[Joint House and Senate Hearing, 117 Congress]
[From the U.S. Government Publishing Office]


                  HOW CHINA USES ECONOMIC COERCION TO
                SILENCE CRITICS AND ACHIEVE ITS POLITICAL 
                AIMS GLOBALLY
=======================================================================

                                HEARING

                               BEFORE THE

              CONGRESSIONAL-EXECUTIVE COMMISSION ON CHINA

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                               __________

                            DECEMBER 7, 2021

                               __________

 Printed for the use of the Congressional-Executive Commission on China
 
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT] 


              Available at www.cecc.gov or www.govinfo.gov

                              __________

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
46-272 PDF                 WASHINGTON : 2022                     
          
-----------------------------------------------------------------------------------   
 
              CONGRESSIONAL-EXECUTIVE COMMISSION ON CHINA

                    LEGISLATIVE BRANCH COMMISSIONERS

      Senate                                     House

JEFF MERKLEY, Oregon, Chair          JAMES P. McGOVERN, Massachusetts,  
DIANNE FEINSTEIN, California                 Co-chair
MARCO RUBIO, Florida                 CHRISTOPHER SMITH, New Jersey
JAMES LANKFORD, Oklahoma             THOMAS SUOZZI, New York
TOM COTTON, Arkansas                 TOM MALINOWSKI, New Jersey
STEVE DAINES, Montana                BRIAN MAST, Florida
ANGUS KING, Maine                    VICKY HARTZLER, Missouri
JON OSSOFF, Georgia                  RASHIDA TLAIB, Michigan
                                     JENNIFER WEXTON, Virginia
                                     MICHELLE STEEL, California

                     EXECUTIVE BRANCH COMMISSIONERS

                           Not yet appointed

                      Matt Squeri, Staff Director

                   Todd Stein, Deputy Staff Director

                                  (ii)


                            C O N T E N T S

                              ----------                              

                               Statements

                                                                   Page
Opening Statement of Hon. Jeff Merkley, a U.S. Senator from 
  Oregon; Chair, Congressional-Executive Commission on China.....     1
Statement of Hon. Chris Smith, a U.S. Representative from New 
  Jersey.........................................................     2
Statement of Hon. Thomas Suozzi, a U.S. Representative from New 
  York...........................................................     4
Statement of Bonnie Glaser, Asia Program Director, German 
  Marshall Fund of the United States.............................     6
Statement of Zack Cooper, Senior Fellow, American Enterprise 
  Institute......................................................     8
Statement of Jenny Wang, Senior Strategy and Research Associate, 
  Human Rights Foundation........................................     9
Statement of Ho-fung Hung, Henry M. and Elizabeth P. Wiesenfeld 
  Professor in Political Economy, Johns Hopkins University.......    10

                                APPENDIX
                          Prepared Statements

Glaser, Bonnie...................................................    35
Cooper, Zack.....................................................    40
Wang, Jenny......................................................    45
Hung, Ho-fung....................................................    50

Merkley, Hon. Jeff...............................................    56
McGovern, Hon. James P...........................................    57

                       Submissions for the Record

Question for the Record from Senator Ossoff for Ho-fung Hung.....    58
CECC Truth in Testimony Disclosure Form..........................    59
Witness Biographies..............................................    60

                                 (iii)

 
  HOW CHINA USES ECONOMIC COERCION TO SILENCE CRITICS AND ACHIEVE ITS 
                        POLITICAL AIMS GLOBALLY

                              ----------                              


                       TUESDAY, DECEMBER 7, 2021

                            Congressional-Executive
                                       Commission on China,
                                                    Washington, DC.
    The hearing was held from 10:00 a.m. to 11:54 a.m. in Room 
106, Dirksen Senate Office Building, Senator Jeff Merkley, 
Chair, Congressional-Executive Commission on China, presiding.
    Also present: Senators Rubio, Lankford, Ossoff, and Daines, 
and Representatives Smith, Suozzi, Steel, Wexton, and Mast.

  OPENING STATEMENT OF HON. JEFF MERKLEY, A U.S. SENATOR FROM 
   OREGON; CHAIR, CONGRESSIONAL-EXECUTIVE COMMISSION ON CHINA

    Chair Merkley. Good morning. Today's hearing of the 
Congressional-Executive Commission on China entitled ``How 
China Uses Economic Coercion to Silence Critics and Achieve Its 
Political Aims Globally'' will come to order.
    As the second-largest economy in the world and the largest 
trading partner to many countries, China leverages the 
attraction of its market and the global economy's deep ties to 
supply chains in China to punish critics and reward self-
censorship. This hearing will examine the ways the Chinese 
government and Communist Party attempt to use economic coercion 
for political aims, such as quashing critical commentary on 
China's policies and conduct regarding Taiwan, regarding Hong 
Kong, regarding Xinjiang, or anything else China deems 
sensitive, or intimidating U.S. and other businesses into 
toeing the Communist Party line if they want access to China's 
market.
    Increasingly, those that run afoul of these aims can see 
their products targeted, from Australian wine to Norwegian 
salmon to Philippine bananas to Taiwanese pineapples. The 
Chinese government has also ramped up the intensity of its 
coercive behavior, as seen in its wide-reaching campaign 
against Australia in response to calls for an independent 
inquiry into the origins of COVID-19. This Commission has also 
been on the receiving end of formal sanctions, just like other 
parliamentarians, government officials, non-governmental 
organizations, researchers, and others who speak out against 
human rights abuses in China.
    For this Commission, like many groups around the world, the 
intimidation, harassment, and economic coercion directed at 
critics of the Chinese government and Communist Party only 
reinforces our resolve to shine a light on this behavior. But 
for many other groups, the threat of retaliation by the Chinese 
government or market casts a very long shadow. Earlier this 
year, the Commission held a hearing with the top U.S.-based 
sponsors of the Olympic Games. Even after being confronted with 
many of the most egregious human rights violations of this 
century, the companies' testimony largely served to demonstrate 
how the pull of the Chinese market continues to incentivize 
self-censorship.
    That's because it's not easy to stand up to a government so 
willing to use its country's economic clout as a cudgel to 
bully individuals, corporations, and sovereign states. We saw 
this dynamic in action in recent weeks when a Marriott hotel in 
Prague turned away the World Uyghur Congress because of 
concerns about ``political neutrality.'' Yet not everybody is 
cowed into silence by the bullying. The recent actions by the 
Women's Tennis Association to suspend tournaments in China in 
response to the treatment of Chinese tennis star Peng Shuai 
inspire me and inspire many members of this Commission.
    Clearly this is an evolving landscape. For the United 
States to be able to defend American businesses and citizens 
from censorship and intimidation or to work with other 
countries to help insulate one another from coercive economic 
tools that undermine basic political rights, we need to better 
understand the nature, the scale, and the scope of this 
challenge. We need to identify the tools that will be effective 
in response--and those that won't be effective--as well as 
where China's economic coercion is headed.
    Those are the questions we're hoping to grapple with in 
this hearing. The panel of experts we'll hear will help us do 
that. Today's witnesses will shed light on the range of 
measures China employs, on pertinent trends, on particular 
impacts on U.S. businesses, on the risky environment Hong Kong 
is becoming for multinational corporations, and on 
recommendations for policymakers in the United States and 
globally. Just as last month's hearing on techno-
authoritarianism highlighted the ways in which China exports 
authoritarian values through technology, this hearing will 
examine the ways in which it exports and imposes authoritarian 
values through trade and business ties. I look forward to 
learning from our expert witnesses how we can resist the 
erosion of civil, political, and human rights threatened by 
these developments.
    I'd now like to recognize Congressman Smith for his opening 
remarks.

                STATEMENT OF HON. CHRIS SMITH, 
             A U.S. REPRESENTATIVE FROM NEW JERSEY

    Representative Smith. Mr. Chairman, thank you very much for 
convening this very important hearing. Mr. Chairman, as we all 
know, the motto of the 2022 Beijing Olympic Games is ``Together 
for a Shared Future,'' ostensibly expressing an ideal of global 
solidarity and good will that is cherished globally. No one 
betrays this motto more flagrantly and violently than the 
Chinese Communist Party.
    With its increased global stature and power, the People's 
Republic of China has been given an opportunity to become a 
responsible member of the global community, although my 
reservations have never abated. During forty-one years in 
Congress, I have had deep concerns about the Chinese Communist 
Party, and indeed, I chaired four congressional hearings--the 
first 22 years ago, on December 8, 1999, on why China should 
not be accepted into the WTO until systematic human rights 
violations that are pervasive were stopped. Yet, the global 
community, from businesses, to governments, to the 
International Olympic Committee, continues to welcome China 
with open arms.
    Unfortunately, the PRC has used its power and stature to 
coerce as a means to achieve their ends, what the CCP deems as 
fitting Chinese national interests, at the expense of fair and 
transparent international relations, giving the lie to the 
saccharine sweet ``shared future'' Olympic Games rhetoric. We 
used to worry about the PRC cultivating soft power and 
persuasive policy tools, and that is a concern. But that worry 
was misplaced. There is nothing soft about the CCP's 
increasingly naked tactics of economic coercion. As our expert 
witnesses will likely tell us today, the PRC's first notable 
act of economic retaliation occurred in 2010 as China blocked 
salmon imports from Norway after the Nobel Committee awarded 
the Peace Prize to Chinese human rights activist Liu Xiaobo.
    For the Philippines, teeth were bared after the country 
confronted China in 2012 at Scarborough Shoal in the South 
China Sea. The Philippines discovered that its tropical fruit 
exports to China were quarantined due to alleged infestation. 
Mongolia was targeted after hosting the Dalai Lama. For South 
Korea, the economic retaliation came after deploying the U.S. 
missile defense system. For the U.K., it was for supporting 
pro-democracy protesters in Hong Kong, while China retaliated 
against the Czech city of Prague for signing a sister-city deal 
with Taipei. Hardly a week goes by without some reporting of 
Chinese economic coercion. The most recent targets seem to be 
Australia and Lithuania, and on multiple fronts. In sum, the 
list just keeps growing and it's not just restricted to any 
certain industry or region.
    Indeed, perhaps countries could take heart from the brave 
resistance to the PRC by Lithuania, a country that suffered 
firsthand from the degradations of communism. Because of the 
openness and closer ties with Taiwan, and its withdrawal from 
the Beijing-led 17+1 group of mostly Central and Eastern 
European countries, the PRC has stopped clearing exported goods 
from Lithuania through customs and has interfered with the 
workings of the Lithuanian embassy in Beijing, in violation of 
the Vienna Convention on Diplomatic Relations.
    Rather than buckling under, Lithuania announced that its 
officials would not be attending the genocide Olympic Games in 
Beijing. Indeed, perhaps Lithuania would have gone even further 
had the U.S. led by example and fully boycotted the genocide 
Olympics unless the venue were moved from the PRC to another 
country. If the Chinese Communist Party truly desired to lead 
globally, it would cultivate trust and friendship. Yet even 
this short-term reliance on bullying seems to be backfiring. 
The adverse effect of China's counterproductive tactic of 
economic coercion truly is now seeing some consequences.
    According to the Carnegie Endowment for International 
Peace, in April of 2020 an internal report was circulated by 
the Chinese Institutes of Contemporary International Relations, 
a government-affiliated think tank associated with the PRC's 
top intelligence agency. This report concluded that, ``global 
anti-China sentiment is at its highest since the 1989 Tiananmen 
Square crackdown. Even in Asia, where strong economic ties with 
China are construed to be critical to development, anti-Chinese 
sentiment is indeed growing. Last year Vietnam issued its first 
defense white paper in 10 years in which it rejected Beijing's 
claims and criticized China's maritime tactics, citing 
``unilateral actions, power-based coercion, violation of 
international law, militarization, change in the status quo, 
and infringement upon Vietnam's sovereignty, sovereign rights, 
and jurisdiction as provided in international law.''
    Malaysia and the Philippines are building up their 
militaries. They're strengthening outposts that would help push 
back against Chinese expansion. The New York Times recently 
reported that anti-Chinese sentiment in South Korea has also 
grown so much this year that China has replaced Japan, its 
former colonial ruler, as the country regarded most unfavorably 
in South Korea. China is reporting approaching challenges from 
within, tottering along a demographic precipice. From 2020 to 
2050 it will lose 200 million working-age adults and gain 200 
million senior citizens--all of which will impose monumental 
social and economic costs, severely testing China's leadership. 
And all of that is attributable, of course, to child limitation 
policies, including the almost 40-year one child per couple 
policy.
    Moreover, China is running out of resources, too. Water has 
become scarce, and the country has imported more energy and 
food than any other nation. It is evident that were its 
leadership rational, the PRC would change its behavior to 
obtain global support and cooperation. Yet, under Xi Jinping, 
the genocide dictator, it does not do so. Today's hearing is 
yet more evidence that the PRC's economic coercion and its 
attempt to silence critics have not gone unnoticed. Again, I 
thank you for putting this together, Mr. Chairman.
    Chair Merkley. Congressman Suozzi, do you have opening 
remarks?

               STATEMENT OF HON. THOMAS SUOZZI, 
              A U.S. REPRESENTATIVE FROM NEW YORK

    Representative Suozzi. Thank you, Mr. Chairman. Thank you 
so much for yet another hearing where we are trying to call to 
people's attention what the Chinese Communist Party is up to 
and what they are trying to do to impose their will throughout 
the world. I sound like a broken record, and I've said this 
before, that ever since the 1970s when Nixon went to China, we 
thought that the more that China was exposed to the United 
States and to the West generally, the more they would become 
like us and the more they would look at the ideas of democracy 
and of human rights and of capitalism. And that just has not 
happened. They do not share our values in any way whatsoever.
    In the 1980s, we were worried about the car companies from 
Japan and Germany taking over our manufacturing base, and they 
did a pretty good job of it. But we changed the way we did 
business and we really moved aggressively with technology and 
globalization, looking for the best prices wherever we could 
throughout the world. China was a great opportunity for us to 
reduce the cost of consumer goods here in the United States of 
America, but now we are paying the price. China has become one 
of the world's dominating forces, and they are breaking the 
rules on a regular basis. That's why this hearing is so 
important--to talk about how they're using their power.
    You know, we talk in America all the time about the whole 
of government. Well, the Chinese Communist Party is certainly 
using the whole of government to advance their ideas and to try 
to hide from the world how they treat even their own people--
whether it's the Uyghurs in the Xinjiang region, or the 
students in Hong Kong, or the Buddhists in Tibet. They just 
subjugate people, and ethnic minorities, religious minorities, 
because they want to have uniformity in their country. They're 
using every single possible tool at their disposal, whether 
it's intellectual property theft, whether it's forced 
technology transfer, state intervention in markets, and 
certainly the Belt and Road Initiative.
    Now we see that whenever anybody dares to speak out about 
their treatment of the Uyghurs, or to speak out about their 
treatment of the press or the students in Hong Kong, or their 
treatment of the Buddhists, they will do everything they can 
using the whole of government to try and hurt them 
economically, whether it's the NBA basketball teams, or 
celebrities, or major corporations of the United States of 
America, or manufacturers, or hotel chains. They will do 
whatever they can to withhold economic benefit, to sanction, to 
hold American and international companies accountable for 
saying something that they disagree with.
    We need to continue to wake up the people of the United 
States of America and the world community as to the abuses by 
the Chinese Communist Party. And we need to recognize that 
they're pretty effective. They have managed to use the whole of 
government--they use every tool in their toolbox--to suppress 
discussion about their human rights violations, about their 
unfair trade practices, and about their attempts to try and 
become the global power economically, militarily, 
technologically. We have such an important role, and I thank 
you, Mr. Chairman, for holding this hearing to call everyone's 
attention to what the Chinese Communist Party is up to and the 
power and effectiveness they are using to do that.
    Tom Lantos, a Holocaust survivor and former member of 
Congress, and certainly one of our great advocates for human 
rights, said, ``The veneer of civilization is paper thin. We 
are its guardians, and we can never rest.'' That's why this 
hearing, and the other hearings you've held, Mr. Chairman, are 
so important. And we thank you for doing it. I appreciate the 
witnesses for being here today to share their thoughts. Thank 
you.
    Chair Merkley. Thank you, Congressman.
    I'd now like to introduce our panel. Bonnie Glaser is the 
Director of the Asia Program at the German Marshall Fund of the 
United States. She was previously a Senior Advisor for Asia at 
the Center for Strategic and International Studies. Ms. Glaser 
is a Nonresident Fellow with the Lowy Institute in Sydney, 
Australia, and Senior Associate with the Pacific Forum.
    Zack Cooper is a Senior Fellow at the American Enterprise 
Institute and Co-director of the Alliance for Securing 
Democracy. He also teaches at Princeton University, is a 
partner at Armitage International, and co-hosts a net 
assessment podcast for War on the Rocks. He previously served 
on staff at the Pentagon and White House and has conducted 
research at the Center for Strategic and International Studies 
and the Center for Strategic and Budgetary Assessments.
    Jenny Wang is a Senior Strategy and Research Associate at 
the Human Rights Foundation, where she works on Asia-related 
research, projects, and campaigns, and spearheads the 
organization's Oslo Freedom Forum in Taiwan. She is co-author 
of the Human Rights Foundation's report, ``Corporate 
Intimidation and Censorship in China: Recommendations for 
Foreign Companies.''
    Ho-fung Hung is the Henry M. and Elizabeth P. Wiesenfeld 
Professor in Political Economy at Johns Hopkins University's 
Paul H. Nitze School of Advanced International Studies. He is 
the author of ``City on the Edge: Hong Kong under Chinese 
Rule,'' ``Clash of Empires: From `Chimerica' to the `New Cold 
War,' '' ``China Boom: Why China Will Not Rule the World,'' and 
``Protest with Chinese Characteristics.''
    Our witnesses will now proceed in that order. Ms. Glaser, 
you are first.

   STATEMENT OF BONNIE GLASER, ASIA PROGRAM DIRECTOR, GERMAN 
               MARSHALL FUND OF THE UNITED STATES

    Ms. Glaser. Chairman Merkley and distinguished members of 
the Commission, thank you for holding this important hearing 
and inviting me to participate. As the world's top trading 
nation and second-largest market and one of the largest 
providers of development finance, the PRC has the potential to 
wield significant influence by using both economic sticks and 
carrots. In the past decade, there have been dozens of 
instances of PRC economic coercion, which include threats and 
the imposition of economic costs by a state on a target with 
the objective of extracting a policy concession.
    China's employment of economic coercion and positive 
economic inducements have had only limited success in 
compelling targets to change their behaviors. Beijing has 
successfully deterred countries and companies from undertaking 
actions harmful to Chinese interests, including refraining from 
criticizing PRC policies. There are known instances where 
Chinese officials have threatened economic consequences against 
countries that refuse to side with China in votes at the UN 
Human Rights Council.
    Since 2010, the PRC has used economic coercion more and 
more frequently, and in virtually every case the targets have 
been companies and industries in democratic states, based on an 
apparent calculation that pressure on influential business 
constituencies in democracies will mobilize them to lobby their 
governments to change policies detrimental to China. Unlike 
traditional economic sanctions, Beijing's economic coercion 
usually relies on informal measures that provide plausible 
deniability and enable China to ratchet pressure up or down as 
needed. Chinese economic coercion tactics include import and 
export trade restrictions, tourism curbs, popular boycotts, and 
other measures. Over the years, Beijing has become increasingly 
bold in the use of such tactics. In two recent cases, the PRC 
has banned the import of almost a dozen products from Australia 
and blocked all imports from Lithuania, in violation of WTO 
rules.
    Despite limited success and occasional blowbacks, Beijing 
continues to view economic coercion as a valuable tool in its 
economic statecraft toolkit. This is likely because it judges 
that the cost to China is negligible. Recent developments, such 
as the AUKUS deal and the pending EU anti-economic coercion 
tool, suggest that countries are willing to band together to 
impose greater economic costs on China. The United States 
should undertake unilateral steps, as well as with like-minded 
partners, to counter and deter potential Chinese economic 
coercion, as well as prepare measures to limit potential damage 
to companies and industries.
    First, the most effective defense against trade coercion is 
to diversify trade relationships. The U.S. should identify 
sectors which are overly dependent on Chinese markets on both 
the export and import side, and therefore vulnerable to 
coercive trade practices. National and local governments should 
actively promote trade diversification.
    Second, the United States should help potential targets of 
economic coercion to develop tools to identify cases of trade 
coercion and respond quickly. Trade associations and other 
stakeholders should be encouraged to work closely with U.S. 
Government agencies. A mechanism should be created for sharing 
information and best practices.
    Third, American companies should have plans in place to 
respond to potential Chinese coercion. They should be 
encouraged to report all instances of coercion to appropriate 
U.S. Government entities. Congress should explore how to 
appropriate funds for a vehicle to compensate companies 
affected by such coercion.
    Fourth, Congress should examine whether companies should be 
required to report or disclose when they are subject to 
pressure or benefits from Chinese measures, including 
subsidies. Also worth considering is requiring disclosure of 
significant import or export dependence on China in sectors 
closely linked to national security.
    Fifth, encourage private sector trade associations to 
develop a voluntary code of conduct regarding China. Such a 
code would include commitments by American companies to refrain 
from self-censorship and other activities that are contrary to 
U.S. values and interests. The U.S. should consider developing 
incentives that could be provided to companies that sign onto 
the code of conduct.
    Sixth, and finally, create a voluntary counter-coercion 
coalition of like-minded countries willing to push back against 
economic coercion. Collective steps could include encouraging 
targeted countries to pursue WTO dispute settlement cases 
against instances of economic coercion, where WTO remedies are 
possible, taking retaliatory trade investment or other policy 
measures against China, and creating a counter-coercion reserve 
fund to compensate companies for economic losses.
    Thank you again for the opportunity to testify today and 
for holding this very important hearing, Senator.
    Chair Merkley. Thank you very much.
    Dr. Cooper.

           STATEMENT OF ZACK COOPER, SENIOR FELLOW, 
                 AMERICAN ENTERPRISE INSTITUTE

    Mr. Cooper. Chairman Merkley and other distinguished 
Commission members, thank you for the invitation to testify 
before you today. The topic of this hearing could not be 
timelier. Over the last few weeks, the world has watched as 
Beijing has attempted to silence one of China's brightest 
global stars. Peng Shuai's courage in speaking out stands in 
stark contrast to the Beijing government's efforts to censor 
her. This case highlights the lengths that Beijing will go to 
to silence criticism, both at home and abroad.
    Economic coercion is a particularly difficult challenge in 
this regard. In my written remarks, I argue that China's 
economic coercion against Norway, Mongolia, Australia, the 
European Union, and the United States highlights three 
concerning trends--specifically, China's economic coercion has 
become more frequent, more targeted, and more explicit.
    In terms of frequency, Beijing is growing more willing to 
use economic tools for foreign policy ends. Whereas there were 
only a handful of cases of clear economic coercion by China in 
the early 2010s, experts have identified dozens of incidents 
over the last few years. The Alliance for Securing Democracy, 
which I co-direct, collects data on this through our 
Authoritarian Interference Tracker. We list, at the moment, 67 
cases of economic coercion by China against companies, 
individuals, and countries in the last decade--most in the last 
few years.
    At the moment, our database only tracks transatlantic 
targets, so it doesn't deal with any of the Asian or other 
targets that are well known. These cases include not only 
threats but also problematic positive inducements, which Audrye 
Wong has labeled ``subversive carrots.'' The evidence suggests 
that China's leaders are turning increasingly to economic 
tools, despite the fact that many of these sanctions have 
negative effects on China's standing abroad.
    At the same time, China's leaders' use of economic measures 
has become more targeted. China's earlier pressure on Norway 
and Mongolia broadly impacted key economic sectors in each 
country, but many recent measures have been designed to isolate 
specific companies and individuals. Human rights activists, 
political leaders, and businesses have all come under pressure 
for actions that the Communist Party opposes. Even adhering to 
foreign laws can now put companies at risk under China's new 
anti-sanctions law.
    Finally, China's economic statecraft is far more explicit 
today than it was a decade ago. Beijing used to disguise most 
of its economic pressure, attempting to use ambiguity to make 
it more difficult to call them on their World Trade 
Organization violations. Today, however, China's leaders are 
more willing to be explicit when they use economic tools for 
coercive purposes. For example, Beijing has threatened to 
blacklist companies by putting them on an ``unreliable entity 
list.'' And amidst political disputes with Australia and 
Lithuania, China has explicitly applied economic tools for 
coercive purposes.
    In short, China's economic coercion is becoming more 
frequent, more targeted, and more explicit. This will require 
renewed efforts to protect our societies, deter future 
bullying, and punish Beijing when it acts coercively. I go into 
more detail into each of these in my written remarks, so let me 
summarize the main points here. As a starting point, we should 
aim to better protect ourselves through diversification. 
Dependence on China allows Beijing to accumulate influence over 
time and then to deploy that leverage coercively. There is no 
way to avoid these pressures entirely, but countries and 
companies can manage these risks through prudent 
diversification.
    At the same time, since our economies will no doubt remain 
interdependent, at least to some degree, we should seek to 
leverage our own economic power in certain strategic areas. 
Selective de-coupling will no doubt continue, but it is also in 
our interest that China remain dependent on the United States 
and our allies and partners in certain areas. This should be 
seen as a counterpart to selective de-coupling and should be 
implemented strategically in concert with key allies. 
Ultimately, the United States will have to work with like-
minded countries to penalize China when it engages in economic 
coercion. The European Union's anti-coercion instrument should 
be a starting point for these discussions. In fact, China's 
coercion against Lithuania may provide an early test of this 
approach. Collective action will be critical, since Beijing is 
hoping that it can use its economic heft to coerce smaller 
players.
    Thank you once again for the opportunity to testify before 
you today. I look forward to joining the other panelists in 
addressing your questions.
    Chair Merkley. Thank you very much, Dr. Cooper.
    And now we'll turn to Ms. Wang.

     STATEMENT OF JENNY WANG, SENIOR STRATEGY AND RESEARCH 
               ASSOCIATE, HUMAN RIGHTS FOUNDATION

    Ms. Wang. Chairman Merkley and members of the Commission, 
thank you for inviting me to testify today. I will be speaking 
about the authoritarian Chinese government, but more 
specifically, the stunning costs that multinational companies 
pay in order to appease the Chinese government and secure 
access to the Chinese market.
    On the face of it, this topic may seem like an economic 
issue, but it is a human rights and moral issue as well. 
Companies wishing to profit in China must be willing to comply 
with draconian Chinese national laws or face expulsion from the 
market. When companies deliberately choose to censor or 
apologize to appease the Chinese government, they are offering 
legitimacy to the authoritarian regime and signaling their 
willingness to disregard not only the human rights of others 
but of their own, too, as the cost of doing business in China.
    In March 2021, Swedish apparel brand H&M faced a boycott in 
China for simply releasing a statement of concern about Uyghur 
forced labor. The company lost approximately $74 million in 
sales for the quarter ending May 31 this year. With the 2022 
Beijing Olympics just weeks away, it is expected that the 
Chinese government will continue its fierce campaign of 
economic coercion as a strategic tool to intimidate firms to 
remain silent about its human rights record.
    Based on my observations, as described in my written 
testimony, companies are now choosing from three methods to 
approach China's economic coercion. One, they embrace it. Two, 
they capitulate to it. Or, three, they condemn it. We must be 
demanding better of these businesses that employ, supply, 
entertain, and house our people. When companies are not held 
accountable for embracing or capitulating to China's economic 
coercion, they will not fully recognize the severity of their 
actions.
    In order to approach China's economic coercion with human 
rights central to the discussion, immediate next steps should 
be to raise awareness about such coercion and to increase 
accountability. To raise public awareness and visibility, my 
recommendation is to approve legislation to establish the China 
Censorship Monitor and Action Group. The establishment of this 
group would be a critical first step toward raising awareness 
about how the Chinese government impacts the freedoms of 
multinationals, specifically those founded on liberal values in 
democratic countries. Additionally, Congress should mandate 
greater transparency among American companies by introducing 
legislation that would require them to publicly report their 
respective exposures to China.
    To increase accountability, my recommendations are to sign 
H.R. 1187 into law, which would mandate that the Securities and 
Exchange Commission define environmental, social, and 
governance--ESG--practices. Recently, there has been more 
awareness about climate change and environmental issues. It is 
imperative for corporations to remember that ESGs also include 
human rights and ethical considerations.
    Furthermore, especially in light of the U.S.'s diplomatic 
boycott, we should request a follow-up with the witnesses of 
the Corporate Sponsorship of the 2022 Beijing Olympics hearing 
to discern whether they have taken any concrete actions to 
address what was discussed. Businesses with global operations 
have great influence, both positive and negative. It is up to 
Congress to help influence, inform, and prompt them to uphold 
our values, to avoid complicity, and stand firmly with human 
rights in response to China's economic coercion.
    I look forward to discussing this in more detail and 
answering your questions. Thank you for the humbling 
opportunity to testify before the Commission today.
    Chair Merkley. Thank you very much, Ms. Wang.
    And now we turn to Dr. Hung.

STATEMENT OF HO-FUNG HUNG, HENRY M. AND ELIZABETH P. WIESENFELD 
    PROFESSOR IN POLITICAL ECONOMY, JOHNS HOPKINS UNIVERSITY

    Mr. Hung. Chairman Merkley and distinguished members of the 
Commission, thank you very much for holding this very important 
hearing today. It is my honor to have this opportunity to 
testify here today. My testimony will focus on the political 
and economic risk that U.S. corporations and investors face 
under the new political environment in Hong Kong after the 
implementation of the National Security Law.
    Hong Kong has always been an indispensable and unique 
offshore financial center of China. It is the doorway through 
which most money goes in and out of China. Hong Kong's global 
financial center status hinges on its rule of law, freedom of 
the press, and the transparency of corporate governance. These 
foundations have been thorns on the back of the CCP leaders, 
whose secret wealth kept in Hong Kong was often exposed by 
journalists. Hong Kong-based Chinese front companies that 
helped Iran, North Korea, and other unruly regimes to evade 
international sanctions are often exposed by journalists 
working in Hong Kong.
    Under the new political environment, the Hong Kong and 
Beijing governments have been passing new laws, besides the 
National Security Law, that enhance political control and 
jeopardize these foundations. This summer the Chinese 
government was ready to apply the Anti-Foreign Sanctions Law to 
Hong Kong. This law will force foreign corporations in Hong 
Kong to choose between violating international sanctions, U.S. 
sanctions, or violating Chinese law. Such an impossible choice 
will force many foreign corporations to leave Hong Kong.
    In this context, the Biden administration issued a business 
warning to American corporations in Hong Kong on July 16th this 
year. In August, the National People's Congress Standing 
Committee, surprisingly, announced it would delay the 
application of the law to Hong Kong. Beijing appeared to be 
hesitant about destroying Hong Kong's financial centrality too 
hastily, though it is expected the law's application to Hong 
Kong will come back sooner or later.
    For another example, the Hong Kong government has started 
restricting public access to information on directors and 
executives of registered companies. If such restriction had 
been in place earlier, journalists and the U.S. Government 
would have never discovered that Huawei has been using a Hong 
Kong-registered front company to violate international 
sanctions in Iran and trick a foreign bank to become an 
inadvertent accomplice in the scheme.
    Another troubling development is the implementing of the 
anti-doxxing law amendment in September this year. The amended 
law criminalized unconsented disclosure of private information, 
vaguely defined, without the need for proof of the harm done. 
It hands the government vast authority to prosecute dissidents 
and journalists who disseminate information about the powerful 
elite. It expands the authorities' power to request internet 
platforms to remove content. It also gives authorities the 
power to access electronic devices and search premises without 
a warrant. This law will force social media companies to comply 
with the Hong Kong authorities to delete posts or surrender 
users' information.
    The independence and integrity of financial regulators in 
the Hong Kong financial markets have also been under threat. 
Even before the implementation of the National Security Law in 
2014, the Hong Kong Securities and Futures Commission fined and 
banned an American short seller for publishing a negative 
research report about Evergrande, the now-troubled private 
property developer in China. It also fined and reprimanded 
Moody's, the credit rating agency, for a report that warned 
about corporate governance irregularities of 49 mainland 
Chinese companies listed on the Hong Kong stock exchange.
    The Hong Kong government's denial of visas to foreign 
journalists covering financial news is equally troubling. As 
independent and critical research of Chinese business and 
government in Hong Kong becomes ever-more difficult and 
corporate governance becomes murky, investment into the 
financial products issued by the Chinese government and Chinese 
companies will become increasingly risky. U.S. investors' 
involvement in these financial products also ties their 
financial fortunes to Chinese companies and to Chinese 
government actions that violate international sanctions and 
human rights.
    In light of the above, there are several things that the 
U.S. Government could do to protect the interests and integrity 
of U.S. corporations and investors in Hong Kong. First, the 
U.S. Government could regulate tech companies and ensure that 
they will not become the accomplices in the crackdown on Hong 
Kong. Second, the U.S. Government could devote resources to 
develop technology and tools that residents in Hong Kong and 
elsewhere in China could use to bypass internet censorship and 
suppression. The relevant Hong Kong sections in the U.S. 
Innovation and Competition Act of 2021 are a laudable first 
step and need to become law soon.
    Third, the U.S. Government could issue warnings about or 
place restrictions on investment in risky financial products 
issued by dubious Chinese entities and sold in Hong Kong 
markets. The Treasury sanctions restricting investment in 
Russian sovereign bonds earlier this year is a precedent. 
Fourth and last, foreign journalists in Hong Kong are the last 
line of defense for a fair, clean, and level playing field for 
foreign companies in Hong Kong. The U.S. Government needs to 
use whatever diplomatic tools are available to ensure the free 
operation of foreign journalists in Hong Kong.
    Again, I have to thank the chairman and the Commission 
members for holding this hearing. And I look forward to your 
questions. Thank you.
    Chair Merkley. Thank you very much.
    We're now going to proceed to seven-minute periods for 
questions. I encourage our witnesses to keep your remarks 
pointed and tight so we can get to as much information as 
possible. Ms. Glaser, I wanted to start with you. You're 
arguing for collective strategies. The United States just 
announced a diplomatic boycott of the Olympic Games to draw 
attention to both the stripping of political rights in Hong 
Kong, but very much also the genocide against ethnic 
minorities, including the Uyghurs. That's a genocide 
determination that's come from both Democratic and Republican 
administrations.
    We haven't heard Europe or other nations announce that 
they're going to join us in this diplomatic boycott to 
highlight what China has been doing, and then to prevent the 
Olympics from being used as a propaganda facade for China. Do 
you anticipate other countries are going to join us, or how 
should the U.S. go about expanding its partnership in this?
    Ms. Glaser. Thank you for the question, Senator.
    Over the last 24 hours, I have also paid close attention, 
waiting for some of our allies and partners to similarly 
announce that they too will not have their officials attend the 
Olympics. I know that members of the Biden administration have 
been consulting very closely for months with our allies and 
partners on the issue of how we would respond to the Olympics. 
I personally think that it would have been ideal if the 
Olympics could have been moved out of Beijing. That way, 
athletes would be able to participate, but the spotlight would 
not be on Beijing. They would not be able to benefit from being 
host.
    Unfortunately, that path was not taken, and so now I think 
the only option really that is available to us is to try to get 
as many countries as we can to stand with us in this coalition. 
I hope that we will see in the coming days countries state that 
they too will not be sending their diplomats to the Olympics. 
I'm sure that, as I said, the Biden administration is 
continuing to have discussions with them, but I'm personally 
disappointed that we did not announce simultaneously with our 
allies and partners, and if they shy away from doing so and 
send their officials, then I think that undermines our ability 
to signal China that their practices in Xinjiang and the other 
human rights violations that they are pursuing are 
unacceptable.
    Chair Merkley. You know, I was thinking about how China 
internally has such effective censorship to prevent Chinese 
citizens from knowing what is going on in the world in terms of 
reaction to China's policies and pondering whether there is 
enough publicity around these strategies of economic coercion 
that the damage to China's reputation around the world might, 
in their eyes, start to exceed the value of trying to 
discourage criticism. Do you think that a vocal, extended, 
multilateral commentary on China's human rights record and 
publicity about their economic coercion strategy might lead 
China to find, in time, that this is a strategy they should 
abandon?
    Ms. Glaser. Well, Senator, I agree with you that this is a 
message we should be sending around the world, though I 
personally think we will have more impact on other countries 
who are being affected. We should encourage them to speak out, 
even in the case of Muslim-majority countries that are often 
standing behind China and supporting their activities in 
Xinjiang. We should be communicating with their people to 
encourage them to put pressure on their governments to speak 
out. But in terms of resonating with this message inside China, 
I'm personally less optimistic. I think we need to impose 
costs, not just try to impose reputational costs but real 
economic costs.
    Chair Merkley. Thank you. Dr. Cooper, you have noted that 
selective decoupling could be an effective strategy, but you've 
also said that it's in our interests for China to remain 
dependent on the U.S. in some sectors. These two thoughts seem 
in tension with each other. How do you draw the line between 
them?
    Mr. Cooper. I think what's so important here, Senator, is 
that we can't cut all the links between the United States and 
China. If we look first for the links that China is most 
dependent on, those are actually the links that give us the 
most leverage. It is very tempting to go after the economic 
sectors and the specific products that we know Beijing needs 
the most, but in doing so, we actually decrease our leverage 
over the long term. What I think we need is to work with allies 
and partners on a very specific plan to look at the areas that 
China is most vulnerable to and where it's most dependent on 
the United States and our allies and partners, and then to work 
with them, our allies, to figure out how to actually perhaps 
even increase China's dependence on some of those areas. 
Strategic decoupling in some areas at the same time as we 
strategically recouple in others.
    Chair Merkley. Okay. Thank you.
    Ms. Wang, when we see a situation--how China treats 
Australia in blocking a dozen-plus products, or we see how 
Lithuania's being treated with particular, kind of, complete 
exclusion of their products, how should the free world respond 
to back up those countries and alleviate the economic costs, 
and therefore undermine the effectiveness of China's 
strategies?
    Ms. Wang. Thank you, Senator, for this question. How should 
the free world respond to how the Chinese government treats 
Australia and Lithuania? First, I think it is important for us 
to work closely with our allies and to work closely with our 
partners, but we should also be looking internally domestically 
here as well. We need to also be pushing our companies 
domestically to be accountable, and to learn more about the 
nature and the scope of China's economic coercion. Thank you, 
Senator.
    Chair Merkley. Thank you very much. With that, my time's 
expired. We're going to turn to Senator Rubio.
    Senator Rubio. Thank you, Mr. Chairman. Thank you all for 
coming in and doing this. It couldn't be more timely. This is a 
major issue all across the board. My questions are largely 
geared on something you've all talked about, and what the 
purpose of the hearing is, and that is the ability to leverage 
economic power, whether that is direct spending and/or 
investments that China's Communist Party makes abroad, or 
access to their marketplace, to get all kinds of actors to bend 
to their will--international organizations, countries and 
governments, and corporations.
    It is my belief, and I think well founded, that there are 
major American corporations who are either witting or unwitting 
lobbyists on behalf of the official narratives and policy 
preferences of the Communist Party of China. The reason is 
pretty simple, and that is they go to them and say: If you want 
to continue to have access to our--whether they say it or they 
imply it--if you want to continue to have access to our 
marketplace, if you want to continue to be able to sell things 
here, which represents X amount of your annual revenue, then we 
expect you to go talk to your ``friends'' in America and get 
them to back off. I think that perhaps the most stunning 
example of it has been the cowardly, but real, effort behind 
the scenes by several corporations who benefit from slave labor 
to impede the passage of the Uyghur Forced Labor bill that the 
chairman and I and so many others, including in the House, have 
been working on.
    So with that reality in place, we've got some things that 
we need to tackle. First, Ms. Glaser, I think in your testimony 
you recommended developing a voluntary code of conduct for 
businesses regarding China, I think including a commitment to 
refrain from self-censorship. That's another pretty amazing 
thing--how much of the information and news we consume today is 
self-censored because they don't want to not be able to 
distribute that program, that movie, whatever it might be, in a 
pretty large market. But how would we hold these companies 
accountable if they in fact signed this code of conduct? 
Obviously, this can't be sort of a legal prescription because 
it sounds almost like a shaming and naming effort. But how 
would we first, you know, get companies to sign on? But more 
importantly, who would hold them accountable for violations of 
it? And how would we hold them accountable if we had such a 
code?
    Ms. Glaser. Well, thank you, Senator Rubio. It's very 
difficult, I think, to influence companies' choices, as well as 
to hold them accountable. If companies don't sign up to a code 
of conduct, yes, we can name and shame and say they are not 
interested in adhering to our values and joining with other 
companies around the United States and the world to defend 
those democratic values. So, yes, it is a mechanism essentially 
to name and shame, and try to provide incentives for companies 
to get on board.
    In the case of something like slave labor, then I think you 
have more options because if you do good research and you 
identify that companies are using slave labor, you make that 
data public, then that company is going to be spotlighted in a 
way that it doesn't want to be. Perhaps people will buy fewer 
of their goods. People will write articles about them. This is 
going to be very negative in terms of, I think, their bottom 
line, as well as their reputation.
    In terms of things like movies, obviously far more 
difficult because the Chinese have accumulated a great deal of 
influence because there are a lot of people who watch movies in 
China. I think that in that regard you have to start with 
naming and shaming, and I think making something like this 
voluntary, you're more likely to get companies to join onboard. 
At least it's a beginning step. Thank you.
    Senator Rubio. Thank you.
    And Ms. Wang, you talked about passage of S. 413, that 
establishes the China Censorship Monitor and Action Group. I'm 
proud to be the lead Republican co-sponsor on this bill. I hope 
we can pass it swiftly. You recommend increasing transparency 
among American companies that are significantly exposed to 
China. Do you think it would be a good idea to require U.S.-
listed companies to disclose the existence of Chinese Communist 
Party committees and the role they play in the company's 
corporate governance in their annual reports to the SEC?
    Ms. Wang. Thank you, Senator. Yes, I do believe that 
American businesses should be disclosing these. I was reading a 
bit more about Hollywood, actually. I read a recent report by 
PEN America, and it stated that a lot of the filmmakers have 
private meetings with decisionmakers. So I think when we ask 
for transparency we can ask about their market shares, their 
closed-door meetings, and who they are talking with. How can we 
better understand the situation when we don't have this data 
and we don't have this information? So, yes, I do believe that 
we should be----
    Senator Rubio. Just to be clear, when you talk about these 
private meetings, what you're basically saying is they're going 
through a pre-censorship review? Like, this is what our movie's 
about, this is what our script is about--does any of this give 
you a problem or heartburn? They're trying to avoid producing 
something they later on have to edit so they can have it 
distributed in this market?
    Ms. Wang. Correct. According to the report, there is a 
quote that Xi Jinping says often. He would like films to ``tell 
China's story well.''
    Senator Rubio. Professor Hung, do you believe Hong Kong 
should continue to enjoy its reputation as a center for 
international finance, given the power the Communist Party of 
China now exercises over foreign companies, and last year's 
detainment and arrest of business executives? Should they 
continue to be considered the sort of international hub that's 
safe to do business in?
    Mr. Hung. Thank you, Senator Rubio. I think, as I outlined 
in my testimony, there's a lot of troubling signs that the 
nature of the Hong Kong financial center and the institutions 
that protect its integrity and fairness has been deteriorating. 
There's some remaining institutions and practices that separate 
Hong Kong financial markets from, for example, the Shanghai or 
Shenzhen financial markets, but the direction of the 
development is really troubling.
    I think what we in the U.S. can do is to indicate the kind 
of measures that the U.S. can do, for example, as I 
recommended, that it can be put on the table that at some point 
that the U.S. can ban the investing in Chinese government 
bonds, and like what we have done with regard to the Russian 
sovereign debt. Also, totally decertify Hong Kong and stop 
recognizing Hong Kong as a kind of financial market separate 
from mainland China. And with regard to access to U.S. dollars 
and many other measures. This kind of option needs to be put on 
the table to let them know that if they go further that this 
will be enacted. Thank you.
    Senator Rubio. My time has expired, but I thank you all for 
being here. I apologize I didn't get to you, Mr. Cooper, but I 
thank you all for being a part of this.
    Chair Merkley. Thank you very much. Congresswoman Steel, 
are you with us?
    Representative Steel. Yes. I'm with you. Thank you very 
much, Mr. Chairman. Thank you, all the witnesses, for coming 
out. I'm just so grateful, because we really have to make China 
transparent and stop the human rights abuses. The Chinese 
Communist Party has a long history of using threatening and 
violent tactics to silence those who want to speak out against 
the government. As mentioned, the disappearance of Peng Shuai 
once again highlights this serious issue.
    The Olympics is coming up in February next year. This week 
I had to send a letter calling on corporate businesses who are 
sponsoring the Beijing Games to follow the lead of the Tennis 
Association and use their platforms to call out China's human 
rights abuses. My first question is for Ms. Wang. Do you feel 
other global companies have an obligation to speak out like we 
saw with the Women's Tennis Association? Why are these 
companies feeling the pressure from the CCP?
    Ms. Wang. Thank you for this question. Yes, I do believe 
that corporate sponsors and businesses do have an obligation to 
speak up and to follow the WTA's lead. I would like to draw our 
attention to the United Nations Guiding Principles on Business 
and Human Rights. This document provides guidelines for both 
states and companies on how they can best address and prevent 
human rights abuses. Furthermore, what I think is most crucial 
and important about these guiding principles is that it states 
that when there are conflicting requirements--so, for example, 
in the U.S. and China--companies must honor internationally 
recognized standards of human rights; for example, the 
Universal Declaration of Human Rights, as well as the 
International Convention on Civil and Political Rights.
    Representative Steel. Thank you very much for your answer. 
China has recently violated international standards related to 
intellectual property rights. We really have a problem with 
that, not just the U.S. but other countries too. And then 
subsidization and over-capacity, and they do not abide by the 
international norms and rules that have brought China to its 
current economic position. So I want to ask Dr. Cooper or Ms. 
Glaser, how can other global leaders hold China transparent and 
accountable in an international system that is free, open, and 
fair? And is that really possible?
    Mr. Cooper. Well, thank you, Congresswoman. This is such an 
important question. I think there are at least three steps that 
we have to take. First, the United States has to realize that 
it needs to work with allies and partners to address this 
issue. Addressing it unilaterally has not been effective, so we 
need to work with our key allies, especially the G-7 countries 
and perhaps an expanded group of countries, to address Chinese 
unfair economic practices, especially intellectual property 
theft.
    That means, in my view, that we have to be looking at trade 
agreements that would hold China and others to high standards. 
I know this is a difficult issue on Capitol Hill, but that 
means thinking about what the Trans-Pacific Partnership or its 
follow-on agreement is going to be, and how the U.S. can take a 
leadership role there, not just in bilateral discussions with 
China.
    Then finally, I think we have to make this a key issue in 
the relationship. China always talks about its core issues. 
Well, there's something like $300 billion of U.S. intellectual 
property being stolen each year by China. That has to be a core 
issue from an American perspective on the relationship, and 
China has to understand that if it doesn't adapt its behavior 
that that's going to have some very severe negative effects 
over the long term on the U.S.-China bilateral relationship.
    Representative Steel. Okay. Thank you very much. Professor 
Hung, the Chinese government has worked hard to manipulate 
public opinion and censor pro-democracy leaders in Hong Kong. 
What does it look like for American businesses that want to do 
business inside of Hong Kong? What kind of censorship, 
intimidation are we seeing in Hong Kong today by the CCP?
    Mr. Hung. Thank you very much for that question, 
Congresswoman. American businesses and foreign businesses have 
been complaining about unfair treatment and an unlevel playing 
field and biased regulatory enforcement in mainland China for a 
long time. And for a long time, Hong Kong has been upholding 
its separation from mainland China in this regard and 
maintaining kind of a relatively fair and open, transparent 
corporate environment. But unfortunately, in recent years, it 
has been deteriorating in Hong Kong, and many American 
businesses and foreign businesses in Hong Kong are starting to 
face some of the same challenges that they have been facing in 
mainland China.
    Particularly after the implementation of the National 
Security Law, it's not only the National Security Law that 
creates additional political economic risk to American 
corporations, but the political environment has changed, and 
the government's mentality and assumption has changed. For 
example, in recent months there's been a draconian quarantine 
and, I would say, unscientific closure of the borders of Hong 
Kong. American businesses and the Chamber of Commerce have been 
lobbying the Hong Kong government to relax this rule because it 
is very bad for global firms in Hong Kong. They cannot see 
their families and they cannot travel.
    But they didn't listen, and they didn't loosen. So the 
government definitely is now taking kind of a priority on 
political considerations over economic considerations, and the 
situation in Hong Kong is deteriorating for American and global 
business there.
    Representative Steel. Thank you, Professor Hung.
    So, you know, it seems like it's getting worse and worse 
every day. How are you going to fix it? And how can the Hong 
Kong government really participate and work and try to make 
sure that these American businesses can just do free business 
there--like most countries--they go in and they can do, as long 
as they follow the rules. But the rules are getting tougher and 
tougher that the Chinese government is imposing. How are we 
going to fix this? And how are we going to grow? And what is 
Hong Kong's future?
    Mr. Hung. For one thing, some American businesses and other 
foreign businesses in Hong Kong have been diversifying their 
operations to other financial centers farther away from China. 
For example, in Singapore. They can continue to do business 
with their Chinese clients, no longer in Hong Kong, but in 
Singapore. In fact, some private equity funds run by some well-
connected mainland Chinese businessmen have already reportedly 
diversified their operation in Singapore. It is going to be a 
trend. Definitely the CCP and whole of government want to 
maintain Hong Kong as a financial sector.
    But with the deteriorating regulatory environment and the 
other situation that can turn Hong Kong into another kind of 
financial sector, is what I worry about. That is, a kind of 
financial sector which is more like a Caribbean tax haven, a 
money laundering center. It is also a financial sector with a 
lot of money coming in and going out, but it will be very 
different from the financial center of Hong Kong right now 
that's based on fair and transparent corporate governance and 
open information, and so on and so forth. So it can become like 
that, and if that's the case, then it will be very unfortunate.
    Representative Steel. Thank you.
    Chair Merkley. Thank you very much. We now turn to Senator 
Lankford.
    Senator Lankford. Mr. Chairman, thank you, and thanks to 
all the witnesses for bringing the facts and information to our 
conversation today. Professor Hung, I want to continue on with 
our dialogue on this and the Belt and Road Initiative, and what 
China is doing in countries around Africa, around multiple 
regions of Asia, around the Western Hemisphere, Central and 
South America to be able to influence markets, but to also be 
able to control minerals, to control ports, control airports, 
and to be able to take on some of the sovereign debt. You have 
written about some of these issues specifically, about them 
taking on debt around the world and how sustainable that is, 
but also the effect for those individual countries as well. Can 
you elaborate more on that?
    Mr. Hung. Thank you, Senator, for the very important 
question. Actually, that is the design and the intention of the 
Chinese government, to use Hong Kong as a kind of offshore 
financial sector to channel money and to finance a lot of these 
Chinese companies going to Belt and Road. In this regard, and 
China definitely is extending a lot of loans and debt to the 
Belt and Road countries, but at the same time the U.S. still 
has leverage to shape how this development unfolds because many 
of the Belt and Road and bilateral loans or multilateral loans 
for the AIIB (Asian Infrastructure Investment Bank) are 
actually denominated in U.S. dollars.
    The reality is that the world economy is still very much 
reliant on the U.S. dollar as the reserve currency and kind of 
a transaction currency. And so a lot of these developing 
countries and Asian countries, when they borrow money from 
China they refuse to take the renminbi loan. And that is a very 
typical development--in the beginning the Chinese try to lend 
in renminbi. But actually, the debtor is not interested. So in 
the end China lends in U.S. dollars.
    As far as China relying on the U.S. dollar, many Chinese 
entities and Chinese corporations rely on the Hong Kong 
financial market to raise debt and bonds in U.S. dollars, and 
then through the Hong Kong financial market raise capital in 
Hong Kong dollars, which are actually pegged with the U.S. 
dollar and freely convertible. So in this regard, in the 
international transaction clearance and through the SWIFT 
(Society for Worldwide Interbank Financial Telecommunications) 
system, and also Hong Kong access to the U.S. dollar, the U.S. 
still has a lot of leverage in influencing China's behavior in 
Belt and Road and the developing world.
    Senator Lankford. Dr. Cooper, earlier Ms. Wang was asked 
about Australia. I want to be able to drill down just a little 
bit more on supply chain issues and what example we can take 
from what China has done using economic leverage on Australia 
to our own supply chain issues that we're facing now and the 
potential for that in the future. Ms. Wang had the opportunity 
to be able to answer that. Dr. Cooper, I wanted you to be able 
to also talk about this as well. What should we see from the 
issue of Australia? What should we learn from that? And what 
awareness should we have around our own supply chain issues?
    Mr. Cooper. Well, thank you, Senator Lankford. I think 
Australia is a really important case for several reasons. The 
first is that actually China has struggled to get its political 
objectives obtained in Australia, and I think it's done 
remarkable damage to Beijing's cause. Now, I will admit that I 
think a lot of friends of China don't acknowledge how much 
damage China has done, but if you look at the objectives that 
China appeared to have, and here China was quite clear; in 
fact, the Chinese embassy in Canberra gave a list of 14 demands 
that they were seeking from the Australian government, and I 
think they've obtained precisely zero of those demands through 
this economic coercion campaign.
    In fact, if you look at the Australian economy, there are 
roughly 11 different products that were directly affected. Only 
one or two of those were not relatively quickly shifted to 
other global markets. So the damage done to the Australian 
economy has been much less significant than I think many in 
China, and even many in Australia, would have imagined. So I 
think it's a good reminder that, in fact, the world still has 
substantial leverage to push back against China, and even 
countries that are targeted can withstand that pressure, as 
Australia has. Now, it comes at a cost, but we're seeing 
increasingly that countries are willing to bear those costs. I 
think the Lithuania case right now is another important 
example.
    So I think what we should take away from the Australian 
case is, first, you probably can't escape this kind of pressure 
unless you're going to fully agree with China on every issue, 
which very few countries and companies are willing to do. 
Second, that when the pressure comes, that countries can stand 
firm against it, especially if they have allies and partners 
that are willing to stand with them.
    Senator Lankford. Dr. Cooper, thank you.
    Ms. Wang, you've written extensively on the issue of 
Taiwan. It's very different than Australia or very different 
than the United States in the threats that they face in Taiwan 
in particular. They're exceptionally isolated. Could you talk 
about some of the economic pressures that they are facing right 
there in Taiwan, and what the United States in particular can 
do to be able to lessen some of the economic pressures? And 
what other countries--as China tries to cut off diplomatic 
relationships with any country that has diplomatic 
relationships with Taiwan--can do to actually support the 
people of Taiwan rather than isolate them?
    Ms. Wang. Thank you. The topic of Taiwan is quite sensitive 
to the Chinese government, as we all know. Taiwan is one of the 
sensitive three Ts, along with Tibet and Tiananmen. Taiwan is 
increasingly under pressure from the Chinese authoritarian 
government. They're diplomatically isolating them and they're 
bullying them on a geopolitical level.
    I think what we can do to support Taiwan is to continue 
these delegations to visit the island and to meet legislators 
there as well. I would also be happy to look into this in more 
detail and respond in writing for the record.
    Senator Lankford. Okay. I appreciate that very much. I 
really see what China did with Hong Kong as the model of what 
they're going to try to do with Taiwan as well, to be able to 
buy off political figures, to be able to use social media, and 
to be able to control the conversation in Hong Kong to then be 
able to move in, get the laws changed, and to be able to take 
over quietly as the model that they'll try to do in Taiwan as 
well. There's a real risk of that in the days ahead, and there 
are ways that we can continue to be able to stand with the 
people of Taiwan to be able to get, actually, facts and 
information to them about the brutality of the Communist 
government, what they've done on human rights violations, and 
to be able to continue to protect their free and fair elections 
in the days ahead would be a tremendous asset to them and the 
world. Then also, to increase diplomatic conversations with 
others. So I appreciate very much the engagement of all the 
witnesses that are here. Thank you, Mr. Chairman.
    Ms. Glaser. Could I possibly offer just maybe 15 seconds in 
answer to that question?
    Chair Merkley. Please go ahead.
    Ms. Glaser. I think the most important thing that the 
United States needs, and other countries need to do with 
Taiwan, is to be signing economic agreements with them. This 
has been, I think, an unfortunate gap in our relationship with 
Taiwan. Even as we strengthen diplomatic and security ties with 
Taiwan, we are not negotiating a bilateral free trade 
agreement, a bilateral investment agreement. Since we are not 
in the CPTPP (Comprehensive and Progressive Agreement for 
Trans-Pacific Partnership), there is very little we can do to 
help Taiwan get into that. The European Parliament has endorsed 
signing a bilateral investment treaty with Taiwan, but so far, 
of course, the EU has not opened those negotiations.
    So Taiwan is increasingly isolated economically. They 
recently signed free trade agreements, when Ma Ying-jeou was 
president, with New Zealand and with Singapore. Then China has 
boxed them out of being able to sign other agreements, and I 
think it's really important for countries around the world to 
stand up to China. We can do so and strengthen Taiwan's 
security and the economic prosperity of the island by 
negotiating such agreements. Thank you.
    Senator Lankford. It's a pleasure. Thank you. Thank you, 
Mr. Chairman.
    Chair Merkley. Thank you, Senator Lankford.
    We'll turn back to the House, to Congresswoman Wexton, who 
represents Northern Virginia and the Shenandoah Valley.
    Representative Wexton. Thank you, Mr. Chairman. I want to 
thank all the witnesses for coming and appearing before us 
today and talking about this really important topic. You know, 
one of the things that has become clear to me the more that I 
learn about China is that they play the long game, you know? 
They think in terms of century or even millennia. Here in the 
U.S., and in the West generally, we have a much shorter-term 
time horizon. We think about the fiscal year, or we think about 
our congressional term, or we think about when the next 
shareholder dividend is supposed to be paid.
    China takes advantage of that. And they have methodically 
inserted themselves deeply into the economies, not just here in 
the West and in the U.S., but in just about every country in 
the world. They have been able to do that by manipulating our 
systems and what we value here in the U.S. Here it's really 
kind of been twofold. It's been the cheap goods that U.S. 
companies are able to sell all around the world. Then it's also 
been access to the Chinese market, which is huge and extremely 
lucrative for U.S. companies.
    So, Ms. Wang, I'm very glad that you mentioned the Women's 
Tennis Association. I want to get to that in a moment. But, Ms. 
Glaser, I want to talk with you a little bit about your 
comments on China pressuring U.S. companies to do kind of their 
dirty work for them, right, and to lobby us here in Congress 
for what they want to see happen legislatively. I know that 
most of us on this panel have been on the receiving end of this 
same kind of pressure about the Uyghur Forced Labor Prevention 
Act, and I'm glad to see that that will hopefully be moving 
through the House shortly. But I know that I've been on the 
receiving end of that for my Uyghur Forced Labor Disclosure 
Act. And so, Ms. Glaser, if you could talk a little bit about 
the pressures that come from U.S. corporations in order to do 
China's work for them here in Congress.
    Ms. Glaser. Well, thank you for the question, 
Congresswoman. I think it's obvious, and many of us have talked 
about today, how companies are essentially lobbying members of 
Congress, as well as the U.S. Government, for the United States 
to lift tariffs on China, to take a series of actions that will 
certainly benefit those companies' bottom line, but will not 
necessarily, I think, be in the broader interests of the United 
States.
    I was at the U.S.-China Business Council annual gala this 
past week, where our Under Secretary of State Jose Fernandez 
really gave a terrific speech laying out some of the problems 
that China presents, the challenges in stealing intellectual 
property and forced technology transfer, its subsidies to 
companies. And I have to say that many members of the U.S. 
Business Council, the companies, were almost embarrassed by the 
fact that a Biden administration official was giving this 
message, because ultimately what they want to do is just do 
more trade and more business with China.
    So I think that this is a problem. And I think that we 
should be trying to bring companies together to understand the 
consequences for our shared interests, and particularly when it 
comes to forced labor in Xinjiang. This is something that we 
should be naming and shaming companies for--sourcing some of 
their products in Xinjiang.
    Representative Wexton. Thank you so much, Ms. Glaser. It's 
really not just the forced labor, it's also the genocide that's 
going on. Which brings me to the upcoming Olympics in Beijing, 
for the Winter 2022 Olympics. You know, that's just weeks away. 
Ms. Wang, I'm very glad that you mentioned the Women's Tennis 
Association and its CEO Steve Simon, because he truly deserves 
to be held up as an example of how to handle the Chinese 
government's intimidation.
    I want to add my voice to the chorus of those calling out 
the IOC for their role as propagandist-in-chief for the CCP on 
this issue. You know, they don't have the best history, but 
they've really hit a new low with this. And so I'm very 
concerned with the upcoming Olympics that we're not going to be 
able to ensure the safety of U.S. athletes and the world's 
athletes there. But, you know, I'm just encouraged that the 
U.S. has instituted this diplomatic boycott. I do hope that 
other nations will join us. I do want to commend Lithuania for 
really punching above their weight in this area, when it comes 
to pushing back against China's abuses.
    Now, the WTA is tiny compared to some of these 
multinational corporations who are sponsors of the Olympics and 
who are very, very entangled in their markets over there. You 
know, it's fair to say that they will be hurt more by their 
pulling out of China than the PRC will. But what would happen, 
Ms. Wang, say, if Nike, or Coca-Cola, or Apple were to make 
their stance on this known and start pulling their supply 
chains and their products out of China?
    Ms. Wang. Thank you. I think that would be wonderful news. 
It would be great if we saw Apple, if we saw Coca-Cola all pull 
out of China, because they would be following WTA's lead and 
standing firmly with human rights and avoiding complicity. 
According to international law, corporations should not be 
aiding and abetting human rights abuses. So I would greatly 
applaud Apple and Coca-Cola if they do not abide by the Chinese 
government. Thanks.
    Representative Wexton. Thank you very much.
    Ms. Glaser, do you have any ways that the U.S. Congress and 
the administration could support those businesses who do wish 
to support the WTA and take action against China?
    Ms. Glaser. Thank you, Congresswoman. I will think about 
that and get back to you, but I do think we should come up with 
incentives so that we can give companies a reason to not stand 
by China. Perhaps, you know, reputational advantage isn't 
enough. In the case of the WTA, of course, the opposite 
outcome. If they had not taken the action that they did, I 
think we would all be condemning them. So the risk of that 
reputational cost I think is important. But I think we should 
think about more incentives, and I will think about that. Thank 
you.
    Representative Wexton. Thank you so much. It seems my time 
has expired, and I yield back.
    Chair Merkley. Thank you very much, Congresswoman.
    We are now going to turn to Senator Ossoff of Georgia.
    Senator Ossoff. Thank you, Mr. Chairman.
    A question I'd like to pose to the panel as a whole, 
beginning with you, please, Ms. Glaser, is: When in your view 
have the various policies that we're grouping under the rubric 
of Chinese economic coercion--when have they been effective 
from the standpoint of the CCP and achieved the aims of the 
CCP? And when have they failed?
    Ms. Glaser. Well, that's a terrific question. I do talk 
about that a bit in my written testimony. The first case, in 
2010, against Norway, I think was very effective and not 
because of the economic consequences, because they were 
actually short lived and Norwegian salmon producers were able 
to circumvent restrictions and get their salmon through third 
markets to China. But the political consequences for Norway 
were deemed unacceptable. They were frozen out for many years, 
and finally, in 2017, signed a joint statement with China 
which, if you read it, you can tell it was written in Beijing, 
that condemned any action that would violate the one China 
principle. And basically, Norway pledged that they would never 
damage Chinese interests in any way, shape, or form again.
    In the case of Mongolia, the Mongolian government said that 
it would not invite the Dalai Lama to visit Mongolia again. So 
that was another successful case. Even the 2010 Japanese case, 
where Japan agreed to release the captain of the fishing boat 
that had collided with the Japanese Coast Guard ship. It was 
successful in the short run. China did get the captain to be 
released. But of course, over the longer term it was just the 
beginning of the really significant turn in Japanese sentiment 
against China. So I would say they ended up paying a price for 
it because the effort to curtail rare earth exports to Japan--
at that time Japan was about 90 percent dependent on China for 
its rare earth imports--within a decade Japan brought that down 
to 58 percent. And that is an example for so many other 
countries, again, about the need to diversify, find other 
sources for goods, and not be overly trade dependent on China.
    There are other cases, but I will leave you more time to 
ask questions of other witnesses. Thank you.
    Senator Ossoff. Thank you. Mr. Cooper, same question to 
you, please.
    Mr. Cooper. Well, thank you. It's a wonderful question. I 
agree with everything that Ms. Glaser said and just add on that 
I think what we've seen is that the smallest players are the 
most vulnerable, especially when you're a small player and 
you're highly dependent on China for certain parts of your 
market. So if you look at the Philippines with tropical fruit, 
and bananas in particular, huge vulnerability there. If you 
look at other countries, like Vietnam, with tourism, at times 
that's been highly effective.
    I think the countries that actually have stood more 
strongly against this kind of economic coercion and been less 
vulnerable to it are, not surprisingly, the bigger countries. 
So China has often avoided targeting the United States with 
these kinds of economic measures, at least maybe it's gone 
after individual companies and individuals, but it hasn't gone 
after the United States as a whole, for the most part. It 
hasn't gone after the European Union as a whole. Look who it's 
going after now, one of the smallest member states in the EU, 
Lithuania. And I think there is a reason for that.
    What I think we need to do to demonstrate solidarity with 
those smaller countries is stand behind them and show that 
through either an anti-coercion mechanism or some other 
collective action that actually China can't isolate these 
smaller countries and that big countries are going to stand 
beside them. That, I think, has to be the key message, because 
otherwise Beijing will be able to continue picking off smaller 
countries and companies and individuals one at a time.
    Senator Ossoff. Thank you, Mr. Cooper.
    Ms. Wang, the same question to you, please.
    Ms. Wang. Thank you. I will be speaking from a human rights 
dimension. I believe, of course, China's intimidation and 
censorship has long been around, for decades. So for example, 
one of the earliest examples that we can refer to is Disney. 
Back in 1996, there was a Disney film called ``Kundun,'' 
featuring a story about Tibet and the Dalai Lama. And that 
resulted in a Disney ban in 1999 and that ban was only lifted 
because they had conversations with the Chinese government to 
open a Shanghai Disneyland, and also the cartoon ``Mulan.''
    This intimidation has been specifically more about the 
three Ts--Taiwan, Tibet, and Tiananmen, but I believe we saw an 
uptick in 2019, surrounding the anti-extradition protests in 
Hong Kong. I believe there was this uptick then because the 
protests really captured the global spotlight, and that's when 
the Chinese government realized that they have these tools at 
their disposal. They have these tools that they honed for 
decades to silence criticism and dissent.
    So from this perspective, I think China's coercion in 
intimidating and censoring companies and businesses really 
increased in 2019 up until now. And it will only increase as we 
approach the Beijing Olympics.
    Senator Ossoff. Thank you, Ms. Wang.
    Mr. Hung, my time has expired but I'll send that question 
to you for the record. I yield back, Mr. Chairman. Thanks again 
to our panel.
    Chair Merkley. Thank you very much, Senator. Now we'll turn 
to the House side to Congressman Mast from Florida's 18th 
Congressional District.
    Representative Mast. I thank everybody for their testimony. 
I've enjoyed it. I've enjoyed the analysis. Probably one of my 
favorite presidents, Reagan, spoke about a number of things in 
his 1964 ``A Time for Choosing'' speech. But he gave a poignant 
phrase at one point, which has been used at different times 
throughout history. He said: Those who had the most to lose 
have done the least. Can somebody in this panel prove me wrong, 
prove this sentiment wrong in this case, as it relates to this 
chameleon, crooked communist China that we're dealing with, and 
the three Ts that were just brought up, and COVID-19, and the 
list could go on and on, all of the economic coercion that we 
see across the globe, from large economies or strong economies 
to smaller economies and weaker economies. Could somebody prove 
me wrong, or rather prove that sentiment wrong? Not me wrong, 
but prove that sentiment wrong, that those that have the most 
to lose have done the least as it relates to this situation?
    Ms. Glaser. I'd be happy to jump in, Congressman, and maybe 
to try to give you an example. I think actually Taiwan has an 
enormous amount to lose, but it certainly has not done the 
least. Taiwan has been sending about--if you include Hong Kong 
and Macau in their exports--in 2020 I think the export level 
rose to over 40 percent. I think it hit almost 44 percent of 
their exports that year. And it is coming down now, and I think 
has dropped now to under 40 percent. But we have seen Taiwan, I 
think in really significant ways, stand up to China.
    They are doing so not just economically and trying to 
encourage their businesses to come back and reinvest, re-shore 
in Taiwan, and have seen a great deal of success in part 
because of the economic circumstances, of course, in China, as 
well as the tariffs. But they're also standing up to China 
politically, but I would say in ways that are consistent and 
prudent, and not provocative, doing so in ways that are very 
much in the interests of the United States, which is one of the 
reasons that the United States has seen ever-stronger relations 
with Taiwan in the last few years. Thank you.
    Representative Mast. Thank you for the thoughtful response. 
I think it leads well into a follow-on question. What, number 
one, could we all learn from Taiwan's response, if you would 
call that the strongest response? And an additional follow-on 
to that would be this: Why should the response not be 
provocative?
    Ms. Glaser. Well, I will address the second part of the 
question and maybe give others an opportunity to talk about 
what we should learn from Taiwan. There are so many things. But 
if Taiwan were to take actions that were deemed by Beijing as 
being exceedingly provocative, we could end up in a situation 
where Xi Jinping decides to use force to, as they would say, 
reunify Taiwan with China. I think that that would be 
catastrophic.
    Therefore I believe the best set of policies by Taiwan and 
by the United States is to help keep Taiwan strong and enable 
it to continue its practices of self-governance, being able to 
develop its own policies, to participate more in the 
international community and, as I mentioned earlier, sign free 
trade agreements and other trade agreements, which they are 
allowed to do under WTO. They are, after all, full members. So 
when I use the term ``provocative,'' what I mean is I worry 
about the potential for a Chinese attack on Taiwan. I want to 
see Taiwan continue to be safe and to be able to make their own 
decisions on behalf of their own citizens. Thank you.
    Representative Mast. Yes, ma'am. And again, I appreciate 
the conversation on this, your willingness to speak up on that 
front. I think for many of us, we could probably say that 
there's a spoiler alert in this, in that in my opinion it 
wouldn't be whether Taiwan is provocative or not. I'm not 
trying to dissect you in this way. I don't think you're trying 
to make all of these points, but it brings it up. I don't think 
it's the fact that Taiwan is or is not provocative that keeps 
them from violent actions by China. It's only by China's 
decision that they decided to not yet resort to a violent 
takeover of Taiwan, that that has not occurred yet.
    And I think probably many of us can sit here and believe 
that this is exactly what they're mulling over, chewing over, 
not as it relates to Taiwan's actions but as it relates solely 
to China's desire. And in that, I would say that the greatest 
strength we have is using any and all means to be provocative 
against China, letting them know that we will not tolerate 
these kinds of actions on any front, understanding that we're 
not waiting for an action to occur because they're reacting to 
somebody else. They're simply acting out of their own desire, 
and we have to be at that place of understanding of China in 
order to truly combat them.
    Ms. Wang. May I add on? Thank you. I want to------
    Representative Mast. I would hope you would.
    Ms. Wang. Thank you. I wanted to piggyback, or answer your 
question about what we can learn from Taiwan. I think we can 
all refer to Taiwan's response to the COVID-19 pandemic. They 
had their own #TaiwanModel ``all hands on deck'' approach. I 
think what the U.S. can learn is that, as Congressman Suozzi 
mentioned in his opening remarks, we need a whole-of-government 
approach. How can we get everyone involved to stand with our 
values, to protect human rights, and to protect our democracy? 
Thank you.
    Representative Mast. I thank everybody for the time.
    Chair Merkley. Thank you very much, Congressman. Senator 
Daines is enroute to join us, but he's a couple minutes out. 
While we're waiting for him, I wanted to have you, Dr. Cooper--
you note that China has this category, ``unreliable partner.'' 
It's a lesser categorization that makes it hard for a foreign 
entity to participate in China's economy. Can you just explain 
how they're using that tool?
    Mr. Cooper. Absolutely. Thank you, Mr. Chairman.
    The United States has a very formal, legalized approach to 
sanctions, and China has, for a very long time, had almost no 
formal legalized approach to sanctions. I think what we've seen 
in the last few years is Beijing realizing that actually it 
would be helpful if Beijing had at least a quasi-legal 
approach. And so what it has done is create in many ways 
parallel processes to what we have in the United States. In 
this case, it's called the Unreliable Entity List. And this, I 
think, is intended very specifically to be a response to the 
U.S. Entity List, which is run by the Commerce Department. And 
so this Unreliable Entity List would, I think, very clearly 
target those companies that are engaged in behavior that 
Beijing thinks crosses some red lines. And it's a little 
unclear exactly what those red lines would be, and it's unclear 
which companies would be targeted first.
    But I think what we do know is that China is looking to 
create what will at least appear to be legal mechanisms. The 
big difference here, of course, is that our mechanisms, our 
sanctions, are rooted in U.S. law, and they tend to be very 
specific actions, and they require legal justification. And the 
Treasury Department in particular spends a huge amount of time 
making sure that it can come to these conclusions. I think it's 
quite clear that Beijing will do nothing of the sort. A company 
will be on the list for highly political reasons, and it will 
be very difficult to tell what got a company on the list and 
how they might come off. And so that's the case not just with 
the Unreliable Entity List but with some of the other sanctions 
that China is creating at the moment.
    Chair Merkley. So have they put a country or a company on 
this list yet or threatened to put a company or country onto 
this list in order to obtain a change in behavior?
    Mr. Cooper. They have threatened to put several companies 
on this list. There were reports months ago about a handful of 
specific companies that might be listed. My understanding is 
that they were not formally listed--none of them have, yes. I 
think no one has at the moment, but other panelists may know 
more on that.
    Chair Merkley. Thank you very much.
    Senator Daines of Montana.
    Senator Daines. Senator Merkley, thank you. I want to thank 
you all for coming before this Commission and providing 
perspective and expertise on this important topic.
    I spent nearly six years working in China as an American 
expat launching brands, once upon a time, to compete against 
Chinese brands when I worked in the private sector. I've led 
congressional visits to China and neighboring countries several 
times. Just last month I was in India, meeting with government 
officials and some tech leaders, talking about trade as well as 
the threats and the challenges that China poses to the United 
States, to India, other allies, and even its own people.
    It's clear that the U.S. needs to work closely with our 
allies to counter China's growing economic coercion, influence, 
and its efforts to export its surveillance state abroad.
    Dr. Cooper, it's clear that China is not satisfied with 
simply censoring its own population but also seeks to influence 
speech and actions abroad, outside its borders, including the 
self-censorship of scholars, foreign publishers, businesses, 
even academic journals, related to doing work in or about 
China.
    What do you believe are the long-term effects of such 
actions? And what could be done to help both governments and 
the private sector withstand such pressures?
    Mr. Cooper. Thank you, Senator.
    I think there are a number of long-term impacts. Many of 
them are quite detrimental to China directly. I think one of 
the clear impacts we've seen is that many Americans, including 
many experts on China, are unwilling to go to China today 
because they fear for their safety. And this is not a 
completely unfounded fear. On my last trip to China, one of the 
small number of people I was on a trip with ended up in jail 
later.
    Senator Daines. And what was the date of that?
    Mr. Cooper. I guess that was three years ago; Michael 
Kovrig. He's a Canadian citizen, now finally back in Canada 
after being detained in response to, effectively, an American 
court case against Huawei. So I think China has done tremendous 
damage to its own cause in many ways. And the difficulty with 
people, even experts on China, being able to go to China is 
going to be a real problem for understanding what's going on in 
Beijing and for Beijing understanding what's going on outside 
its own borders.
    I think that's another thing that we're seeing as a result 
of this censorship campaign is actually many people in China 
don't understand how much damage China has done to its own 
cause abroad. They don't understand how bad the polling data is 
outside of China on views, not just of Xi Jinping and the 
Communist Party, but on the country as a whole. We could get 
into the effects on individual companies and on down the line. 
I think China has done tremendous damage to itself through many 
of these measures.
    Senator Daines. Yes. Just look at the flow of capital, 
decisions being made just as we speak. Capital that may have 
been intended for direct investment in China is now headed to 
other markets in the region and elsewhere.
    Australia in particular has been targeted aggressively by 
China. What can we learn from their experience? And what would 
you say is China's assessment of the reaction by the United 
States, as well as other democracies?
    Mr. Cooper. I think we can learn a lot from Australia, 
particularly that if you're willing to stand firmly behind your 
beliefs that you can make it through one of these pressure 
campaigns. We're certainly not at the end of it yet. I don't 
know when Australia will get to the end of this campaign, but I 
do think the Chinese view tends to be that there's no reason to 
stop putting pressure on Australia, and perhaps eventually 
Australia will cave. I don't think that's going to happen, and 
I think it's in our interest to demonstrate that our alliance 
is very close and that we and our friends will stand with 
Australia.
    I think the AUKUS agreement was an effort to do so, but let 
me say that I think we need to do more for Australia 
economically. Australia is under economic pressure, and we've 
responded in part by tightening our alliance in the security 
area.
    But if you think about other countries that are going to 
come under pressure from China, they're not going to get their 
own AUKUS-type deal. What they're going to want is U.S. 
support, U.S. economic support, and support from other like-
minded countries. And so I think we have to do more to stand 
with Australia economically to show other countries that 
actually, if they come under this kind of pressure, that their 
friends will stand with them as well.
    Senator Daines. Dr. Cooper, thank you.
    Ms. Wang, China is in the process of testing a digital 
yuan. While most countries that are looking at digital 
currencies are concerned about privacy implications, China's 
motivation stems in large part from a desire to gain insight 
into the financial lives of its citizens. How could a push by 
the Chinese government to spread the use of the digital yuan 
outside of its own borders threaten human rights in neighboring 
countries, in countries where China has made significant 
capital investments?
    Ms. Wang. Thank you.
    I think pushing a digital yuan is a threat to human rights 
and democracy, because essentially the Chinese government is 
exporting its authoritarianism, and it is exporting its 
censorship by weaponizing its power. I think the export of 
surveillance we've seen play out in Tibet. We see it play out 
in the Uyghur region. From there itself we can see crimes 
against humanity, against millions of innocent people. So thank 
you for the question.
    Senator Daines. Dr. Cooper, with regard to Taiwan and 
China's ongoing and increasing pressure campaign on that 
democracy, what would be appropriate additional steps for the 
United States to take to support Taiwan and deter heightened 
Chinese aggression?
    Mr. Cooper. I think there are a number of military steps 
that we should take, and I think we should be focusing most on 
action and less on talk. But I think one thing that other 
panelists have already raised is the importance of economic 
ties with Taiwan. One thing that we keep coming back to this 
morning is the importance of diversification. We should be 
helping Taiwan diversify. That means giving it other economic 
options. So whether it's the United States or Europe looking to 
make trade agreements with Taiwan, that's the kind of thing 
that gives countries leverage to push back against economic 
coercion, and I think that should be a top priority.
    Senator Daines. Senator Merkley, I'm out of time. Thank 
you.
    Chair Merkley. Thank you very much, Senator.
    I'm going to ask a few questions in closing here. First, I 
wanted to note, Ms. Glaser, that you and several panelists have 
suggested that we need to understand the landscape of economic 
coercion better by having companies systematically report both 
their potential exposure to the risk of Chinese economic 
coercion but also instances in which there are threats or 
actions taken--in the form of coercion.
    Do you envision a particular congressional law then that 
mandates companies to report in this fashion? And do we have 
model legislation for this?
    Ms. Glaser. That's an excellent question, Senator. I don't 
know whether we have any specific model that we can look to, 
but I do think that legislation is necessary in this regard 
because I think we can compel companies. This would have to be 
clearly defined. What is the information that we are asking 
them to convey or report? Is it going to be the percentage of 
their exports that go to China? How much perhaps they have 
invested in China? I mean, those are examples of exposure. Are 
we going to just narrow it down to areas where there are 
national security implications rather than trying to identify 
writ large what the exposure of a company is economically to 
China?
    So I think we'd have to think through exactly what the 
purpose of it is. But I think that that's an exercise that is 
very much worth considering, and I think Congress should take 
up this issue.
    Chair Merkley. Okay. Well, I invite you and others to 
brainstorm what that might look like, and any information you 
have on conversations that have been held with our 
multinationals in regard to how they might support or have 
concerns that we could address in that regard.
    Another point raised for potential legislation was a 
compensation fund. Would anyone on the panel like to address 
how that might work?
    Dr. Cooper.
    Mr. Cooper. Yes. I think in the long term we need some sort 
of compensation fund, not to fully compensate those that are 
targeted--that's probably impossible--but to demonstrate 
solidarity with those that are targeted. So if the political 
message coming out of a Chinese coercion campaign is that the 
rest of the world, or at least a big subset of states, are 
standing with the country that has been targeted, that's a very 
different message than, Oh, they've just been left on their 
own. And that means both that we need to have a coercive 
response to China--a strong deterrent--but also that we have to 
provide at least some support.
    Right now, for example, one of the messages you hear often 
in Australia is that the United States has actually benefited 
from China's sanctions on Australia because, for example, 
American producers of various goods are now replacing 
Australian producers in China. That's the wrong message. We 
need the message to be that like-minded governments are 
standing with one another.
    So I don't think we're talking about a huge amount of 
money. The question in my mind is how do you do this in a way 
that doesn't clearly violate the World Trade Organization? 
There's been talk, for example, of could you have a 
countervailing action that would go against certain Chinese 
companies that would gather some funds and that could be 
redirected toward the companies that have been harmed by 
Chinese action? I think that's probably WTO-violating. But I 
think those are the kinds of discussions that I would expect to 
be hearing the next few years as people think through ways to 
do this.
    Chair Merkley. Thank you, because I think it's important to 
put forward models of what that might look like and test them. 
What happens when the Women's Tennis Association says we're 
forgoing games in China, or the NBA says we are going to 
withdraw our extensive strategy for a basketball league in 
China? It might be a little simpler when a single company, a 
single product, is affected; what that looks like, and whether 
this is an international effort or just nation by nation.
    Then I want to turn to the blocking laws. Dr. Cooper and 
Dr. Hung, you've both mentioned in your testimony the anti-
foreign sanctions law. This was back in June of 2021. It built 
on previous laws China had adopted, expanding the private right 
of action and creating a counter-control list that could affect 
visas, and freezing assets of foreign entities. This is part of 
kind of the new phase of Chinese strategy and economic 
coercion. It places companies in a tight spot between following 
their home's country laws and then being subject to sanctions 
by China.
    Would either of you, Dr. Hung and Dr. Cooper, like to 
expand on the challenge this presents and whether China has 
used this strategy yet, and, if so, what it looks like?
    Mr. Hung. Thank you, Senator.
    I would like to respond by saying that right now the 
sanctions regime that China is trying to develop is much less 
effective and sophisticated than the U.S. one. Dr. Cooper 
already pointed out that the U.S. regime is very much legal-
based. And another reason is that the U.S. sanctions regime is 
very much based on the international economy's economic 
dependence on the U.S. dollar as a kind of reserve currency and 
as a kind of transaction currency.
    A lot of U.S. sanctions against entities and against 
countries and financial institutions that are doing business 
with them will be in trouble because the transaction needs to 
go through the U.S. dollar system. And it is exactly why China 
tried to extend their entire foreign sanction norms to Hong 
Kong, but they backpedaled and then did some estimation about 
whether they will delay it or actually cancel it, because 
actually Chinese companies depend on Hong Kong and depend on 
the Hong Kong financial markets for access to U.S. dollars--in 
raising capital and borrowing in U.S. dollars.
    So China tried to turn the tables by internationalizing the 
use of renminbi. And some of the questions mentioned the 
attempt to popularize the use of digital yuan and then creating 
a whole Chinese alternative currency system. This is the thing 
that China actually is trying to do but is still a long way 
from achieving. But in that regard, it will be very important 
for the U.S. to--vigilance about this China plan to develop an 
alternative currency and currency system and then uproot the 
international use of the U.S. dollar, which is a huge lever 
that the U.S. has regarding these sanctions issues.
    Chair Merkley. Thank you very much, Dr. Hung.
    And I have to note that I may be approaching the last 
person to vote, and so my team is telling me I need to conclude 
the hearing. I think this new phase that China is involved in 
of creating a legal regime to try to reinforce its strategy of 
economic coercion is one that merits a lot of attention.
    Thank you all very much for your expertise and testimony 
today. To summarize, China is engaged in a massive acceleration 
of its strategy of economic coercion. Its goal is to silence 
criticism around the world, to be able to conduct egregious 
actions, whether it's stripping Hong Kong of political rights 
or engaging in genocide, and have the world not respond.
    But here in the free world it's essential that we stand up 
for our values, our human rights values. It's essential that we 
respond. A huge thank you to the Biden administration for 
announcing yesterday a diplomatic boycott of the Olympic Games, 
and we must challenge every other nation in the free world to 
join us.
    A huge thank you to the Women's Tennis Association for 
being very powerful in its response to Ms. Peng's treatment, 
the tennis star's treatment, by the Chinese government. They're 
really setting a great example.
    We need to carry forward and work on the suggestions that 
you all, as a panel of experts, have put forward today, 
including exploring having companies report on their exposure 
to economic coercion, proceeding to have companies report on 
any attempted coercion. And then we need to work in partnership 
with the rest of the world, because the United States by itself 
cannot be effective in responding.
    So thank you for standing up for the human spirit. China 
has said that it's criticizing the United States for its 
diplomatic boycott, saying it's not in keeping with the Olympic 
spirit. I'll tell you what's not in keeping with the Olympic 
spirit of uplifting humanity, and that's crushing humanity by 
stripping people of their political rights and engaging in 
genocide.
    Thank you all very much. The record will remain open until 
the close of business on Friday, December 10th, for any items 
members would like to submit for the record or any additional 
questions for our witnesses.
    This hearing is adjourned.
    [Whereupon, at 11:54 a.m., the hearing was concluded.]

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


                         A  P  P  E  N  D  I  X

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


                          Prepared Statements

                                ------                                


                 Prepared Statement of Bonnie S. Glaser

    Chairman Merkley, Chairman McGovern, and distinguished Members of 
the Commission, thank you for holding this important hearing and asking 
me to participate.
    Economic coercion--defined here as a threatened or actual 
imposition of economic costs by a state on a target with the objective 
of extracting a policy concession--is an increasingly prominent 
instrument of Chinese foreign policy. A vast array of economic coercion 
measures combined with a set of positive inducements comprise China's 
economic statecraft toolkit. As the world's top trading nation, the 
second-largest market, and one of the largest providers of development 
finance, Beijing has the potential to wield significant influence by 
using these sticks and carrots. Although China's employment of economic 
coercion has had only limited success in changing the behavior of 
targets, it has been more successful in deterring countries and 
companies from undertaking actions harmful to Chinese interests. In 
addition, PRC positive economic inducements have unquestionably 
persuaded some states and firms to refrain from criticizing PRC 
policies, although this impact is more difficult to measure.
    Unlike traditional economic sanctions, Beijing's economic coercion 
usually relies on informal measures that provide plausible deniability 
and enable China to ratchet pressure up or down as needed. Whereas 
there are many instances of Chinese officials and state media 
threatening to take punitive economic actions against countries and 
foreign firms, there are very few cases where the Chinese government 
has publicly acknowledged implementing coercive acts. For example, 
after Australia called for an independent investigation into the 
origins of the coronavirus, China's ambassador to Australia, Chen 
Jingye warned that ordinary Chinese would say ``Why should we drink 
Australian wine? Eat Australian beef?'' Beijing subsequently cited 
violations of phytosanitary requirements as the reason for holding up 
imports of Australian beef, timber, and lobster. China also falsely 
alleged that Australia was dumping barley and wine and subsidizing the 
producers of those products. After months of vague import restrictions 
on Australian coal, the Chinese government formalized the ban by 
granting approval to Chinese power companies to source coal from a list 
of countries that did not include Australia.
    The PRC has employed coercive economic measures in support of its 
foreign policy objectives since at least 2010 when it used coercion on 
two occasions: (1) halting rare earth exports to Japan to compel Tokyo 
to release the captain of a Chinese fishing trawler who was detained 
after colliding with a Japanese patrol boat operating near the disputed 
Senkaku/Diaoyu islands; and (2) restricting salmon imports from Norway 
after the Norwegian Nobel Peace Prize Committee granted the annual 
award to Chinese dissident Liu Xiaobo. Since then, the PRC has used 
economic coercion against over a dozen countries. In virtually every 
case, the targets have been companies and industries in democratic 
states. The Chinese apparently believe that by pressuring influential 
business constituencies in democracies they can change the policies of 
targeted governments.
    Beijing often uses other non-economic coercive tactics in 
combination with economic coercion. Downgrading bilateral relations, 
cancellations of high-level dialogues, or preventing foreign officials 
from meeting with their Chinese counterparts are commonly used 
alongside economic coercion tactics. Arbitrary indictments, 
detainments, and harsh sentences for imprisoned foreign nationals have 
been used by the PRC to exert pressure on foreign governments. In its 
attempt to compel Ottawa to release Huawei's CFO Meng Wangzhou, 
Beijing's illegally detained Canadian citizens Michael Kovrig and 
Michael Spavor as well as restricted imports of Canadian commodities 
such as canola seeds, oil and meal. Swedish citizen Gui Minhai was 
sentenced to 10 years in prison in 2020 on charges of illegally 
providing intelligence to foreigners. Gui was awarded the annual 
Tucholsky Prize for writers and publicists living under threat or in 
exile by Swedish PEN, an NGO committed to defending freedom of 
expression. China's ambassador to Sweden publicly announced that his 
country planned to impose restrictions on economic ties and trade with 
Sweden and deny visas to reporters from Sweden who criticize China.
    Below are four categories of PRC coercive economic diplomacy.

                           Trade Restrictions

    The majority of cases have included the imposition of export and 
import restrictions. Beijing has employed many tactics, including 
tariff increases, targeted customs inspections, license denials, 
informal embargoes, and selective use of international regulations. In 
one of the most recent cases, Beijing ended all trade with Lithuania by 
delisting it as a country of origin, which meant that imported goods 
from that country cannot clear customs. The measures were taken to 
punish Vilnius for permitting Taiwan to establish a representative 
office with the name ``Taiwanese Representative Office.'' China has 
only taken measures to restrict imports of products for which it has an 
easily available substitute. It did not target imports of iron ore from 
Australia, for example, because China sources 60% of its iron ore from 
Australia and has no reliable alternative suppliers.

                             Tourism Curbs

    With a large number of outbound tourists and considerable control 
over their movements, Beijing has frequently restricted tourist flows 
to other countries. The Philippines was one of the first targets of a 
freeze on Chinese tourist visits in 2012 after a Philippine warship 
attempted to arrest Chinese fishermen who were fishing in the lagoon at 
Scarborough Shoal, which is disputed between the PRC and the 
Philippines. Protests against China in Manila provided a pretext for 
the state-owned China Travel Service to suspend indefinitely all tours 
to the Philippines due to ``strong anti-China sentiment'' that could 
pose a risk to the safety of PRC citizens.

            Actions Against Foreign Companies and Industries

    A high degree of centralized government control enables the PRC to 
take punitive measures against companies and industries that are 
associated with a country that China is seeking to punish. When South 
Korea deployed the Terminal High Altitude Area Defense (THAAD) anti-
missile system in 2017, Beijing rejected certification of Korean 
batteries for hybrid-electric vehicles, which prevented any vehicle 
equipped with cells made by LG Chem and Samsung SDI from being sold in 
China.
    In some instances, the PRC uses economic coercion to target 
companies to change specific practices that the Chinese Communist Party 
deems objectionable which are not connected to government policy. In 
early 2018, the PRC threatened to take action against Western airlines 
and companies that listed Taiwan as a ``country'' on their websites. 
The following year, China canceled digital streaming of Houston Rockets 
games after the NBA team's General Manager Daryl Morey posted a tweet 
supporting Hong Kong protesters. Rather than risk being shut out of the 
Chinese market, the NBA and other entities that have faced censorship 
from China have issued public apologies and many companies have 
complied with Chinese demands.
    Just last month, Taiwanese company Far Eastern Group and its 
subsidiaries were fined US$13.89 million for alleged breaches involving 
environmental, land use, fire safety, tax issues and other regulations 
at factories in five Chinese provinces. Beijing openly accused the 
company of supporting Taiwanese independence by providing large 
political donations to candidates from Taiwan's ruling party, the 
Democratic Progressive Party.
    China has long required Taiwanese businesses seeking to invest in 
China to support the ``One China'' policy, but it has rarely enforced 
this policy. Seeking to prevent further punitive actions from being 
taken against his company, Far Eastern Group Chairman Douglas Tong Hsu 
published an article stating that he has always opposed Taiwan 
independence and supported the ``one-China principle.''

                            Popular Boycotts

    The PRC uses state and social media to encourage its citizens to 
launch nationalistic boycotts against companies and industries from a 
target state. The South Korean conglomerate Lotte Group, which provided 
the land in Seoul for the THAAD deployment, was targeted with massive 
protests that eventually forced it to shut down its 112 stores in 
China. In 2012, Chinese authorities fueled anti-Japanese protests after 
Tokyo's prefectural governor Shintaro Ishihara announced his decision 
to let the municipality purchase three of the disputed Senkaku/Diaoyu 
Islands from their private owner.
    In some cases, popular boycotts by the Chinese people and companies 
may occur without Chinese government urging or direction, as PRC 
officials claim. However, it is undeniable that the government has 
employed a range of levers to both promote and tamp down popular 
boycotts during foreign policy disputes. The fact that Chinese 
officials threatened to instigate consumer boycotts of some Australian 
products in retaliation for Canberra's offending policies indicates 
that Beijing views popular boycotts as a useful coercive economic tool.
    Although this hearing is focused primarily on economic coercion, it 
is important to note the negative impact of China's positive economic 
inducements as well. In addition to creating debt crises, corruption, 
environmental damage, and other negative consequences, China's 
financing to developing countries under the Belt and Road Initiative 
has stifled global criticism of Chinese violations of human rights. 
Many recipients of China's BRI funding have openly supported Beijing's 
position that its actions against Uighurs and other minorities in 
Xinjiang are necessary to counter terrorism and extremism. During the 
47th session of the United Nations Human Rights Council earlier this 
year, more than 90 countries, including several with majority Muslim 
populations, expressed their support for China's stance and 65 of them 
opposed interference in China's handling of the situations in Xinjiang 
and Tibet. Although it is difficult to prove, it is likely that many of 
the states that sided with China did so because they want to continue 
to receive Chinese loans and investment, and fear that refusal to 
support Beijing would put those benefits at risk.
    When has the PRC's economic coercion been successful and why? 
Studies show that the level of economic pain that initiating countries 
can inflict on targets rarely, by itself, determines whether coercion 
is effective. In the cases in which China has employed economic 
coercion, the failure to compel many of the targeted foreign 
governments to alter their policies is due in part to the fact that 
Chinese application of economic pressure has generally been aimed at a 
small number of companies or industries in each target country and 
therefore the impact on China's total trade with that country has been 
relatively limited. In most cases, the economic hardship has been short 
lived because companies have discovered ways to circumvent PRC 
restrictions or found new markets for their goods. For example, 
Canada's exports to China fell by $3.5 billion in 2019, but that loss 
only constituted a small fraction of Canada's $447 billion in exports 
that year.
    Of the almost one dozen Australian products targeted by Chinese 
coercion, all are being shipped elsewhere, except for a small 
percentage of high-end Australian wine.
    The PRC's move to halt all trade with Lithuania will not have a 
major negative effect on the Lithuanian economy because only 1% of its 
exports go to China. However, if Beijing were to take similar actions 
to block all imports from a state that has a greater trade dependency 
on China, the impact could be far more damaging. Since the PRC's 
decision to delist Lithuania as a country of origin is in clear 
violation of WTO rules, it is possible that this action may strengthen 
the willingness of democracies to unite to push back against Chinese 
economic coercion.
    In the cases that PRC pressure has successfully led to policy 
changes in the target state, political factors have played a bigger 
role than the effectiveness of economic coercion. Norway's exports to 
China declined as much as $1.3 billion between 2011 and 2013, but by 
2014 its exports had rebounded to normal levels. The Norwegian 
government remained subject to significant restrictions on political 
interactions with Beijing, however. After seven years, Oslo agreed to 
make political concessions to China to restore the bilateral 
relationship to normal. In 2017, Norway signed a new political 
agreement with Beijing in which it said that Norway ``fully respects 
China's sovereignty and territorial integrity, attaches high importance 
to China's core interests and major concerns, will not support actions 
that undermine them, and will do its best to avoid any future damage to 
the bilateral relations.''
    Mongolia conceded to Chinese demands more quickly than Norway. The 
PRC implemented measures to hamper trade with Mongolia after 
Ulaanbaatar hosted the Dalai Lama, Tibetan's spiritual leader, for a 
visit. The Mongolian government subsequently publicly stated that 
``Tibet is an inseparable part of China and the Tibet issue is China's 
internal affair.'' It agreed to never host the Dalai Lama again. Both 
political and economic factors likely played a role in Ulaanbaatar's 
decision. Mongolia was desperate for Chinese investment in mining and 
infrastructure and Beijing had canceled talks to discuss a potential 
loan. The country's geographical proximity to China also requires 
preserving some modicum of friendliness and stability in relations with 
its much larger neighbor.
    In Japan's case, although China was not successful in blocking rare 
exports to Japan, Tokyo capitulated and released the Chinese captain of 
the fishing vessel. Japan's decision was likely based on political 
considerations, and perhaps concerns that Beijing could take more 
harmful measures, such as acting against Japanese investment in China.
    In the majority of instances in which Beijing has used economic 
coercion against states, it has failed to change the policies of its 
targets. In some cases, China's trade weaponization has backfired. In 
the wake of being subjected to Chinese pressure, some countries have 
taken steps to reduce their dependence on China and create more 
resiliency in their supply chains. Although China won a short-term 
victory against Japan in 2010, Tokyo subsequently slashed its 
vulnerability to China: over 90% of Japan's rare earths were imported 
from China in 2010, it cut that reliance to 58% within a decade.
    Moreover, Beijing's coercion has caused many countries to rethink 
their economic relationships with China and encourage their companies 
to diversify. In some cases, China's use of coercive tools has 
inadvertently caused the formation of nascent anti- China coalitions. 
The pursuit of trade restrictions against Australian industries was 
probably a factor in Canberra's reassessment of its security 
environment that led to its decision to sign the trilateral AUKUS pact 
with the United States and Australia.
    China's economic coercion has likely been more successful in 
deterring some countries from taking actions that could damage Chinese 
interests than in compelling policy reversals. In fact, the intended 
target of Chinese actions often may not be the offending country; 
instead, China often coerces one to deter another--``killing the 
chicken to scare the monkey.''

                            Recommendations

    Despite its limited success and occasional blowbacks, Beijing 
continues to view economic coercion as a valuable tool in its economic 
statecraft toolkit. This is likely because it judges that the cost to 
China is negligible. Recent developments such as the AUKUS deal and the 
pending EU anti-economic coercion tool suggest that countries are 
willing to band together to impose greater costs on China. The United 
States should consider undertaking unilateral steps as well as working 
with like-minded partners to counter and deter potential Chinese 
economic coercion, and to prepare measures to limit potential damage to 
companies and industries.

To Do List:

      Diversify trade relationships. The United States should 
identify sectors which are overly dependent on the Chinese market and 
therefore vulnerable to coercive trade practices. National and local 
governments should actively promote trade diversification.

      Assist companies and industries to identify and respond 
to trade coercion. The United States should help potential targets of 
economic coercion to develop tools to identify cases of trade coercion 
and respond quickly. Trade associations and other stakeholders should 
be encouraged to work closely with U.S. government agencies. Mechanisms 
should be created for sharing information and best practices.

      Prepare to assist targets of coercion. Encourage 
companies to have a plan in place to respond to potential Chinese 
coercion. They should be encouraged to report all instances of coercion 
to appropriate U.S. government entities. The U.S. government should 
become actively involved in coercion cases in various ways, ranging 
from diplomatic condemnations of China's actions to providing 
compensatory support for targeted industries and workers. Congress 
should explore how to appropriate funds for a vehicle to compensate 
companies affected by Chinese coercion. The provision of assistance to 
targets of coercion will likely reduce incentives to comply with 
Chinese demands.

      Encourage private sector trade associations to develop a 
voluntary code of conduct regarding China. Such a code would include 
commitments by U.S. companies to refrain from self-censorship and other 
activities in China that are contrary to U.S. values and interests. The 
U.S. should consider developing incentives that could be provided to 
companies that sign on to the code of conduct.

      Create a voluntary counter-coercion coalition of like-
minded countries willing to push back against economic coercion. When 
instances of economic coercion take place, coalition members can decide 
whether and how to respond. Through collective action, the coalition 
would seek to compel China to stop its economic coercion campaign and 
to desist from taking future coercive measures in the future. 
Collective steps could include: (1) issuing a joint declaratory 
statement condemning Chinese behavior and other coordinated diplomatic 
actions; (2) encouraging targeted countries to pursue WTO dispute 
settlement cases against instances of economic coercion where WTO 
remedies are possible, with other coalition members then signing on to 
those cases as third parties; (3) explore ways of taking retaliatory 
trade, investment or other policy measures against China that are 
consistent with WTO rules; and (4) create a counter-coercion reserve 
fund to compensate companies for economic losses. The fund should be 
capitalized by coalition members and private sector firms who might be 
targeted by coercion and receive compensatory support. Even a small 
amount of compensation would send a signal of political support to the 
targets of coercion, and more broadly to allies, partners, and the 
private sector.

      Work with allies and partners to reform the WTO so that 
member states are protected from economic predation. Realistically, 
this cannot be achieved quickly, but it is in the interests of 
democracies to strengthen the WTO so it can effectively penalize bad 
behavior when it occurs and arbitrate disputes objectively.

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT] 

                   Prepared Statement of Zack Cooper

                                 ______
                                 

            Between Beijing and a Hard Place: Responding to
                       China's Economic Coercion

    Senator Merkley, Representative McGovern, and other distinguished 
Commission members, thank you for inviting me to testify before you 
today.
    The topic of this hearing--how China uses economic coercion to 
silence critics and achieve its political aims globally--could not be 
more timely. Over the last few weeks, the world has watched as Beijing 
has attempted to silence one of China's brightest global stars. Peng 
Shuai's courage in coming forward with allegations of sexual assault 
perpetrated against her by a former vice premier stands in stark 
contrast to the Communist Party's efforts to muzzle her.\1\ After Peng 
described her assault on social media, state censors quickly deleted 
the post and restricted searches for Peng's name. Shortly thereafter, 
Peng disappeared from public view, only to reappear several days later 
in materials circulated by state media purporting to show Peng safe and 
sound. Few were convinced, including the Women's Tennis Association, 
which has continued to advocate on Peng's behalf, despite the likely 
economic consequences.
    Many around the world--including members of this Commission--have 
persistently brought attention to this case.\2\ China's efforts to 
silence Peng remind many of Beijing's censorship and repression 
campaigns on a variety of other domestic issues, including Hong Kong, 
Tibet, and Xinjiang. But China's leaders have been active in silencing 
criticism abroad as well, often using a variety of economic tools. The 
Alliance for Securing Democracy, which I co-direct, collects data on 
economic coercion through our Authoritarian Interference Tracker.\3\ We 
list 67 cases of economic coercion by China in the last decade alone. 
And at the moment, our database only tracks actions targeting the 
transatlantic community, so it does not capture the multitude of well-
known cases of economic coercion against targets outside the United 
States and Europe.

        Examples of China's Economic Coercion to Silence Critics

    To better understand the approaches that Beijing tends to take--and 
how these tactics have shifted over time--it is helpful to scrutinize 
five cases of Chinese economic coercion. The cases below illustrate how 
China has sought to silence critics in U.S. partner countries (Norway 
and Mongolia), U.S. treaty allies (in Australia and Europe), and even 
in the United States itself. There are a number of similarities across 
cases, but they also suggest that Beijing is shifting its approach in 
three ways: China's economic coercion is becoming more frequent, 
targeted, and explicit.

      Norway: In 2010, the Norwegian Nobel Committee awarded 
the Nobel Peace Prize to Chinese dissident Liu Xiaobo. At the time, Liu 
was jailed in China for ``inciting subversion of state power'' by 
calling for political reforms. In response to the Nobel Prize award, 
the Chinese government instituted economic punishments against 
Norway.\4\ Subsequently, the Norwegian Seafood Council claimed that 
Norway's share of the Chinese salmon market fell from 92% to 29%.\5\ 
Furthermore, Beijing stopped negotiations with Oslo on a free trade 
agreement, and some Norwegian individuals were reportedly denied visas 
to China.\6\ Relations between the two countries did not improve until 
2016, when Chinese foreign minister Wang Yi stated, ``Norway deeply 
reflected upon the reasons why bilateral mutual trust was harmed, and 
had conscientious, solemn consultations with China about how to improve 
bilateral relations.'' \7\ A Norwegian scholar concluded, ``the Chinese 
government can effectively use economic sanctions to affect the foreign 
policy positions of democratic governments . . . China has become too 
big to fault.'' \8\

      Mongolia: In 2016, the Dalai Lama traveled to Mongolia. 
One week after the Dalai Lama's visit, China began to impose fees on 
commodity imports from Mongolia. In addition, loan negotiations between 
Mongolia and China were suspended. Chinese foreign minister Wang Yi 
warned that ``The Dalai Lama's furtive visit to Mongolia brought a 
negative economic impact to China-Mongolia relations.'' \9\ Under 
growing economic pressure from its larger neighbor, the Mongolian 
government relented and promised to prevent future visits of the Dalai 
Lama.\10\ Mongolian Foreign Minister Tsend Munkh-Orgil publicly stated, 
``Under this current government, the Dalai Lama will not be invited to 
Mongolia, even for religious reasons.'' \11\ The Chinese government 
noted this commitment and stated that it hoped ``Mongolia will truly 
learn lessons from this incident.'' \12\ Similar patterns of economic 
punishment have been observed elsewhere, with researchers finding that 
visits by the Dalai Lama decreased exports to China by 12.5% over the 
following two years.\13\

      European Union: China has used economic leverage with 
individual European Union (EU) member countries to restrict statements 
on human rights and other contentious issues. In 2017, for example, the 
EU drafted language criticizing China for its human rights record. The 
statement was intended to be released at the United Nations Human 
Rights Council, but for the first time the EU failed to come to 
agreement on a public statement. Public reports suggested that Greece 
and Hungary led efforts to block the statement, with the Greek foreign 
minister opposing ``unconstructive criticism of China.'' \14\ Both 
countries took similar actions in 2016 to prevent issuance of an EU 
statement criticizing China's South China Sea policies. Chinese funding 
for the port of Piraeus in Greece and for railways in Hungary appears 
to have provided Beijing with leverage. After one Greek intervention, 
China's Foreign Ministry went so far as to publicly congratulate ``the 
relevant EU country for sticking to the right position.'' \15\ More 
recently, Beijing has sanctioned European experts, officials, and 
institutions that have spoken out on human rights issues. And in just 
the last few days, China has delisted Lithuania as a country of origin, 
effectively blocking all imports from or exports to Lithuania, amidst 
their ongoing political dispute.\16\

      Australia: In 2017, Chinese influence in Australia 
attracted substantial attention due to a series of disclosures about 
Chinese political donations.\17\ Donations from individuals with close 
ties to Beijing appear to have been intended to alter Australian 
decision-making regarding China. In some cases, Chinese officials 
directly threatened Australian political leaders that they would suffer 
in elections if they went against Chinese wishes.\18\ Tensions rose 
again when Australia called for an investigation into the origins of 
the pandemic, after which China placed restrictions on a variety of 
Australian exports to China. Chinese officials even provided a list of 
14 grievances that they insisted be addressed, which included 
``unfriendly or antagonistic report[s] on China by media'' in 
Australia.\19\ Deep China-Australia economic ties gave China an 
``increased ability to threaten and use economic coercion in its 
relations with Australia.'' \20\ Yet, despite this leverage and 
pressure, Australia has stood strong. Jeffrey Wilson concludes that, 
``Beijing's attempt to bully Canberra has been a spectacular failure.'' 
\21\ Rory Medcalf notes, ``perceptions of Australia's vulnerability to 
Chinese economic pressure are exaggerated.'' \22\

      United States: Although China has traditionally been 
reticent to target the United States with economic sanctions, Beijing 
has recently used economic tools to penalize American businesses and 
individuals for speaking out on various human rights issues.\23\ In the 
best known case, the National Basketball Association lost substantial 
business in China after one of its general managers posted on social 
media about Chinese repression in Hong Kong.\24\ American companies 
that do business in Taiwan have also faced various kinds of pressure to 
alter their labeling of Taipei.\25\ And prominent athletes and actors 
have been warned to avoid criticizing China, lest they and their 
employers lose business.\26\ Chinese officials have even gone so far as 
to warn U.S. businesses that they ``cannot make a fortune in 
silence''--suggesting that they lobby the Biden administration to 
change it policies toward China.\27\ Beijing has also sanctioned U.S. 
officials, experts, and institutions for speaking out, signaling a 
fundamental change in China's traditional approach.\28\ Whereas the 
United States once appeared to be largely off-limits for Chinese 
economic coercion, U.S. companies and individuals are increasingly 
coming under direct pressure.

               Trends in China's Use of Economic Coercion

    These five cases demonstrate that the scope, scale, and severity of 
the challenge from China's economic coercion is expanding. In 
particular, China's economic coercion has become more frequent, more 
targeted, and more explicit in recent years. Going forward, 
policymakers should expect these trends to continue.\29\

      More Frequent: Beijing is far more willing today to use 
economic tools for foreign policy ends than it was a few years ago. 
Whereas there were only a handful of clear cases of economic coercion 
by China in the early 2010s, experts have identified dozens of 
incidents over the last few years.\30\ This is true not only for 
negative penalties, but also positive inducements. Audrye Wong explains 
that China has provided ``economic inducements in illicit and opaque 
ways,'' which she calls ``subversive carrots.'' \31\ Elaine Dezenski 
notes that despite promises to avoid ``conditionality'' in its overseas 
assistance, China prefers ``closed bidding processes, non-transparent 
contracts, and a commitment to non-interference,'' making political 
influence easier.\32\ These trends suggest that Chinese leaders feel 
more confident in using economic tools, despite the fact that many of 
these actions have had significant negative effects on China's standing 
abroad.\33\

      More Targeted: At the same time, China's leaders have 
become more targeted in their use of economic measures. This transition 
toward more targeted measures mirrors the longer-term shift toward more 
targeted sanctions by the United States and many of its allies and 
partners. Earlier pressure on Norway and Mongolia broadly targeted key 
economic sectors in each country, but recent measures have been 
designed to isolate specific companies and individuals. Human rights 
activists, political leaders, and businesses have all come under 
pressure for making statements and taking actions that the Communist 
Party opposes. Even adhering to foreign laws can put companies at risk 
now that China's National People's Congress has passed an anti-
sanctions law that permits a broad set of responses against entities 
that adhere to foreign sanctions which Beijing considers ``arbitrary'' 
or ``unilateral.'' \34\

      More Explicit: Finally, China's economic statecraft is 
far more explicit and legalistic today than it was a decade ago. 
Beijing used to disguise most of its economic pressure, attempting to 
use ambiguity to avoid committing egregious World Trade Organization 
violations.\35\ Thus, previous measures, such as restrictions on rare 
earth exports, were often described in public as simple trade disputes 
unconnected to foreign policy choices.\36\ As William Norris has noted, 
there are a multitude of economic actors in China with different 
interests, which has often made it difficult to know the intent behind 
any specific Chinese economic action.\37\ Today, however, China's 
leaders are more willing to be explicit when they use economic tools 
for coercive purposes, with few if any efforts made to disguise the 
behavior. For example, Beijing has threatened to blacklist companies by 
putting them on an ``unreliable entity list'' when they ``endanger 
national sovereignty, security, or development interests in China, or 
violate normal market transaction principles by suspending normal 
transactions.'' \38\

                     Implications for Policymakers

    These trends suggest that China is likely to increase the 
frequency, targeting, and explicitness of its economic coercion in the 
years ahead. To deter and defend against these actions, the United 
States and other like-minded countries will have to work together more 
closely.\39\ Not only that, but China's growing willingness to target 
companies and individuals will mean that those actors will find 
themselves isolated unless they can find ways to coordinate among 
themselves and with their governments. With those objectives in mind, 
here are three steps that the United States and others should consider 
to better defend themselves, deter future bullying, and counter 
Beijing's economic coercion through collective action.

      Defending through Active Diversification: In a recent 
report, Darren Lim, Ashley Feng, and I argued that foreign actors will 
have to rely more on diversification to protect themselves against 
Chinese economic statecraft.\40\ This is true not only of the United 
States and its allies and partners, but also of companies and 
individuals within those countries. Deep dependence on China allows 
Beijing to accumulate influence over time and then to deploy that 
leverage coercively when countries, companies, and individuals act 
against the Communist Party's interests. There is no way to avoid such 
pressures entirely, but these risks can be managed by diversifying 
export markets and production hubs. The administration and the Congress 
should therefore consider whether companies operating in the United 
States should have to disclose the material risks to their businesses 
from over-exposure to any single foreign market or production hub, 
particularly ones that engage in widespread censorship and 
disinformation. Doing so might spur corporate boards to insist on 
auditing procedures that could identify over-exposure to certain risky 
markets and thereby incentivize diversification.

      Deterring through Strategic Recoupling: Over the last few 
years, a number of countries have engaged in selective decoupling to 
reduce their dependence on China in certain sensitive areas. These 
steps will no doubt continue. In the long-term, however, it is also in 
the U.S. interest that China continues to be dependent on America and 
its allies and partners for a wide range of goods.\41\ This is true 
both in high-technology areas, such as advanced semiconductors, but 
also in more basic but essential commodities such as agricultural 
products. One need look no further than Australia to see that imports 
like iron ore are critical to China, which gives foreign governments 
real leverage. Therefore, the offensive tool of strategic recoupling 
should be seen as a natural counterpart to defensively oriented 
selective decoupling. The United States should lead efforts with allies 
and partners to determine in which areas China's dependence can be 
maintained, or even increased, to provide leverage for deterring future 
economic coercion campaigns.

      Countering through Collective Action: Defense and 
deterrence are two key elements, but ultimately the United States will 
have to work with key allies and partners to penalize China when it 
engages in economic coercion against such countries, companies, and 
individuals.\42\ Doing so requires cooperation on what the European 
Commission is calling an anti-coercion instrument.\43\ When certain 
steps are triggered, the European Union will be able to institute 
countermeasures against coercion from abroad. The current case of 
Chinese coercion against Lithuania may provide an early test of this 
approach. Collective action will be critical, since Beijing is hoping 
that it can use its large market to coerce smaller foreign actors. 
Effective responses to China's economic statecraft will require 
concerted action by a number of like-minded countries. Working together 
with the European Union and others on a mechanism to counter coercion 
should therefore be a top priority for U.S. lawmakers and policymakers. 
Although this effort is likely to take years, work toward this type of 
arrangement should begin in earnest immediately.

[Endnotes begin on the following page.]
Endnotes:

    \1\ Leta Hong Fincher, ``Why Peng Shuai Has China's Leaders 
Spooked,'' New York Times, December 2, 2021, https://www.nytimes.com/
2021/12/02/opinion/peng-shuai-china-
leaders.html?searchResultPosition=1.
    \2\ Congressional-Executive Commission on China, ``Chairs Ask 
International Olympic Committee to Confirm Peng Shuai's Safety and 
Intervene on China's Human Rights Violations,'' Press release, November 
24, 2021, https://www.cecc.gov/media-center/press-releases/chairs-ask-
international-olympic-committee-to-confirm-peng-shuai%E2%80%99s.
    \3\ Alliance for Securing Democracy, ``Authoritarian Interference 
Tracker: Economic Coercion,'' https://securingdemocracy.gmfus.org/
asd_tools/strategic-economic-coercion/.
    \4\ Richard Milne, ``Norway Sees Liu Xiaobo's Nobel Prize Hurt 
Salmon Exports to China,'' Financial Times, August 15, 2013, https://
www.ft.com/content/ab456776-05b0-11e3-8ed5-00144feab7de.
    \5\ ``China Still Miffed at Norway 3 Years after Nobel Awarded to 
Dissident Liu Xiaobo,'' Sydney Morning Herald, October 29, 2013, http:/
/www.smh.com.au/world/china-still-miffed-at-norway-3-years-after-nobel-
awarded-to-dissident-liu-xiaobo-20131029-2wcv2.html; Xianwen Chen and 
Roberto Javier Garcia, ``Economic Sanctions and Trade Diplomacy: 
Sanction-Busting Strategies, Market Distortion and Efficacy of China's 
Restrictions on Norwegian Salmon Imports,'' China Information 30, no. 1 
(March 2016).
    \6\ ``Cold Shoulder,'' The Economist, February 18, 2012, http://
www.economist.com/node/21547832.
    \7\ ``Norway, China Normalize Ties after Nobel Peace Prize Row,'' 
Reuters, December 19, 2016, https://www.reuters.com/article/us-norway-
china/norway-and-china-restart-diplomatic-relations-after-row-over-
nobel-peace-prize-idUSKBN1480R4.; see also Marc Lanteigne and Bjornar 
Sverdrup-Thygeson, The Diplomat, ``Towards the Thaw: Seeking Clarity in 
China-Norway Relations,'' The Diplomat, January 16, 2016, https://
thediplomat.com/2016/01/towards-the-thaw-
seeking-clarity-in-sino-norwegian-relations/.
    \8\ Ivar Kolstad, ``Too Big To Fault: Effects of the 2010 Nobel 
Peace Prize on Norwegian Exports to China and Foreign Policy,'' CMI 
Working Paper, No. 3 (2016), https://www.cmi.no/
publications/file/5805-too-big-to-fault.pdf.
    \9\ ``China Says Hopes Mongolia Learned Lesson after Dalai Lama 
Visit,'' Reuters, January 24, 2017, http://in.reuters.com/article/us-
china-mongolia-dalailama-idINKBN158197.
    \10\ ``Mongolia Vows No More Dalai Lama Visits After China Turns 
Screws,'' Bloomberg, December 21, 2016, https://www.bloomberg.com/news/
articles/2016-12-21/mongolia-vows-no-more-dalai-lama-visits-after-
china-turns-screws.
    \11\ Joseph Dussault, ``Why the Dalai Lama Is No Longer Welcome in 
Mongolia,'' Christian Science Monitor, December 22, 2016, https://
www.csmonitor.com/World/2016/1222/Why-the-Dalai-Lama-is-no-longer-
welcome-in-Mongolia.
    \12\ Dussault, ``Mongolia Vows No More Dalai Lama Visits After 
China Turns Screws.''
    \13\ Andreas Fuchs and Nils-Hendrik Klann, ``Paying a Visit: The 
Dalai Lama Effect on International Trade,'' Journal of International 
Economics 91, no. 1 (2013).
    \14\ Robin Emmott and Angeliki Koutantou, ``Greece Blocks EU 
Statement on China Human Rights at U.N.,'' Reuters, June 19, 2017, 
https://www.reuters.com/article/us-eu-un-rights/greece-blocks-eu-
statement-on-china-human-rights-at-u-n-idUSKBN1990FP.
    \15\ Jason Horowitz and Liz Alderman, ``Chastised by E.U., a 
Resentful Greece Embraces China's Cash and Interests,'' The New York 
Times, August 26, 2017, https://www.nytimes.com/2017/08/26/world/
europe/greece-china-piraeus-alexis-tsipras.html.
    \16\ ``Lithuania complains of trade `sanctions' by China after 
Taiwan dispute,'' Financial Times, December 3, 2021, https://
www.ft.com/content/0ebaa7c7-761d-445e-b3e4-f5d2c9b4768f.
    \17\ Four Corners ``Power and Influence,'' Australian Broadcasting 
Corporation, 2017, http://www.abc.net.au/4corners/power-and-influence-
promo/8579844.
    \18\ Author interview.
    \19\ Jonathan Kearsley, Eryk Bagshaw, and Anthony Galloway, `` `If 
you make China the enemy, China will be the enemy': Beijing's fresh 
threat to Australia,'' Sydney Morning Herald, November 18, 2021 https:/
/www.smh.com.au/world/asia/if-you-make-china-the-enemy-china-will-be-
the-enemy-beijing-s-fresh-threat-to-australia-20201118-p56fqs.html.
    \20\ Bates Gill and Linda Jakobson, China Matters: Getting It Right 
for Australia (Carlton, Victoria: La Trobe University Press, 2017).
    \21\ Jeffrey Wilson, ``Australia Shows the World What Decoupling 
From China Looks Like,'' Foreign Policy, November 9, 2021, https://
foreignpolicy.com/2021/11/09/australia-china-decoupling-trade-
sanctions-coronavirus-geopolitics/.
    \22\ Rory Medcalf, ``China's Economic Leverage: Perception and 
Reality,'' Australian National University, Policy Options Paper, No. 2 
(March 2017), https://nsc.crawford.anu.edu.au/sites/
default/files/publication/nsc_crawford_anu_edu_au/2017-05/
policy_papers.pdf.
    \23\ Isaac Stone Fish, ``Beijing wants U.S. business leaders to 
plead its case. Here's why they shouldn't.,'' Washington Post, January 
18, 2021, https://www.washingtonpost.com/opinions/2021/01/18/beijing-
wants-us-business-leaders-plead-its-case-heres-why-they-shouldnt/.
    \24\ Tom Kludt, `` `The losses are substantial': the NBA's trouble 
with China, four months on,'' Guardian, February 24, 2020, https://
www.theguardian.com/sport/2020/feb/24/china-nba-hong-kong-protests-
financial-costs-update.
    \25\ Sui-Lee Wee, ``Giving In to China, U.S. Airlines Drop Taiwan 
(in Name at Least),'' The New York Times, July 25, 2018, https://
www.nytimes.com/2018/07/25/business/taiwan-american-
airlines-china.html.
    \26\ Max Boot, ``Hollywood just can't stop groveling to China,'' 
Washington Post, May 31, 2021, https://www.washingtonpost.com/opinions/
2021/05/31/hollywood-just-cant-stop-groveling-china/.
    \27\ Helen Davidson, ``Beijing warns China-linked US businesses: 
you cannot `make a fortune in silence','' The Guardian, December 2, 
2021, https://www.theguardian.com/world/2021/dec/02/beijing-warns-
china-linked-us-businesses-you-cannot-make-a-fortune-in-silence.
    \28\ Rachel Treisman, ``China Slaps Sanctions On 28 Trump 
Administration Officials, Including Mike Pompeo,'' NPR, January 20, 
2021, https://www.npr.org/2021/01/20/958996415/china-slaps-sanctions-
on-28-trump-administration-officials-including-mike-pompeo.
    \29\ Matt Schrader, ``Friends and Enemies: A Framework for 
Understanding Chinese Political Interference in Democratic Countries,'' 
Alliance for Securing Democracy, April 22, 2020 https://
securingdemocracy.gmfus.org/friends-and-enemies-a-framework-for-
understanding-chinese-
political-interference-in-democratic-countries/.
    \30\ Peter Harrell, Elizabeth Rosenberg, and Edoardo Saravalle, 
``China's Use of Coercive Economic Measures,'' Center for a New 
American Security, 2018, https://s3.us-east-1.amazonaws.com/
files.cnas.org/documents/China_Use_FINAL-1.pdf?mtime=20180604161240&
focal=none; Alliance for Securing Democracy, ``Authoritarian 
Interference Tracker.''
    \31\ Audrye Wong, ``How Not to Win Allies and Influence 
Geopolitics,'' Foreign Affairs, May 7, 2021, https://
www.foreignaffairs.com/articles/china/2021-04-20/how-not-win-allies-
and-influence-geopolitics.
    \32\ Elaine K. Dezenski, ``Below the Belt and Road,'' Foundation 
for Defense of Democracies,'' May 2020, https://www.fdd.org/wp-content/
uploads/2020/05/fdd-monograph-below-the-belt-and-road.pdf.
    \33\ Wong, ``How Not to Win Allies and Influence Geopolitics.''
    \34\ Yew Lun Tian, ``An eye for an eye? China's new anti-foreign 
sanctions law,'' Reuters, June 11, 2021, https://www.reuters.com/world/
china/an-eye-an-eye-chinas-new-anti-foreign-sanctions-law-2021-06-11/.
    \35\ Evan A. Feigenbaum, ``Is Coercion the New Normal in China's 
Economic Statecraft?'' Carnegie Endowment for International Peace, July 
25, 2017, https://carnegieendowment.org/2017/07/25/is-coercion-new-
normal-in-china-s-economic-statecraft-pub-72632.
    \36\ Darren Lim and Victor Ferguson, ``In beef over barley, Chinese 
economic coercion cuts against the grain,'' The Interpreter, May 13, 
2020, https://www.lowyinstitute.org/the-interpreter/barney-over-beef-
chinese-economic-coercion-cuts-against-grain.
    \37\ William J. Norris, Chinese Economic Statecraft: Commercial 
Actors, Grand Strategy, and State Control (Cornell, NY: Cornell 
University Press, 2016), www.jstor.org/stable/10.7591/j.ctt18kr4kx.
    \38\ ``MOFCOM Order No. 4 of 2020 on Provisions on the Unreliable 
Entity List,'' Ministry of Commerce People's Republic of China, 
September 19, 2020, http://english.mofcom.gov.cn/article/policyrelease/
questions/202009/20200903002580.shtml.
    \39\ Bonnie Glaser, ``Time for Collective Pushback against China's 
Economic Coercion,'' Center for Strategic and International Studies, 
January 13, 2021, https://www.csis.org/analysis/time-
collective-pushback-against-chinas-economic-coercion.
    \40\ Darren Lim, Zack Cooper, and Ashley Feng, ``Trust and 
Diversify: A Geoeconomic Strategy for the Australia-US Alliance,'' 
United States Studies Centre, 2021, https://www.ussc.edu.au/analysis/
trust-and-diversify-a-geoeconomic-strategy-for-the-australia-us-
alliance.
    \41\ Zack Cooper, ``How to tame China,'' Washington Examiner, 
November 11, 2021, https://www.washingtonexaminer.com/restoring-
america/patriotism-unity/how-to-tame-china.
    \42\ Wendy Cutler et al., ``Responding to trade coercion: A growing 
threat to the global trading system,'' Asia Society Policy Institute 
and Perth US Asia Centre, 2021, https://perthusasia.edu.au/
getattachment/e1419c93-89c9-4016-b8cc-769eeefd9f9f/PU-228-TradeCoerc_
8pp_WEB.pdf.aspx?lang=en-AU.
    \43\ European Commission, ``Strengthening the EU's autonomy--
Commission seeks input on a new anti-coercion instrument,'' Press 
release, March 23, 2021, https://ec.europa.eu/commission/presscorner/
detail/en/IP_21_1325.
                                 ______
                                 

                    Prepared Statement of Jenny Wang

    Chairman Merkley, Co-chair McGovern, members of the Commission, and 
distinguished guests, thank you for inviting me to testify today, just 
days before the inaugural Summit for Democracy.
    Today, I will be speaking about one of the most pressing threats to 
democracies and global freedoms: the authoritarian Chinese government, 
and more specifically--the stunning costs that multinational companies 
pay in order to appease the Chinese government and secure access to the 
Chinese market.
    On the face of it, this topic may seem like an economic issue, but 
it is a human rights and moral issue as well.
    According to the Human Rights Foundation's political regime 
analysis, China is a fully authoritarian regime, ruled by the Chinese 
Communist Party (CCP). There is no separation of powers, no judicial 
independence, and a severe lack of respect for the fundamental rights 
of citizens. While freedoms are enshrined in Chapter II of the 
Constitution of the People's Republic of China (PRC), in practice, the 
Chinese government monitors all aspects of its citizens' lives, 
suppressing any criticism about its rule and ideologies.\1\ This grip 
has only tightened under Xi Jinping, impacting those far beyond its 
borders.\2\ China's bellicose behavior is driven solely by the CCP's 
sheer determination to maintain and consolidate power--and it is 
willing to go to great lengths to do so.
    Corporations worldwide have long been enticed by China's market, 
due to the country's large population and the promise of growth.
    As such, the CCP is weaponizing their economic power to pressure 
firms to censor themselves or to even apologize if they don't help 
advance the party's political agendas. Companies wishing to profit in 
China must be willing to comply with draconian Chinese national laws 
and to carry out pro-CCP narratives, or face expulsion from the 
market.\3\
    When companies decide to abide by the Chinese government's demands, 
they are intentionally complicit in human rights abuses and acts of 
genocide perpetrated by the CCP, and they are actively violating rights 
widely recognized by international human rights law.
    When companies deliberately choose to censor or apologize to 
appease the CCP, they are offering legitimacy to the authoritarian 
regime, and signaling their willingness to disregard not only the human 
rights of others, but of their own too, as the cost of doing business 
in China.
    In 2020, my colleagues at the Human Rights Foundation and I 
published a report titled Corporate Intimidation & Censorship in China 
which illustrates these dire realities.
    While this phenomena is not new, we saw a sharp rise of such 
economic coercion and fear of expulsion among companies with interests 
in China, in the summer and fall of 2019 during the anti-extradition 
protests in Hong Kong. The Chinese government, whether directly through 
state-controlled media or indirectly by manipulating public opinion, 
rebuked multinationals for supporting Hong Kong's pro-democracy 
movement--or for even simply posting content that could be interpreted 
as support.\4\ The CCP's use of economic coercion is to not only 
silence criticism and dissent, but to intentionally trigger a ripple 
effect \5\ to mold public opinion both inside China, and overseas.
    Corporations are constantly facing economic, moral, and 
humanitarian challenges as they navigate this landscape. Such 
navigation, in and of itself, is a challenge too.
    For example, in March 2021, Swedish apparel brand H&M (formally 
known as Hennes & Mauritz AB) faced a scathing boycott in China for 
simply releasing a statement of concern about Uyghur forced labor. 
Chinese state media and citizens flooded the internet to vilify the 
brand; several H&M stores closed, online presence disappeared, and 
locations were removed from maps.\6\ The company reportedly lost 
approximately $74 million in sales in China for the quarter ending May 
31, 2021.\7\
    Even if the Chinese government does not mobilize nor retaliate 
immediately after an offending comment or action, corporations and 
their leaders are quick to pre-emptively apologize to best protect 
their access to China's market. Just last month, Jamie Dimon, the CEO 
of JPMorgan, expressed regret for a joke he made about the CCP's 
centennial.\8\
    With the 2022 Beijing Winter Olympics weeks away, it is expected 
that the Chinese government will continue its fierce campaign of 
economic coercion as a strategic tool to intimidate firms to remain 
silent about its human rights record.
    Based on my observations, companies are now choosing from three 
methods to approach China's economic coercion: (1) Embrace, (2) 
Capitulate, or (3) Condemn.

1. Embrace: Maintaining the current trajectory

    Maintaining the current trajectory includes the continuation of 
censoring, apologizing to the regime, or being complicit in the Chinese 
government's abuses.
    At the CECC's Corporate Sponsorship of the 2022 Beijing Olympics 
hearing in July 2021, representatives from U.S.-based companies Airbnb, 
Coca-Cola, Procter & Gamble, and Visa deliberately avoided explicitly 
condemning the Chinese government's atrocities.\9\
    Furthermore, just last week, it was revealed that Airbnb has been 
renting homes in Xinjiang, on land owned by the paramilitary 
organization Xinjiang Production and Construction Corps (XPCC)--despite 
the human rights abuses unfolding in the region, and the fact that XPCC 
is sanctioned under the Global Magnitsky Act.\10\
    Multinationals that choose this method are aware of the 
reputational risks and corporate hypocrisy of embracing China's 
economic coercion--but choose not to care. They should recognize their 
actions may put them at higher regulatory risk from the U.S. government 
due to their reflexive obedience and willingness to appease the Chinese 
government at any and all costs.\11\

2. Capitulate: ``One company, two systems''

    In June of 2019, I received an official email from LinkedIn Support 
Team, notifying me that ``due to prohibited content'' located on my 
LinkedIn profile, my profile and my public activity on the page ``will 
not be viewable in China.'' \12\ Several journalists, academics, and 
activists who have posted content deemed sensitive by the Chinese 
government have also received the same message.\13\
    In October 2021, LinkedIn, which is owned by Microsoft, decided to 
shut down its localized version in China, citing ``a significantly more 
challenging operating environment and greater compliance 
requirements.'' However, instead of exiting the Chinese market 
altogether, it opted to create a new application called ``InJobs,'' 
\14\ which will be even more localized and compliant with stringent 
local regulations, with no social posting and networking features, 
specifically for usage in China.\15\ It is knowingly aiding and 
abetting the Chinese government's clampdown on human rights.
    ``One company, two systems'' is a play on Hong Kong's failed ``One 
country, two systems'' model. Such a framework to address China's 
economic coercion may seem promising on the surface because it 
illustrates how corporations are starting to acknowledge the issue, yet 
still does not fully address it. It is deceitful and disingenuous since 
it continues to turn a blind eye to the Chinese government's abuses to 
ensure access to the market, and does not firmly ensure human rights 
are protected.

3. Confront: Standing firm

    Multinationals have long approached China's economic coercion by 
abiding by the Chinese government's requests--which is why the Women's 
Tennis Association (WTA)'s recent stance against China is so rare and 
warmly welcomed.
    In early December 2021, CEO and Chairman of the WTA Steve Simon 
officially announced the WTA's decision to immediately suspend all 
tournaments in China, including Hong Kong, in response to the 
uncertainties surrounding Chinese tennis player Peng Shuai's freedom, 
safety, and well-being. Within the statement, Simon expressed his hope 
of how ``leaders around the world will speak out . . . no matter the 
financial ramifications.'' \16\ In 2019, the WTA entered a ten-year 
deal to host WTA Finals in China. According to Simon, the ballpark 
monetary amount of the WTA's involvement in China is more than $1 
billion, including real estate, stadium build-out, prize money, etc.
    The WTA's responses to the Chinese government's intimidation and 
lack of transparency about Peng Shuai have been a master class of how 
multinationals with interests in China can prioritize moral 
responsibility and human rights over profits.\17\
    The WTA's stance is an example of how companies can use their 
corporate leverage to demand accountability from the Chinese 
government. The WTA's corporate leverage includes the Association's 
international presence, Simon's public statements in support of Peng 
Shuai, as well as the trust and influence of top tennis players such as 
Naomi Osaka and Serena Williams.
    We must be demanding better of the businesses that employ, supply, 
entertain, and house our people.
    When companies are not held accountable for embracing or 
capitulating to the CCP's economic coercion, they will not fully 
recognize the severity of their actions.
    In order to address these three methods and to approach China's 
economic coercion with human rights central to the discussion, 
immediate next steps would be to (1) raise awareness and visibility 
about China's economic coercion and (2) increase accountability.
    To raise public awareness and visibility about economic coercion, 
my recommendations are to:

    1. Approve legislation to establish the China Censorship Monitor 
and Action Group per S. 413.\18\ The establishment of this task force 
would be a critical first step towards increasing awareness about how 
the Chinese government impacts the freedoms of transnational companies, 
specifically those founded on liberal values in democratic countries. 
Furthermore, in addition to consulting with federal and independent 
agencies, relevant stakeholders in the private sector and the media, 
and United States allies and partners, the task force should also 
consult the United Nations Guiding Principles on Business and Human 
Rights.

    2. Mandate greater transparency among American companies by 
introducing legislation that would require them to publicly report 
their respective exposures to China. This data would provide both 
policymakers and consumers better insight about the potential impact of 
China's economic coercion and guide pragmatic and achievable policy 
decisions in the future. These exposures to China could include market 
shares, closed-door meetings, and who American business leaders are 
engaging with.

    To increase accountability, my recommendations are to:

    1. Sign H.R. 1187 into law, which would mandate the Securities and 
Exchange Commission to define environmental, social, and governance 
(``ESG'') practices, and establish a Sustainable Finance Advisory 
Committee.\19\ Recently, there has been more awareness around climate 
change and environmental issues. It is imperative for corporations to 
remember the ``S'' in ESGs also include human rights and ethical 
considerations.

    2. Request a follow-up hearing with the witnesses of CECC's 
Corporate Sponsorship of the 2022 Beijing Olympics hearing in July 
2021. A follow-up hearing would provide an opportunity for the 
Commission to discern whether the witnesses have taken any concrete 
actions to address what was discussed, and to once again emphasize the 
importance of leveraging their influence to uphold fundamental human 
rights.

    Businesses with global operations have great influence--both 
positive and negative. It is up to Congress to help influence, inform, 
and prompt them to uphold our values, and stand firmly with human 
rights in response to China's economic coercion.
    I look forward to discussing this in more detail and answering your 
questions. Thank you for the humbling opportunity to testify before the 
Commission today.

    [Appendix and Endnotes appear on the following pages.]
   [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
    
Endnotes:

    \1\ Corporate Intimidation & Censorship in China: Recommendations 
for Foreign Companies, Human Rights Foundation (9 June 2020), https://
hrf.org/report-corporate-intimidation-
censorship-in-china/.
    \2\ 100 Years of Suppression: The CCP's Strategies in Tibet, the 
Uyghur Region, and Hong Kong, Human Rights Foundation (6 August 2021), 
https://hrf.org/new-hrf-report-the-ccps-100-years-of-suppression/.
    \3\ Supra note 1 at page 7.
    \4\ Supra note 1 at page 15.
    \5\ A ripple effect from employers to employees, from merchants to 
consumers, from educators to students, from movie films to movie 
audiences, etc.
    \6\ H&M's China Sales Hit as Boycott Bites, Reuters (2 July 2021), 
https://www.reuters.com/business/retail-consumer/hms-china-sales-hit-
boycott-bites-2021-07-02/.
    \7\ Stu Woo, H&M Pays Price of Upsetting Beijing as China Sales 
Drop, The Wall Street Journal, (Updated 1 July 2021), https://
www.wsj.com/articles/h-m-pays-price-of-upsetting-beijing-as-china-
sales-drop-11625136844.
    \8\ The Editorial Board, Did Jamie Dimon Hit a Nerve? The Wall 
Street Journal (25 November 2021), https://www.wsj.com/articles/did-
jamie-dimon-hit-a-nerve-china-communist-party-11637862914.
    \9\ Corporate Sponsorship of the 2022 Beijing Olympics: Hearing 
before the Congressional-Executive Commission on China, 117th Congress 
(2021), https://www.cecc.gov/events/hearings/
corporate-sponsorship-of-the-2022-beijing-olympics.
    \10\ Bethany Allen-Ebrahimian and Jacque Schrag, Exclusive: Airbnb 
Hosts Xinjiang Rentals on Land Owned by Sanctioned Group, Axios (30 
November 2021),https://www.axios.com/airbnb-xinjiang-listings-
sanctions-china-766dae2f-91e0-4a3e-9656-544ef8f35db0.html.
    \11\ Supra note 1 at page 20.
    \12\ Image 1 in Appendix.
    \13\ Bethany Allen-Ebrahimian, LinkedIn blocks U.S. journalists' 
profiles in China, Axios (30 September 2021), https://www.axios.com/
linkedin-blocks-us-journalists-profiles-in-china-22fcefd4-5bc1-490b-
a448-b4f9b05e9566.html.
    \14\ Mohak Shroff, China: Sunset of Localized Version of LinkedIn 
and Launch of InJobs App Later This Year, LinkedIn Official Blog (14 
October 2021), https://blog.linkedin.com/2021/
october/14/china-sunset-of-localized-version-of-linkedin-and-launch-of-
new-injobs-app.
    \15\ Forrester (Contributor), LinkedIn Has Not Given Up on The 
China Market, Forbes (21 October 2021), https://www.forbes.com/sites/
forrester/2021/10/21/linkedin-has-not-given-up-on-the-china-market/
?sh=50fac2133d42.
    \16\ Steve Simon Announces WTA's Decision to Suspend Tournaments in 
China, Women's Tennis Association (1 December 2021),https://
www.wtatennis.com/news/2384758/steve-simon-announces-wta-s-decision-to-
suspend-tournaments-in-china.
    \17\ Ben Morse and Nectar Gan, Women's Tennis Suspends All 
Tournament in China Over Concern for Peng Shuai, CNN, (02 December 
2021), https://www.cnn.com/2021/12/01/tennis/wta-
suspend-tournaments-china-peng-shuai-spt-intl/index.html.
    \18\ S. 413, 117th Congress (2021-2022): A bill to establish the 
China Censorship Monitor and Action Group, and for other purposes. (24 
February 2021), https://www.congress.gov/bill/117th-congress/senate-
bill/413/text.
    \19\ H.R. 1187, 117th Congress (2021-2022): Corporate Governance 
Improvement and Investor Protection Act. (Referred in Senate, 17 June 
2021), https://www.congress.gov/bill/117th-congress/house-bill/1187/
text.
                                 ______
                                 

                   Prepared Statement of Ho-fung Hung

    Chairman Merkley, Chairman McGovern, and respected members of the 
Commission, it is my honor to have this opportunity to contribute my 
expertise and testify before the Commission on China's economic 
coercion. My testimony will draw from the findings of my ongoing 
research and publications about Hong Kong business and politics. It 
will focus on the challenges that U.S. corporations and investors face 
under the new political environment in Hong Kong after the 
implementation of the National Security Law in July 2020.
    Since the 1980s, Hong Kong has been an indispensable offshore 
financial center of China while China's financial system was closed to 
the world. One purpose of Beijing's One Country, Two Systems design is 
to maintain such a role of Hong Kong after the sovereignty handover.
    After China acceded to the WTO, China has continued to keep strict 
foreign exchange control and refused to liberalize its capital account. 
Hong Kong has been the only financial market under Chinese sovereignty 
that maintained a free financial system open to the world and a freely 
convertible currency of its own. It is a unique gateway where Chinese 
corporations raised capital from international investors, borrowed in 
USD, and channeled their investment to other parts of the world. As my 
forthcoming book City on the Edge: Hong Kong under Chinese Rule shows, 
as of 2019, among the 1,738 Chinese companies listed in overseas 
markets, 1,331 were listed in Hong Kong.\1\ In 2018, 67 percent of FDI 
going into China originated from Hong Kong, and 57 percent of China's 
outgoing FDI was destined for Hong Kong. Hong Kong is still an 
indispensable doorway through which money goes in and out of China.
    Such special status of Hong Kong under China's sovereignty turns 
Hong Kong into an ideal destination for the Chinese political elite to 
hide their wealth and conduct shady international financial and 
commercial deals, violating international sanctions. With the 
tightening of political control in Hong Kong across the board, foreign 
companies which used to operate in a liberal and open environment have 
started to face unique and mounting political and economic risks.
    Hong Kong status as a free offshore financial center with 
enthusiastic participation by investors and corporations worldwide 
hinges on its rule of law, freedom of the press, the transparency of 
its corporate governance, and neutrality of its business regulators. 
These foundations for Hong Kong's financial centrality are now being 
threatened in the new political landscape. Despite their economic 
significance, these foundations have been thorns in the side of the 
CCP. For example, the presence of a free press presents a constant 
threat that the Chinese political elite's private wealth in Hong Kong 
would be exposed and create embarrassment for them.\2\ Hong Kong-based 
Chinese front companies that helped North Korea and other unruly 
regimes to evade international sanctions are often exposed by 
journalists working in Hong Kong.\3\
    While the National Security Law itself poses a threat to civil 
liberty, the free flow of information, and private property in Hong 
Kong, it also profoundly transforms Hong Kong's political climate. It 
opens the door for the HKSAR and Beijing governments to pass new laws 
in the name of national security that worsen Hong Kong's business 
environment for foreign corporations and investors.

                     The Anti-Foreign Sanctions Law

    For example, this summer (2021), Chinese official media and 
establishment political figures in Hong Kong have been citing 
authoritative sources to indicate that the Anti-Foreign Sanctions Law, 
passed in China in June of this year, would be made applicable to Hong 
Kong in the NPCSC meeting in August. If it becomes a reality, any 
corporation, foreign or Chinese, operating in Hong Kong will face an 
impossible dilemma. If they abide by U.S. sanctions on Chinese or Hong 
Kong entities and officials, they will be violating China's Anti-
Foreign Sanctions Law and penalized. If they comply with China's Anti-
Foreign Sanctions Law, they will be violating the many U.S. and 
international sanctions. Facing this impossible choice, many 
corporations would have to consider leaving Hong Kong.\4\ Against this 
backdrop of a looming anti-foreign sanctions law beside tightening 
repression in many other realms of Hong Kong, the U.S. Government 
issued an official warning to U.S. businesses operating in Hong Kong on 
July 16.\5\
    As it turns out, Beijing's political elite are seemingly still 
divided on how much economic price to pay for continuing to tighten the 
screws on Hong Kong. Presumably, certain factions of the powerful elite 
still worry about the loss of Hong Kong as an offshore market.
    When the market was worrying about the inevitable application of 
the Anti-Foreign Sanctions Law to Hong Kong in late August, the NPCSC 
surprisingly announced it would delay the decision to obtain more time 
to assess its economic impact.\6\ Despite this temporary backpedaling, 
establishment figures do express confidence that the application of the 
law to Hong Kong will be back on the agenda sooner or later.\7\ But 
this episode also manifests the soft spot and limits of Beijing's 
crackdown on Hong Kong and U.S. continuous leverage over Beijing's Hong 
Kong policy.

              Declining Corporate Governance Transparency

    When the Hong Kong authorities are expanding their control of the 
media in the name of safeguarding national security, it also expands 
its power in a way that jeopardizes the very transparency and integrity 
of the Hong Kong business environment. For example, in March 2021, the 
HKSAR government announced it would start restricting public access to 
information of directors and executives of registered companies.\8\ For 
decades, journalists in Hong Kong took advantage of public access to 
such information, including name, HKID number, and addresses of 
directors of registered companies, to identify who is truly behind some 
important business transactions and property holdings. It is the 
channel through which journalists expose many corruption cases and 
unfair business transactions (e.g., government officials with insider 
information sell or buy a property through a company they hold). It is 
also the channel through which the Chinese elite's property ownership 
in Hong Kong, usually owned in the name of companies set up to hide the 
identities of the true owners, was discovered.\9\ Labeling journalists' 
access to the board of directors' information as undue ``privilege,'' 
the HKSAR government is transforming the Hong Kong business environment 
into one rife with mysterious companies with secretive, powerful owners 
behind the scene, somewhat like money laundering centers and tax havens 
in the Caribbean. Journalists would also find it more difficult to 
discover problems with publicly listed companies if the identities of 
their bosses were shrouded in the dark.
    Also, it has been an established practice that powerful Chinese 
companies set up front companies in Hong Kong to conduct international 
transactions that violate international sanctions. If one of such front 
companies were exposed and blacklisted internationally, the powerful 
company behind would move on to establish a new front company in its 
place. If the new ban on public access to companies directors' 
information had been in place earlier, the world would have never known 
that Skycom, a Hong Kong-registered company that violated U.S. 
sanctions and sold restricted computer equipment to Iran illegally, was 
controlled by Huawei.\10\ Powerful Chinese companies would have tricked 
more foreign banks operating in Hong Kong to violate international 
sanctions inadvertently, like the example of HSBC in the Huawei 
case.\11\ This new restriction on disclosure of company information 
muddles the environment for foreign corporations operating in Hong 
Kong.

                          The Anti-doxxing Law

    Another troubling development is implementing the anti-doxxing law 
amendment in October this year. The amended law criminalized 
unconsented disclosure of private information, vaguely defined, without 
the need for proof of the harm done. It hands the authorities vast new 
authorities to prosecute dissidents and journalists who disseminate 
information about the powerful elite and expands the authorities' power 
to request local and foreign media and internet platforms to remove 
content deemed to violate the law. It also gives authorities the power 
to access electronic devices and search premises without a warrant.\12\
    This law will significantly impact U.S. social media companies 
operating in Hong Kong, as the law's most draconian measures can be 
applied to them if one of their users is deemed to violate the vaguely 
defined offense. To try to maintain Hong Kong's financial center 
status, the Hong Kong government has not yet banned U.S. social media 
and internet browsing platforms. The continuous presence of U.S. social 
media companies in authoritarian Hong Kong poses a unique challenge. 
Under the anti-doxxing law, the social media companies could be forced 
to comply with the HK authorities to delete posts or surrender users' 
information out of the HKSAR government's request with a threat of 
heavy penalty. The law could effectively turn those companies into the 
enforcers of the government's efforts to stifle the free speech of 
their users, including U.S. citizens inside or outside Hong Kong. The 
law would also force those companies to surrender users' data.
    Before the law was enacted, Singapore-based Asia Internet Coalition 
(AIC), which represents Apple, Facebook, Google and Twitter among other 
members, warned that ``introducing sanctions aimed at individuals is 
not aligned with global norms and trends,'' and that local staff in 
Hong Kong handling the day-to-day operations for these tech giants does 
not have the access rights or ability to remove content if so demanded 
by the local government. The anti-doxxing law could place members in an 
untenable position that could force them to ``refrain from investing 
and offering their services in Hong Kong.'' \13\

                  Deteriorating Regulatory Environment

    Independent and respected institutions that have been instrumental 
in safeguarding the reputation and integrity of the Hong Kong business 
environment have been under threat even before the National Security 
Law. Some of them appear to face increasing political pressure and 
start to behave like a political tool of the authorities. For example, 
it is unclear whether Hong Kong's independent financial regulator, the 
Securities and Futures Commission, could uphold its independence. In 
2014, the SFC took action against an American short-seller for 
publishing a negative research report about a powerful property 
developer (Evergrande!) from mainland China. It also fined and 
reprimanded credit rating agency Moody's for a report that warned about 
corporate governance irregularities of 49 mainland Chinese companies 
listed in the Hong Kong market.\14\
    These may be isolated cases, but they already raised the fear that 
the regulatory body would increasingly favor mainland companies, 
creating a chilling effect on financial analysts who do research that 
was critical of them. This summer, The Economist warned that ``[g]lobal 
banks say that practices from mainland China are seeping into the city. 
These include a shift in the way IPOs and bonds are underwritten. Where 
banks' roles were once clearly defined early in the process, now a 
handful of institutions, many of them mainland Chinese, fight for top 
spots in transactions. Many are accused of inflating their orders for 
the securities in order to impress clients. This has reduced the 
transparency of the process and disrupted price discovery. . . . 
bankers fear that Hong Kong's standing as a global financial centre 
will suffer. Moreover, the situation mirrors the city's greater 
dilemma. A cosmopolitan society with globally recognised norms is 
rapidly losing ground to a Chinese way of life.''

                        Risks to U.S. Investors

    With China's economic slowdown and brewing economic crisis over the 
last decade, Chinese entities have been increasingly eager to raise 
debt in the international financial market via the Hong Kong platform. 
Hong Kong is already a unique global platform for Chinese corporate 
bond offshore sales. It also started to emerge as a platform for 
Chinese government bond sales. Just this October, the debut of the 
Shenzhen government bond in Hong Kong--the first-ever offshore sale of 
Chinese government bonds--attracted USD 775 million worth of global 
subscriptions.\15\ U.S. institutional and individual investors' 
involvement in these financial products could effectively tie their 
financial fortunes to Chinese companies and Chinese government action 
that violate international sanctions and human rights.
    As independent and critical research, including financial analysis, 
academic research, and journalistic reporting, of Chinese business and 
government in Hong Kong became increasingly difficult, and as Hong Kong 
regulators become ever more biased toward the mainland Chinese firms 
and government, investment into these corporate and government bonds in 
the Hong Kong market will become increasingly risky. While U.S. 
institutional investors may feel the urge to follow the herd of global 
high finance to pile into such an exotic bond market, individual 
contributors to investment funds will always have to bear the heaviest 
loss when anything bad happens. The explosion of the debt crisis of 
Evergrande and other major Chinese property developers recently is the 
best indication of such risk to U.S. investors.
    My new book about the corporate origins of deteriorating U.S.-China 
relations shows U.S. businesses in mainland China have been complaining 
about the lack of rule of law, lack of free flow of information, bias 
of regulators against them, unpredictability (or politicization) of law 
and regulations enforcement there for a long time. These problems have 
created an unlevel playing field in which U.S. corporations compete 
with domestic Chinese ones at a disadvantageous position.\16\ But at 
least for financial deals, U.S. corporations could rely on the Hong 
Kong financial market, which did not share many of the shortcomings in 
the mainland Chinese environment. However, under the new political 
climate of Hong Kong, the institutional foundations of the fairness and 
transparency of Hong Kong's financial market erode rapidly, making the 
Hong Kong business environment converge with the mainland.
    The temporary stalling of applying the Anti-Foreign Sanctions Law 
to Hong Kong shows significant vested interests in the CCP still prefer 
not to destroy Hong Kong's financial center status too rapidly. But the 
development in the recent two years shows that Beijing's instinct for 
absolute control is so great that any internal check against the 
destruction of Hong Kong's financial centrality can at best be 
temporary. The HKSAR government's refusal to take any advice and 
complaint from AmCham Hong Kong and U.S. financial firms to lessen the 
draconian and unscientific quarantine regime and border closure that 
hinders operations of global firms indicates that the authorities are 
ready to sacrifice Hong Kong's financial centrality for the sake of 
political control.\17\ The recent denial of work visas to foreign 
journalists covering financial news in Hong Kong (like the rejection of 
visa renewal for the Hong Kong correspondent of The Economist) without 
giving any reasons is another indicator.\18\
    For a long time, Beijing had adopted a ``frog-cooking'' approach to 
taking away Hong Kong's political freedom, adding the temperature 
gradually so we might not be alerted that the freedom is taken away. 
After a certain point, Beijing turns up the fire all the way to destroy 
whatever remains (via the imposition of the NSL new order). Now, 
Beijing has started to use this frog-cooking approach to slowly take 
away the institutional foundations of Hong Kong's status as a 
transparent, fair, and clean offshore financial center, turning it into 
a murky swamp where politically well-connected Chinese firms and their 
collaborators enjoy outsized feasts whereas unsuspecting foreign 
investors are eaten. It also slowly pressures foreign corporations 
eager to make money in Hong Kong to become accomplices of its efforts 
to repress and surveil Hong Kong's civil society and subvert 
international order and rule.

                            Recommendations

    In light of the above considerations, there are several things that 
the executive and legislative branches of the U.S. Government could do 
to protect U.S. corporations and investors concerning the deteriorating 
business environment in Hong Kong.

    (1) While most U.S. social media and web browsing platforms cannot 
operate in China and nearly all other authoritarian states, their 
continuous operation in Hong Kong poses a unique challenge. The Hong 
Kong government has not yet banned them, but it has been trying to 
force them to comply and aid its efforts to stifle dissenting voices 
and collect users' information. The U.S. Government should find ways in 
existing laws or make new laws to regulate these companies and ensure 
that they will not become the accomplices of the crackdown in Hong 
Kong. Such measures would help U.S. companies to resist the temptation 
of staying in Hong Kong and muddling through while slowly becoming 
enforcers of local repressive policies. Such cooperation with local 
authorities might yield short-term profit, but it will also create a 
huge risk to those companies and their investors in the long run.

    (2) The U.S. could allocate more resources to develop technology 
and tools that residents in Hong Kong (and elsewhere in China) could 
use to bypass internet censorship and suppression. The fund allocated 
to develop technologies and programs for an ``open, interoperable, 
reliable and secure internet'' for Hong Kong residents in the U.S. 
Innovation and Competition Act of 2021 is a laudable first step.\19\ 
While the Great Firewall of China is closing in on Hong Kong fast, time 
is running out for the U.S. Government to counteract the enclosure and 
help maintain internet freedom in Hong Kong. The USICA was passed in 
the Senate earlier this year. It needs to be passed in the House and 
become law soon.

    (3) Continue to monitor the political and economic risks that 
investment in Chinese stocks, corporate bonds, and government bonds 
could bring to U.S. investors. Suppose the transparency and 
accountability of the Chinese issuers of financial products in Hong 
Kong continue to erode. In that case, the U.S. Government will be 
responsible for issuing warnings or even restrictions on U.S. 
institutional investors' involvement in such products. It will be a 
necessary thing to do to protect the savings, investments, and pensions 
of millions of working Americans. There is a precedent in the Treasury 
sanction against investment in Russian sovereign bonds earlier this 
year.\20\ Keeping this option open could also serve as a deterrent that 
shapes the Chinese and Hong Kong authorities' calculation about how 
fast and wide they would dismantle preexisting institutions that 
warrant the integrity of the Hong Kong financial market.

    (4) For a long time, Hong Kong has been a base for journalists, 
analysts, and academic researchers who might not be able to enter 
mainland China to investigate Chinese companies, Chinese political 
development, and the Chinese business environment. The knowledge 
generated in these endeavors is of utmost importance to U.S. investors 
when making investment decisions. With the troubling new trend of 
expelling foreign journalists and the stifling of local media under the 
NSL, the U.S. Government needs to use whatever diplomatic tools are 
available to ensure media organizations and personnel from the U.S. and 
other like-minded countries can continue to operate freely in Hong 
Kong. They constitute an irreplaceable line of defense for a fair, 
transparent, and level playing field in the interest of many U.S. 
companies operating in the Hong Kong market.

    [Endnotes appear on the following page.]
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                 Prepared Statement of Senator Merkley

    Good morning. Today's hearing of the Congressional-Executive 
Commission on China entitled ``How China Uses Economic Coercion to 
Silence Critics and Achieve Its Political Aims Globally'' will come to 
order.
    As the second-largest economy in the world and the largest trading 
partner to many countries around the world, China leverages the 
attraction of its market and the global economy's deep ties to supply 
chains in China to punish critics and reward self-censorship. This 
hearing will examine the ways the Chinese government and Communist 
Party attempt to use economic coercion for political aims, such as 
quashing critical commentary on China's policies and conduct regarding 
Taiwan, Hong Kong, Xinjiang, or anything else China deems sensitive, or 
intimidating U.S. and other businesses into toeing the Party line if 
they want access to China's market.
    Increasingly often, those that run afoul of these aims see their 
products targeted, from Australian wine to Norwegian salmon to 
Philippine bananas to Taiwanese pineapples. The Chinese government has 
also ramped up the intensity of its coercive behavior, as seen in its 
wide-reaching campaign against Australia in response to calls for an 
independent inquiry into the origins of COVID-19 and other political 
grievances. This Commission has also been on the receiving end of 
formal sanctions, just like other parliamentarians, government 
officials, nongovernmental organizations, researchers, and others who 
speak out against human rights abuses in China.
    For this Commission, like many around the world, the intimidation, 
harassment, and economic coercion directed at critics of the Chinese 
government and Communist Party only reinforces our resolve to shine a 
light on this behavior. But for many others the threat of retaliation 
by the Chinese government or market casts a long shadow. Earlier this 
year, the Commission held a hearing with the top U.S-based sponsors of 
the Olympic Games. Even after being confronted with many of the most 
egregious human rights violations of this century, the companies' 
testimony largely served to demonstrate how the pull of the Chinese 
market continues to incentivize self-censorship.
    That's because it's not easy to stand up to a government so willing 
to use its country's economic clout as a cudgel to bully individuals, 
corporations, and other sovereign states. We saw this dynamic in action 
in recent weeks when a Marriott Hotel in Prague turned away the World 
Uyghur Congress because of concerns about ``political neutrality.''
    Yet not everybody is cowed into silence by the bullying. The recent 
actions by the Women's Tennis Association to suspend tournaments in 
China in response to the treatment of Chinese tennis star Peng Shuai 
inspire me and many members of this Commission.
    Clearly this is an evolving landscape. For the United States to be 
able to defend American businesses and citizens from censorship and 
intimidation, or to work with other countries to help insulate one 
another from coercive economic tools that undermine basic political 
rights, we need to better understand the nature, scale, and scope of 
this challenge. We also need to identify the tools that will be 
effective in response--and those that won't--as well as where China's 
economic coercion is headed.
    Those are the questions we're hoping to grapple with in this 
hearing. The panel of experts we'll hear from will help us do that. 
Today's witnesses will shed light on the range of measures China 
employs, pertinent trends, particular impacts on U.S. businesses, the 
risky environment Hong Kong is becoming for multinational corporations 
because of the reach of new laws, and recommendations for policymakers 
in the United States and globally.
    Just as last month's hearing on techno-authoritarianism highlighted 
the ways in which China exports authoritarian values through 
technology, this hearing will examine the ways in which it exports--and 
imposes--authoritarian values through trade and business ties. I look 
forward to learning from our witnesses about how we can resist the 
erosion of civil, political, and human rights threatened by these 
developments.

             Prepared Statement of Representative McGovern

    Thank you, Mr. Chairman, for convening this hearing on the Chinese 
government and party's coercive use of its economic might to pursue its 
political objectives and to silence critics.
    Last July this Commission held a hearing entitled ``Corporate 
Sponsorship of the 2022 Beijing Olympics'' with the five U.S.-based 
companies that are top sponsors of the International Olympic Committee. 
We wanted to know if they would use their ample leverage as sponsors to 
insist on human rights improvements in China in the lead-up to the 2022 
Beijing Winter Olympics.
    Each of the five witnesses testified to how their company had 
incorporated human rights principles into their business operations. 
When asked by Commissioners, however, whether they would press those 
principles with the Chinese government ahead of the Olympics, they 
declined to answer. In fact, when asked directly by Senator Cotton 
whether they accepted the finding by two Administrations that the 
Chinese government was committing genocide against the Uyghurs, only 
one of the five said yes. These American companies refused to publicly 
acknowledge a fact because they feared Chinese government retaliation. 
This is a clear example of China's economic coercion at work.
    It is also a case where evidence of coercion is inferred rather 
than visible. I suspect this is the norm. While there are many reported 
cases of the Chinese government flexing its economic muscle for 
political reasons--the boycott of Norwegian salmon in response to the 
award of the Nobel Peace Prize to Liu Xiaobo comes to mind--they are 
likely dwarfed by unreported cases, much like the amount of an iceberg 
under the surface.
    Further, it may be that companies, whether tech giants, 
international financial firms, or sports leagues, are self-limiting or 
self-censoring because intimidation by the Chinese government and party 
is the expected price of doing business there.
    This is a big picture question I hope our witnesses will address: 
To what extent is economic coercion the norm? Are additional analytical 
tools needed to help us understand and assess the scope of this 
coercion?
    I also look forward to the witnesses' policy recommendations for 
how we should respond. The options appear to be neither simple nor 
easy, and will require careful and considerate diplomacy with 
international partners and collaboration between governments and 
industry.
    In the legislative and regulatory realm, calls for enhanced 
transparency to help in the effort to resist economic coercion also 
dovetail with reforms sought in the growing movement to tackle 
corruption as a foreign policy and human rights priority. These topics 
and more will be discussed in this week's Summit for Democracy convened 
by the Administration and could create a good synergy for policy 
solutions.
    Thank you and I look forward to your testimony.
                       Submissions for the Record

                                ------                                


                  Questions and Answers for the Record

           Question from Senator Ossoff for Dr. Ho-fung Hung

Question. When, in your view, have the various policies that we are 
grouping under the rubric of Chinese economic coercion been effective 
from the standpoint of the Chinese Communist Party and achieved the 
aims of the Chinese Communist Party, and when have they failed?

Answer. Beijing's purpose in employing economic coercion against 
countries, companies, or civil institutions is to make them do things 
aligned with Beijing's poitical positions or not do things contrary to 
those positions, mostly the latter. It can be about stopping their 
expression of concern about Xinjiang, canceling invitations to the 
Dalai Lama and Hong Kong dissidents, terminating cooperation with the 
U.S. over the South China Sea, etc. The CCP will regard their efforts 
as successful if the concerned entities do play along and cease doing 
things Beijing does not like. The efforts fail if the entities ignore 
Beijing's preferences and continue doing those things.
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                          Witness Biographies

    Bonnie Glaser, Asia Program Director, German Marshall Fund of the 
United States

    Bonnie S. Glaser is the Director of the Asia Program at the German 
Marshall Fund of the United States. She was previously a Senior Adviser 
for Asia and the Director of the China Power Project at the Center for 
Strategic and International Studies. Ms. Glaser is concomitantly a 
Nonresident Fellow with the Lowy Institute in Sydney, Australia, and a 
Senior Associate with the Pacific Forum. For more than three decades, 
Ms. Glaser has worked at the intersection of Asia-Pacific geopolitics 
and U.S. policy.

    Zack Cooper, Senior Fellow, American Enterprise Institute

    Zack Cooper is a Senior Fellow at the American Enterprise Institute 
and Co-director of the Alliance for Securing Democracy. He also teaches 
at Princeton University, is a partner with Armitage International, and 
co-hosts the ``Net Assessment'' podcast for War on the Rocks. He 
previously served on staff at the Pentagon and White House and has 
conducted research at the Center for Strategic and International 
Studies and the Center for Strategic and Budgetary Assessments. He 
received a Ph.D., M.A., and M.P.A. from Princeton University and a B.A. 
from Stanford University.

    Jenny Wang, Senior Strategy and Research Associate, Human Rights 
Foundation

    Jenny Wang is a Senior Strategy and Research Associate at the Human 
Rights Foundation (HRF), where she works on Asia-related research, 
projects, and campaigns, and spearheads the organizations' Oslo Freedom 
Forum in Taiwan. She is a co-author of the Human Rights Foundation's 
report ``Corporate Intimidation & Censorship in China: Recommendations 
for Foreign Companies.''

    Ho-fung Hung, Henry M. and Elizabeth P. Wiesenfeld Professor in 
Political Economy, Johns Hopkins University

    Ho-Fung Hung is the Henry M. and Elizabeth P. Wiesenfeld Professor 
in Political Economy in the Sociology Department and the Paul H. Nitze 
School of Advanced International Studies of the Johns Hopkins 
University. He is the author of ``City on the Edge: Hong Kong under 
Chinese Rule'' (Cambridge UP, 2022), ``Clash of Empires: From 
`Chimerica' to the `New Cold War' '' (Cambridge UP, 2022), ``China 
Boom: Why China Will Not Rule the World'' (Columbia UP, 2015), and 
``Protest with Chinese Characteristics'' (Columbia UP, 2011). His 
analysis on Chinese and Hong Kong politics and economy has been cited 
or featured in major news outlets around the world. His commentary 
about the environment for businesses in Hong Kong, particularly since 
passage of Hong Kong's National Security Law, has appeared in such 
media as the Wall Street Journal, the Washington Post, NPR, and 
Politico.


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