[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
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HEARING
BEFORE THE
COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
__________
MARCH 17, 2021
__________
Printed for the use of the Committee on Foreign Relations
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via http://www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
44-456 PDF WASHINGTON : 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
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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,
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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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