting our stupidity or is it just our greed 
for some short-term gain that we just keep giving in to them? 
It just seems to me, you know, we get up here and we talk 
tough. We are going to do this; we are going to do that. But, 
then, we get a call from home saying, ``Hey, do not do that,'' 
and then, we back off.
    And the Chamber of Commerce, you know, I mean, I do not 
follow them at all actually. I get a little disgusted; 
sometimes I think they sell us out for their short-term greed, 
and that ticks me off.
    And I am wondering what your feelings are on that. I am 
sure your grammar will be a lot better than mine, but I 
apologize. This whole discussion angers me.
    Dr. Friedberg. I think the Chinese are exploiting our 
openness. They are exploiting some sort of essential 
characteristics of our system. We encourage our companies to go 
make a profit.
    Mr. Burchett. Sure.
    Dr. Friedberg. So, I do not think we can fault individuals 
particularly or individual companies, or even sectors of the 
economy, for doing the things that we have, as a country, 
encouraged them to do over the last 25 years. Having said that, 
I think we are at a point now where we have to reexamine all 
aspects of the economic component of our relationship because 
there are portions of it that are undoubtedly beneficial for 
particular sectors of our economy and particular firms and 
individuals, but no longer serve our national interest.
    Coming back to this question of whether we made a mistake 
by trying to engage them economically, we did that I think, in 
part, because we believed that economic growth would lead 
inevitably to political liberalization. And at the time, it 
seemed like that was the wave of the future. This is in the 
immediate aftermath of the cold war. And that was very much in 
keeping also with our sort of deep beliefs about the way the 
world works and should work. But we have to come to terms with 
the fact now that has not panned out in the way that we would 
hope.
    Mr. Burchett. Right, but it seems it is a worldwide 
phenomena. I was in Israel for 4 days and we were flying over 
their deep port. And guess who is building it? The Chinese. 
America did not even bid on it. And we talked to the Ambassador 
about that, and it is sort of like it just kind of slipped 
through. I mean, I do not get it. I just do not get it. I am 
sorry.
    Dr. Friedberg. The fact that they have so much money----
    Mr. Burchett. Yes.
    Mr. Friedberg [continuing]. To invest, the fact that their 
market is as big as it is gives them an enormous amount of 
leverage, and they are becoming more, I think, strategic and 
aggressive in using that leverage.
    Mr. Burchett. Yes, but you said that our companies go over 
there. But I ride a motorcycle. I collect old bikes, and I have 
had a few Harleys in my life. I have studied the phenomena of 
Harley through their ups and down. Everybody was cheering that 
China was opening their market, but it was a joke, if you 
looked at it. I mean, they would let one have in one area, but 
it is only being sold to a certain class of people. I mean, it 
was a complete marketing joke to me. There again, Pavlov's dog, 
they ring the bell and we come salivating.
    I am sorry. Go ahead, ma'am.
    Ms. Magsamen. So, I think that parasite is a very good way 
of describing what is happening.
    Mr. Burchett. Ma'am, you will not get anywhere in this 
committee by complimenting me, I can assure you. The rest of 
the committee has just written you off.
    [Laughter.]
    Ms. Magsamen. But I think that the costs--I mean, 
basically, I think we are going through a new cost-benefit 
analysis of doing business with China. And the good news, I 
think, is that many in the American business community are 
experiencing the negative aspects of doing business in China. I 
think the Chinese are placing requirements on the American 
business community that is actually unhelpful for them. And so, 
the good news I feel is, you know, maybe 10 years ago the 
American business community was all in on China. I do not know 
that that is the case anymore. I think they are feeling the 
restrictions and are making more strategic decisions.
    Mr. Burchett. Great.
    Dr. Economy. I would just say, quickly, that we have 
benefited from the economic relationship with China, of course, 
in terms of import of low-cost goods. Our companies have 
benefited. Our IP brings a lot more money to Apple from the 
iPhone than the Chinese make off of that. But I think Kelly is 
right, we are going through a rethink, and I think that is 
smart. I would only suggest that you give the U.S. Chamber 
another look because they actually take a very tough position 
when it comes to China trade and investment.
    Ms. Sacks. I will just say briefly on the Chamber of 
Commerce, they should take a lesson from this panel here, as 
they regularly have experts speaking on issues and have what 
are called ``manels'' of all men. So, the Chamber would be wise 
to observe the way that this committee has done this, with the 
exception of Dr. Economy.
    Mr. Burchett. I would say--and my time is up; I have to 
go--I would say, if they were so great at what they are doing, 
they would be out making money instead of sitting behind some 
desk grabbing a four-legged mahogany all day.
    Thank you, Mr. Chairman.
    Chairman Engel. Thank you. Thank you, Mr. Burchett. Thank 
you.
    Mr. Phillips.
    Mr. Phillips. Thank you, Mr. Chairman, and to our 
witnesses.
    I want to go upstream and talk about education. If we do 
not start preparing our young people for the world that is, and 
what will surely be, I believe hearings like this will be of 
little consequence. And I was pleased that you, Ms. Magsamen, 
talked about investing in our greatest strength, our people. 
You, Ms. Sacks, talked about investment in STEM education.
    I think it is fair to say that we still in the United 
States have the world's preeminent higher education system, as 
evidenced by over 350,000 Chinese students attending our 
universities at this very moment. But all the evidence 
indicates that we are falling behind relative to our primary 
and secondary education.
    Is there anything specifically we can learn from how the 
Chinese are preparing their young people that we might adopt in 
this country? Ms. Sacks?
    Ms. Sacks. When I go to China and I talk with graduates 
coming out of universities, you know, we have this sort of 
conception that the Chinese State-owned enterprises are really 
what are fueling China's technological ambitions. The reality 
is there is a growing class of really savvy, hard-working 
entrepreneurs in Chinese private companies, and this is really 
what is at the forefront of innovation in these emerging 
technologies. It is an exciting, futuristic place to be.
    What can we learn from that? You know, there is a saying in 
China, ``996,'' that Chinese entrepreneurs and these sort of 
young people coming into startups are working from 9 to 9 6 
days a week, and this is one of the things that potentially is 
making these startups so innovative in stuff like AI, and other 
lessons to be learned in our own culture, as we think about 
ways to approach these cutting-edge fields.
    Mr. Phillips. Anything specifically in schools, primary and 
secondary schools, that the Chinese, how they are preparing 
their children vis-a-vis how we are relative to new 
technologies, STEM? Any of you? Of which you are aware?
    Ms. Sacks. I can get back to you on that. It is an 
excellent question.
    Mr. Phillips. OK. I would welcome it, yes.
    Ms. Sacks. Yes.
    Mr. Phillips. I also want to ask a question on fentanyl. It 
is now the cause of over 30,000 deaths in this country 
annually. That exceeds HIV, car crashes, and gun violence at 
their respective peaks. Of course, just last month the Chinese 
agreed to ban fentanyl, which we hope will stem the flow into 
this country.
    (A) Do you believe that they will follow through on that 
commitment? And (B), if not, what can and should we do to 
prevent the flow of one of the leading causes of death in the 
United States? Whoever wants to take it.
    Ms. Magsamen. I would say that, while the Chinese have made 
that commitment, it is going to be important for the most 
senior levels of this government, including Members of 
Congress, to hold them accountable to that commitment 
aggressively, because I am not entirely convinced that they 
will actually implement that commitment. So, part of it will be 
political level pressure that needs to be sustained, especially 
at the Presidential level, going forward.
    In terms of what to do about it afterwards, I think part of 
this challenge is also going to be, again, working with--and 
actually, the Defense Department is very focused on this, and 
they did a report on it--looking at kind of maritime shipments 
and working on sort of like maritime transparency initiatives 
with other allies around the fentanyl trade as well.
    Mr. Phillips. Any other perspectives? Yes, Doctor?
    Dr. Friedberg. I would be surprised, actually, if the 
Chinese regime is very successful in cutting this off, whether 
because of lack of commitment on their part or because it is a 
huge and complex economy. And they probably do not attach very 
high priority to it. Although I agree, if we want to increase 
the odds that they will, we have to make clear to them that 
this is a top priority issue and keep coming back to it.
    I gather--I am not an expert on this--but I gather that 
some of the measures that have been taken limiting the ability 
of companies to ship small packages into the United States at 
low cost actually will have an impact on at least one channel 
through which these chemicals come into the U.S. But, 
undoubtedly, there will be others.
    Mr. Phillips. From a cultural perspective, what works 
relative to negotiating and prioritizing, especially when it 
comes to an issue like this? How do we make something that 
kills 30,000 people in this country annually the highest 
priority, or at least amongst them, with our Chinese 
counterparts?
    Ms. Magsamen. It has to happen at the Presidential level.
    Mr. Phillips. OK.
    Dr. Economy. I think you have to identify interests within 
China that share the interests here. That is how we got them to 
do something on climate change. There were already groups 
within China that were pressuring the government to do more. If 
that does not exist, I think the odds of them actually adhering 
to this kind of agreement are quite low. And what you are 
probably going to see is more exports going to Mexico, and 
then, from Mexico, coming into the United States. So, it will 
require a level of enforcement, that is going to be quite 
extraordinary on our end.
    Mr. Phillips. OK. Thank you all. I am out of time.
    Thank you.
    Chairman Engel. Thank you.
    Mr. Perry.
    Mr. Perry. Thanks, Mr. Chairman.
    And I thank the members of the panel for being here.
    Without being too overly simplistic, and I suspect, just 
listening to what I have of Ms. Sacks' testimony, by talking, 
in my mind, about, if I can characterize it this way, the 
average Chinese person who in many cases loves America, wants 
to emulate America, and from my understanding, if you travel to 
China and just meet those folks, they are generally 
capitalistic and have a lot of Western values. But the context 
of the question is, we are not dealing with those individuals 
on a decisionmaking level. We are dealing with the world that 
is, which is the Chinese government, the Chinese communist 
oppressive government. And so, I think it starts out with how 
we characterize them. And I am just wanting to get your take on 
China, friend or foe, strategic adversary, ally, enemy? What do 
we characterize them as? And if you folks are confused, imagine 
how we feel. Anybody?
    Dr. Friedberg. Well, we had a little bit of a back-and-
forth on this, and at least I put my hand up supporting the 
term ``adversary,'' for lack of a better one. I think the point 
you started with, though, is an extremely important one, and a 
number of people have touched on it, the necessity of 
differentiating between the Chinese people, the Chinese nation 
and civilization with its long history, and the current Chinese 
regime, the Chinese Communist Party regime. We have to be very 
clear when we talk about China that we are referring to the 
regime and not the Chinese people.
    Mr. Perry. I would agree with you. There have been regimes 
throughout history where everybody in the country was not a 
part of, or believed in, the beliefs or the goals of the regime 
in charge, but, yet, still, they were there and the world had 
to deal with the reality of the regime in charge.
    And my point in making that is, while there are not many 
times, unfortunately, that I agree with my friends down on the 
other side of the aisle here, but particularly Mr. Sires when 
he talks about nine of the 10 of the students were Chinese, or 
even my good friend from Sherman Oaks and he talks about the 
jobs are important. I look at China and I wonder what they do 
that is in the United States' interest that is not more in 
their own interest. Everything they do is more in their 
interest. And while it is nice to have Chinese students here, 
and maybe they would stay, I am not sure that that is in our 
interest, if they are going to be collecting on us and sending 
that information, whether it is intellectual property or 
anything else, back to mother China that is going to be, for 
all intents and purposes, in support of their mission.
    And so, I guess my question to you is this: right now, we 
are in this, well, we have been involved in a trade war, and we 
finally have a President that has responded to the war, in my 
opinion. But I wonder about the differences, as you see them, 
between sanctions and tariffs. Because tariffs are a tool that 
do not have the stigma of sanctions, but I wonder how many 
times we have to watch China disrespect us, steal from us, and 
import opioids--you name the list of infractions--before we 
sanction, before we punish--sanctions are punishments, right?--
before we punish China.
    And is there an appreciable difference to the American 
people, to the person that wants a job, the people in the 
Midwest that are suffering because of the tariffs, the people 
in the steel industry that, to a certain extent, some are 
suffering if you are using steel, and some are winning of you 
are producing steel? So, if anybody can talk about the 
difference between sanctions and tariffs, and what is at stake 
for China and what is at stake for the United States in that 
regard?
    Dr. Economy. I would just offer that, as far as I am 
concerned, the tariffs are useful only insofar as they shocked 
the Chinese system, and shocked the Chinese leadership into 
understanding that this is a different administration with a 
different approach? This is not something that we should look 
to sustain over the long term because, you are right, it does 
harm our farmers and other actors in the United States.
    Sanctions are useful insofar as they target very specific 
acts of economic aggression? So, when you have a Chinese 
semiconductor company, looking to steal or attempting to steal 
from Micron Technologies, then we put the full force of the FBI 
and the Justice Department behind it, and we go after those 
companies. And maybe we bar them from accessing other U.S. 
materials and bar them from selling the United States.
    So, to me, they are two very different things and should 
have two very different uses.
    Mr. Perry. I would agree with you. And since I am out of 
time, let me just ask you this: with everything that has 
happened, including North Korea's recent infractions, is it 
time now--I mean, I understand China is going to play long ball 
and they wait dynasties, where we have Presidential cycles that 
run every 4 years--is it time now to increase pressure on China 
with sanctions?
    Dr. Economy. I am sorry, you mean sanction China over North 
Korea?
    Mr. Perry. Sanction China over numerous things, but the 
point is to increase the pressure using sanctions as opposed to 
tariffs.
    Dr. Economy. Again, for me, I see sanctions as being very 
targeted----
    Mr. Perry. OK.
    Ms. Economy [continuing]. Sort of applications for very 
targeted infractions.
    Mr. Perry. OK. So, let's just say that the intellectual 
military property that was stolen from universities, as 
evidenced in The Wall Street Journal article about a month ago, 
should China be sanctioned for that?
    Dr. Economy. I think the Chinese companies that participate 
in that, absolutely, we should find ways to----
    Mr. Perry. And what about the government that sanctions 
their participation?
    Dr. Economy. Yes, I would have to think more----
    Mr. Perry. OK.
    Mr. Curtis [continuing]. Particularly about what kind of 
sanction could be imposed upon the Chinese government itself.
    Mr. Perry. Financial. OK.
    My time has expired. Thank you, Mr. Chairman.
    Chairman Engel. Thank you very much.
    Mr. Malinowski.
    Mr. Malinowski. Thank you, Mr. Chairman.
    Thanks to the panel.
    Just a word on the South China Sea issue and transitioning 
to the questions that I want to ask you. Your exchange earlier 
reminded me of a conversation that I had with our former 
colleague, Admiral Harris, when he was the commander of our 
forces in the Pacific. And we were talking about my job in the 
State Department, which was human rights, and his job, which 
was dealing with China and its incursions in the South China 
Sea. And we agreed that we were working on exactly the same 
issue because in both cases what we were dealing with was China 
as a great power asserting that the rules did not apply to it, 
and that that is really our interest. And in a sense, we have 
an equivalent interest, whether it is trade, human rights, 
South China Sea, security, in asserting that the rules apply, 
and I think this is how we win our great power competition, by 
being the champion of those international rules that small and 
large countries around the world embrace.
    But let me focus, in particular, on the human rights issue 
and begin with the situation with the Uyghurs, exploring some 
practical possibilities. Dr. Economy, you mentioned that a 
number of large companies had begun to divest from 
relationships with Chinese companies involved in surveillance 
technology, for example, in Xinjiang. And that is, indeed, 
true, but there is still quite a few that have not. There are 
major American pension funds that are still invested in Chinese 
companies that are basically running the surveillance apparatus 
that is oppressing the Uyghurs. McKinsey held their retreat 
near Kashgar, which was quite unfortunate. There is a 
controversy surrounding Erik Prince's company, whether it is, 
in fact, involved in an enterprise, a training camp that would 
be situated there.
    So, the question is, should we do something about this? 
Should the Congress look to legislation in this area? Should 
we, for example, require companies that are listed on American 
stock exchanges to disclose relationships with Chinese security 
services? Should we require the State Department to publish a 
list of problematic Chinese companies that are involved in 
State repression, and perhaps discourage, perhaps prohibit U.S. 
companies from engaging in business relationships with those 
companies, or other things along those lines? For anybody on 
the panel.
    Dr. Friedberg. It seems to me the answer is, yes, we 
should. I do not know the exact mechanism for doing that, but 
why should we allow companies that are engaged in this kind of 
activity, to which we object for a variety of reasons, to 
operate freely in the United States? I do not see any reason 
why we should not or could not do that kind of thing.
    I think there have been cases in the past where Congress 
has passed legislation that imposed similar limitations on 
American companies that were selling materials that could be 
used for surveillance or repression in other parts of the 
world. So, there are models for that that could be applied to 
China as well.
    Ms. Magsamen. So, I would say, yes, yes, yes, and ``plus''. 
I would add the ``plus'' being working with other democracies 
and our allies to do the same, so that we are not the only ones 
on the field doing that.
    Mr. Malinowski. Good point. Thanks.
    Ms. Sacks. Absolutely. The challenge is going to be, when 
there are not direct collaborations, how do you assess this? 
So, for example, if you look at the top AI startups in China 
right now, a very high proportion of them are working with 
security firms that are involved with surveillance in Xinjiang. 
But, again, this is inherently dual-use. So, I could have a 
conversation with a Chinese company that is working on AI for 
growing cucumbers, and then, I can talk with someone about 
drones and sort of biometrics. So, the trick is, in those 
expansive supply chains, when you have U.S. companies investing 
in broad AI incubation and research centers in China, where do 
you draw those lines? And I think that is where the answer is a 
resounding yes, but, then, on these issues it becomes very 
thorny to actually implement it.
    Mr. Malinowski. Good. Well, we have four really smart 
panelists who agree that we should do it and that it might be 
complicated. I would love to get specific recommendations from 
all of you, and I think many of us would be interested in 
pursuing that.
    The second quick question, reciprocity also seems to be an 
important principle that we can apply in advancing some of our 
interests and values. I remember from my time in the State 
Department we had a problem that virtually every single public 
diplomacy activity that our embassies and consulates tried to 
undertake to reach out to the Chinese people was being blocks, 
sometimes hours or days before the scheduled event. And yet, 
Chinese diplomats are completely free in the United States to 
conduct outreach in all 50 States. We are blocked from even 
traveling to some Chinese provinces. They are not in any way 
impeded from doing the same in the United States.
    Again, there are fine lines here. We do not want to mirror-
image bad behavior, but should we be more focused on 
reciprocity when it comes to public diplomacy, when it comes to 
Chinese media, quote/unquote, ``State media,'' having full 
access to the United States, but American journalists are 
denied visas to go to China? Should we get more serious about 
direct reciprocity?
    Dr. Economy. On this one, I will say absolutely. It is 
something I have recommended across the board, that reciprocity 
has often been viewed as something that is lose/lose and leads 
to the lowest common denominator, and thus, we do not want to 
practice it. Traditionally we have believed that we should set 
ourselves up as a model for the Chinese to emulate. But I think 
we are past that point. And so, whether we are talking about 
the media or about Confucius Institutes and American Corners, 
or we are talking about visas, I think that reciprocity would 
be useful for all of them, with the caveat that we need to 
understand what our endgame is in using reciprocity.
    And so, for me, I look at the issue with the visas right 
now where we have started to make it more difficult for some 
Chinese scholars to come to the United States. And I think the 
objective should not be to prevent these Chinese scholars from 
coming to the United States. The objective should be to open 
the discussion with the Chinese government, so that our 
scholars who have been banned or are having trouble getting to 
China, that the door opens to them. And I think the same is 
true across the board, not banning Chinese TV just for the sake 
of banning Chinese TV, but for opening the door to American 
television content in China.
    Chairman Engel. The gentleman's time has expired.
    Mr. Chabot.
    Mr. Chabot. Thank you.
    Dr. Friedberg, I would like to go to you first, if I could, 
about Taiwan. Taiwan is not part of China. It has its own 
government, its own elections, its own military, its own 
courts. It has its own visas and passports that it issues. It 
borrows sovereign debt. It has its own central bank and its own 
currency, its own economy, its own trade relationships, its own 
national identity. It has never been part of the PRC. Despite 
the fact that China likes to make people think that it was, it 
never has been, nor do the people of Taiwan want to be part of 
the PRC. The only thing that makes it different than any other 
normal country is that Beijing forces international 
organizations and other countries to treat it differently.
    Since Jimmy Carter switched diplomatic relations from 
Taiwan to China, Congress has been in an ongoing tug-of-war 
with the executive branch to get the State Department to treat 
Taiwan more like the country that it is. And I have been a 
long-time supporter of Taiwan--you probably sense that from 
what I am saying--and was one of the founding Members of the 
Congressional Taiwan Caucus, and I am now one of the co-chairs 
of the Caucus.
    Would you agree that giving excessive deference to 
Beijing's One China view and the way it looks at China is 
counter to our interests, to U.S. interests? And what else 
should the U.S. be doing to support one of our strongest 
allies, not only in the region, but really around the world? I 
look at them much as I do Israel as far as a country that their 
interests and our interests are very, very similar, if not 
always the same, pretty close. So, what more can we do to 
support this ally against the bullying tactics of one of our 
chief rivals, the PRC, China?
    Dr. Friedberg. Well, I agree with your characterization. I 
think the measures that we have been taking, and could take 
with more strength, include on the diplomatic front being less 
concerned about the inevitable protests from the Chinese if we 
have contact with and dialogue with Taiwanese counterparts. I 
think we have to demonstrate to them that they have not so 
sensitized us that we are afraid of doing things that are 
within our sovereign rights as a country. And I think we are 
doing a bit more of that.
    To me, part of the purpose of that is to signal to the 
Chinese, to the PRC, our continuing commitment to Taiwan. If we 
are allow ourselves to be backed further and further away, I 
think we run the risk of encouraging the regime to think that 
in the end we are really not going to support Taiwan.
    There are measures in the military domain, and we have 
continued to sell arms to them under the terms of the Taiwan 
Relations Act. And I think there is more that we could do. And 
in the economic realm, there may be opportunities for trade 
agreements of various kinds that would enable Taiwan to have 
even greater access to our economy and perhaps to limit the 
extent to which they are dependent on the mainland.
    This is going to be an ongoing struggle, and Dr. Economy 
mentioned--and I agree--that I think the longer-term, or maybe 
not-so-long-term, objective of the current Chinese leadership 
is to at some point to try to resolve this issue in their 
favor. And as they try to push us away and undermine the 
credibility of our commitments, their objective ultimately is 
to isolate Taiwan.
    Mr. Chabot. Thank you very much.
    And I have probably got time for just one more question. I 
will throw it to either of the other three witnesses here, 
whoever wants to take it. Whether it is massive global 
infrastructure investments through the One Belt, One Road 
Initiative, building artificial islands in the South China Sea 
and then militarizing them, cyber theft of technological and 
military secrets, the development carrier killer missiles, or 
leveraging international organizations to advance its policies 
on Taiwan, as I just mentioned, to name but a few, Beijing's 
asymmetric strategies have often caught U.S. administrations 
pretty flat-footed. How do we need to change our thinking to 
counter theses types of threats? It seems almost like the 
problem is systematic here. So, whoever wants to take that on, 
I am open to them. Dr. Economy?
    Dr. Economy. So, let me just say, I think it begins with 
paying attention to what Xi Jinping is saying and how his words 
are going to be translated into action, right? Because China 
often signals what it plans to do. We should not be caught 
offguard.
    Having said that, China is also very opportunistic. When 
the Belt and Road started, it was an infrastructure plan. It 
was not the digital Belt and Road. It was not the polar Belt 
and Road. So, there is a constant need to stay on top of what 
is being said, the policies that are being developed, and what 
we see being translated on the ground.
    On the Taiwan point, I would say, quickly, I think there 
are two other things we could do. One is to engage Taiwan as we 
are thinking through our free and open Indo-Pacific projects, 
like the electrification of Papua, New Guinea that we are doing 
with New Zealand, Australia, and Japan. Why not include Taiwan 
in that kind of endeavor as a way of opening up the 
international space for them, as China is trying to close it.
    The second thing is that I think we need to work with 
Europeans and other allies to ensure that our business 
community is not scrubbing Taiwan from all its sites. The 
pressure is intense, but if they are not faced with the 
competition from Europeans, American companies will not do it. 
So, I think that is the second thing we should do.
    Mr. Chabot. Thank you very much. Excellent panel. Thank 
you.
    Chairman Engel. Thank you very much.
    Ms. Houlahan..
    Ms. Houlahan. Thank you, Mr. Chair.
    And thank you to all of you all for your wonderful 
testimony.
    My questions are for anybody who has input into them. My 
first one has to do with the United Nations, and particularly 
China's influence in peacekeeping operations. We have, 
obviously, seen that China has been very active in peacekeeping 
operations, but has also in some cases undermined some of those 
operations in human rights and sexual trafficking or slave 
trafficking. And in 2014, we saw that China appeared to use the 
aspects of the U.N. for peacekeeping to their own benefit in 
the Sudan and protecting the workers in the oil industry there. 
And so, although it would appear that they are more gracious 
with their time and with their resources, sometimes it is in 
their own self-interest. And so, my question is, how can the 
U.S. ask China to contribute more in this way for the global 
good as opposed to for their own personal good or for their own 
State good? And how can we exert diplomatic pressure to achieve 
that?
    Ms. Magsamen. So, this comes back to, as China's 
capabilities grow, and they should be contributing more to the 
global public good, it is really important for the United 
States to be the one helping them set the standards for that 
contribution. And so, when we lean out of, whether it is 
climate change or peacekeeping--or pick your global issue--
China, then, has a lower bar to hit. So, part of it is about us 
and how we engage in these spaces and how we push the Chinese. 
Just by the sheer fact of our participation in some of these 
agreements, that will be the most helpful, I think, in terms of 
this.
    You used PKO. There is also global pandemic disease, where 
China is really not contributing at the level they need to be 
contributing at, and, in fact, very much focused on their own 
interests in terms of domestic stability in the case of many of 
these pandemic issues.
    So, I think, basically, the bottom line is we have to be 
present. We have to be leading in the standard-setting, and we 
have to be marshaling our friends to push the Chinese as well.
    Ms. Houlahan. Thank you. And, in fact, this committee and 
the body as a whole just passed forward legislation that talked 
about exactly that with relation to the climate issue and, 
also, asking our presence to be more felt and challenging our 
Government to be more responsible from a diplomatic standpoint 
to issues of climate. And I think you are right, we lead by 
example. And if we do not lead, there is a vacuum and the 
opportunity to sort of lower the standards.
    My second question is, again, for anyone, which has to do 
with a recent assessment that the Navy just published in their 
Cyber Readiness Review, which says that they found the 
Department of Navy preparing to win a future kinetic battle, 
while it is losing the current global counter-force, counter-
value cyber war. I am also a member of the Armed Services 
Committee, and I have heard testimony from the DoD regarding 
our need to invest in capabilities to respond to China's 
investment in emerging weapon and cyber technologies. And my 
question is, considering the size of our defense budget and our 
demonstrated priorities recently, in your assessment, are we 
maintaining our elite military status or is China gaining 
ground?
    Ms. Magsamen. As a former DoD person, again, I think with 
respect to China, we need to be making investments in the 
domains that they are going to compete with us in. And frankly, 
more surface fleet is not going to win the day with respect to 
China. It is going to be about how we compete in the digital 
space, in the cyberspace, in outerspace. And so, it is really 
how we spend that money on defense that is going to be the most 
important. I feel like a broken record on this as a former DoD 
official, but Congress has a role to play in pushing the 
Services, in particular, ma'am, on these issues because they 
want to just invest in legacy systems and legacy programs that, 
frankly, are the programs of the last century and not the 
programs of this century.
    Ms. Houlahan. Well, thank you.
    Dr. Friedberg. Could I just add----
    Ms. Houlahan. Oh, please, go ahead.
    Mr. Friedberg [continuing]. On that point, I think what 
appears still to be lacking in this domain is an overarching 
strategy or concepts of operations for countering China, 
especially their Anti Access/Area Denial capabilities, with all 
that that implies. And yet, as the recent report of the 
National Defense Strategy Commission points out, the Defense 
Department has not yet articulated those concepts. And here, I 
agree, I think Congress has an important role to play in 
holding the feet of the DoD to the fire to do that.
    Because going back now to the discussion of Air-Sea Battle 
in 2011, we have, as a country, identified a serious strategy 
problem, called attention to it, and now, not evidently found a 
solution to it. I know that we are working on it. But we need 
to be able to articulate to ourselves, to the Chinese, to our 
friends in the region, how it is that we are going to respond 
to their buildup, and we have not yet done that.
    Ms. Houlahan. Thank you. I have run out of time. I yield 
back.
    Chairman Engel. Thank you very much.
    Mr. Watkins.
    Mr. Watkins. Thank you to the panel for being here.
    The violations of intellectual property, are those 
perpetrated by non-State actors in China or just the 
government?
    Ms. Sacks. I mentioned earlier that I testified in March 
about the role that China's cybersecurity standards regime 
plays in tech transfer and IP theft. And I want to highlight 
that because I think these will continue to be problems even if 
we get a trade deal. There are over 300 domestic cybersecurity 
standards in China which, as part of doing business, require 
things like invasive source code reviews and other kinds of 
sensitive information. This is a channel for IP theft that has 
nothing to do with State actors or even joint ventures. It is 
something that I think is somewhat under the radar, but will 
continue to be an issue. So, the answer is it is much beyond 
the State actor. It is the whole regulatory structure.
    Ms. Magsamen. Can I just add that I think one step that the 
United States could take would be to require Chinese firms to 
disclose their ownership structure before they enter the U.S. 
market, in part, because the distinction between State and 
private is not always as clear as it appears on the surface. 
So, when a Chinese citizen enters the United States, they have 
to provide 5 years of their residences on a form. We should be 
doing the same thing for Chinese companies in terms of exposing 
their ownership structure. It is not barring them. It is just 
imposing a level of transparency that we are currently not 
imposing.
    Dr. Friedberg. Could I add also, going back to the 
discussion we had a few minutes ago about sanctions, if we are 
interested in deterring future theft, we have to impose costs 
on those who have been identified as engaging in theft. And 
that, to me, is one reason for using the tool of sanctions in a 
targeted way against companies/entities where we can prove that 
they have been involved in theft of intellectual property.
    Mr. Watkins. In 2018, China published their Arctic policy 
which painted a picture of their vision. Can anybody comment on 
what the U.S. should be doing? They have a pretty aggressive 
vision, particularly along the lines of trade routes, 
scientific research I suppose. Anything, any comments on that?
    If not, that is fine. I will yield the remainder of my 
time. Thank you.
    Chairman Engel. Thank you.
    Mr. Trone.
    Mr. Trone. Thank you, Mr. Chairman.
    I want to followup on the comments by Congressman Phillips 
a bit ago and reinforce his message. The CDC indicates that 
over 70,000 Americans died last year of drug overdose. That is 
192 every day. Significantly, these overdose deaths come of 
heroin/fentanyl or other products that are laced with fentanyl. 
If you ask local stakeholders, it comes back to one word; it is 
fentanyl.
    So, I had a meeting last week with Minister Xueyuan Xu from 
the Chinese Embassy, and I spoke to her and congratulated her 
about their commitment to list the fentanyl, but had a 
difficult time understanding exactly where they stood on 
enforcement. I could not get much clarity about how that was 
going to take place and how it might look. And I know you 
touched on that a bit, but I was very frustrated.
    So, my first question will be for Ms. Sacks. How do we work 
with China to make sure they crack down on internet sales and 
that as a platform for spreading this drug?
    Ms. Sacks. I was about to say fentanyl is way outside my 
expertise. But the internet issue is interesting because China 
has one of the most comprehensive legal and regulatory regimes 
for cyberspace in the world. I think I would advise maybe next 
time you have these conversations to talk about ways that, if 
there are areas of sort of black market sales or other things 
that are going on through China's digital economy, I would 
think that Chinese lawmakers and officials would have an 
interest in using some of those tools, not just to crack down 
on censoring content that is at odds with the CCP, but also 
things that could potentially be a constructive use of those 
government authorities over cyberspace.
    Mr. Trone. We will hope for the best.
    Given that local Chinese government officials may benefit 
from the export of some of these materials because it helps 
drive local economic targets, what is your assessment of the 
potential to be successful in getting Chinese-U.S. cooperation 
in this space? Dr. Friedberg?
    Dr. Friedberg. Well, I am afraid I am not optimistic about 
it, for the reasons some of which you have suggested in your 
second question. If there are parties in China, as there 
clearly are, that benefit from this process, even if people at 
the top of the regime want to shut it down, it will be 
difficult to do. And that assumes that the people at the top 
are really taking it seriously. And I think, as your 
conversation suggests, there is some reason to question whether 
that is yet the case.
    Mr. Trone. Do we have any sense of the dollars of impact it 
is that is coming out in 2018 of fentanyl?
    No one has any data whatsoever? OK, great.
    Chairman Engel. Thank you. The gentleman's time has 
expired.
    Mr. Guest.
    Mr. Guest. Thank you, Mr. Chairman.
    Dr. Economy, I saw on page 3 of your written testimony you 
talk a little bit about China's social credit system, which 
sounds very Orwellian to me, very Big Brotherish. Could you 
please explain that just in a little more detail, please, 
ma'am?
    Dr. Economy. Sure. The social credit system is an effort by 
the Chinese government to evaluate the political and economic 
trustworthiness of its own citizens. Right now, it is underway 
in about 40 different pilot projects. So, there is no one 
national system. Different pilot projects use different sets of 
metrics, evaluate Chinese people on different things.
    Some of the ones that are common are whether or not you 
have repaid loans whether you are a good citizen in terms of 
your financial standard, but it can be many of other things. 
Did you participate in a protest? That could lower your social 
credit score. Did your friend Sam participate in a protest? 
That could also lower your social credit score. There has been 
talk of using things like, are you buying Chinese goods. So, if 
you buy Chinese goods as opposed to foreign goods, that could 
increase your social credit score.
    And then, these scores are to be used in a forum for 
rewards and punishment. Punishment, maybe you do not get to 
board a high-speed train or a plane. A reward might be that you 
jump to the head of the line for your child at a prestigious 
school. So, all of these things are under discussion and, as I 
said, different parts of the country are doing different types 
of measures. Even when it is a national program in 2020 and 
everybody has a social credit score, there is not going to be 
one uniform set of metrics.
    What is most troubling is the expansion of this social 
credit score to foreign actors, the assignment of a social 
credit score to multinationals, and I just heard recently to 
the leadership of these multinationals. I have only heard of 
one case of this, but I think this is very troubling. So, 
assessing the sort of loyalty to China, in effect, for 
companies and for American and other heads of multinationals I 
think is very problematic.
    Mr. Guest. Yes, ma'am.
    Ms. Sacks, a question for you. In your written statement 
you say, on page 2, you talk a little bit about--and give me 
one moment here--that China is seeking to become a cyber 
superpower, and you talk a little about 5G, artificial 
intelligence. As we stand today, where do we stand, where do 
our capacities stand as it relates to China? In the 1960's, it 
sounded like we had the space race. It sounds like we may be 
moving into a technology race with the Chinese. And my question 
is, where do we stand in that race?
    Ms. Sacks. The first thing I would say is it is not a zero-
sum game. So, we have U.S. companies that are doing cutting-
edge work in these fields accessing talent from China, which 
feeds into that innovation. So, we have to think of these, 
again, as interconnected systems.
    In 5G, the reality is you have two struggling European 
companies, and then, Huawei and the other Chinese telecom, ZTE. 
We missed the boat on that. So, 5G is a real issue.
    On AI, I think that there is certainly cutting-edge work 
being done, primarily by China's private sector in AI. But if 
you look at sort of the application of those companies beyond 
China, I am a little bit skeptical of their ability to capture 
market share outside of China. I think that there is still a 
lot of work to be done in terms of having really--it is not 
just access to massive quantities of data to train AI 
algorithms. It is the math that is being done to that and what 
is being done at sort of the post-graduate and advanced level. 
So, it is close.
    Mr. Guest. And how do you work with the Chinese, but at the 
same time keep the Chinese from stealing our technology? I 
think we have seen industrial espionage. I think we have seen 
the Chinese take American technology, use that in their 
military programs. And how do you have a working relationship 
with the Chinese, but, on the other hand, make sure that we are 
protecting proprietary interests as it relates to things that 
are necessarily militarily important?
    Ms. Sacks. And so, this is where I get to the concept of 
``small-yard, high-fence,'' where we are selective about what 
we are protecting. The current list of emerging technologies 
that has been circulated by the Department of Commerce, 
frankly, I find it unhelpful. They gave industry a very short 
period of time to comment on it, and they are very overly 
broad. So, I think a framework needs to be developed for input 
from military, from commercial stakeholders who have been 
outside of the export control process, to come up with more 
specific technologies and applications.
    It is also hard because we are talking about how do we 
predict technologies in the future, emerging technologies. We 
do not know yet what their use for national security is going 
to be. So, to have a sort of negative list that is overly broad 
I think could shoot ourselves in the foot.
    Mr. Guest. And one quick question for the panel. The recent 
media reports said that there appears to be a more modern 
Chinese aircraft carrier that is under construction, which 
would give them a third carrier group, if they were able to 
deploy that. And I know our discussion has not necessarily been 
as it relates to military, but to the witnesses here, does that 
cause any of the witnesses concerns, that they are continuing 
to expand their military?
    Ms. Magsamen. So, in some respects, China's growing 
economic power means it is going to naturally develop a more 
significant military. They have global economic interests that 
they, themselves, also want to protect.
    In terms of the aircraft carrier itself, I still feel 
confident that ours are better, and I think they have proved 
that recently. So, does it concern me that they are spending 
all this on massive military modernization? Yes, I think we 
should be attentive to what they are doing in that space, but I 
also think we need to be focusing more on what we are doing and 
the investments that we are making to ensure that we are 
actually going to maintain a competitive edge in the domains 
where we are actually going to compete with the Chinese. And I 
am not as certain that it is going to be aircraft carrier on 
aircraft carrier.
    Dr. Friedberg. Just very quickly, I think what is important 
about the further carrier development is as an indication of 
their intent and desire to be able to project power beyond the 
region on a global scale, something they are only beginning to 
do. We will see more of it. It is not shocking. We should 
expect it. We should think about how we respond.
    Chairman Engel. The gentleman's time has expired.
    Mr. Allred.
    Mr. Allred. Thank you, Mr. Chairman.
    And thank you to our great panel. I have learned a lot 
reading your testimony and listening to you today.
    I was struck by the juxtaposition--I am a new Member of 
Congress here. I was sworn in during a shutdown. And while our 
Government was shut down, the Chinese were landing a lander on 
the far side of the moon. And to me, it was kind of a perfect 
example of how some of our own internal squabbles, lack of 
domestic and foreign investment, have accelerated China's kind 
of rise to peer status in many areas. And so, it was an 
interesting way to enter Congress.
    But one area, Dr. Economy, that I wanted to talk to you 
about to begin with that I find perplexing is what China is 
doing on the environment and with their efforts to combat 
pollution, but also some things they are doing that are going 
to contribute to their pollution outputs. And I want to ask, 
despite they are, of course, a member of the Paris Agreement, 
we are not. In this House, we have voted to try to rejoin the 
Paris Climate Accord. But I wonder if you could walk me through 
what you think the Chinese are thinking there and what kind of 
their strategic goals are?
    Dr. Economy. Sure. This is the first Chinese leadership, I 
would say, to take the environment seriously in China. And it 
has done so because the environment was really the largest 
source of social unrest in the country, just as this leadership 
was coming into power. Both online and in terms of actual 
massive demonstrations, they would have 10-15,000 people gather 
in the streets to protest the air quality. So, I think they 
take it seriously.
    The response has been primarily to assuage the concerns of 
the upper middle class, the coastal provinces, the wealthier 
areas. So, that is where the initial efforts have been 
targeted. We have seen that, as the economy has slowed, they 
have stepped back from some of their environmental targets and 
timetables because the economy is still more important to them 
than the environment.
    I think they see a technological advantage to be had or an 
economic advantage to be had from pushing forward very 
aggressively in renewable energies, where they have captured 
the market, solar energy, wind, et cetera. So, I think now they 
are going to do it with electric cars. They have more than 400 
different electric car companies. They have the largest 
electric car market and electric car manufacturing capacity. I 
think they see this as a big advantage for them moving into 
this space.
    At the same time, first, their CO2 emissions increased both 
last year and the year before. Second, they are exporting over 
100 coal-fired power plants through their Belt and Road 
project. So, it is important to distinguish between what they 
want to accomplish at home for domestic purposes and for 
domestic stability, what they see as an economic advantage, and 
what they really care about when it comes to addressing the 
true challenge of global climate change. I think they are three 
different things.
    Mr. Allred. Yes. Well, I would think there is another 
element here, which is what you touched on around solar and 
wind, which is, who among us is going to dominate the next 
generation of energy? In Texas, we have expanded our wind 
capacity dramatically. It is our second highest source of 
energy, electric energy. We are the No. 1 State for wind, not 
Iowa, as some people thing, Texas. But we also are investing 
and there is a lot of private investment around solar.
    And I wanted to ask you about that because, obviously, with 
the Chinese kind of dumping solar panels and their use of 
subsidies that I think ended last year, what is the current 
status of their efforts around the world with solar and what is 
their goal there? And is it possible for us to compete? Are the 
tariffs that we have in place a part of that?
    Dr. Economy. I am not sure where the tariffs are with 
regard to solar. Maybe somebody else on the panel knows. Is it 
possible for us to compete? It will be difficult. China, 
because of its manufacturing capacity, provides cheap and good 
enough technology that can be used for much of the developing 
world.
    And I think that is a problem we are going to face, also, 
with the electric car market. We may have a Tesla. We may have 
the highest-quality, highest-performing sort of elements, 
whether it is solar energy or it is electric cars, but it is 
difficult to compete on the cost level.
    Mr. Allred. Yes. Well, for Texas, we are an energy State. I 
want use to be an energy State going forward, and that means 
dominating the renewable energy market and trying to find ways 
to compete with China. So, I would encourage my colleagues for 
us to continue to think about how we can invest in our own 
markets here, drive innovation, lower costs, consider what 
subsidies, what might be necessary.
    Ms. Sacks, briefly, if you could, President Obama reached a 
cyber agreement with China that was kind of broadly hailed. 
What is the status of that? Has it basically been ignored?
    Ms. Sacks. I think the consensus is that the Chinese side 
has not lived up to the commitments made during that. I would 
argument that the reason that there was some initial decline in 
cyberattacks after the agreement, I think it really had nothing 
to do with the agreement. Apologies to anyone in the room who 
was involved in with it. I think that those are other factors 
and probably Chinese cyberattacks just became much more 
sophisticated and difficult to detect.
    Mr. Allred. Thank you so much.
    Thank you, Mr. Chairman.
    Chairman Engel. Thank you, Mr. Allred.
    Mr. Costa.
    Mr. Costa. Thank you very much, Mr. Chairman.
    A lot of questions, not enough time. Try to be focused in 
your responses.
    Would you describe that we have any sort of a comprehensive 
policy toward China with this administration today? Either of 
you? Any of you?
    Dr. Friedberg. If we do, I do not know exactly what it is.
    Mr. Costa. OK. Next?
    Ms. Magsamen. I think it is incoherent.
    Ms. Sacks. I think that the endgame may be decoupling the 
two systems. Steven Bannon had an op-ed recently in which he 
actually said, I may be radical, but I want regime change. So, 
I think these are sort of the metrics we are discussing.
    Mr. Costa. Yes. Dr. Economy?
    Dr. Economy. I think maybe Matt Pottinger has a 
comprehensive strategy, but nobody else.
    Mr. Costa. OK. I think there is a question--I mean, I view 
China as a competitor that could well become a very significant 
adversary. And for those of us who have spent some time in 
China and followed it closely, I think the notion of the Middle 
Kingdom and the rise again of the Middle Kingdom is really part 
and parcel of the Chinese leadership's focus, as well as many 
of the people.
    Having said that, do you see President Xi as--I mean, 
clearly, he is not a reformer, in my opinion. Among the 
leadership cadre there, is there anyone left that are really 
reformers?
    Dr. Economy. Certainly there are. And I think even within 
the top seven members of the Standing Committee, the Politburo, 
you could look to Wang Yang. I think Li Keqiang is actually 
fairly reform-oriented and perhaps Han Zheng. I will just note 
that, over the summer there was reportedly a lot of criticism 
of President Xi Jinping and there was even discussion that 
there had been a vote about pushing him back.
    Mr. Costa. And I hear that below the surface among some of 
my--yes?
    Dr. Friedberg. I think there is a question of what we mean 
by ``reform''.
    Mr. Costa. Well, I think President Xi will embrace reform 
if it helps him consolidate his power.
    Dr. Friedberg. Yes.
    Mr. Costa. I think he did that a couple of years ago on the 
corruption thing.
    Dr. Friedberg. But I would distinguish, also, between 
economic and political reform.
    Mr. Costa. Right.
    Dr. Friedberg. I think there are people who believe the 
State should back away, the market should get a somewhat 
greater role. I am not aware of people in the top ranks----
    Mr. Costa. And that is a good segue because, with our 
current strategy with this, for lack of a better term, I call 
it poker tariff one-upmanship that we are engaged in, do you 
believe this is going to lead to an agreement here where 
negotiations in the next 48 hours may poise another play on 
this chess game?
    Ms. Magsamen. I think our guess is probably as good as 
yours. I do think that the Chinese believe they have figured 
out how to deal with this President, which is basically give 
him a lot of, you know, superficial business deals at the 
highest level, but not structurally actually----
    Mr. Costa. Well, that is the easy stuff. You can buy more 
soybeans.
    Ms. Magsamen. Right.
    Mr. Costa. You can buy more corn. You can buy more of this 
and that.
    Ms. Magsamen. Yes.
    Mr. Costa. But any real reforms with regards to 
enforcements of the World Trade Organization and copyrights and 
industrial espionage, and the like, that we really must require 
as a part of any agreement, I think it remains elusive.
    Dr. Economy. I would say, I think it remains elusive, but I 
do think that Ambassador Lighthizer is trying to accomplish 
just that.
    Mr. Costa. No, I have had several conversations with him 
about it, and he wants to have a mechanism in place, so that 
when he leaves, we will be able to enforce it. And I think that 
is what the difficulty is, it seems to me.
    Do you think going back to TPP as a strategy to kind of 
encircle the Chinese would be a better way to go about this?
    Dr. Economy. I do not know that it would be better, but I 
think it would complement it and reassert the economic pillar 
of our diplomacy, reestablish us as a leader in the region, and 
give us something that we are actually doing that is positive 
as opposed to just defensive. So, absolutely, if you have it in 
your power to start holding some hearings around rejoining the 
new CPTPP or doing some kind of U.S. ASEAN act----
    Mr. Costa. Well, some of us have been urging----
    Ms. Economy [continuing]. It would be terrific.
    Mr. Costa [continuing]. The administration to consider that 
with the different departments.
    Tell me, I was just last month with a group of our top 
military folks in Hawaii and that whole Pacific-Indo region, 
and we had a group of NATO representatives, a 2-day detailed 
briefing. And there were a lot of comments to the effect that 
they wish there was an equivalent of a NATO in the Pacific as 
it related to the current challenges that China is creating and 
juxtaposed with North Korea. Any thoughts or comments on that?
    Dr. Friedberg. I do not think that is likely to happen----
    Mr. Costa. No, I do not think it is, either, but----
    Mr. Friedberg [continuing]. In large part, because other 
countries in the region would be reluctant to be drawn into 
such an arrangement.
    Ms. Magsamen. But I do think that there are some things 
organically emerging because of China's activities. There is 
greater cooperation, for example, between Japan, Australia, the 
United States, on the defense front. Certainly, we are seeing 
in the South China Sea among the claimant States more maritime 
domain awareness cooperation. So, some networking is actually 
emerging, even if it is not formal.
    Mr. Costa. My time has expired. But if the chairman would 
entertain one quick last question? Do we really believe--I 
mean, because I do not think it is in China's interest that 
they are going to really be constructive in supporting our 
efforts to denuclearize North Korea It seems the last thing 
they want is a united Korean peninsula, in my perspective, and 
I think they just want to control North Korea to the degree 
that it continues to be a problem for us. I do not know. Am I 
wrong?
    Ms. Magsamen. I think that is a sound analysis.
    Dr. Friedberg. I agree. I do not think that they are going 
to press hard enough to bring about those changes.
    Dr. Economy. I would just say, I think there certainly has 
been a debate underway inside China, and there are certainly 
many scholars and sort of senior-type scholars who would favor 
a denuclearized North Korea, who view North Korea as a 
millstone around China's neck. So, I think there is an active 
debate or there has been an active debate.
    Mr. Costa. Well, as we know, China no exception, countries 
do what they believe is in their own interest, and that is what 
we have to deal with from a realistic standpoint.
    Thank you, Mr. Chairman, for the time and this important 
hearing.
    Chairman Engel. Thank you, Mr. Costa.
    Mr. Deutch.
    Mr. Deutch. Thank you, Mr. Chairman.
    And thanks to the witnesses for being here and staying 
here.
    Nearly 7 years after the founding of the People's Republic 
of China and 40 years after the reestablishment of U.S.-China's 
diplomatic relations, China has become a political, economic, 
technological, and military competitor of the U.S. Obviously, 
as we have spoken about throughout this hearing, China's 
interests are increasingly global. Heavy metals, Australian 
politics, constructed its first military base in Djibouti, 
invested in more than a dozen ports throughout Europe, and 
then, now serving as the largest creditor in Latin America. 
Beijing is also the largest importer of oil from the Middle 
East and North Africa. Tomorrow I will chair a subcommittee 
hearing that will examine Chinese influence in the Middle East, 
and I look forward to learning more about China's influence in 
that region.
    But today I want to just look at ways in which China uses 
non-traditional power plays to disrupt U.S. interests. And I 
would like to submit for the record a Wall Street Journal 
article entitled, ``Flood of Trademark Applications from China 
Alarms U.S. Officials,'' dated May 5th, 2018. And I see no 
objection to submitting that for the record.
    [The information referred to follows: appendix 4 deutch ifr 
3 pages]

    Mr. Deutch. This article describes the massive influx of 
trademark applications filed by Chinese entities and 
individuals. It describes the IP challenges the U.S. is facing 
in China and the monetary incentives some Chinese provincial 
governments are offering their citizens for successfully 
registered trademarks here in the U.S.
    According to the U.S. PTO's ``Performance and 
Accountability Report,'' there were 6323 applications in 2014 
by Chinese entities and individuals. By 2015, the number of 
applications more than doubled, over 14,000. In 2016, there 
were almost 29,000, a 200 percent increase. In 2017, there were 
over 50,000 applications, and last year, a smaller, but still 
significant uptick to close to 58,000 applications.
    So, from the reporting that I have seen, a significant 
number of applications, even ones that end up being granted by 
the PTO, are fraudulent with clearly Photoshopped photographs 
of products or photos taken from competitors' websites rather 
than of their own products. We have spoken with the PTO about 
this problem. I know they are taking some steps to better 
identify and address the problem, but it still seems like 
malign actors in China have been very successful in gaming our 
system either for local incentives or for more traditional 
trolling. In the end, we are left with too many fraudulent 
trademarks in our system that prevent Americans and other 
legitimate businesses from qualifying for legitimate trademarks 
considered too similar, too suspicious, and likely fraudulent 
Chinese trademarks. And this deceptive practice is designed to 
not only harm U.S. financial interests, but it makes U.S. 
actors less competitive in the global marketplace.
    So, the question, and late in the hearing I guess I will 
ask it generally, how best should the U.S. confront these sorts 
of IP challenges that we are seeing in China, specifically with 
the PTO and these applications? Dr. Friedberg?
    Dr. Friedberg. Well, I have to say I thought I was aware of 
most of the things that the Chinese are up to. I had not heard 
about this. So, it is something else to worry about.
    Mr. Deutch. I just made this a successful hearing then.
    Dr. Friedberg. So, thank you.
    Just a general point, I am afraid this is not a specific 
answer because I just do not know enough about this topic. But 
it seems to me that we have reached a point where we really 
cannot continue to treat China as a normal trading partner in 
any one of a variety of different domains because of the nature 
of their system and the way in which they have been exploiting 
the openness of ours.
    So, in a sense, I think we have to look at a blank sheet 
and ask ourselves, not just is this a non-zero-sum 
relationship, because it may be, but who is gaining more from 
it and how are the Chinese gaining from it? If we do not do 
that, I think we are going to run in circles, as we have about 
a variety of other issues related to intellectual property. So, 
that is not an answer to your question, but I think we have to 
stand back from the whole relationship and look at it in its 
totality, given what has happened now with the evolution of the 
Chinese system. We were open. We thought it would change. It 
did not. What are we going to do about it?
    Mr. Deutch. So, as we reevaluate, in response to U.S. 
criticism, Beijing approved this new foreign investment law to 
protect what they refer to as the legitimate rights and 
interests of foreign firms. Is that sufficient and, if not, 
what areas need further improvement? Dr. Economy?
    Dr. Economy. That is just the law. What we have to look at 
are the implementing regulations and what happens when 
companies try to do business. Because one thing that happens 
oftentimes with China, when they do something that seems good 
on the face of it, it is that they put in place a number of 
informal barriers to market entry or local regulations that are 
designed to achieve something that the State wants to achieve. 
So, then, in effect, yes, Visa and Mastercard can have access 
to the Chinese market, but three or 4 years later they still 
have no license to operate. And by the way, even if they get a 
license, at this point it is basically useless.
    Mr. Deutch. Great.
    Thank you, Mr. Chairman. Thanks for holding this really 
important hearing.
    And thanks, again, to the witnesses for being here.
    Chairman Engel. Thank you, Mr. Deutch.
    Before I adjourn the hearing, I have a question I would 
like to ask each of our panelists. And that is--and it was 
touched on before by a few people--is a Chinese move on Taiwan 
inevitable? Why do not we start with Dr. Economy?
    Dr. Economy. I think unless there is a change in 
leadership, yes.
    Chairman Engel. Ms. Sacks?
    Ms. Sacks. It is outside my area of expertise.
    Chairman Engel. OK.
    Ms. Magsamen. I agree with Dr. Economy. I think it matters, 
though, the how. I think that the way China is proceeding right 
now is they are basically trying to economically absorb Taiwan 
and isolate it enough internationally that no one notices what 
is going on or disrupting their political campaigns. Whether or 
not they choose to militarily invade I think will depend on a 
number of factors.
    Dr. Friedberg. I do not think it is inevitable.
    Chairman Engel. You think or you do not think?
    Dr. Friedberg. I do not think it is inevitable, but that 
assumes that we are going to continue to do things to signal 
the seriousness of our commitment to Taiwan. I mean, we have 
played this game out as long as we have. I think we can keep on 
doing that for some period of time into the future.
    Chairman Engel. Well, you have sort of answered my second, 
my final question. It is, if so, what should we do about it?
    Dr. Friedberg. Well, I think we need to continue the things 
we have been doing and expand some of the things we have been 
doing to strengthen our diplomatic ties with Taiwan, to signal 
to Beijing the seriousness of our commitment, to try to 
incorporate them more fully into trade agreements and other 
arrangements, and contributing to development in the region. 
And also, militarily, we have to continue to sell them the 
equipment they need to defend themselves, encourage them to do 
things in their own interest to make it more difficult for 
China to coerce or attack them.
    Chairman Engel. Dr. Economy, do you agree?
    Dr. Economy. Yes, I would just say, as I mentioned before, 
I think including them in the free and open Indo-Pacific in a 
much more substantive way is important. And I think we need to 
get other allies onboard, Japan, Australia, the European Union. 
This cannot just be about the United States sustaining Taiwan, 
but it needs to be a much more aggressive and global effort.
    Chairman Engel. Anybody else? Yes?
    Ms. Magsamen. I would also think it is important to assess 
Taiwan in the context of a broader global trend of shrinking 
democracy globally and the rise of authoritarianism. And we 
tend to put Taiwan purely in a U.S.-China bilateral context, 
and actually, it is part of a larger problem.
    Chairman Engel. Thank you.
    You know, we had a hearing a few months ago and it was 
really interesting. Part of it was about NATO and what we 
should expect and what are the pitfalls and what will we be 
doing. And all the witnesses agreed that the biggest threat to 
NATO in the incoming years would be China rather than Russia, 
which struck me as very interesting since NATO was actually 
formed to stop the then-Soviet Union from making moves. So, I 
think China is--it was very interesting to have that kind of a 
statement.
    So, I want to thank all our witnesses for their time and 
testimony today. This hearing has underscored the immense and 
cross-cutting nature of the U.S.-China challenge. And while 
smart competition with China is an imperative for U.S. foreign 
policy, it is clearly not just a foreign policy issue, but one 
that demands a whole-of-government and, indeed, whole-of-
society response.
    So, that is why we are doing a lot of things on China in 
the committee. I look forward to the outcomes of the 
subcommittee hearings that will take place this afternoon and 
tomorrow, and to our continued work on this committee on this 
pressing issue.
    Again, I want to thank our excellent witnesses.
    That concludes the hearing, and the committee is adjourned.
    [Whereupon, at 12:49 p.m., the committee was adjourned.]

                                APPENDIX
                                
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             ADDITIONAL MATERIALS SUBMITTED FOR THE RECORD
             
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            RESPONSES TO QUESTIONS SUBMITTED FOR THE RECORD
            
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