[Senate Hearing 117-11]
[From the U.S. Government Publishing Office]


                                                         S. Hrg. 117-11

                  ADVANCING EFFECTIVE U.S. POLICY FOR 
                  STRATEGIC COMPETITION WITH CHINA IN 
                        THE TWENTY-FIRST CENTURY

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

                                HEARING

                               BEFORE THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION
                               __________

                             MARCH 17, 2021

                               __________


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                 COMMITTEE ON FOREIGN RELATIONS        

             ROBERT MENENDEZ, New Jersey, Chairman        
BENJAMIN L. CARDIN, Maryland         JAMES E. RISCH, Idaho
JEANNE SHAHEEN, New Hampshire        MARCO RUBIO, Florida
CHRISTOPHER A. COONS, Delaware       RON JOHNSON, Wisconsin
CHRISTOPHER MURPHY, Connecticut      MITT ROMNEY, Utah
TIM KAINE, Virginia                  ROB PORTMAN, Ohio
EDWARD J. MARKEY, Massachusetts      RAND PAUL, Kentucky
JEFF MERKLEY, Oregon                 TODD YOUNG, Indiana
CORY A. BOOKER, New Jersey           JOHN BARRASSO, Wyoming
BRIAN SCHATZ, Hawaii                 TED CRUZ, Texas
CHRIS VAN HOLLEN, Maryland           MIKE ROUNDS, South Dakota
                                     BILL HAGERTY, Tennessee
                 Jessica Lewis, Staff Director        
        Christopher M. Socha, Republican Staff Director        
                    John Dutton, Chief Clerk        



                              (ii)        

  
                        C  O  N  T  E  N  T  S

                              ----------                              
                                                                   Page

Menendez, Hon. Bob, U.S. Senator From New Jersey.................     1

Risch, Hon. James E., U.S. Senator From Idaho....................     3

Economy, Dr. Elizabeth, Senior Fellow, Hoover Institution, 
  Stanford University, Washington, DC............................     5
    Prepared Statement...........................................     8

Shugart, Tom, Adjunct Senior Fellow, Center for New American 
  Security, Washington, DC.......................................    12
    Prepared Statement...........................................    15

Khan, Saif, Research Fellow, Center For Security And Emerging 
  Technology, Washington, DC.....................................    37
    Prepared Statement...........................................    39

                                 (iii)

  

 
                    ADVANCING EFFECTIVE U.S. POLICY FOR 
      STRATEGIC COMPETITION WITH CHINA IN THE TWENTY-FIRST CENTURY

                              ----------                              


                     WEDNESDAY, MARCH 17, 2021

                                       U.S. Senate,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:02 a.m. via 
videoconference, Hon. Bob Menendez, chairman of the committee, 
presiding.
    Present: Senators Menendez [presiding], Cardin, Shaheen, 
Murphy, Markey, Schatz, Van Hollen, Risch, Romney, Portman, 
Young, Rounds, and Hagerty.

            OPENING STATEMENT OF HON. BOB MENENDEZ, 
                  U.S. SENATOR FROM NEW JERSEY

    The Chairman. This meeting of the Senate Foreign Relations 
Committee shall come to order. Our topic today is advancing 
effective U.S. policy for strategic competition with China in 
the 21st century.
    Dr. Economy, Mr. Shugart, and Mr. Khan, thank you for 
joining us here this morning to explore one of the most 
consequential questions this committee will consider this year: 
how to develop an effective strategy to counter and manage the 
rise of China.
    The China of 2021 is not the China of 1971 or even the 
China of 2011. China today is challenging the United States and 
destabilizing the international community across every 
dimension of power--political, diplomatic, economic, 
innovation, military, and even cultural, and with an 
alternative and deeply disturbing model for global governance.
    As I said before, I truly believe that China today, led by 
the Communist Party and propelled by Xi Jinping's hyper 
nationalism, is unlike any challenge we have faced before as a 
nation.
    For decades, we have failed to comprehensively address 
China's growing reach, and while I have given the previous 
Administration credit for getting the scope, scale, and urgency 
of the China challenge right, they seem to operate under the 
mistaken belief that just being confrontational was being the 
same thing as being competitive.
    Retrenchment from the global stage, withdrawing from 
international fora only to let China fill in the void, 
alienating our allies and partners, particularly in the region, 
only helped embolden China's efforts.
    Coercing its neighbors in the maritime domain, crushing 
Hong Kong, threatening Taiwan, increasing its trade surplus 
with the United States, racing ahead in the development of new 
digital technologies, a campaign of genocide on its Uighur 
people, China today is more active and more assertive than ever 
before.
    There should be little doubt in my mind that the right 
basic framework for thinking about our relationship with China 
today is strategic competition, not because that is necessarily 
what we want but because of the choices Beijing is making.
    We need to be clear eyed and sober about Beijing's 
intentions and actions and calibrate our policy and strategy 
accordingly. The United States needs a new strategic framework 
for this competition and a new set of organizing principles to 
address the challenges of this new era.
    One of these core organizing principles, I would suggest, 
is the importance of coordinating closely with our allies and 
partners to develop a shared and effective approach to China.
    Indeed, I think Secretary Blinken's and Austin's have 
successfully started embracing this principle with their trip 
this week. And I believe that our China policy must be integral 
as we develop an Indo-Pacific strategy.
    So I am pleased to see that President Biden understands 
that our alliances, our partnerships, and the shared values on 
which they stand, and our reliability and resilience in the 
face of adversity, are crucial for effective global leadership.
    Second, as we consider strategic competition with China, we 
must recognize that in the 21st century the nature of our 
competition also revolves around geo-economic matters, not just 
the geopolitical and military competition that characterize the 
20th century.
    The most hotly contested domains are in the new and 
emerging suite of technologies: 5G, AI, quantum computing, 
nanotech, robotics, zero carbon energy technology, not just the 
traditional categories of blood and steel that have 
traditionally guided our national security thinking.
    If we fail to invest in our geo-economic tools, if we fail 
to replenish the sources of our competitiveness here at home, 
we will find that while we still may dominate in the old 
domains and traditional measures of military power, the world 
has moved on and we will be left behind.
    Successfully doing so requires significant bipartisan 
political efforts. To that end, I appreciate that the ranking 
member has stated his desire to join forces to draft and markup 
a strong bipartisan China bill.
    To accommodate his request for more time to achieve this 
shared objective, I have agreed to move the markup to April 
14th. We will have to work during the recess to have the text 
finished and available to other committee members by the end of 
this work period.
    My expectation is that the text will be representative of 
the shared bipartisan space on China, and members will also 
have opportunities to shape the bill through the amendment 
process.
    Both he and I and many members of this committee have 
introduced bills and issued reports over the past several years 
addressing various aspects of this challenge. Now we need to 
act and adopt a comprehensive bipartisan bill that can provide 
a sustainable and durable framework for the years ahead.
    So I look forward to the opportunity to engage with our 
witnesses today in a genuine and substantive conversation about 
how we can work together to develop a comprehensive approach 
and strategy towards China to reset our strategy and diplomacy, 
to reinvest and replenish the sources of national strength and 
competitiveness at home, to place our partnership and allies 
first, and that reflects our fundamental values as Americans.
    Let me turn to the distinguished ranking member, Senator 
Risch, for his opening statement.
    [No response.]
    Senator Risch, I think you may be muted.
    Senator Risch. It is not now, Bob. Can you hear me?
    The Chairman. Yes, I hear you very well.
    Senator Risch. Thank you very much. I appreciate that.

               STATEMENT OF HON. JAMES E. RISCH, 
                    U.S. SENATOR FROM IDAHO

    Senator Risch. First of all, let me pick up where you left 
off on the bipartisan nature of this effort.
    I think there is no issue before this Congress that demands 
and commands bipartisan effort than the issue that we have in 
front of us, and you point out, a lot of us who have introduced 
bills recently, in recent years, addressing various parts of 
the China issue and it is time to bring them all together, 
which is, of course, the effort that we are undertaking here.
    As most of us in recent years have recognized, strategic 
competition with the People's Republic of China must be United 
States' number-one foreign policy priority.
    The challenges posed by the Chinese Communist Party are 
urgent, and we must act accordingly. We must also maintain U.S. 
political will for the long haul because these challenges will 
shape U.S. foreign policy and the international system for 
decades to come.
    Republicans and Democrats should work together to ensure 
that the U.S. and its Government treats China as the top 
foreign policy priority in the Indo-Pacific as the priority 
region in terms of policy, resourcing, and personnel.
    To support these goals, congressional legislation must be 
truly bipartisan and driven by concrete and actionable steps 
that directly address the biggest threats we face from PRC.
    Today's hearing will be important in shaping this 
committee's efforts, including by providing us with valuable 
ideas on several aspects of competition with China: political, 
economic, military, and technological.
    One of the important aspects or one of the important pieces 
of this puzzle as we go forward is partnerships. We know that 
we have allies in the world who are anxious to join us in our 
quest in this regard.
    Europe, of course, is a natural partner, and I got a report 
recently that itemized things we can do with Europe and with 
support with our European partners. I know the Administration 
will do the same thing as we go forward.
    In addition to Europe, of course, we have other natural 
partners in the region that will join us in our efforts to do 
the things that we are setting out to do here.
    Last week, I reintroduced the STRATEGIC Act with several 
colleagues, which includes proposals to put the United States 
on a stronger path to win this competition.
    The Chairman and I have talked about this and about his 
bill. We are going to work together to try to meld those 
together so that we have a proposal that is truly bipartisan 
and meets all of our ideas as to how we meet the challenge.
    First, the STRATEGIC bill challenges the unfair and illegal 
PRC economic practices that undermine U.S. businesses and an 
international economic system based on free market growth.
    The STRATEGIC Act focuses in particular on increased 
oversight of Chinese company behavior in U.S. capital markets 
and Chinese state-sponsored intellectual property theft. We are 
all aware of the many cases that this has happened, and we have 
got to put an end to this.
    This legislation also addresses the CCP malign influence in 
our media, universities, and even Government. We must ensure 
that our society remains open and free but also resilient and 
aware of the ways in which the CCP attempts to suppress, 
influence, or steal information within the United States.
    The STRATEGIC Act increases transparency around Chinese 
Government funding of our universities and Government-sponsored 
trips for Government officials.
    Next, this act confronts the threat of a modernized and 
growing Chinese military. Its rapid expansion and modernization 
is shifting the balance of power in the Indo-Pacific. The PLA 
is also becoming more active in other regions such as the 
Indian Ocean, Africa, and even the Western Hemisphere.
    The CCP plans to use its military to dominate the waters 
inside the island chain and project great power beyond. It has 
strengthened its ability to coerce Taiwan to unify with 
Mainland and to bully its neighbors into accepting its 
excessive maritime claims.
    Such actions would be devastating to the U.S. and allied 
interests in this entire region. We must ensure the United 
States and its allies are appropriately resourced to meet this 
military challenge.
    I want to take this opportunity to express my concern about 
comments by unidentified Administration officials in the media 
yesterday about Taiwan. Beijing's increased coercion and 
attempts to isolate Taiwan are the reason for seeing increased 
tensions, not engagement with Taiwan by the United States.
    I am especially disappointed to see comments like this 
right before the U.S.-China discussions in Alaska this week. 
The Administration should clarify these statements if, indeed, 
they are truly the Administration's position, since it is 
always hard to tell when the media cites unidentified 
officials.
    Having said that, it is important that those statements are 
out there that the Administration speak to those statements 
that have been made.
    Finally, the STRATEGIC Act holds the CCP accountable for 
its appalling human rights abuses, including its ongoing 
genocide of the Uighurs and other Muslim minorities in 
Xinjiang, egregious human rights abuses in Tibet, and its 
obliteration of individual rights promised to the people of 
Hong Kong.
    Oftentimes, the CCP uses new technologies to carry out 
these abuses. The international community cannot turn a blind 
eye to its human rights abuses. No truly great power undermines 
its own citizens, and the CCP must be held accountable for 
their conduct.
    These are just some of the pressing and important threats 
we face from the PRC, and I look forward to hearing from the 
witnesses on these important issues. I also look forward to 
working with my Democratic colleagues to address these evolving 
challenges in an actionable and bipartisan manner, and I 
believe that the Chairman and I will continue to work in good 
faith in a bipartisan manner to bring these matters before our 
committee, eventually before the Senate, to reach a bipartisan 
solution and action to address these matters.
    So thank you, Senator Menendez. With that, I yield back.
    The Chairman. Thank you, Senator Risch.
    Let me turn to our witnesses now.
    Dr. Elizabeth Economy is a senior fellow for China studies 
at the Council on Foreign Relations and a senior fellow at 
Stanford University's Hoover Institution.
    Dr. Economy is an acclaimed author and expert on Chinese 
domestic and foreign policy. Her most recent book, ``The Third 
Revolution: Xi Jinping and the New Chinese State,'' was 
shortlisted for the Lionel Gelber prize.
    Mr. Tom Shugart is an adjunct Senior Fellow with the 
defense program at the Center for New American Security. His 
research focuses on undersea warfare and maritime competition, 
military innovation, and acquisition and the broader military 
balance in the Indo-Pacific.
    And Mr. Saif Kahn is a research fellow at Georgetown Center 
for Security and Emergent Technology. His research focuses on 
AI policy, semiconductor supply chains, China's semiconductor 
industry, and U.S. trade policy, and his work has been featured 
in the Financial Times, The Washington Post, Fortune, and other 
outlets.
    With that, let me first turn to Dr. Economy. Your full 
statements will be included in the record. We ask you to 
summarize it in 5 minutes, more or less, so that we can have a 
conversation with you.
    Dr. Economy.

   STATEMENT OF DR. ELIZABETH ECONOMY, SENIOR FELLOW, HOOVER 
        INSTITUTION, STANFORD UNIVERSITY, WASHINGTON, DC

    Dr. Economy. Thank you very much, Chairman Menendez, 
Ranking Member Risch, and other distinguished members of the 
committee.
    I appreciate the opportunity to speak before you this 
morning on this critical issue of U.S. strategic competition 
with China.
    When Xi Jinping was selected as General Secretary of the 
Chinese Communist Party in 2012, he spoke of his Chinese dream 
and the great rejuvenation of the Chinese nation, and while no 
one knew exactly what he meant at the time, I do not think 
anyone would have envisioned that his ambition was nothing less 
than a reordered world order.
    In over the past 8 years, it has become clear that he seeks 
to transform the geostrategic landscape across the four 
dimensions, first, by asserting sovereignty over Taiwan in the 
South China Sea as well as over other contested territory such 
as those with India and Japan; second, by replacing the United 
States as the preeminent power in the Asia Pacific through 
Chinese military dominance and a network of regional agreements 
that excludes the United States; third, by embedding Chinese 
political, economic, and technological preferences throughout 
the world, via the Belt and Road Initiative as well as through 
the leverage of its market; and fourth, by aligning 
international norms and values around human rights, internet 
governance, and technical standards with those of China.
    Xi's approach is long term and strategic. He sets targets 
and timetables for achieving his objectives. He mobilizes 
actors from across the Chinese Government, military, and the 
private sector. He structures political and economic incentives 
to induce outside actors to support Chinese objectives, and he 
pursues those objectives in multiple domains within China, in 
other countries, through the Belt and Road and in global 
governance institutions.
    China has achieved notable success in realizing many of its 
strategic objectives, and much of the rest of the world now 
believes that China's rise and the U.S.'s decline are 
inexorable.
    Beijing's management of the COVID-19 pandemic, vaccine 
diplomacy, positive economic growth, technological leadership, 
and growing military prowess lend credibility to such a 
narrative.
    However, China's strategy also has significant 
vulnerabilities. In many respects, the same state control that 
contributes to China's success has also begun to limit the 
credibility and attraction of many Chinese initiatives.
    Chinese technology companies, such as Huawei and ByteDance, 
face growing constraints and access in global markets as a 
result of CCP interference. Nordic countries that once welcomed 
PRC investment now scrutinize it for potential military 
applications.
    Many countries have closed their Confucius Institutes, 
which are perceived as vehicles for advancing a Chinese 
Government political narrative.
    In addition, China's willful diplomacy, along with its 
egregious actions in Xinjiang and Hong Kong, have resulted in a 
backlash against China.
    Popular opinion polls throughout the Asia Pacific, for 
example, indicate significant distrust of Xi Jinping and little 
interest in Chinese regional leadership, and the Belt and Road 
has become bumpy, as popular protests and host countries 
proliferate, deals are canceled and renegotiated.
    COVID-19 placed particular stress on Belt and Road deals 
with the Chinese Government reporting that 60 percent had been 
adversely affected.
    The Trump administration was instrumental in drawing 
international attention to many of the risks of growing Chinese 
power and influence, and it put in place a number of policies 
to protect the United States from unfair and even malign 
Chinese economic and political activities.
    If to compete effectively with China, the Biden 
administration must move beyond the previous Administration's 
more reactive and defensive strategy to a sort of more positive 
and proactive message of U.S. leadership that contributes to 
advance global prosperity and security.
    And as the Interim National Security Strategy guidance 
suggests, and I outlined in my testimony, U.S. leadership 
should be firmly rooted in U.S. values, strong relations with 
allies and partners, and a robust presence in multilateral 
institutions.
    A good example of such leadership is the major new vaccine 
diplomacy initiative with Australia, Japan, and India that 
answers the humanitarian need, demonstrates the ability of 
democratic allies and partners to cooperate effectively, and 
provides an alternative to Chinese global vaccine diplomacy.
    Moving forward, the Administration and Congress has a long 
list of priorities that it needs to address with regard to 
China. China is a global challenge that is going to require a 
global response.
    Let me just mention four.
    First, we need to develop an economic pillar of engagement 
in the Asia Pacific. China's weaving a net of regional trade 
agreements and U.S. companies will lose ground in the most 
economically dynamic region of the world if the Administration 
and Congress do not fight their way into the CPTPP or pursue a 
range of significant sectoral trade agreements.
    Second, the United States, as the chairman mentioned, needs 
to retool at home. In the same way that we set clear objectives 
and targets for ensuring military preparedness that include 
research and development, manufacturing, the development of 
human capital, and logistics, we need a technology policy that 
does the same.
    Third, to compete effectively with China, the United States 
must look beyond its traditional allies and partners to forge a 
new relationship with the world's developing economies.
    China's engagement in Africa and the Middle East, as well 
as Latin America and Southeast Asia, have provided fertile 
ground for Chinese values, technologies, and policy preferences 
to take hold.
    Moreover, when the United States and its allies criticize 
China in Xinjiang, Hong Kong, and the South China Sea, Beijing 
is able to rally support from within these developing 
economies.
    The United States needs to change this dynamic by working 
with other large market democracies to pursue a significant new 
development initiative with these economies, such as a 
sustainable Smart Cities program, include them in the clean 
network and resilient supply chain initiatives, welcome them to 
the table as part of small ad hoc groups on Administration 
priorities such as cyber, climate, and corruption, and ensure 
opportunities for studying in the United States and other 
advanced democracies for the next generation of leaders from 
these countries.
    Finally, I would just note that China's released the 14th 
Five Year Plan just a week ago, and in it highlights priority 
areas for China including the Arctic and Antarctica, maritime 
governance, and space.
    Xi Jinping has put the world on notice about his next big 
strategic place and we should pay attention.
    Thank you very much.
    [The prepared statement of Dr. Economy follows:]

              Prepared Statement of Dr. Elizabeth Economy

                              introduction
    Chairman Menendez, Ranking Member Risch, and other distinguished 
members of the committee, thank you for the opportunity to testify 
today on this important topic of U.S. strategy in an era of great power 
competition. My remarks will focus primarily on the political elements 
of this competition.
    China's leaders seek to reclaim Chinese centrality on the global 
stage by asserting sovereignty over contested territory, replacing the 
United States as the preeminent power in the Indo Pacific, embedding 
Chinese economic, security, technological, and political preferences 
throughout the rest of the world, and shaping norms, values, and 
standards in international institutions to reflect Chinese preferences. 
In such a world, political and economic choice globally will be 
constrained, and U.S. economic and security interests will be 
compromised.
    For almost a decade, Chinese leaders have made substantial progress 
toward achieving their objectives. Their success is a function of the 
leverage of the Chinese market, growing military prowess, long-term 
strategic planning, strong state capacity, and a multi-actor, multi-
domain strategy. At the same time, Beijing's pursuit of narrow self-
interest and reliance on coercive tactics have engendered popular 
backlashes in many countries and rendered it incapable of exerting true 
global leadership. These vulnerabilities afford the United States a new 
opportunity to present and gain broad support for an alternative vision 
of the 21st century world order.
    The United States should begin by reframing the U.S.-China 
competition away from the narrative of a bilateral rivalry to one 
rooted in values. It should also reassert its presence in global and 
regional institutions, coordinate with allies and partners, pursue its 
own multi-actor, multi-domain strategy, and develop a national 
consensus around American political and economic renewal. These are the 
building blocks of U.S. competitiveness. Beyond these steps, however, 
Washington needs a bold strategic initiative that engages the larger 
international community, is rooted in U.S. values, and gives life to 
its strategic vision.
                        china's strategic vision
    Chinese leaders offer a new vision of world order rooted in 
concepts such as ``the rejuvenation of the great Chinese nation,'' a 
``community of shared destiny,'' a ``new relationship among major 
powers'' and a ``China model.'' Once the rhetoric is stripped away, 
their vision translates into a significantly transformed international 
system. The United States is no longer the global hegemon with a 
powerful network of alliances that reinforces much of the current 
rules-based order. Instead, a reunified and resurgent China is on par 
with, or even more powerful than, the United States. And the 
international community and institutions reflect Chinese values and 
policy preferences.
    At the heart of the Chinese leadership's vision is the 
reunification of China itself. Chinese leaders are particularly focused 
on maintaining control within their own border regions, including 
Xinjiang, Tibet, Inner Mongolia, and Hong Kong and asserting control 
over areas they consider core interests, such as Taiwan and a vast 
swath of the South China Sea. China also has outstanding territorial 
disputes with its neighbors, including India, Japan, Nepal, Bhutan, and 
South Korea, that it wants resolved in its favor, Several of these 
disputes flared up over the course of the COVID-19 pandemic, as China 
sought to gain advantage while the rest of the world was distracted.
    Chinese President Xi Jinping also envisions China as the preeminent 
power in Asia. China is establishing a network of regional economic and 
security arrangements that exclude the United States (some by the 
choice of the United States, itself). It leads the Asian Infrastructure 
Investment Bank and the Shanghai Cooperation Organization. It concluded 
the Regional Comprehensive Economic Partnership (RCEP) in November 
2020, has expressed strong interest in joining the Comprehensive and 
Progressive Agreement for Trans-Pacific Partnership (CPTPP), and is 
advancing a free trade agreement with Korea and Japan. It also calls 
for a future Asia-Pacific Free Trade Agreement. In addition, China is 
rapidly developing the military capabilities necessary to realize its 
sovereignty objectives with regard to the South China Sea and Taiwan.
    Beyond its own backyard, China is embedding its technologies, 
goods, and values throughout the world via the Belt and Road, and its 
offshoot, the Digital Silk Road (DSR). The DSR is the infrastructure of 
the 21st century: the BeiDou satellite system, Huawei Marine fiber 
optic cables, e-commerce, and, on the horizon, China's digital currency 
and electronic payment system, which is currently being piloted 
domestically in preparation for a fuller rollout by the 2022 Olympics. 
China's Health Silk Road (HSR) includes the provision of Chinese-
constructed hospitals, tracking systems, doctors, medical devices (one 
of China's Made in China 2025 sectors), and traditional Chinese 
medicine. China's vaccine diplomacy has also become a central element 
of its HSR. Finally, Beijing maintains an extensive, well-funded 
program of student, journalist, and military officer education and 
training opportunities in China for citizens from Asia, Latin America, 
Africa, and the Middle East--including 10,000 full-ride scholarships 
for students from BRI countries.
    As U.S. and other international actors have experienced, China 
increasingly uses the leverage of its market to coerce international 
actors to align their views with those of China. While traditionally 
this coercion has been reserved for issues China deems ``core'' 
interests, such as Taiwan, Hong Kong, and the South China Sea, Chinese 
red lines have proliferated over the past year. Beijing expelled Wall 
Street Journal reporters in retaliation for an op-ed entitled ``China 
Is the Real Sick Man of Asia,'' threatened countries' market access in 
China if they barred Huawei 5G technology, and launched a boycott 
against Australian goods after the country called for an inquiry into 
the origins of the COVID-19 pandemic. China's market leverage also 
provides it the wherewithal to pursue programs such as the Confucius 
Institutes and Thousand Talents Program--which it is rebooting in 2021 
to accelerate the process of drawing foreign scientific talent to 
China--that take advantage of the openness of other countries to 
advance Beijing's economic interests and political narrative. And even 
as China pursues technological self-reliance, Xi Jinping seeks to use 
the country's market to deepen foreign companies' reliance on it, 
asserting: ``We will enhance the global value chain's dependence on 
China and develop powerful retaliation and deterrence capabilities 
against supply cut-offs by foreign parties.'' \1\
    Finally, China's strategy involves transforming global governance 
institutions by reforming norms and values around human rights and 
Internet governance, setting technology standards, and weaving the BRI 
into the mission of more than two dozen U.N. agencies and programs. In 
the 14th Five-Year Plan, Chinese officials signaled particular interest 
in shaping norms around the Arctic and Antarctica, maritime governance, 
and space.
                          process and progress
    China pursues its vision with a strategy that is long-term, multi-
actor, and multi-domain. Chinese leaders advance bold long-term 
initiatives with targets and timetables, such as the Belt and Road 
Initiative, reunification with Taiwan, and China Standards 2035. They 
mobilize and coordinate significant human and financial resources from 
all sectors of the Chinese Government, military, business, and society 
to realize those objectives. And they reinforce a single initiative in 
multiple domains.
    For example, in their pursuit of becoming the world's leading 
innovation and technology power, Chinese leaders set targets and 
timetables for controlling domestic and then global market share in a 
wide range of technologies, rally both private and state-owned firms to 
realize the objectives, protect Chinese firms with programs such as 
Made in China 2025, subsidize the deployment of Chinese technology 
through the Digital Silk Road, place Chinese citizens at the head of 
international standard setting bodies such as the International 
Telecommunications Union, and flood those bodies with large Chinese 
delegations and scores of proposals. The Chinese Government is also 
highly opportunistic: for example, when China headed Interpol, it 
proposed that China upgrade the organization's telecommunications 
infrastructure; it linked a free trade deal with the Faroe Islands with 
acceptance of Huawei 5G technology; and it implicitly threatened to ban 
German cars if Germany banned Huawei.
    Over the past several years, Beijing has made progress on a number 
of its strategic objectives:

   It has realized its sovereignty claim over Hong Kong through 
        the imposition of the National Security Law and expanded its 
        military capabilities and presence in the South China Sea.

   It also has withstood international opprobrium and targeted 
        economic sanctions for its violations of human rights in 
        Xinjiang, and it has successfully mobilized developing 
        economies, particularly from Africa and the Middle East, to 
        support its stance on Hong Kong, Xinjiang, and the South China 
        Sea.

   Its trade initiative, RCEP, elevates its economic position 
        within the Indo-Pacific.

   The BRI has laid the foundation for Chinese technology to 
        provide much of the world's next generation telecommunications, 
        financial, and health infrastructure.

   Chinese dominance in U.N. technology standard-setting bodies 
        and capacity-building on Internet governance are reinforcing 
        acceptance of both Chinese technology and the more repressive 
        norms and values it enables.

    Yet China's actions have also created new challenges:

   China's assertiveness and coercive tactics have contributed 
        to popular backlashes that threaten its larger strategic 
        objectives. Polls in 2020 and 2021 suggest that citizens in 
        many developed and developing economies do not trust Xi Jinping 
        or China and favor Japanese, EU, or U.S. leadership over that 
        of China.\2\

   Rather than undermine the U.S.'s role in the Asia Pacific, 
        Chinese actions have strengthened U.S. relations with members 
        of the Quad and other Asian partners, such as Vietnam. And the 
        EU has stepped up to enhance its political and security 
        engagement in the Asia Pacific.

   Significant solidarity among advanced democracies has 
        emerged to protest Chinese policies in Xinjiang and Hong Kong, 
        to call for an investigation into the origins of COVID-19, and 
        to ban or limit Huawei 5G technology. And countries are 
        increasingly scrutinizing and defending against Chinese 
        behavior that attempts to subvert the principles of 
        international institutions.

   The absolute number of Confucius Institutes has declined 
        over the past few years to just over 500--far short of 
        Beijing's target of 1000 worldwide by 2020.\3\

   The Belt and Road has become increasingly bumpy. 
        Approximately 60 percent of BRI projects have been ``somewhat'' 
        or ``seriously'' affected by the pandemic; and several European 
        members of China's 17+1 BRI construct are considering exiting 
        the arrangement.
                realizing the u.s. competitive advantage
    The Biden administration's Interim National Security Strategic 
Guidance established a useful set of basic parameters for U.S. strategy 
in the 21st century: protecting the underlying political and economic 
strengths of the United States, promoting a favorable distribution of 
power, and leading and sustaining a stable and open international 
system underwritten by our allies, partners, and multilateral 
institutions that is capable of meeting the challenges of this 
century--cyber, climate, corruption and digital authoritarianism. To 
realize this future, however, will require the United States not only 
to lead with a strong vision but also to operate with a new degree of 
humility and partnership.
    First, the United States must account for shifting structural 
realities. By 2030, or perhaps earlier, the size of China's economy 
will likely surpass that of the United States. China's population 
already exceeds that of the United States by more than four times, 
providing it a distinct advantage in human capital, whether for 
advancing innovation, growing a domestic market, or enhancing global 
political outreach. And within the Asia Pacific region, China claims a 
distinct military advantage simply by virtue of geography. These 
factors will require greater reliance on allies and partners.
    Second, the United States needs to integrate American values and 
ambitions at home with its leadership abroad, while acknowledging that 
some of these values are still aspirational. These values include a 
commitment to inclusion and equality, free trade and economic 
opportunity, innovation and sustainability, openness, human dignity, 
and the rule of law. Many of these aims are already embedded but not 
fully realized in the current rules-based order. Operating from such a 
framework enables the United States to assert a positive and proactive 
message of leadership that resonates both domestically and 
internationally.
    Third, and related, the United States should make clear that the 
central challenge China poses is a value and norm-based one and not, as 
is often asserted, one defined by a rising power versus an established 
power. When competition is framed in a bilateral U.S.-China context, 
China gains an important advantage. Every issue is elevated into a 
signal of relative power and influence; and as the rising power, any 
relative Chinese gain becomes a win. A framework that embraces values 
and norms also is more likely to engage U.S. allies and partners. 
Conflict in the South China Sea becomes a normative challenge by China 
to freedom of navigation and international law rather than a 
competition for military dominance between the United States and China 
in the Asia Pacific. It is a challenge that speaks not only to the 
United States but also to the 168 nations who are already party to 
UNCLOS.
    Fourth, as many in the U.S. policymaking community have 
acknowledged, the United States needs to retool at home. The polarized 
American polity and chaotic response of the U.S. Government to the 
pandemic tarnished the United States' image and contributed to the 
impression of U.S. decline.\4\ Before taking office, Biden 
administration National Security Council officials Kurt Campbell and 
Rush Doshi argued that the United States would need to rebuild and 
rethink the relationship between the state and the market in ways that 
addressed inequality, sustained growth, and ensured competitiveness 
with China.\5\ The United States needs the same clear objectives and 
targets for realizing these goals that it adopts for ensuring military 
preparedness.
    Fifth, the United States must re-engage broadly and deeply in 
regional and global organizations. These organizations are a central 
battleground in ensuring a ``stable and open'' international system 
that reflects U.S. interests and priorities. The Biden administration 
has already rejoined a number of multilateral agreements and 
organizations and made clear its intention to seize back the initiative 
in areas such as human rights, climate change, and technology. However, 
it must also remain attuned to new Chinese priorities. China's recently 
released 14th Five-Year Plan (2021-2025), for example, highlighted 
several priority areas for deeper Chinese engagement in regional and 
global governance: the Arctic and Antarctica, maritime governance, 
regional free trade, and space. The United States should be prepared 
for significant new Chinese initiatives in these arenas and should 
ensure that it can operate from a position of relative strength, for 
example, by acceding to UNCLOS and the CPTPP, and developing a tightly 
coordinated strategy with allies around Arctic and space governance.
    Sixth, the United States and its allies and partners should create 
informal working groups, perhaps within the context of the OECD, to 
coordinate and advance shared norms and values as well as to defend 
against Chinese coercion. In particular, many U.S. analysts have 
underscored the need for such cooperation in setting joint technology 
standards. Developing consensus candidates for leadership positions in 
international institutions, ensuring strong representation by 
democracies in bodies such as the UNHRC and ITU, and addressing larger 
issues of institutional reform, for example, in the WHO and WTO, should 
also be priority areas for policy coordination. And, aligning a policy 
approach to address ongoing Chinese human rights abuses particularly in 
Xinjiang, Tibet, and Hong Kong is essential.
    A democratic alliance could also cooperate to combat China's 
coercive economic policies. While campaigns to buy Taiwanese pineapples 
and Australian wine in the face of Chinese boycotts are important 
signals of allied cohesion, stronger steps are necessary. In cases 
where China boycotts goods from countries on political grounds, an 
alliance network could simultaneously boycott or impose tariffs on 
Chinese goods. Similarly, when China threatens loss of market access 
for industries, such as hotels and airlines, other countries should 
respond by threatening to take away Chinese airlines' or hotel access 
to their markets. Reciprocity signals to China that other countries are 
prepared to respond with more than rhetorical condemnation and levels 
the playing field for future negotiation.
    The United States should also encourage deeper European security 
engagement in Asia. NATO Secretary General Jens Stoltenberg has called 
for NATO to play a larger role in the Asia Pacific region, coordinating 
with Australia, Japan, New Zealand and South Korea to support global 
rules and set norms and standards in space and cyberspace in the face 
of destabilizing Chinese behavior.\6\ Europe could take part in 
conversations the Quad is pursuing around supply chain resiliency, the 
pandemic, and disinformation campaigns as well.\7\ Importantly, a 
stronger Europe-Asia security partnership could play an crucial role in 
bolstering Taiwan's security.
    Seventh, for the United States to ensure a world order that 
reflects its values and normative preferences--and not those of China--
and to meet the challenges of this century requires more than simply 
cooperation with its traditional allies and partners. It requires 
forging a new relationship with the world's developing economies that 
is rooted in new economic opportunities for those countries, is imbued 
with U.S. values, and is directed toward meeting the global challenges 
outlined in the Administration's guidance.
    The breadth and depth of China's engagement with the world's 
developing economies, particularly in Africa and the Middle East, but 
also Latin America and Southeast Asia, has provided China with fertile 
ground for its values, technologies, and policy preferences to take 
hold. And it is forging closer military ties with many of these 
countries as well. Yet, there is an opportunity in many cases to change 
this dynamic.
    To begin with, the United States should adopt a more inclusive 
diplomatic framework and engage a broader range of countries in 
thinking through how best to advance a common strategy on cybersecurity 
and governance, climate, corruption and digital authoritarianism. China 
shouldn't achieve an advantage simply because it shows up and listens 
and the United States does not.
    In consultation with the developing economies, the United States 
and other large market democracies, such as Germany, France, the UK, 
Japan, and Australia, should also pursue a significant new development 
initiative--for example, a sustainable and smart cities program in 25 
to 30 developing countries. Such an initiative would leverage U.S. 
strengths and those of its democratic allies and address the broader 
global imperatives identified by the Biden administration. It would 
involve political and economic capacity building around the rule of 
law, transparency, sustainability, and innovation and would engage not 
only governments but also the private sector, civil society, and 
international institutions.
    While much of a new development effort would require new financial 
support, the United States and its partners could also leverage current 
initiatives, such as the U.S.-led Clean Network or Quad-based efforts 
to establish resilient supply chains. As multinationals diversify part 
of their supply chains away from China to develop regional 
manufacturing and distribution centers, for example, these new 
investment opportunities could become part of this new development 
initiative. Development agencies and NGOs, such as the Asia Foundation 
\8\ and Bloomberg Philanthropy, that support grassroots programs on the 
rule of law, sustainability, and technological innovation could also 
play an important role. They are a force multiplier for democratic 
values and should be part of a considered U.S. and allied strategy. And 
at the same time, the United States and its allies could reinforce the 
political, environmental, and technological standards in U.N. agencies 
and standard setting bodies. Creating a new path forward to engage the 
developing world is essential to U.S. competitiveness with China, not 
to mention the future well-being of the international system.
    Finally, even as the bilateral U.S.-China relationship remains 
overwhelmingly competitive, the United States should keep the door open 
to cooperation with China. There is legitimate space to elevate the 
world's capacity to respond to climate change, pandemics, and global 
disasters through U.S.-China cooperation. Reconstituting a bilateral 
dialogue that supports discussion and negotiation on singular, targeted 
issues of mutual concern, such as visas or maritime safety, would also 
be beneficial. And supporting civil society exchanges, such as the 
Fulbright program and Peace Corps, that offer the opportunity to share 
U.S. perspectives and values, have little downside for the United 
States and significant potential upside.

----------------
Notes

    \1\ Frank Tang, ``China puts supply chain security at forefront to 
avoid being `strangled' by sanctions, analysts say,'' South China 
Morning Post November 9, 2020.
    \2\ ``The State of Southeast Asia: 2021 Survey Report,'' ISEAS 
Yusof Ishak Institute, February 10, 2021.
    \3\ ``Confucius Institute/Classroom, Hanban, https://
web.archive.org/web/20210101041525/http:/english.hanban.org/
node_10971.htm.
    \4\ Richard Wike, ``The Trump era has seen a decline in America's 
global reputation,'' Pew Research Center, November 19, 2020.
    \5\ Kurt Campbell and Rush Doshi, ``The China Challenge Can Help 
America Avert Decline,'' Foreign Affairs, December 3, 2020.
    \6\ Sebastian Sprenger, ``NATO chief seeks to forge deeper ties in 
China's neighborhood,'' Defense News, June 8, 2020.
    \7\ Garima Mohan, ``Europe in the Indo-Pacific: A Case for More 
Coordination with Quad Countries,'' German Marshall Fund of the United 
States, January 14, 2020.
    \8\ The author is a current Trustee of the Asia Foundation.

    The Chairman. Thank you, Doctor.
    Let me call upon Mr. Shugart.

STATEMENT OF TOM SHUGART, ADJUNCT SENIOR FELLOW, CENTER FOR NEW 
               AMERICAN SECURITY, WASHINGTON, DC

    Mr. Shugart. Chairman Menendez, Ranking Member Risch, 
members of the committee, thank you for the opportunity to 
share my thoughts on the military balance in the Indo-Pacific 
region.
    It is a privilege to testify here today. I must note that 
the views I will express are my own and do not represent those 
of any organization with which I am affiliated.
    What I consider the overall state of the military balance 
in the region, my assessment is that we are entering a period 
of deep uncertainty, in stark contrast to the more favorable 
situation of the past and also in contrast to the situation 
that, without changes to current trends, we seem headed towards 
in time. That is, Chinese military domination of the region.
    In fact, just this week, the Air Force Chief of Staff and 
Marine Corps Commandant wrote that, ``Based on assessments 
conducted by senior military and civilian leaders over the past 
several years, trend lines indicate the Joint Force is not 
ready to satisfy the demands of great power competition in the 
Indo-Pacific.''
    The ongoing trends in the regional military balance that 
concern me the most are those related to China's development of 
broad capabilities clearly intended to counter or deter U.S. 
intervention to defend our allies. These are most visible in 
the form of China's deployment of large numbers of long range 
and precise ballistic missiles, its growing bomber force, and 
its rapidly growing Blue Water Navy.
    As detailed in my written testimony, China has been engaged 
in what could be described as the largest and most rapid 
expansion of maritime and aerospace power in generations.
    While the United States and our allies have begun to 
recognize and take action to address the challenge, these 
efforts continue to face impediments to implementation, and 
have thus far been of somewhat limited impact.
    But even with all that, invading or coercing our allies 
within the region will remain a high bar for China for some 
time. Our military has hard-won advantages over China's based 
on experience, multipurpose platforms, and difficult to 
replicate capabilities in key areas such as undersea warfare, 
stealth aircraft, and the worldwide reach of our naval forces.
    These advantages will take time for China to erode, though 
we should remain watchful, given recent indications of focused 
Chinese efforts in these areas.
    Considering it all, what I am left with is a humbling sense 
of uncertainty that I mentioned before. In this regard, the 
following unanswered questions come to the fore.
    First, will China acquire the sealift capacity to invade 
Taiwan, and if so, when? While much recent commentary has 
documented the growing level of integration between civilian 
industry and the Chinese military, known as military-civil 
fusion, some may not appreciate the scale of such integration 
with China's world-class merchant fleet.
    For perspective, China's shipbuilding industry routinely 
builds more tonnage of ships annually than the United States 
did at the peak of the emergency shipbuilding program of World 
War II, and China's merchant fleet today totals more than seven 
times the size of our merchant fleet at the end of that war, 
when it was supporting huge armies thousands of miles from 
home.
    Next, in a conflict would the PLA strike our forces 
preemptively, degrading their ability to respond? Some analysts 
assess that China is unlikely to do so out of a concern of 
widening the conflict.
    However, such an interpretation minimizes a number of 
factors in Chinese strategic thought, as well as real-world 
evidence which indicates that they are building a force to be 
able to do so and practicing using it.
    And finally, how would key weapons system interactions play 
out? To a far greater extent than in wars of the past the 
course of peer conflicts in the precision-strike era may be 
dramatically affected by individual weapon, sensor, and 
information system interactions whose resolution may not be 
truly known until the shooting actually starts.
    Given all of this, and given China's desire to gain what 
they call war control prior to escalation, our deterrent 
efforts must focus on amplifying uncertainty in their minds as 
it is uncertainty of success and a desire to ensure continued 
internal stability that is most likely to deter the Chinese 
Communist Party from engaging in armed conflict--not efforts to 
merely impose costs and provide off ramps.
    With this in consideration, my specific recommendations for 
how to ensure continued deterrence of Chinese military 
aggression are as follows.
    First, we should undermine China's potential plans to 
strike a key U.S. and allied capabilities at the start of a 
conflict by denying China easy targets within the region, and 
by building resilience against command and control disruption.
    Next, we and our allies should visibly prepare for 
protracted war. This could include measures such as stockpiling 
critical supplies, conducting joint exercises focused on 
interdiction of Chinese maritime commerce, and designing easy-
to-produce weapons and platforms whose production could be 
rapidly increased.
    Last, we must ensure that our allies and partners and their 
publics fully appreciate the threat posed by the growing 
capabilities of the Chinese People's Liberation Army and the 
grave consequences--for them--of a failure of deterrence.
    Thank you for the opportunity to testify today. I look 
forward to your questions.
    [The prepared statement of Mr. Shugart follows:]

                   Prepared Statement of Tom Shugart
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]


    The Chairman. Thank you very much.
    Mr. Khan.

 STATEMENT OF SAIF KHAN, RESEARCH FELLOW, CENTER FOR SECURITY 
            AND EMERGING TECHNOLOGY, WASHINGTON, DC

    Mr. Khan. Chairman Menendez, Ranking Member Risch, members 
of the committee, good morning and thank you for the 
opportunity to speak today.
    I am a research fellow specializing in semiconductor policy 
at the Center for Security and Emerging Technology, a 
nonpartisan think tank at Georgetown University that studies 
the security implications of new technologies.
    Today, I will cover three topics: first, the United States' 
and China's respective advantages in technology competition; 
second, how our best strategy to sustain long-term leadership 
will be to double down on our current strengths, our 
international partnerships, and ability to attract the world's 
top talent; third, the importance of maintaining U.S. 
competitiveness in two linchpin technologies: semiconductors 
and artificial intelligence.
    China's science and technology has progressed faster than 
U.S. efforts to track it. China has a vast technology transfer 
infrastructure, R&D investments equal to the United States, and 
more than twice as many yearly S&T graduates as America does.
    China's efforts have resulted in competitive capabilities 
across facial recognition, genomics, IT applications, military 
aviation, and materials science.
    But the United States and its allies retain advantages in 
many core technologies, especially areas with hard-to-acquire 
know-how and high capital costs that pose barriers to entry.
    These areas include semiconductor chips, jet engines, 
certain space-related technologies, and equipment for quantum 
computing. The U.S. also leads China in fundamental research. 
But the areas in which the U.S. is currently ahead may not 
provide a durable strategic advantage.
    First, the technology landscape evolves quickly and 
unpredictably. Where China is behind in a critical domain it 
seeks to leapfrog ahead by acquiring cutting-edge technologies 
from abroad and investing in new paradigms that render U.S. and 
allied advantages obsolete.
    Second, supply chains have become increasingly globalized, 
meaning no single country controls all inputs necessary to 
secure technological capabilities through unilateral trade 
controls.
    Third, unlike decades ago, the private sector dominates 
today's most strategic technologies, requiring governments to 
adapt them before any strategic advantage can be gained.
    To compete with the increasing scale and quality of China's 
S&T efforts, we must double down on our asymmetric advantages.
    First, our network of allies is the world's strongest. The 
U.S. funds only 28 percent of global R&D compared to China's 26 
percent, but the U.S., plus six allies, fund over half. And 
although the United States is just one node in globalized 
supply chains, together with allies we control key technologies 
such as chip manufacturing equipment.
    To mount an effective response to China, we must cooperate 
with allies on research, investment, technology standards, and 
export controls.
    Second, America's open society has continually attracted 
the world's best and brightest. Half of the Ph.D.-level 
scientists and engineers employed in the United States were 
born abroad. But outdated immigration restrictions have made 
other nations increasingly attractive.
    Meanwhile, China's science and engineering workforce is 
growing faster than its U.S. counterpart and will become the 
world's largest if it has not already.
    We must both invest in our domestic workforce and ensure 
the U.S. remains the world's top destination for global talent 
by broadening and accelerating pathways to permanent residency 
for scientists and engineers.
    They want to stay. Foreign nationals graduating from U.S. 
science and engineering Ph.D. programs overwhelmingly remain in 
the United States. Strong evidence suggests that increases in 
high-skilled immigration improve innovation, jobs, and wages 
for U.S.-born workers.
    Finally, I want to call special attention to two linchpin 
technologies, semiconductor chips and artificial intelligence.
    Semiconductor chips underpin all modern technology. While 
the U.S. and allies still lead in semiconductors, China is 
investing at an unprecedented rate. If trends continue, China 
will become the world's largest semiconductor manufacturer, 
fundamentally altering the global economic and security 
landscape.
    Meanwhile, U.S. manufacturers have lost market share and 
will continue to fall behind without policy action. To reduce 
supply chain risks and create high-quality American jobs, we 
should generously fund semiconductor manufacturing incentives.
    And to ensure that democracies lead in advanced chips and 
that they are used for good, we must partner with allies on 
joint R&D and tightening multilateral export controls on chip-
manufacturing equipment.
    Semiconductor chips provide the computing power for 
artificial intelligence, the second technology I want to 
discuss. AI promises to revolutionize sectors from 
transportation to scientific discovery.
    But AI systems are fragile and error prone. Deploying them 
in critical systems without verifying their trustworthiness 
poses grave risks.
    We must better collaborate with allies on R&D for AI safety 
and security and test beds and standards for AI development. We 
must also identify opportunities to collaborate with 
competitors, including China, to build confidence and avoid 
races to the bottom.
    We should invest in new AI technologies that protect 
privacy and other civil liberties, and restrict exports of 
American technology to human rights abusers, such as Chinese 
companies using AI systems for surveillance.
    The U.S. can ensure long-term technological leadership, but 
only with concerted action. I thank the committee for the 
opportunity to speak today.
    [The prepared statement of Mr. Khan follows:]

                  Prepared Statement of Saif Khan \1\

    Chairman Menendez, Ranking Member Risch, members of the Committee: 
Good morning, and thank you for the opportunity to speak today. I'm a 
research fellow specializing in semiconductor policy at the Center for 
Security and Emerging Technology (CSET), a nonpartisan think tank at 
Georgetown University that studies the security implications of new 
technologies.
    Today, I'll cover three topics. First, the United States' and 
China's respective advantages in technological competition. Second, our 
best strategy to sustain long-term leadership will be to double down on 
our current strengths, including our international partnerships and 
ability to attract the world's top talent. Third, the importance of 
maintaining U.S. competitiveness in two linchpin technologies: 
semiconductors and artificial intelligence.
    China's science and technology has progressed faster than U.S. 
efforts to track it. China has a vast technology transfer 
infrastructure, R&D investments equal to the United States, and more 
than twice as many yearly S&T graduates as America does.\2\ China's 
efforts have resulted in competitive capabilities across facial 
recognition, genomics, IT applications, military aviation, and 
materials science. But the United States and its allies retain 
advantages in many core technologies, especially areas with hard-to-
acquire implicit know-how and high capital costs that pose barriers to 
entry.\3\ These areas include semiconductor chips, jet engines, certain 
space-related technologies, and equipment for quantum computing.\4\ The 
United States also leads China in fundamental research.\5\
    But the areas in which the United States is currently ahead may not 
provide a durable strategic advantage. First, the technology landscape 
evolves quickly and unpredictably. Where China is behind in a critical 
domain, it seeks to ``leapfrog'' ahead by acquiring cutting-edge 
technologies from abroad and investing in new paradigms that render 
U.S. and allied advantages obsolete.\6\ Second, supply chains have 
become increasingly complex and globalized, meaning no single country 
controls all inputs necessary to secure technological capabilities 
through unilateral trade controls. Third, unlike decades ago, the 
private sector dominates today's most strategic technologies, requiring 
governments to adapt them before any strategic advantage can be 
gained.\7\
    To compete with the increasing scale and quality of China's science 
and technology efforts, we must double down on our asymmetric 
advantages.
    First, our network of allies is the world's strongest. The United 
States funds only 28 percent of global R&D compared to China's 26 
percent. But the United States plus six allies fund over half.\8\ And 
although the United States is just one node in globalized supply 
chains, together with allies it controls key technologies, such as chip 
manufacturing equipment. To mount an effective response to China, we 
must cooperate with allies on research, investment, technology 
standards, and export controls.
    Second, America's open society has continually attracted the 
world's best and brightest. About half of the Ph.D.-level scientists 
and engineers employed in the United States were born abroad.\9\ 
Immigrants to the United States invented the modern computer chip and 
launched companies critical to America's security and prosperity today, 
from SpaceX to Google. But outdated U.S. immigration restrictions have 
made other nations increasingly attractive.\10\ At the same time, 
China's science and engineering workforce is growing much faster than 
its U.S. counterpart--and will become the world's largest, if it hasn't 
already. In response, we must both invest in our domestic workforce and 
ensure the United States remains the world's top destination for global 
talent by broadening and accelerating pathways to permanent residency 
for scientists and engineers.\11\ They want to stay: foreign nationals 
graduating from U.S. science and engineering Ph.D. programs 
overwhelmingly remain in the United States.\12\ Strong evidence 
suggests that increases in high-skilled immigration improve innovation, 
jobs, and wages for U.S.-born workers.\13\
    Finally, I want to call special attention to two linchpin 
technologies: semiconductor chips and artificial intelligence.
    Semiconductor chips underpin all modern technology. While the 
United States and allies still enjoy the lead in semiconductors, China 
is investing at an unprecedented rate. If current trends continue, 
China will become the world's largest semiconductor manufacturer, 
fundamentally altering the global economic and security landscape. 
Meanwhile, U.S. manufacturers have lost market share, and will continue 
to fall behind under the policy status quo. To reduce supply chain 
risks and create high-quality American jobs, we should generously fund 
the manufacturing incentives program in the CHIPS for America Act. And 
to ensure that democracies lead in advanced chips and that they are 
used for good, we must partner with allied democracies on joint R&D and 
tighten multilateral export controls on chip manufacturing 
equipment.\14\
    The second technology I want to discuss is artificial intelligence. 
AI promises to revolutionize national security, healthcare, 
agriculture, energy, transportation, and scientific discovery. But AI 
systems are fragile and error-prone. Deploying them in critical systems 
without verifying their trustworthiness poses grave risks. We must 
better collaborate with allies on R&D for AI safety and security; test 
& evaluation, validation & verification (TEVV) of AI systems; and 
testbeds and standards for AI development. We must also identify 
opportunities to collaborate with competitors, including China, to 
build confidence and avoid races to the bottom.\15\ We should invest in 
new types of AI technologies that protect privacy and other civil 
liberties,\16\ and tightly control exports of American technology to 
human rights abusers, such as Chinese companies using advanced AI 
systems for surveillance.\17\
    In summary:

   The United States and China each have technological 
        advantages; and U.S. advantages may not provide a durable 
        strategic edge.

   We must double down on our international partnerships and 
        openness to the world's top talent.

   We must place a special focus on leadership in certain 
        linchpin technologies such as semiconductors and artificial 
        intelligence.

    The U.S. can ensure long-term technological leadership, but only 
with concerted action. I thank the Committee for the opportunity to 
speak today. I look forward to your questions.

----------------
Notes

    \1\ For helpful feedback, I thank Zachary Arnold, Daniel Hague, 
Helen Toner, Igor Mikolic-Torreira, Lynne Weil, and Remco Zwetsloot.
    \2\ National Science Foundation, ``The State of U.S. Science and 
Engineering 2020,'' January 2020, https://ncses.nsf.gov/pubs/nsb20201/
u-s-and-global-education.
    \3\ Andrea Gilli and Mauro Gilli, ``Why China Has Not Caught Up 
Yet: Military-Technological Superiority and the Limits of Imitation, 
Reverse Engineering, and Cyber Espionage,'' International Security, 
vol. 43, no. 3, p. 141, https://www.mitpressjournals.org/doi/full/
10.1162/isec_a_00337.
    \4\ Saif M. Khan, Alexander Mann, and Dahlia Peterson, ``The 
Semiconductor Supply Chain: Assessing National Competitiveness'' 
(Center for Security and Emerging Technology, January 2021), https://
cset.georgetown.edu/research/the-semiconductor-supply-chain/; Matt 
Daniels, ``The History and Future of US-China Competition and 
Cooperation in Space'' (John Hopkins University Applied Physics 
Laboratory, 2020), https://www.jhuapl.edu/Content/documents/Daniels-
Space.pdf.
    \5\ See William Hannas and Huey-Meei Chang, ``China's Access to 
Foreign AI Technology: An Assessment'' (Center for Security and 
Emerging Technology, September 2019), 7-8, https://cset.georgetown.edu/
research/chinas-access-to-foreign-ai-technology/.
    \6\ Lauren Dudley, ``China's Quest for Self-Reliance in the 
Fourteenth Five-Year Plan,'' CFR Net Politics, March 8, 2021, https://
www.cfr.org/blog/chinas-quest-self-reliance-fourteenth-five-year-plan.
    \7\ This analysis derives from a more detailed assessment of U.S.-
China technology competition in Zachary Arnold, ``U.S. Investment in 
China's Capital Markets and Military-Industrial Complex,'' Testimony 
before the U.S.-China Economic and Security Review Commission, March 
19, 2021, https://www.uscc.gov/hearings/us-investment-chinas-capital-
markets-and-military-industrial-complex.
    \8\ Melissa Flagg, ``Global R&D and a New Era of Alliances'' 
(Center for Security and Emerging Technology, June 2020), https://
cset.georgetown.edu/research/global-rd-and-a-new-era-of-alliances/.
    \9\ National Science Foundation, ``Science and Engineering Labor 
Force,'' September 2019, https://ncses.nsf.gov/pubs/nsb20198/
immigration-and-the-s-e-workforce.
    \10\ Tina Huang and Zachary Arnold, ``Immigration Policy and the 
Global Competition for AI Talent'' (Center for Security and Emerging 
Technology, June 2020), https://cset.georgetown.edu/research/
immigration-policy-and-the-global-competition-for-ai-talent/.
    \11\ Zachary Arnold, Roxanne Heston, Remco Zwetsloot and Tina 
Huang, ``Immigration Policy and the U.S. AI Sector'' (Center for 
Security and Emerging Technology, September 2019), https://
cset.georgetown.edu/research/immigration-policy-and-the-u-s-ai-sector/.
    \12\ Remco Zwetsloot, Jacob Feldgoise, and James Dunham, ``Trends 
in U.S. Intention-to-Stay Rates of International Ph.D. Graduates Across 
Nationality and STEM Fields'' (Center for Security and Emerging 
Technology, September 2020), https://cset.georgetown.edu/research/
trends-in-u-s-intention-to-stay-rates-of-international-ph-d-graduates-
across-nationality-and-stem-fields/; Remco Zwetsloot, James Dunham, 
Zachary Arnold, and Tina Huang, ``Keeping Top AI Talent in the United 
States'' (Center for Security and Emerging Technology, December 2019), 
https://cset.georgetown.edu/research/keeping-top-ai-talent-in-the-
united-states/.
    \13\ See, e.g., National Academies of Sciences, Engineering, and 
Medicine, ``The Economic and Fiscal Consequences of Immigration,'' 
Washington, DC: The National Academies Press, 2017, https://doi.org/
10.17226/23550; Jennifer Hunt and Marjolaine Gauthier-Loiselle, ``How 
Much Does Immigration Boost Innovation?,'' American Economic Journal: 
Macroeconomics, Vol. 2, No. 2, April 2010, 31-56, https://
www.aeaweb.org/articles?id=10.1257/mac.2.2.31; Stuart Anderson, 
``Immigrants and Billion-Dollar Companies'' (National Foundation for 
Economic Policy, 2018), https://nfap.com/wp-content/uploads/2018/10/
2018-BILLION-DOLLAR-STARTUPS.NFAP-Policy-Brief.2018.pdf; Giovanni Peri, 
Kevin Y. Shih, and Chad Sparber, ``Foreign STEM Workers and Native 
Wages and Employment in U.S. Cities,'' NBER Working Paper 20093, May 
2014, https://www.nber.org/papers/w20093.
    \14\ Saif M. Khan, ``Securing Semiconductor Supply Chains'' (Center 
for Security and Emerging Technology, January 2021), https://
cset.georgetown.edu/research/securing-semiconductor-supply-chains/.
    \15\ Andrew Imbrie and Elsa Kania, ``AI Safety, Security, and 
Stability Among Great Powers: Options, Challenges, and Lessons Learned 
for Pragmatic Engagement'' (Center for Security and Emerging 
Technology, December 2019), https://cset.georgetown.edu/research/ai-
safety-security-and-stability-among-great-powers-options-challenges-
and-lessons-learned-for-pragmatic-engagement/; Michael Horowitz and 
Paul Scharre, ``AI and International Stability: Risks and Confidence-
Building Measures'' (Center for a New American Security, January 12, 
2021), https://www.cnas.org/publications/reports/ai-and-international-
stability-risks-and-confidence-building-measures.
    \16\ Tim Hwang, ``Shaping the Terrain of AI Competition'' (Center 
for Security and Emerging Technology, June 2020), https://
cset.georgetown.edu/research/shaping-the-terrain-of-ai-competition/.
    \17\ Dahlia Peterson, ``China's System of Oppression in Xinjiang: 
How It Developed and How to Curb It'' (Brookings Institution, September 
2020), https://cset.georgetown.edu/research/chinas-system-of-
oppression-in-xinjiang-how-it-developed-and-how-to-curb-it/.

    The Chairman. Well, thank you all for your testimony. We 
will start a round of 5-minute questioning and we will 
recognize members by seniority in the order of their appearance 
at the time of the gavel. In order to be recognized, please 
have your video on so that I know you are ready to be called 
upon.
    So I will start the first 5 minutes.
    It is no secret that China seeks to exert its influence and 
power through conventional and emerging tools. But there is 
still some debate about exactly to what end. I have my own 
views, but I would like to hear yours.
    What do you believe is China's goal in the near term, in 
the long term, and why?
    Dr. Economy?
    Dr. Economy. Thank you very much.
    As I suggested, I think China seeks a transformed world 
order, one which is reclaimed centrality on the global stage, 
where its norms and values are reflected instead of those of 
liberal democracies, and where it has regional preeminence 
where it is reunified, it is an innovation and technological 
powerhouse so that its technologies from fiber optic cables to 
e-commerce to satellite systems also dominate globally.
    We have seen China move ahead with it, digital currency. So 
I think it is seeking to escape from the dollar dominance in 
the future.
    So I think it is all about returning China to past glory, 
but it is glory for the 21st century.
    The Chairman. Mm-hmm. Let me ask you all, Secretary Blinken 
and National Security Advisor Sullivan are planning on meeting 
with their Chinese counterparts this weekend.
    The Administration has cautioned that this meeting is not 
intended to be the first of a dialogue but, rather, an initial 
meeting to set expectation and priorities and to inform the 
Administration's Indo-Pacific and China policy reviews.
    What would you hope to see out of this Alaska meeting? What 
should they hope to accomplish in this trip, from your 
perspectives?
    Anyone in particular want to share?
    Dr. Economy. I, certainly, would hope that they will 
clearly articulate sort of the U.S.'s new approach that is 
rooted in values, that this is going to be a policy that is an 
alliance-based policy and that the United States is going to be 
back assuming a leadership position in international 
institutions, that we take seriously China's human rights 
abuses in Xinjiang and its policies in Hong Kong.
    I think Kurt Campbell was extremely articulate in his 
defense of Australia when he said that the United States is not 
going to improve its relationship with China unless China 
improves its relationship with Australia.
    I think it is an important signal that the United States is 
standing by its allies. So I think it is establishing a new 
framework for the U.S. approach to China that is embedded in 
values and allies and multilateral institutions.
    The Chairman. All right. And then let me ask, and I think 
both to you, Dr. Economy and Mr. Shugart, in this particular 
respect, do you believe that our Indo-Pacific strategy ought to 
be a function of our China policy, as it was during the Trump 
administration, or that our China policy ought to be a function 
of our Indo-Pacific strategy? Put another way, can we get China 
right if we do not get the region right first?
    Dr. Economy. Okay. I think, absolutely, our allies come 
first and it is, an Indo-Pacific strategy because Indo-Pacific 
strategy is at the center, but again, it is about a global 
strategy and it is based in our allies, it is based in our 
values, and that is what the free and open Indo-Pacific 
represents.
    And I think China should be placed within that. We do not 
want to be in a reactive and defensive position where we are 
simply responding to China. We want to be in a proactive 
position, and I think we can only do that if we are asserting 
our own values up front.
    Mr. Shugart. On that question, Senator, I think that, I 
mean, we should be expressing the basic goals that support--I 
mean, I think that the unfortunate military confrontation 
largely arises out of their apparent desire to contravene what 
we are used to for decades now.
    A free and open Pacific--freedom of navigation, et cetera, 
really, those are the challenges that drive the military 
confrontation for the most part that we are seeing there.
    Under the question of defense goals, or their goals in the 
defense realm, they have made it fairly clear in their defense 
white papers and other strategic documents what those are.
    It is just we have very different interpretation sometimes 
of what those words mean and what that translates into. They 
talk about sovereignty.
    We may think that that sovereignty is the control of 
individual nations, but they may define it as reuniting 
themselves with Taiwan.
    When they talk about maritime rights and interests, those 
are not the maritime rights and interests, in accordance with 
international law, as we understand them.
    So they have made that pretty obvious. The biggest one, 
what I think we can see over time, is their Navy's expansion 
for what they call protecting overseas interests and their sea 
lines of communication.
    We can see that, as their capabilities have grown, their 
military capabilities have grown, so have their strategic 
objectives to go along with those.
    And I think it is when you consider the full list of what 
they have said their interests are and objectives are, that 
they really do want to maintain sea lines of communication 
overseas--that is what explains, to some degree, the really 
major expansion of their Blue Water Navy that we have seen in 
recent years.
    The Chairman. Thank you.
    Senator Risch.
    [Audio issue.]
    Senator Risch. --and that is one of the things we did not 
talk about much was the student exchange that our countries do. 
There are almost 370,000 students, Chinese students, studying 
in America. Let me say that again. Three hundred and seventy 
thousand Chinese students study in America.
    On the other hand, the United States has less than 12,000 
students studying in China. We do not talk about this much 
because as being an open society we encourage exchange of 
culture, but for those of us who work in the intelligence space 
we know at least part of those 370,000 are actually in the 
collection business. And so as a result of that, this whole 
thing gets mixed together and not much gets done about it.
    But for Chinese students studying high-tech matters here 
and all matters, really, in the United States, it is easy for 
them to extricate the value that we have and the knowledge that 
we have and take it home.
    Now, we do not want to in any way curb exchange of culture. 
But on the other hand, I think we need to protect ourselves.
    I would like to hear each of your thoughts on this 
obviously unbalanced situation with the number of students 
studying in each place and what we do about having students 
placed in areas where our very valuable information is stored.
    Why do you not do it the same way you started?
    Ms. Economy, if you would----
    Dr. Economy. Okay. So I think as you suggested, there are 
differences between undergraduates and graduate students. For 
undergraduate students, I would say the danger is, really, that 
some students are there to report on other students and I think 
we need to make clear at the college level maybe they should 
have a civics class on American values.
    They maybe sign a pledge that they are not going to report 
on their fellow students or face expulsion.
    I think we should not allow for Chinese Government funding 
of Chinese student organizations on campuses and I, certainly, 
know that Congress has moved very aggressively to encourage 
universities to shut down their Confucius Institutes.
    So I do not think we should close down avenues of study for 
Chinese students. I think it is essential that we keep those 
doors open.
    And just let me make one point on the return part of it. 
You mentioned the disparity in number. I mean, the truth is 
that the number of U.S. students studying in China has declined 
and some campuses have closed their programs because of lack of 
U.S. student interest.
    I think that is the problem. It is not that the Chinese are 
keeping American students out but that American students are 
not actually pursuing Chinese language study or want to study 
in mainland China. That is the challenge.
    As far as the graduate students are concerned, I think we 
have discovered PLA members posing as students. Obviously, that 
needs to stop and the FBI is doing its investigations.
    Universities that are accepting defense funding in labs 
should not have Chinese graduate students there unless they 
have some very intense security within their labs, and I think 
we need to be very careful and do a lot of vetting of Chinese 
graduate students.
    But, again, I do not want to limit their opportunities, but 
our priority has to be to secure our intellectual property.
    Mr. Shugart. Senator, I would say while educational policy 
is mostly beyond my area of expertise, clearly, any information 
flowing in that direction regarding technical advances would, 
obviously, be detrimental, potentially, to the long-term 
military advantage in the region for us.
    Senator Risch. Thank you.
    Mr. Khan. I would like to quote a senior 
counterintelligence official who actually noted that 99.9 
percent of Chinese students in the U.S. are just here to 
contribute to the economy. We are talking about a very, very 
small percentage of the total that actually presents any 
concern.
    Another point is, Chinese officials are on record as noting 
that the brain drain that they are experiencing to the United 
States is actually very much to their disadvantage and to our 
advantage.
    I think that the Chinese students are actually contributing 
quite a bit to our economy, and it is actually a source of 
comparative advantage.
    Another piece is that virtually all of the notable cases of 
espionage have actually not involved students but, rather, 
other types of institutions such as industry or Government 
labs, for example. And so students really are not the 
population that we should be very concerned about.
    But I absolutely agree with Dr. Economy and Mr. Shugart 
that we should be concerned about our intellectual property. I 
do think that there are more targeted measures that we can take 
to ensure protection of that intellectual property.
    Senator Risch. Thank you. Thank you very much. I will have 
to say I respect your opinion, Mr. Khan. But I can tell you 
that dealing with the intelligence people, they are 
substantially more concerned about the issue than you are. That 
is a fair way of laying out both of our views on it and I think 
all of us need to explore that a bit further.
    My time is probably up or close to it. But I would like to 
hear from Dr. Economy, very briefly, about the reference she 
made to the dollar being, obviously, your national standard. 
That is something that we have enjoyed for many, many years. If 
that changes, it is going to affect things dramatically.
    Dr. Economy, would you care to comment about that?
    Dr. Economy. Sure. I think, for a long time, the Chinese 
have sought to increase the role of the yuan in world trade, 
but now they are pursuing this digital currency.
    There is actually a program that we are starting up at the 
Hoover Institution just now to explore sort of the Chinese 
objectives and ambitions with regard to this.
    But, certainly, one of the things that we are going to be 
looking at is how they might use a digital currency to push the 
use of the renminbi and move away from the role of the dollar 
as the world's reserve currency.
    Senator Risch. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    For all members' purposes, there should be a clock on your 
screen just so you can measure your time.
    Senator Shaheen.
    Senator Shaheen. Thank you, Mr. Chairman, and thank you to 
all of our witnesses.
    Yesterday, we held a hearing in the Armed Services 
Committee with the head of SOUTHCOM, Southern Command, who is 
responsible for the Western Hemisphere south of the United 
States, so Central America and Latin America, and he gave us a 
map of Chinese influence in Latin America that I found very 
troubling. I am going to hold this up.
    Now, I appreciate that you will not be able to see the 
specifics, but just look at the red color because that is where 
China has so much of its influence.
    And I want to read a couple of the statistics here. Of the 
31 countries in Latin America, 25 host Chinese infrastructure 
projects. Nineteen countries have joined the One Belt One Road 
Initiative.
    The cumulative value of COVID-19 assistance to Latin 
America is greater than $120 million. The goal for China is to 
provide $250 billion in loans to Latin America by 2025, and 
they have had 44 heads of state meetings there since 2015 with 
heads of state from countries in Latin America.
    So I would like, Mr. Chairman, if I could to submit this 
for the record, this map.
    The Chairman. Without objection.
    [The information referred to follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]


    Senator Shaheen. Thank you.
    So, clearly--you have been talking mostly about China's 
influence in the Indo-Pacific but, clearly, they are moving 
into Europe. They are moving into Latin America, in the Western 
Hemisphere. In fact, they have significant diplomatic and 
economic assistance throughout Latin America.
    So and while they are doing that, in the last 4 years we 
have had only one ambassador in the Central American countries 
and that is in Guatemala.
    So can you talk about what advantage it gives to China when 
we leave the playing field to them in places like Latin America 
and what the implications of that are for the United States?
    I can direct it or anyone can take it.
    Dr. Economy. Sure, I can start and then maybe others can 
add in.
    Absolutely. The Belt and Road Initiative is a global 
initiative includes technology like deploying Huawei, but also 
fiber optic cables in e-commerce. So you are going to see the 
Chinese e-commerce companies coming in as well.
    It includes hard infrastructure--ports and railroads and 
highways. There is a military component to it. So you can watch 
China building ports and have PLA navy ships stop by for some 
visits. I do not think that has happened yet there, but this is 
the kind of thing that you can expect.
    And it includes political capacity building and so offering 
seminars for Belt and Road countries on how to manage the 
internet and control civil society.
    So for authoritarian-leaning countries, of course, this is 
very attractive. You know, it is a one-stop shop on how to 
bolster your control over the economy.
    There is a lot of attraction for many countries and I 
participated in a seminar with Latin American scholars and some 
former officials and they say, China listens to us.
    They are engaging in joint innovation projects, which they 
find very exciting and attractive in ways that the United 
States does not. They are pouring money into having students 
from Latin America go to China. So they have full scholarships 
for students to go there.
    China is trying to deploy the type of soft power that the 
United States has traditionally----
    Senator Shaheen. Right.
    Dr. Economy. --been known for, and they are making inroads.
    Senator Shaheen. They are. Thank you. And I think it was 
just fair to say that most of us who saw that map yesterday in 
the Armed Services Committee were surprised to see--not just 
see what China is doing in the Indo-Pacific but surprised to 
see what they are doing in our hemisphere in Latin America.
    And recognizing that our Government cannot order American 
companies to invest abroad in the same way that the PRC can, 
can you all talk about what we can do to better encourage our 
companies to invest in places where there are interests I hope 
not just of those private companies but of the American 
Government around the world?
    Dr. Economy. Sure. Part of that last proposal that I 
mentioned in my testimony about developing a new economic 
development initiative with our larger market democracy allies 
has to do with just that.
    So using Development Finance Corporation funding to support 
American firms to go into some of these countries, thinking 
about how to bring these countries--when we are talking about 
developing resilient supply chains, when we are encouraging our 
companies to diversify out of China, to develop more regional-
based supply chains, then why not think about encouraging them 
to go into some countries in Latin America.
    So I think there are ways that we can do that. But I think 
we need to think in a grand and strategic way in partnership 
with others. We are not going to be able to do it alone.
    We are not going to be able to match China investment for 
investment. So we need to come up with, I think, a creative way 
of reengaging.
    And, again, I think part of it, to be frank, is listening, 
because one thing that China does, at least at the outset of 
its--you mentioned all those visits that the Chinese leaders 
make and they are holding all these seminars--they give leaders 
and other officials the feeling that they are being listened to 
and I think that is something very much that sometimes we are 
good at it and sometimes we are not.
    Senator Shaheen. Thank you. Thanks, Mr. Chairman.
    The Chairman. Senator Portman.
    Senator Portman. Chairman, thank you very much for holding 
the hearing. To you and Senator Risch, I appreciate your focus 
on China. I noted the commitment to an April 14th markup of the 
China bill. I thank you for that. It is timely.
    So many great questions to ask but, Mr. Khan, I want to 
start with you. You talked about the need for us to enhance our 
own research here to keep up with China. You talked about 
artificial intelligence in particular and you talked about the 
semiconductor crisis we face right now without a supply chain 
that is reliable.
    Let me just ask you two quick questions, if I could. In the 
National Defense Authorization Act, we got the CHIPS Act 
included. It is an authorization. It would require a $37 
billion appropriations to make it effective.
    Then we also got AI legislation in, including senators of 
this committee and I worked on this. It is called the AI 
Initiative Act, as you know, and it is about the Government--
the Federal Government's coordination of artificial 
intelligence response and research that would require a $6 
billion commitment.
    Do you support those levels of funding, and, if not, do you 
support more or less? What is the appropriate amount of funding 
for the taxpayers to work with the private sector to enhance 
our ability to keep up with China and to surpass them, 
hopefully, in some of these areas?
    Mr. Khan. Yeah, Senator, thanks for the great questions. So 
yes, I do support those ranges of funding for the CHIPS Act.
    That would certainly work as an initial down payment, and 
depending on the effectiveness of incentives and the other 
programs in the CHIPS Act, we can consider later appropriating 
even additional funds on top of that.
    I do think that keeping semiconductor manufacturing in the 
United States is an absolutely critical national security 
priority. Right now, the supply chains for this technology are 
too centralized and there are risks that we could be cut off. 
And so it should be a very high priority and I think even those 
levels of funding are actually quite cost effective.
    Senator Portman. I look at what is happening to the auto 
industry in Ohio and elsewhere around the country, and we are 
literally stopping production of automobiles right now.
    Over 200,000 cars were not made this year that would have 
been made but for the semiconductors, and we are totally 
dependent on Taiwan, as you know, and China's developed them 
quickly.
    Another point, Mr. Chairman, on the China legislation, we 
have legislation called Securing the American Innovation Act 
and it comes from a year-long investigation by the Subcommittee 
of Investigations, a deep dive, bipartisan, and what we are 
able to reveal, sadly, was that for two decades now China has 
been systematically targeting promising American researchers, 
promising American research paid for by the U.S. taxpayer and 
taking it to China to improve their conditions, including the 
rise of the Chinese military and the economy.
    And we have begun to crack down on it, finally. You know, 
you have seen the number of arrests by the FBI and the U.S. 
Attorney's Offices. But, frankly, we need legislation to give 
them more tools to be able to deal with it.
    So as we put more money into some of our research 
institutions in order to respond to the threat from China 
economically, we have got to be sure we are protecting that 
money.
    So I appreciate Senator Risch, Senator Coons, and others in 
the committee who have been co-sponsors of that legislation, 
and I hope it can be included in whatever final China bill we 
have because it provides what we need to ensure that we have 
that balance.
    We need foreign researchers to work with our researchers 
here, but we also need to take common steps to prevent bad 
actors from taking that research, which has been done over, 
again, two decades.
    On the issue of China, Dr. Economy, I want to talk to you 
about what we are doing with the Global Engagement Center. This 
is to try to push back on disinformation and propaganda. China 
is very good at it.
    Last year, Senator Booker and I chaired an oversight 
hearing of this committee on combating disinformation and the 
expert witnesses told us that China spends over $10 billion 
annually in state-sponsored disinformation operations. Ten 
billion dollars annually.
    And so my question to you, Dr. Economy, is can you 
elaborate a little on China's use of disinformation? It is 
inexpensive. It has got a lot of deniability attached to it.
    I listened carefully to what Senator Shaheen said about 
Latin America. They are certainly engaged in there and in 
Africa. What are the most pressing areas where you have studied 
China disinformation campaigns and why do they use this tactic 
and what should we be doing to push back against it?
    Dr. Economy. Thank you, Senator.
    Certainly, look, we are right in the midst of a Chinese 
disinformation campaign ourselves, right, as the Chinese are 
spreading untruths about the United States as the source of 
COVID-19, you know.
    So, obviously, shedding light and pushing back against 
Chinese efforts is critical. But I think in other countries 
that have a less robust free press is one of the greatest 
concerns in my mind. If you look in Africa, for example, where 
Chinese media companies are managing not only, for example, the 
digitization of villages in Kenya but also providing the 
content for Kenyan television in many villages, and the 
newspapers are, basically, doing what they used to do with AP. 
It is much cheaper--they can just get for free from Renmin 
Ribao or China Daily.
    And so what you are getting in many developing countries 
now is just a flood of Chinese information. And so it is a 
little bit different, maybe, from disinformation, but it is a 
close second because it is, basically, spreading a Chinese 
narrative and cutting out access to, you know, other sources of 
information.
    For example, in Kenya they price access to the BBC and 
other international stations at a higher rate to dissuade 
people from buying access to that kind of information.
    So, they influenced the recent Taiwanese elections or 
attempted to. They spread all sorts of disinformation over the 
course of COVID-19 pandemic about other countries' responses.
    I think that the most important thing we can do is simply 
to shed light on the lies, to push back against them and act in 
concert with our allies on this.
    Our best response is sort of the transparency that is 
inherent in our own system.
    Senator Portman. Well, I think my time is up. But the 
Global Engagement Center is directed at all those things, and 
Senator Murphy and I have attempted to get more funding into it 
for that reason, because it does support a free press, as an 
example, to get to the truth in those countries.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Senator Schatz.
    Senator Schatz. Thank you, Mr. Chairman. Thank you to the 
testifiers.
    Dr. Economy. I want to stay with you for a few minutes. I 
want to ask about the Arctic and China's interests there. China 
is taking advantage of the fact that the Arctic is becoming 
more accessible because of climate change.
    In 2013, it became an observer of the Arctic Council, the 
primary forum Arctic states use to discuss regional issues, and 
in 2018, the Chinese Government published its own Arctic 
strategy where it proclaimed itself to be a near Arctic state, 
which is pretty much meaningless.
    But it does indicate to us that they are trying to get a 
seat at the table as Arctic states discuss the rules of the 
road.
    China has also announced a Polar Silk Road plan to finance 
a port airfield and undersea cable and other infrastructure 
projects in the region. And last year, its first domestic-built 
icebreaker completed an Arctic expedition.
    So can you talk about China's goals in the Arctic and 
specifically what the United States can and should be doing 
about it? And if you would not mind commenting on whether or 
not you think we should ratify the Law of the Sea Treaty?
    Dr. Economy. So the last question first.
    Yes, I think we should ratify the United Nations 
Convention, the Law of the Sea, both because of what is taking 
place in the South China Sea but also, as I think you are 
intimating, in terms of the Arctic.
    168 countries have ratified. We should be part of that. It 
gives us a platform to engage with them. So, absolutely.
    In terms of China's move to become a great Polar power--it 
is very interesting, this has begun as early as 2008. Right at 
the moment of the global financial crisis, China established 
its own Polar Institute, as you said.
    It is, I think, the perfect example of that kind of multi-
actor multi-domain approach that I was talking about, long-term 
strategic objectives. They deployed their diplomats and their 
scholars, so they are reframing the narrative around the Arctic 
to talk about it as because it is global climate change, 
because of the resources there, it is an issue of global 
commons so it should not be managed by merely the few Arctic 
countries that are there that are part of the Arctic Council.
    You have their scientists taking part in Arctic research. 
They have done more polar expeditions now than any other 
country. Their military is developing great capabilities with 
the icebreakers, pursuing a very aggressive campaign that 
already is outstripping us.
    They see this, as you said, Xi Jinping wants to be a great 
Polar power. They are going to try to reshape the way that 
Arctic governance is sort of considered so that they will get a 
seat at the table, a formal seat, not simply an observer seat, 
and they have been investing, as I noted, in Nordic countries.
    So they have deployed both state-owned enterprises and 
private enterprises to tick up strategic investments, and one 
of the things that we see, beginning in 2018, is that a number 
of Nordic countries have noticed this and their defense 
intelligence agencies have said, this has to stop. So you are 
beginning to see pushback.
    So I think----
    Senator Schatz. Hold on.
    Dr. Economy. Sorry.
    Senator Schatz. I want to go--I want to go south, with my 
remaining time, to Oceania. Most of China's influence in the 
region comes from financing loans, more than one and a half 
billion in the last decade, and we know about the debt trap 
diplomacy that they deploy.
    It is becoming increasingly a problem in Oceania where 
economies are fragile during the pandemic, and I worry that 
China could take advantage of indebted countries to gain a 
foothold in the Pacific to develop ports and airstrips.
    In Vanuatu, China agreed to finance a $90 million dollar 
wharf large enough to dock cruise ships. But Vanuatu is also 
already highly indebted to China with China holding half of its 
external debt. As we look at post-pandemic society, the risk of 
default and recapturing these assets may be high.
    Can you talk about what the United States should be doing 
in the region in terms of soft power, economic power, whether 
it is USAID or any of our other tools of diplomacy?
    Clearly, we are not going to be financing ports all over 
the place, but we have got to have tools in our toolkit and we 
have got to be engaged in Oceania and not think of our Asia 
Pacific strategy as just South China Sea, DPRK, Japan, and TPP.
    We have got to look at the vast ocean in between our 
country and China, and the many, many countries that are in the 
Pacific.
    Dr. Economy. Thank you. So I think this is an area where we 
have a program in place, the Blue Dot Initiative, that if it 
were really moved forward in an aggressive way with Australia 
and Japan to work with countries to help them develop the 
capacity to appropriately evaluate Chinese bids and Chinese 
initiatives, and then to offer alternatives that we cannot be 
there doing this.
    But, Japan is a larger provider of infrastructure in 
Southeast Asia than China is. So there may be opportunities for 
Australia, Japan, and other countries to step in and do some of 
this infrastructure development as well, or, at the very least, 
if China is going to do it to ensure that it is done in a way 
that is economically sustainable for these countries.
    Senator Schatz. I will make two final points. Your point 
earlier with Senator Shaheen about the value of listening and 
treating a head of state like a head of state really applies to 
FSM, to the Marshalls, throughout Oceania.
    And then one final sort of point of personal privilege, I 
just think this committee and U.S. Government officials should 
be extremely precise when describing the Government of China as 
opposed to the Chinese, because I think that, given what is 
happening in U.S. society to Chinese Americans and other Asian 
Americans, we owe everyone that kind of precision.
    Thank you.
    Dr. Economy. Thank you.
    The Chairman. Thank you, Senator Schatz, and a point well 
taken.
    Senator Rounds.
    Senator Rounds. Thank you, Mr. Chairman.
    Let me just begin by telling you that I very seldom find 
one of these committee hearings where all of the individuals 
involved in providing testimony seem to agree on a particular 
item, and in this particular case, we hear all of our separate 
members here in front of us all talking about the very serious 
challenges that we have regarding the People's Republic of 
China.
    And I look back at the time in which I served as the 
chairman and now the ranking member of the Armed Services 
Subcommittee on Cybersecurity and the impact that China has on 
the way that we look at the international norms, and in 
particular, thinking--the numbers that we most recently heard 
about what China has done across the globe--intellectual 
property, the theft of over $600 billion in international 
property or intellectual properties, their lack of respect for 
copyrights, lack of respect for patents, their interest in not 
just espionage but in theft through cyber activity--all seems 
to point to a difference in norms between what most of the rest 
of the normalized international society accept as being good 
for all of our countries versus what this particular Government 
believes is the right way to react with other governments.
    I would like to just work our way through. Should we be 
involved and do you think it is worthwhile to discuss with the 
Government of China what the appropriate norms are and in the 
establishment of norms with regard to cyber activity, just as 
an example?
    Look, I mean, it used to be we talked about air, land, and 
sea. Now we have got cyberspace and we have got space, and in 
both cases we have an outlier with China in terms of their 
apparent lack of regard for what most of us thought were norms.
    I would like to just get on the line with each of you and 
just briefly share with us what you think the possibilities are 
of actually having a good dialogue, and what the benefits to 
them would be for having that dialogue with us and what we can 
do if they decide not to.
    Dr. Economy, would you like to begin and just, briefly, 
your thoughts.
    Dr. Economy. So, briefly, I think the Chinese very well 
understand what appropriate norms are. We had a cyber agreement 
with them. I think it was signed in 2015 under the Obama 
administration. There seemed to be a dip in cyber attacks.
    But then later people said it was simply because the cyber 
attacks were more sophisticated and we just were not picking up 
on them at the same rate.
    So I do not think there is an issue where China does not 
understand what it means to protect intellectual property or 
does not understand what they are doing with their cyber 
economic espionage.
    And I am afraid that there is not much point in norm 
discussions, but there probably is some point in working with 
allies to bring pressure to bear upon them in some way.
    Senator Rounds. Thank you.
    Mr. Shugart?
    Mr. Shugart. I, largely, agree with Dr. Economy there.
    We know that Chinese cyber activity has been quite 
deleterious to the military balance in the Pacific. There are 
numerous examples of Chinese platforms of weapon systems and 
sensors that are very closely modeled on what we have 
developed.
    It explains, to some extent, the ability that is sometimes 
people will ask, how is it that when we spend so much more than 
them that they are able to become so threatening in the region, 
and part of it is because they are able to have a second-mover 
advantage in terms of the costs associated with it.
    That does not mean they are not innovative in their own 
ways. But, certainly, the cyber angle has helped them out a 
lot. I agree that they know what the right answer is, from our 
perspective and I do not see them changing anytime soon just 
because we ask them about it.
    Senator Rounds. Mr. Khan, a comment?
    Mr. Khan. I do think we have to continue to harp on our 
values, say what they are. But at the end the day, we have to 
respond effectively to Chinese attempts at technology transfer, 
and there are a lot of changes we can potentially make to 
better combat that.
    One is just better applying export controls and investment 
screening measures more multilaterally and in a more targeted 
way. We also just do not know enough about China's technology 
transfer infrastructure as well as their emerging technology 
developments.
    And so we, ideally, need a stronger base of open source 
intelligence, just tracking all of those developments so we 
know what to fight against.
    And, finally, I think we need a better whole of society 
approach on research security. Some of my colleagues at 
Georgetown have talked about creating public-private 
partnerships that bring Government, industry, and academia 
together to create best practices for how to combat tech 
transfer.
    I think we have to take an approach to respond to China's 
technology transfer. I think just stating our norms is not 
going to be enough.
    Senator Rounds. Thank you.
    Mr. Chairman, my time is expired. Thank you.
    The Chairman. Thank you, Senator Rounds.
    Senator Cardin.
    Senator Cardin. Thank you, Mr. Chairman, and let me thank 
all of our witnesses. This is, certainly, a critically 
important subject when we talk about strategic competition with 
China.
    So I want to talk about where China is out of norm, and 
that is in good governance issues, and there are so many areas 
that we could talk about--the way they treat the Muslim 
minority, the Uighurs, what they have done with the people of 
Hong Kong and the commitment that they made in regards to the 
system that would be used in Hong Kong.
    And we have taken action. Congress has passed legislation 
to impose certain sanctions against China as a result of these 
behaviors. The administrations, the Trump administration, the 
Biden administration, have all taken and considered action 
against China as a result of their violations of human rights.
    My question is, there is still a lot of space left on which 
we can impose sanctions against China, including trade 
sanctions.
    It would certainly be much stronger if we worked with our 
allies in a common strategy. I would like to get your view as 
to what has worked, what more can be done, and what allies are 
going to be critically important for us to have working in 
unison with us to make it clear to China that there will be 
consequences if they continue the oppression in Hong Kong and 
the way that they treat their own citizens?
    Dr. Economy. What allies would be critical to work with if 
we were to impose more sanctions on China? Germany, certainly, 
they are a huge exporter to China. Japan--I think we can go 
down the line.
    But I have to say, unfortunately, that I believe when it 
comes to issues that China considers core sovereignty issues 
like Xinjiang, and like Hong Kong--I am not certain that any 
amount of economic sanction is going to bring about change.
    I think, instead, China will continue to hunker down and 
assert its sovereignty. So I am not saying we should not do it. 
I am just saying I do not anticipate that it is going to 
engender the desired result.
    Senator Cardin. Let me just respond to your point, and I 
recognize that and you mentioned Germany. We lost an 
opportunity in the Trans-Pacific Partnership to be in unity 
with the Asian countries and Pacific countries in a policy that 
could have isolated China's influence on the trade front.
    Germany, of course, is very much in tune with the EU. So 
working with the European Union would, certainly, be critically 
important. So if we can deal with the Pacific nations and we 
can deal with Europe and isolate China economically for these 
types of behaviors, it seems to me that our sanction policy 
would be more effective.
    I recognize that China will never acknowledge their 
justification of sovereignty, even though it is no 
justification for violating their international commitments on 
Hong Kong, the way they treat their own citizens.
    But my point is that we are not going to give up. President 
Biden has made it clear that our foreign policy is going to be 
wrapped in our values.
    My question is, how can we be more effective at changing 
behavior in China, and to me, perhaps reengaging the Pacific 
nations on trade, perhaps dealing with Europe on specific 
sanctions related to Hong Kong?
    I welcome your additional thoughts, any member of the panel 
that may have thoughts on that.
    Dr. Economy. Let me just offer one quick additional thought 
and that is, it is fairly easy when it comes--for China when it 
comes to the United States sanctioning China or even, I would 
say, United States and its closest allies for China to say it 
is just United States trying to contain China. That is why it 
is doing this, right.
    What would be more helpful would be if we could engage a 
broader swath of the developing economies to stand up. As I 
mentioned earlier, those are the countries that come to China's 
defense in the United Nations around things like Xinjiang and 
Hong Kong.
    Those are the countries that we need to get to our side. I 
think once China feels as though it has, you know, nowhere, has 
no support, I think that is when we are going to begin to--that 
is when China will begin to feel the heat.
    And I will just quickly note that from 2019 to 2020 there 
were two different resolutions brought before the United 
Nations on Xinjiang. The Central Asian nations dropped off 
their support for China from the first to the second.
    So it is possible to peel them away. They did not sign up 
to criticize China but they did not support China. So I think 
we need to do more work in that arena.
    Senator Cardin. Very good points. I would also recognize my 
colleagues' talk about the Belt and Road Initiative. Very much 
we have to diminish China's influence that they are trying to 
buy in otherwise democratic free countries that influence their 
judgment in joining us in isolating China because of their 
human rights violations.
    I think putting together that entire package it can be much 
more effective in bringing about change in China's governance 
activities.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Cardin. We love your green 
tie. You are followed by someone who has an even deeper green 
tie, Senator Romney.
    Senator Romney. Thank you, Mr. Chairman.
    Dr. Economy, as I have listened to the three people 
testifying this morning, I am struck by the massive investment 
China is making around the world, an investment and propaganda, 
investment in sending students around the world.
    Of course, the Belt and Road, making loans all throughout 
Latin America, through Africa, to the Middle East. The number 
in Iran was massive.
    How are they financing all this? How do they afford it? 
Where is the money coming from? Because we are not providing 
anywhere near the kind of investment around the world that they 
are. And yet, we are the larger economy in the world. How is it 
they are able to afford all of these massive investments?
    Dr. Economy. First, a lot of the Belt and Road investment 
is not actually investment loans, and I think that is important 
to remember that they are lending the money to these countries 
and then they are using--these countries are often using 
Chinese construction firms, Chinese equipment, and so--or they 
are getting paid back through resources.
    So it is one big cycle of Chinese money going through and 
leading back to China, and they are able to do that because 
they have such low-cost labor, they underbid, and they 
subsidize.
    So, you know, I think they have put a priority on this is 
also how they are able to do it, and we have not put a priority 
on this.
    I mean, it is also less expensive, frankly, to, host a 
student in China than it is to host a student in the United 
States.
    So I think there are a number of ways, but I think, 
fundamentally, what it speaks to is Xi Jinping's belief that 
this kind of outreach is going to pay off over the long term, 
and that it is bent on, especially in the technology field with 
the Digital Silk Road.
    China is going to, basically, provide the technological 
infrastructure for the 21st century. It is a long-term 
investment in play.
    Senator Romney. But as they loan money to a foreign country 
to build a port or to build whatever--the country is going to 
pay them back in the future, but in the current, they are 
actually spending the money to pay people to go to that country 
to build the port and so forth.
    So there is a lot of money coming in. A lot of that money 
is coming from the U.S. and we have pension funds and others 
that are investing in China. So I think we need to think of 
that.
    Just another question I will ask you, Dr. Economy, or the 
other members of the panel as well, which it is very clear that 
China has an extraordinarily comprehensive strategy to dominate 
the region, and I would suggest once they feel they have 
dominated the region they intend to dominate the world.
    And, I mean, their strategy includes their military, their 
competitiveness economically, their propaganda efforts, the 
management of their own people, their monitoring of their own 
people, their geopolitical strategy with Belt and Road, the 
technology transfer.
    It is an unbelievably comprehensive strategy. There is no 
way that a bunch of men and women in Congress are going to come 
up with a strategy to confront that. We are being outcompeted 
in a dramatic way on the world stage, and we are not equipped, 
as a group of folks that are a little long of tooth, to come up 
with some that is so comprehensive that we are going to push 
back in a positive way and assert our leadership in the world.
    And so I wonder, what do we do? How would you suggest that 
we develop the kind of comprehensive approach and the decisions 
on where to invest money and how much to invest to counter what 
China is doing around the world? Because at this stage, we are 
highly reactive and, frankly, for the last decade or so we are 
losing pretty badly.
    Dr. Economy. So I am going to make one quick point and 
then, please, everybody else jump in, and that is; we have to 
have our own vision.
    We have to have our own vision for what the United States, 
its place, is going to be in the world and for what the world 
is going to look like in 2049, and then we have to structure 
down from that.
    And then we have to work with our allies to realize that 
vision, because I think you are right. Otherwise, we end up 
simply responding to the thousand different initiatives that 
China is putting forth.
    And so even to say about strategic competition against 
China, really, it should be about, you know, what does the 
United States want this world to look like in 2050 and how are 
we going to get there. I think that is how we have to approach 
this.
    Senator Romney. Thank you.
    The other members, happy to have you comment.
    Mr. Shugart. So I think--sorry, Mr. Khan. Go ahead, please.
    Mr. Khan. Within the technology domain, I think China still 
recognizes that with respect to certain high-end technology 
supply chains, semiconductors being one of them, they are 
actually still relatively dependent on the United States and 
allies.
    That might not remain the case in the years ahead. But they 
are investing quite heavily to, hopefully, gain technology 
independence in some of those domains. They are trying to 
localize supply chains.
    And so whatever we can do in our technology strategy to 
maintain that leverage that we have now will have huge 
geopolitical and strategic relevance in the years ahead.
    Senator Romney. Thank you.
    Mr. Shugart. And from the military perspective, I think 
that it is definitely going to have to be a team effort. We are 
going to have to have an association of like-minded democracies 
and nations that are going to have to band together ever 
tighter in order to counteract Chinese military power in the 
region and further abroad.
    I would point out that, from a military perspective, China 
is not really trying all that hard yet. I mean, outside 
estimates, not theirs. I never believe theirs. But outside 
estimates of their military spending is less than 2 percent of 
GDP.
    So they are not really quite breaking a sweat yet, which 
means it is going to take greater involvement, contribution, 
both in terms of perspectives provided, strategies considered, 
and just shoulders put to the wheel to be able to succeed in 
the long run.
    Senator Romney. Thank you. My time is up.
    The Chairman. Thank you.
    Senator Murphy.
    Senator Murphy. Thank you very much, Mr. Chairman. This has 
been incredibly informative. A fantastic panel. Thanks for 
taking the time with us.
    I want to build upon Senator Romney's questions regarding 
the scope of Chinese economic development efforts and just note 
that we have, essentially, voluntarily put one hand behind our 
back.
    We have an International Development Finance Bank, one that 
is more nimble and more comprehensive today, thanks to efforts 
of Congress to establish the DFC. But its cap is around $60 
billion, whereas the Chinese development bank's overall 
portfolio today is $1.3 trillion. And so if we do not start 
getting in the international economic development game, at the 
very least with the capacities that we have today, then there 
is absolutely no way to be able to meet China where they are.
    And so I wanted to ask that question about whether the DFC 
is the proper entity to be able to compete internationally for 
development finance projects, whether you think that we need 
some new special purpose vehicle, and then to ask about, you 
know, this question of how we can better integrate with our 
European partners.
    There is no effective China strategy that does not involve 
very close cooperation with Europe, and these development 
financing projects can be much more effective if they are done 
jointly with European partners.
    So I wanted to open up that line of questioning for the 
panel.
    Dr. Economy. Okay. So I will start, I guess. So I think the 
Development Finance Corporation was a terrific innovation. Some 
people have proposed that perhaps there should be another one 
that is explicitly devoted to technology so that the 
Development Finance Corporation can focus on the harder 
infrastructure and then we can have one that deals with 
technology infrastructure.
    So we would need more investment. But obviously, you are 
right, we need to partner with Asian allies and European 
allies.
    Europeans are concerned about China's inroads within 
Europe, in particular. They also have their own Asian 
connectivity strategy that they have talked about.
    But my experience in dealing with the Europeans is that 
they have a less of a threat perception when it comes to China 
than our Asian partners, and so they are a little bit slower 
off the mark.
    That does not mean that we should not continue to try to 
work with them. But I do think that they are not quite as 
invested in terms of pushing back against China.
    They do not have the same degree of threat perception, I 
think, as the United States and our Asian partners. So I am all 
for cooperating with Europe.
    I just think it will be more difficult than not with some 
of the major economies. U.K. may be an exception. But I think 
France and Britain, in particular, are a little bit dragging 
their heels.
    Senator Murphy. Let me follow up with a question about our 
diplomatic efforts. Last year was the first year that China had 
more diplomatic posts around the world than the United States 
did, and I have conveyed a few times during the committee's 
proceedings a story from a recent trip I took to Dublin at the 
exact moment that they were going through a tender for a 5G 
contract.
    Our embassy there noted that the Chinese embassy had 
swelled in personnel that--not coincidental to this private 
sector contract tender. Chinese diplomats had all of a sudden 
shown up to make the case.
    We have no capacity to do that nor do we, frankly, have any 
strategy that would involve integration of U.S. diplomats with 
private sector contracts in any meaningful way.
    A group of us yesterday proposed a pretty dramatic increase 
in just the size of the U.S. diplomatic corps, in part to be 
more nimble in order to support private sector efforts to 
compete with China around the world.
    What do you make of China's investment in diplomacy posts 
and is it necessary for us to keep up?
    Dr. Economy. Absolutely, and again, it speaks to that sort 
of strategic and multi-level, multi-domain approach that I 
mentioned. China basically grasps everybody and deploys them 
toward a single objective, as you point out.
    So their embassy people become involved in pushing for 
Huawei. They will fund universities to do studies on the Belt 
and Road and provide students to--on the Digital Silk Road 
provide scholarships for students to come back for the best 
essays to talk about why it works.
    You are right, we are not going to compete. But I will say 
I did research in Greece, and I will say that the American 
ambassador there, he blogs. They hosted the American Pavilion. 
It was the year of the United States when he was there.
    He brought American companies like Google and others and 
they did sort of incubator things and innovation workshops. And 
everywhere I went in Greece people talked about how effective 
that diplomacy was.
    Secretary Pompeo visited once, if not twice. The head of 
the Development Finance Corporation went to Greece and all of a 
sudden Greece, which had to pilot projects on Huawei underway, 
now is not going to use Huawei in its 5G infrastructure, moving 
forward.
    So I think it is enormously important to have a strong 
diplomatic presence that is capable of understanding what is 
happening on the ground and to bring in the firepower from 
Washington when needed and also from the private sector.
    Senator Murphy. It is a good reminder that diplomacy is 
both about quantity and quality. Ambassador Pyatt is truly 
exceptional and we can learn from his efforts in Greece.
    Thank you for your time. Appreciate it.
    The Chairman. Thank you.
    Senator Young.
    Senator Young. Well, thank you, Mr. Chairman, Ranking 
Member, and I thank our witnesses very much.
    Mr. Khan, you highlighted in your testimony the ways in 
which China is pulling ahead in this technological competition 
with the United States and that it is critically important for 
us to take action to keep up.
    I wholeheartedly agree with this concern. I believe that we 
need to recognize that in order to compete with China we must 
not ignore America's unprecedented capacity for innovation.
    We have done this successfully in the past, of course, as a 
country, most notably during the Cold War. In the 20th century, 
the United States led the world with investments in science and 
technology and infrastructure that would highlight the crucial 
role of the Federal Government in catalyzing innovation in 
national defense, economic security, and American prosperity.
    The Apollo program may be one of the greatest examples. In 
response to Sputnik, the Federal Government spent $140 billion 
in today's dollars to land a man on the moon and to win the 
space race.
    The success of NASA would lead to spinoffs and hundreds of 
new products, new industries, and American leadership in 
aerospace itself. By 2018, U.S. dominance in this aerospace 
sector contributed $2.3 trillion in GDP to the U.S. economy, 
including $143 billion dollars in exports annually, more than 
the entire investment to put a man on the moon over a decade.
    I believe we are staring at another Sputnik moment, only 
this time with China's investments in research into emerging 
technologies, technologies that have the power to dramatically 
reshape our world, especially if they are developed by the 
authoritarian regime in Beijing.
    This is why I am working on bipartisan legislation, the 
Endless Frontier Act, to confront this challenge head on, 
invest in R&D, and keep America in our leadership position, in 
short.
    The bill focuses a $100 billion investment in research and 
development over 5 years on 10 key emerging technologies, 
including the two you highlighted in your testimony, artificial 
intelligence and semiconductors.
    Recognizing and embracing the global challenge that China 
presents, these funds would be used to crowd in the expertise 
of both U.S. private industry and also crowd in the expertise 
and capital of our global partners and allies.
    I would note that the model I favor to scale up proven 
technologies would be the very DFC like structure just endorsed 
by Dr. Economy. I believe the time is right to get this done, 
and I look forward to the Senate considering this issue in 
coming weeks.
    Mr. Khan, what are the risks to the United States if we are 
not successful in this competition over technology with China?
    Mr. Khan. Senator, first, I would just like to note that I 
agree wholeheartedly with your characterization of China's 
challenge to U.S. technology leadership as really a Sputnik 
moment.
    We really should be increasing R&D at the federal level 
quite substantially. You look at the numbers over the last few 
decades, and the percentage of GDP we are spending on R&D has 
continually declined and it is really now the time that we 
should be looking to stabilize that and perhaps increase it.
    The Federal Government has a unique role in funding 
precompetitive breakthrough research that industry is not 
always well placed to consider, and if we do not do this 
traditional technology paradigms are going to slow down.
    People talk about that in semiconductors, Moore's law, 
which is this observed law of progress with computer chips. 
Without basic investments, we probably are going to start 
seeing slow progress, and in a time of slow progress that means 
competitors can catch up, and China in particular.
    If technology leadership is going to be a key piece of 
overall strategic relevance in the long term, then we have to 
keep investing and running faster than China in order to 
maintain that leadership, and at the same time, we do have to 
work with allies, given the scale of these challenges.
    Senator Young. So, Mr. Khan, I am grateful for the 
response. Let me just follow up on a thread there. You talked 
about the importance of federal investment. I would expand 
that, paired with whatever monies we can get from the private 
sector as well as partner and allied countries and so forth.
    Why cannot the market alone take care of this? Is it 
because, and I will volunteer to you my understanding of it. It 
is because venture capital, venture capital, will not invest in 
technologies that are not entirely proven or do not have a 
strong record of being proven.
    It is too speculative, and the time horizon for a return on 
investment is too long and the spillover benefits that are 
realized in terms of national security and in our collective 
benefits are not--would not be captured in terms of the return 
on investment for venture capital. So that initial investment 
would not be possible.
    And then as it relates to scaling, which is where the real 
money is, ultimately required, you need a DFC like structure or 
some other federal construct to help scale proven technologies 
because private equity does not do this. Private equity, 
instead, they identify existing proven business models and they 
go in, as Mitt Romney can tell you--he has worked in this 
space--and they prove they will optimize existing models and 
squeeze more value out of them.
    So is it that reason or are there other reasons why federal 
investment, premarket, in technologies as opposed to just hard 
science are required here?
    Mr. Khan. Senator, I think you are absolutely right to 
point out time horizons as a big piece of the issue, also 
spillovers as well.
    I think in mature industry areas it is also easier for the 
industry to set a target in a known paradigm.
    But when you are talking about the next technology 
paradigm, there could be 20 different things that are going to 
be important, and industry is not always going to be focused on 
that. In fact, that technology could disrupt existing 
industries. So that is a big risk.
    A few decades ago in America it was the time of the 
dominance of the corporate research lab, which had a similar 
place where they were able to have very long time horizons.
    But right now, that model is less common in industry, and I 
do think the Federal Government can fill that role of long-term 
investments that prioritize wide spillovers to the broader 
economy.
    Senator Young. I am over my time. I apologize, Chairman. 
Thank you so much to all our witnesses.
    The Chairman. Thank you.
    Senator Van Hollen.
    [No response.]
    The Chairman. Senator Van Hollen, I believe you are muted.
    Senator Van Hollen. Thank you, Mr. Chairman and Ranking 
Member. Great hearing. I want to thank all the witnesses 
testifying today.
    I do believe we have a dangerous misalignment between the 
nature of our foreign policy challenges today and our current 
strategy and resources for meeting them, and I was pleased to 
join with Senator Murphy and some of our House colleagues 
yesterday in proposing changes to our foreign affairs budget, 
including significantly increasing the DFC, which has been 
mentioned, but also providing more of a diplomatic search to 
counter China's global initiatives to export their model and 
also meet other foreign policy challenges.
    I do want to salute the Biden administration for their 
action today in sanctioning 24 officials from China and Hong 
Kong for their crackdown on democracy and human rights in Hong 
Kong, based on a bipartisan bill Congress passed last year.
    But I agree with Dr. Economy that those measures are much 
more effective if taken in concert with a multiplier effect 
with our allies and partners around the world.
    That is true whether you are talking about human rights or 
the other major challenges before us. I agree with Senator 
Young and others who have said we need a major sort of Apollo 
program when it comes to our investment in these cutting-edge 
technologies, given China's very expressly stated goals around 
the China 2025 agenda.
    So, Dr. Economy, there have been lots of talk about how we 
need to work with our democratic partners and allies around the 
world in terms of organizing some kind of strategy to counter 
China's moves around the world to export its model to leverage 
some of its unfair economic practices.
    There has been talk of techno democracies versus techno 
autocracies. Many different lenses through which we could view 
this.
    Here is my question. I am trying to boil down these 
concepts into specific actions. So if you were the secretary of 
state right now and you were sitting down with the heads of 
state of our partners and allies around the world, what 
specific actions would you say we should take today, as 
specific as you can, in laying out a strategy to bring 
democracies together to counter some of China's actions? And 
thank you for all your good work in this area over many years.
    Dr. Economy. So thank you, Senator Van Hollen.
    I think approach to China has to happen at two levels. One 
is the defensive strategy and one is the offensive strategy, 
and the defensive one is looking across each one of those 
domains that I mentioned from China's reunification strategy to 
the Asia Pacific region, out to the Belt and Road and up into 
global governance institutions.
    So it matters that we coordinate policy in each one of 
those areas. For example, in global governance institutions, 
you know, we need to coordinate, for example, in the OECD to 
develop consensus candidates to head U.N. agencies and 
programs.
    We need to work together to flood expert committees in the 
technical standards areas where China has been doing that and 
taking control of these committees.
    So in each one of those domains, we need to have a 
coordinated strategy to push back when we can identify those 
Chinese policies and push back against them.
    Beyond that, I will go back to my last recommendation, 
which is we need a coordinated effort to bring a vision that is 
rooted in democratic values that addresses the kinds of issues 
that the Biden administration has laid out--corruption, the 
cyber and climate--through into the developing world.
    It cannot be all about just the allies and our partners. We 
need to engage the rest of the world, and how do we get buy-in 
from those countries into the liberal international order into 
the vision, you know, that we believe sustains the rules-based 
order.
    And so for me, the biggest and most important thing that 
the United States and its allies can do is to think through a 
comprehensive initiative, again, rooted in our values and our 
partnerships that brings together the economic development 
needs of the rest of the world in a sustainable way and brings 
innovation to these economies.
    I think that is the way that we actually counter China.
    Senator Van Hollen. I appreciate that. I see my time is 
already out. So I will just follow up with the other witnesses 
separately. But thank you all very much for your good guidance 
and counsel.
    The Chairman. Thank you.
    Senator Hagerty.
    [No response.]
    The Chairman. Senator Hagerty, I believe you are muted.
    Senator Hagerty. Thank you, Senator Menendez, Ranking 
Member Risch. I appreciate this very informative hearing that 
you have organized and I want to thank all of our witnesses as 
well.
    I would like to turn our discussion to an area where we've 
had tremendous progress, frankly, since 2004, and I put a lot 
of effort on my own behalf into this area, and that is our 
cooperation in the countries known as the Quad--our allies 
Japan, India, and Australia.
    This cooperation, I think, can have a great impact on our 
relationship with China. We have seen great progress, 
particularly accelerating over the past several years, and I am 
very pleased to see the Biden administration continue a focus 
on the Quad.
    In fact, there was a leaders meeting that took place just 
this past Friday between our President and his counterparts in 
Japan, Australia, and India.
    I would like to open a question to the group. Given our 
progress to date, what new milestones can you offer for 
cooperation with our Quad partners? And the second part of the 
question is whether there might be other nations that we should 
include in this cooperative effort?
    [No response.]
    Senator Hagerty. I will first ask Dr. Economy.
    Dr. Economy. I wanted to give somebody else a chance to 
start off.
    Senator Hagerty. I keep picking on you, Elizabeth. I am 
sorry.
    Dr. Economy. No, no, it is okay.
    I mean, let me take the second part of your question first, 
and that is are there other nations. I think there are a lot of 
opportunities to engage other countries one by one, with the 
Quad, and I also think the general secretary of NATO has 
expressed a lot of interest in expanding cooperation in the 
Asia Pacific on cyber issues, on space issues. So I could see 
some partnership between the Quad and NATO developing in the 
future.
    In terms of the issues that the Quad should look at moving 
forward, I think that, basically, what we are hoping for is 
that the Quad is going to become the foundation for the entire 
Asia Pacific region in terms of maintaining freedom of 
navigation and free trade and better human rights and 
governance practices.
    So I think initiatives that reflect those basic principles 
are what we would want to see. And I could offer some 
suggestions but I want to give some time to other people who 
have some concrete ideas.
    Senator Hagerty. Please. Thank you.
    Mr. Shugart. So from a military perspective, the ever-
closer Quad engagement is very good to see. I am a former naval 
officer so I tend to see things perhaps from a maritime 
perspective, but it seems like the greatest challenge we are 
going to see worldwide is, to a pretty large extent, going to 
be a maritime one. That as China, somewhat understandably, 
tries to develop the ability to secure their sea lines of 
communication against--in the case of a military conflict, that 
is going to result in development like we have not seen in 
quite some time, and all the Quad nations are maritime nations.
    But I think keeping moving along those lines of like-minded 
nations who are interested in free trade and open economic 
development, because we have to remember that in the world as 
we know it the worldwide global commons has been in the caring 
hands of either us or, prior to us, the Royal Navy for the 
previous several hundred years.
    We have not seen a time period where we have allowed an 
authoritarian-collectively that is, have allowed an 
authoritarian nation like China to gain control of the global 
commons.
    So any nation that is interested in making sure that does 
not happen should be somebody who it would be helpful to have 
on board and achieve ever closer collaboration.
    Thank you.
    Mr. Khan. I would just like to add from the perspective of 
technology diplomacy, it is critical to partner with the key 
high-technology producing nations in the region.
    That includes Korea and Singapore at a minimum, but we also 
have to be working with many of the emerging economies in 
Southeast Asia who are going to become increasingly important 
for technology supply chains in the future.
    Senator Hagerty. I appreciate that suggestion, Mr. Khan, 
and I must add that the U.S. has a tremendous military 
presence, a tremendous maritime presence, in the region. And I 
also concur that we need to continue to cooperate with the 
other maritime nations in the area but look for ways to 
cooperate and partner with other nations.
    And I particularly appreciate the direction you are taking 
us, Mr. Khan, in terms of finding ways to advance our 
technological cooperation.
    Thank you very much.
    The Chairman. Thank you.
    Senator Markey.
    Senator Markey. Thank you, Mr. Chairman, very much. Senator 
Cory Gardner and I introduced the landmark Asia Reassurance 
Initiative Act, which was passed into law in 2018 and has since 
provided $2.5 billion per year towards initiatives in the areas 
of security, economic development, human rights, and fighting 
corruption in the Indo-Pacific.
    These investments are meant to cement the United States 
place in the Indo-Pacific, allowing us to work with our 
regional allies and partners to compete effectively with China 
and advance the mission of a free and open Indo-Pacific region.
    Dr. Economy, how do investments such as those implemented 
through ARIA move the ball forward in terms of combating 
China's influence in the Indo-Pacific?
    Dr. Economy. I think they are critical. I sit on the board 
of the Asia Foundation, for example, and so the type of 
grassroots effort to cement the rule of law to help develop 
innovative ways for countries to develop their export 
capabilities, women's empowerment issues--I think all of these 
things are essential.
    Personally, what I think is missing from this is some form 
of a branding initiative, and I worry sometimes that we in the 
United States do a lot in terms of capacity building, which is 
essential.
    And yet, somehow it gets diluted and there is not the same 
sense of everything that the United States is bringing to the 
table, and even with our allies as the Belt and Road 
Initiative.
    And so, to some extent, I think what we really need to do 
is to have a comprehensive initiative, with a name attached to 
it that sort of lays out very clearly for countries this is 
what the United States is bringing to the table. In a very sort 
of five points, this is our effort.
    So I think it is terrific. But I think we are missing an 
opportunity in terms of actually selling the United States in 
some of these countries.
    Senator Markey. Thank you.
    Senator Gardner and I thought that Asia Reassurance 
Initiative was a good headline. But you are right, maybe they 
need to--thank you--we have to do a better job. I agree with 
you.
    May I also ask you, Dr. Economy, how do we balance these 
interests? We need China on climate change, on nuclear 
nonproliferation. But at the same time, they are engaging in 
activities against the Uighurs, and in Hong Kong that are 
absolutely reprehensible.
    So how do we balance those interests? Because, clearly, we 
need them on climate change, for example.
    Dr. Economy. We need them. But, it is in their own interest 
to respond to climate change. So I am firmly in the camp that 
says we should not be trading out any issues of importance to 
us to try to garner Chinese support on climate change.
    Xi Jinping has established himself, ostensibly, as the 
leader on the global stage on climate change. I think that 
gives us leverage to hold him to account. That does not mean we 
should not take advantage of opportunities to partner with 
China on climate change.
    When they emerge, we can help them make a more robust 
emissions trading system. We can model best behavior by setting 
out our benchmarks for how we are going to achieve carbon 
neutrality by 2050.
    We can push them to green the Belt and Road Initiative. 
There is a lot that we can do. But one thing I do not ever want 
to see us do is trade out other priorities to get them on 
board.
    Senator Markey. No, and I agree with you. I agree with you. 
But it is a delicate balance we have to strike. I agree with 
you.
    And finally, Mr. Khan, on green infrastructure, China is 
now manufacturing 95 percent of solar panels. What should the 
United States be doing in that one specific area of green 
energy in order for us to be competitive globally?
    Mr. Khan. Senator, I have not investigated that issue in 
much detail, but I absolutely think that should be an area that 
we are heavily investing in as well.
    Senator Markey. Okay, great.
    Dr. Economy, have you looked at that, the green energy gap 
that has been created in terms of production coming out of 
China?
    Dr. Economy. Right. China, beginning in 1992, started to 
encourage foreign firms to invest in China as a condition of 
their access to Chinese market. They had to set up 
manufacturing plants in China and slowly over that time it has 
captured the wind and solar markets.
    There are other green technologies where I think we can 
still be leaders. There is smart green technologies, et cetera. 
We have battery production.
    We need--there are areas that we--look, we have to set out 
the objectives, allow for some support for these----
    Senator Markey. Thank you, Mr. Chairman.
    The Chairman. Thank you.
    I see no other colleagues that have booked on, and unless 
someone is on and has not shown their video and recognizing 
that there is a vote underway, with the thanks of the committee 
to an incredible panel.
    We have different dimensions here that we have explored. We 
appreciate your insights. The record for this hearing shall 
continue until the close of business tomorrow for questions to 
be asked for the record.
    And with the thanks of the committee, this hearing is 
adjourned.
    [Whereupon, at 11:50 a.m., the committee was adjourned.]

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