[Senate Hearing 117-315]
[From the U.S. Government Publishing Office]
S. Hrg. 117-315
BEIJING'S LONG ARM:
THREATS TO U.S. NATIONAL SECURITY
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HEARING
BEFORE THE
SELECT COMMITTEE ON INTELLIGENCE
OF THE
UNITED STATES SENATE
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
__________
AUGUST 4, 2021
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Printed for the use of the Select Committee on Intelligence
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
45-491 PDF WASHINGTON : 2023
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SELECT COMMITTEE ON INTELLIGENCE
[Established by S. Res. 400, 94th Cong., 2d Sess.]
MARK R. WARNER, Virginia, Chairman
MARCO RUBIO, Florida, Vice Chairman
DIANNE FEINSTEIN, California RICHARD BURR, North Carolina
RON WYDEN, Oregon JAMES E. RISCH, Idaho
MARTIN HEINRICH, New Mexico SUSAN COLLINS, Maine
ANGUS KING, Maine ROY BLUNT, Missouri
MICHAEL F. BENNET, Colorado TOM COTTON, Arkansas
BOB CASEY, Pennsylvania JOHN CORNYN, Texas
KIRSTEN E. GILLIBRAND, New York BEN SASSE, Nebraska
CHUCK SCHUMER, New York, Ex Officio
MITCH McCONNELL, Kentucky, Ex Officio
JACK REED, Rhode Island, Ex Officio
JAMES INHOFE, Oklahoma, Ex Officio
----------
Michael Casey, Staff Director
Brian Walsh, Minority Staff Director
Kelsey Stroud Bailey, Chief Clerk
C O N T E N T S
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AUGUST 4, 2021
OPENING STATEMENTS
Page
Warner, Hon. Mark R., a U.S. Senator from Virginia............... 1
Rubio, Hon. Marco, a U.S. Senator from Florida................... 4
WITNESSES
Evanina, Bill, Founder and CEO, The Evanina Group; Former
Director for the National Counterintelligence and Security
Center (NCSC).................................................. 6
Prepared Statement........................................... 8
Puglisi, Anna, Senior Fellow, Center for Security and Emerging
Technology (CSET) at Georgetown University..................... 18
Prepared Statement........................................... 20
Pottinger, Matt, Distinguished Visiting Fellow, The Hoover
Institute; Former Deputy National Advisor for the White House.. 30
Prepared Statement........................................... 33
BEIJING'S LONG ARM:
THREATS TO U.S. NATIONAL SECURITY
----------
WEDNESDAY, AUGUST 4, 2021
U.S. Senate,
Select Committee on Intelligence,
Washington, DC.
The Committee met, pursuant to notice, at 2:45 p.m., in
Room SH-216 in the Hart Senate Office Building, Hon. Mark R.
Warner (Chairman of the Committee) presiding.
Present: Senators Warner, Rubio, Wyden, Heinrich, King,
Bennet, Casey, Gillibrand, Burr, and Cornyn.
OPENING STATEMENT OF HON. MARK R. WARNER, A U.S. SENATOR FROM
VIRGINIA
Chairman Warner. Good afternoon. I call this hearing to
order. And welcome to our witnesses, one of them a good, good
friend of the Committee: The Honorable Bill Evanina, former
Director of the National Counterintelligence and Security
Center. He is the founder and CEO of The Evanina Group. And in
many ways, a lot of what we're going to be talking about today,
he's worked on with the Members of this Committee for many,
many years.
Anna Puglisi, Senior Fellow at the Center for Security and
Emerging Technology, or CSET, at Georgetown University.
And on WebEx, Matt Pottinger, the Distinguished Visiting
Fellow at The Hoover Institution and former Deputy National
Security Adviser at the White House.
Today, the Committee will examine the counterintelligence
threats posed by the People's Republic of China and the Chinese
Communist Party. We will look at the PRC's activities within
the United States as it works to acquire critical U.S.
technologies and intellectual property, hack into the U.S.
cyber networks, and conduct influence operations to shape
narratives to be more favorable to the PRC and the CCP. I hope
the witnesses will also discuss their recommendations for
better countering the CCP's efforts in the United States.
Now, the Intelligence Committee, as Senator Burr often
reminded us, doesn't normally hold open hearings, but Vice
Chairman Rubio and I believe this story needs to get out to the
American public.
Several years ago, the Committee, in a bipartisan way
thanks in part to Senators Rubio, Burr, Cornyn, and Collins,
convened a series of classified sessions with leaders from the
Intelligence Community and leaders from the private sector--
tech, finance, venture capital, academia--to brief them on
efforts by the CCP to target their industries. I've wanted for
some time to take those briefings and move them into an open
hearing so that the U.S. public, including the private sector,
our academic institutions, our media outlets, and others, can
better understand these threats and how we as a society can
counter them. Because the truth is the government cannot
counter the CCP's actions all by itself.
One of the most important areas that I hope the witnesses
will address is how China is focusing on targeting key U.S.
technologies for both acquisition and development. These
include aerospace, advanced manufacturing, AI, biotech, data
analytics, semiconductors, renewables--all in order to ensure
PRC's future dominance in these areas. We saw this play out in
many ways. And again, I think this Committee was one of the
first to notice the CCP's efforts in their pursuit of 5G
technology, backing Huawei. And I'm proud of this Committee's
work in sounding the alarm on the threat of what would happen
if networks all around were reliant on a sole-source Chinese
provider in 5G. That would threaten both our national security
and our allies' security. I hope the witnesses will also
address how the CCP is using a variety of methods to acquire
these capabilities, including cyber and traditional espionage,
but also using a lot of the tools of business, joint ventures,
acquisitions, mergers, and increasingly strategic investments
by firms that, at the end of the day, are answerable to the
Communist Party leadership in Beijing.
They're also creating a series of partnerships with
universities, in many ways, oftentimes luring some of those
universities into trips or sinecures that sometime put that
academic research at risk.
We also know, increasingly, we're seeing their malign
influence efforts to affect policy decisions that we in the
Congress make. Matter-of-fact, the FBI has estimated that
China's theft of simply American intellectual property, not
worldwide, just American intellectual property runs from
between $300 billion to $600 billion a year. According to the
DOJ, 80 percent of all economic espionage prosecutions brought
by the DOJ alleged conduct that would benefit the Chinese
state, and 60 percent of all trade secret theft cases have some
nexus to China.
FBI Director Wray told this Committee in April that the
Bureau has more than 2,000 operations going on, investigations,
that tie back to the Chinese government. And this is one of the
most stunning facts he laid out. He opens up a new
investigation into Chinese espionage every 10 hours. The
Director also attested that no other country represents more of
a threat to the United States, to economic security, and to
democratic ideals than China. And that China's ability to
influence American institutions is ``deep, wide, and
persistent.'' Ceding leadership across these technology sectors
would have major repercussions for U.S. economic and national
security.
Let's not forget that, in most ways, since World War II,
the United States has led in both scientific research and the
development of transformational technologies. It's this
leadership that has translated into decades of economic success
for U.S. companies and our military capabilities. As part of
our technological leadership, the U.S. or like-minded
democracies also set the global standards and protocols for new
technology. Many times, we can implant in those standards, in
those protocols, our values: democracy, transparency, diversity
of opinion, and respect for human rights. And that is a long-
term value to our country that I don't think is often factored
in. I've been frustrated though by the frequency by which U.S.
companies and their desire for market access in China have
frankly given up sometimes on those values, and sometimes
facilitated and enabled the PRC to acquire sensitive U.S.
technologies. The idea they can't miss the Chinese market means
they make sacrifices going into that market they would make in
no other nation in the world. China, in turn, uses these
technologies to advance its own illiberal vision to surveil and
control its population, stifle the free flow of information,
and repress foreign influence campaigns worldwide. These
technologies enable the PRC to suppress dissidents and restrict
religious groups. We see that whether it's in Xinjiang or in
Hong Kong.
As we think through what the CCP is doing in the United
States, I want to make crystal clear though, my concerns lie
squarely with the President of China, Xi Jinping, and the
Chinese Communist Party leaders, not the people of China, and
certainly not with Chinese-Americans or other Asian-Americans
who've contributed so much to our society.
Our answer to these challenges cannot be to keep talented
folks out of the United States. In fact, we've seen in my State
of Virginia, Northern Virginia particularly, a technology
hotbed, literally, 40 percent of all the startups are started
by first-generation Americans. So, it is in our national
interest to welcome these talented Chinese academics,
entrepreneurs, and technologists and in fact make it more
attractive for them to use their talent to bolster our economy
rather than simply going back to China. This is, again, where
our values come into play. And Americans should also be aware
that the PRC's pressures and coercion efforts don't stop with
the diaspora or Chinese nationals living in the United States.
As Senator Rubio pointed out, increasingly the CCP is
focused on pressuring U.S. citizens, entities, and businesses
across industries to, again, shape a narrative that advances
their goals. Even for this hearing, a number of potential
witnesses declined to participate in an open format for fear of
retribution to themselves or their families. From the PRC's
pursuit of critical and sensitive technology to its repression
at home and coercion abroad, and its focus on trying to win the
technology battle in the 21st-century, it's clear that I think
our country is facing a new Sputnik moment where we must take
steps to remain competitive, especially in technology, and find
better ways to strengthen our defenses against the CCP's
myriad, intelligence, tech acquisition, and foreign influence
operations. Because we're back into this kind of semi-hybrid
system today, for today's meeting, we will be asking questions
by order of seniority, and as Senator King has made clear, with
the five minute rule applying.
Thank you. I now turn to the Vice Chairman.
OPENING STATEMENT OF HON. MARCO RUBIO, A U.S. SENATOR FROM
FLORIDA
Vice Chairman Rubio. Thank you, Mr. Chairman, for holding
this hearing.
I think you started out by talking about how unusual it is
we have these open hearings, and there's a reason for it. The
Members of this Committee on a regular basis review some of the
most sensitive intelligence, both intelligence and the products
that come from them, that this government has available to it.
So, I think it should send a powerful message when you see that
on issue after issue relating to China, issues that some would
argue are outside the purview of what this Committee has
traditionally looked at--technology, academia, influence
operations, global diplomacy, industrial policy--that it is
Members of this Committee that you see in the lead on so many
issues relating to China. Because of the role the Members on
the Committee play, they have a very unique insight into this
horror show that's playing out before our eyes in the 21st
century.
The title of this hearing is ``The Long Arm of China.'' The
long arm of China is not some futuristic threat. It's already
here. China stealing between $300 billion and $600 billion a
year--$300 billion and $600 billion a year--of American
technology and intellectual property. They hack into networks,
and they take it. They use venture capital funds to buy
promising technology startups. They hide their ownership that
way. They partner with universities on research, and then they
steal that research, often research whose seed funding came
from the U.S. taxpayer. They force American companies doing
business in China to give the technology over to them.
And I think the other thing most people don't realize is
China already, already, has tremendous influence and control
over what Americans are allowed to say or hear about them or
many of the other issues in the world. Hollywood is so
desperate, for example, to have their movies shown in China
that Hollywood won't make a movie that the China communist
censors don't approve. The U.S. corporations are so desperate
to have access to the Chinese market that they'll lead costly
boycotts of a state, an American state, that passes a law that
they don't like. But they don't dare say a word about the fact
that as we speak, genocide is taking place against Uyghur
Muslims. American companies have actually fired Americans who
live in America for saying or writing something that China
doesn't like. There are some examples here that are pretty
stunning.
In 2019, China suspended business ties with the NBA because
the general manager of the Houston Rockets expressed support
for Hong Kong democracy protests.
In 2019, Apple removed an app that enabled protesters in
Hong Kong to organize, following CCP pressure.
In 2019, an American company, Activision Blizzard,
suspended a gamer and took away his prize money for voicing
support for Hong Kong protesters.
In 2018, Marriott fired an employee that ran a social media
account, because he liked a Twitter post from a Twitter account
applauding Marriott for listing Tibet as a country rather than
as part of China, and he was fired after that.
In 2018, Gap made a shirt with a map of China, and it
didn't include Taiwan. They apologized for it, and they removed
the shirt from its stores. Well, maybe you think that shirt
thing is trivial. I don't think people getting fired is
trivial, apps getting removed is trivial. These are just one of
a handful of many. And this is already happening.
So, in conclusion, I'd say two things. The first is the
Chairman is absolutely right. This is not about the Chinese
people or especially not about Chinese-Americans, okay? My
parents came from Cuba. I live in a community filled with
Cuban-Americans. It would be unfair to blame Cuban-Americans
for the atrocities of the Cuban regime, and it would most
certainly be unfair to blame the Cuban people for the
horrifying actions of the regime that controls that enslaved
island. Likewise, the biggest opponents of the Chinese
Communist Party on the planet happen to be Chinese. Many live
here, many in other parts of the world, and many under their
oppressive thumb. So, this is not about the Chinese people. It
is about a Communist Party, and it is time to wake up.
Today, China is already carrying out the biggest illegal
wealth transfer from one nation to another in the history of
mankind.
Today, the Chinese Communist Party has more control over
what Americans can say, what we can hear, what we can read,
what we can watch than any foreign government has ever had in
our history.
And they have weaponized our openness. They have weaponized
our decency, and they have weaponized our corporate lust for
profits against us. And if we don't wake up and we don't
address this now, the America our children are going to inherit
very soon could very well be one where the sanctimonious
preachings, as someone once said, the sanctimonious preachings
of a genocidal communist tyranny will be the only thing that
Americans will be allowed to hear or say about China.
So, I'm glad we're having this hearing. And, Mr. Chairman,
just as a point of privilege here, one of our longtime
staffers, today is his last hearing with us, Paul Matulic. He's
been with the Committee for 16 years. Worked with Senators
Hatch, Chambliss, Burr, and Cornyn, and now, here with us, and
so he's retiring. And we hope, as all retirees should, he's
moving to Florida. We don't know. But that's what Americans do.
We want to thank him for his service to the Committee, and we
hope our last hearing will be a memorable one. Thank you for
your service.
[Applause.]
Chairman Warner. Well, let me echo that, and this was a
subject of quite a bit of the focus yesterday in our closed
hearing where we went into some of Paul's behavior and
linguistic abilities. Luckily, that will stay classified, but
we all very much value Paul's work and, again, want to commend
him, in particular, for him and the whole team with their
relentless pursuit of the truth in the Russia investigation.
With that, we turn to our witnesses, and I'm not sure--
Anna, Bill, or Matt on WebEx--who's going to go first but the
floor is yours.
STATEMENT OF BILL EVANINA, FOUNDER AND CEO, THE EVANINA GROUP;
FORMER DIRECTOR FOR THE NATIONAL COUNTERINTELLIGENCE AND
SECURITY CENTER (NCSC)
Mr. Evanina. Good afternoon, Chairman Warner, Vice Chairman
Rubio, Members of the Committee. It's an honor to be here
before you today. I've humbly briefed this Committee on a
regular basis for more than a decade as the Director of
National Counterintelligence and Security Center, and as a
senior executive of the FBI and CIA. I was tremendously honored
last year to be the first Senate-confirmed director of NCSC,
leading our Nation's counterintelligence efforts. And I want to
specifically thank this Committee for your support.
I'm here today before you as a private citizen.
Today's topic, the holistic and comprehensive threat to the
United States posed by the Communist Party of China is an
existential threat, and it is the most complex, pernicious,
aggressive, and strategic threat our Nation has ever faced. I
proffer that the U.S. private sector and academia have become
the geopolitical battle space for China. Xi Jinping has one
goal: to be the geopolitical, military, and economic leader in
the world. Period. He, along with China's Ministry of State
Security, People's Liberation Army, and United Front Work
Department, drive a comprehensive and whole-of-country approach
to their efforts to invest, leverage, infiltrate, influence,
and steal from every corner of the United States.
This is a generational battle for Xi and the Communist
Party. It drives their every decision. So, why does it matter?
Because economic security is national security. Our economic
global supremacy, stability, and long-term vitality is at risk
and squarely in the crosshairs of Xi Jinping and the communist
regime. It is estimated that 80 percent of American adults have
had all of their personal data stolen by the Communist Party of
China. The other 20 percent? Just some of the data.
As the Chairman and Vice Chairman already referenced, the
estimated economic loss last year from the country of China
just from known intellectual property and trade secrets loss is
between $300 billion and $600 billion a year. It's a big
number. What that means it's between $4,000 and $6,000 per
American family of four after taxes.
Competition is great and necessary, and it is what made
America the global leader we are today. However, I would
proffer China's economic growth the past decade via any and all
means is considerably less than fair competition. My question
is, are we really competing?
If we do not alter how we compete with awareness of China's
malign methodology and one-sided practices, we will not sustain
our global position as the world leaders from tomorrow's
emerging technology down to our creative ideations. We must
create a robust public-private partnership with real
intelligence sharing while at the same time staying true to the
values, morals, and rule of law which made America the greatest
country in the world.
This will take a whole-of-nation approach with the mutual
fund-analogous, long-term commitment. Such an approach must
start with a contextual awareness campaign, reaching a broad
audience from every level of government to university campuses,
and from boardrooms to business schools. The ``why'' matters.
As an example, Huawei is a national security threat to the
United States. This Committee is aware of that. But we do not
officially explain to America why. U.S. boards of directors and
investment leaders must begin to look beyond the next fiscal
quarterly earnings call and begin to think strategically about
how their investment decisions and unawareness to the long-term
threat can impact their businesses and industries, as well as
America's economic and national security.
From a cybersecurity perspective, China possesses
persistent and unending resources to penetrate our systems and
exfiltrate our data, or sit dormant and wait, or plant malware
on a critical infrastructure for future hostilities. At the
same time, the insider threat epidemic originating from the
Communist Party of China has been nothing short of devastating
to the United States corporate world.
Additionally, the Communist Party of China strategically
conducts malign influence campaigns at the state and local
level of the United States with precision. These efforts must
be exposed and mitigated. To effectively defend against China
and compete effectively, we must put the same effort into this
threat as we did to combat terrorism the past 20 years. I would
suggest the threat posed by the Communist Party of China is
much more dangerous to our economic and military viability as a
Nation.
In conclusion, I'd like to say for the record, as the
Chairman and Vice Chairman mentioned, the significant national
security threat we face from the Communist Party of China is
not a threat posed by the Chinese people or as individuals.
Chinese nationals or any Chinese person or Chinese ethnicity
here in the United States or around the world are not a threat.
They should not be racially targeted in any manner whatsoever.
This is a threat pertaining to a draconian communist country
with an autocratic dictator who is committed to human rights
violations and stopping at nothing to achieve its geopolitical
goals. Thank you for this opportunity to be here with you
today, and I look forward to dialog with my colleagues. Thank
you.
Chairman Warner. Thank you, Bill. Anna?
[The prepared statement of Mr. Evanina follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
STATEMENT OF ANNA PUGLISI, SENIOR FELLOW, CENTER FOR SECURITY
AND EMERGING TECHNOLOGY (CSET) AT GEORGETOWN UNIVERSITY
Ms. Puglisi. Thank you. Chairman Warner, Ranking Member
Rubio, Members of the Committee, thank you for the opportunity
to testify today. The issues we are going to discuss will make
us uncomfortable because they touch on the core beliefs and
assumptions we make as Americans regarding democracy,
opportunity, capitalism, open markets, and the importance and
role of immigrants throughout the history of the U.S. My own
grandparents were immigrants who came here to this country with
little formal education, worked menial jobs, and made a new
life for themselves.
My presence here today is a testament to the American
dream. I want to start with saying that there's no room for
xenophobia or ethnic profiling in the U.S. It goes against
everything we have stood for as a Nation. And precisely because
of these values, we need to find a principled way forward. The
issues should not be seen as concerns of one Administration or
the policies of one political party. But as the challenges
created by a nation-state that is ever more authoritarian and
that has a different system, a different regard for human
rights, and a different view of competition and fairness.
Since you have my written testimony, I will focus my
remarks on some of the highlights.
China is engaged in a strategic rivalry with the U.S.
centered on economic power. China's management of its
relationship with the U.S. has been designed to mask key
aspects of this rivalry. This is why it's so difficult to have
these conversations. Beijing, in many ways, understands the
societal tensions, and its statecraft is directed at them--
exploiting identity politics and promoting any changes to U.S.
policy as ethnic profiling. Extreme positions such as closing
our eyes or closing the doors only benefits China. So, now,
let's take a moment and talk about what's at stake.
United States science and technology dominance since World
War II has underpinned U.S. national strength and soft power.
Losing our technological edge and the influence it entails will
have far-reaching implications beyond scientific disciplines.
This is not only about military technologies. Future strengths
will be built on 5G, AI, and biotechnology. And our systems are
fundamentally not the same. China's central government policies
and the role of the State create this different system. These
include talent programs that exploit its diaspora, S&T
development programs with acquisition strategies built into
them, and China's policy on civil-military fusion.
Let me be clear, China says it will use any knowledge or
technology it acquires for its military. This is not
conjuncture or profiling or analysis but China's stated
position--and, I would add, for decades. We should believe
them. Given the scope and scale of China's activities, a re-
evaluation of our underlying assumptions and how we evaluate
risk will be essential to counter these efforts.
Therefore, I have the following recommendations.
First, we really do need to improve ourselves. The U.S. and
other liberal democracies must invest in the future. And we
also have to realize that not all discovery has immediate
commercial application. We need to focus on things that provide
the highest value to the Nation instead of just the lowest
cost. We must build research security into future funding
programs.
We also need to face the facts as a society. Beijing
doesn't play by fair market rules. It does not respect foreign
intellectual property. It is willing to act directly and
indirectly to ensure its favored companies win in the market.
The result of this is that our companies and our researchers
are not competing on an equal and level playing field, but
instead are up against the strategy--and, I would add, the
power and the money--of a nation-state.
We must increase transparency. Existing policies and laws
are insufficient to address the level of influence the Chinese
Communist Party exerts in our society, especially in academia.
We must increase reporting requirements for foreign money at
our academic and research institutes, and university government
labs and research institutions should have clear reporting
requirements and rules on the participation of foreign talent
programs. That part really needs to be country agnostic.
We need to ensure true reciprocity. This is about fairness
and market access. We can no longer allow China to weaponize
its market, connecting China's reciprocity and sharing of
scientific data to its access to U.S. institutions and big
science facilities as the leverage point. For too long, we have
looked the other way when China has not followed through on the
details of its agreements that it has entered into.
We also need to bolster cooperation and the communication
of risk with our allies and partners. What also makes these
conversations difficult, and as my colleague has alluded to, is
that the reality that China is presenting is inconvenient to
those that are benefiting in the short-term. This includes
companies looking for short-term profits, academics that
benefit personally from funding and cheap labor in the
laboratories, and former government officials who cash in as
lobbyists for China state-owned and state-supported companies.
We need to move beyond tactical solutions and have a
comprehensive strategy for how we deal with China.
So, I would like to thank the Committee once again for
continuing to discuss this issue. These are hard conversations
that we, as a Nation, must have if we are going to protect and
promote U.S. competitiveness, future developments, and our
values. If we do not highlight and address China's policies
that violate global norms and our values, we give credence to a
system that undermines fairness, openness, and human rights.
The Chinese people deserve better, the U.S. people deserve
better, and I think our future really depends on it. So, thank
you.
Chairman Warner. Thank you, Anna.
And now, I think we're going to hear from Matt Pottinger
via WebEx.
[The prepared statement of Ms. Puglisi follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
STATEMENT OF MATT POTTINGER, DISTINGUISHED VISITING FELLOW, THE
HOOVER INSTITUTE; FORMER DEPUTY NATIONAL ADVISOR FOR THE WHITE
HOUSE
Mr. Pottinger (via WebEx). Chairman Warner and Vice
Chairman Rubio, thank you and your fellow Committee Members for
hosting a public hearing on this very important topic.
Many Americans were slow to realize it, but Beijing's
enmity for the United States really began decades ago. Ever
since the Chinese Communist Party, or the CCP, came into power
in 1949, it's cast the United States as an antagonist. And then
three decades ago at the end of the cold war, Beijing quietly
revised its grand strategy to regard Washington as its primary
external adversary, and it embarked on a quest for regional,
followed by global, dominance.
The United States and other free societies have belatedly
woken up to this contest, and there's a welcome spirit of
bipartisanship that's emerged on Capitol Hill. But even with
this new consensus, we failed to adequately appreciate, I
think, one of the most threatening elements of the Chinese
strategy, and that's the way that it seeks to influence and
coerce Americans, including political, business, and scientific
leaders, in the service of Beijing's ambitions. So, the CCP's
methods are really a manifestation of political warfare, which
is the term that George Kennan, the chief architect of our cold
war strategy of containment, used in a 1948 memo to describe
the employment of all of the means at a nation's command short
of war to achieve its national objectives.
So, that's what China is doing.
And one of the most crucial elements of Beijing's political
warfare is its so-called United Front Work. So, United Front
Work is an immense range of activities with no analog in
democracies. China's leaders call it a ``magic weapon,'' and
the CCP's 95 million members are all required to participate in
the system, which has many different branches. The United Front
Work Department alone, which is just one branch, has three
times as many cadres as the U.S. State Department has Foreign
Service officers. Except instead of practicing diplomacy, the
United Front gathers intelligence about and works to influence
private citizens, as well as government officials overseas with
a focus on foreign elites and the organizations they run,
including businesses that you and Senator Rubio just mentioned.
Peter Mattis, who detailed how United Front Work is organized
during his 2019 testimony before the House Permanent Select
Committee on Intelligence, said, ``Put simply, United Front
Work is conducted wherever the party is present.'' And the
party is quite present here in the United States. Assembling
dossiers on people has always been a feature of Leninist
regimes. But Beijing's penetration of digital networks
worldwide, including using 5G networks that you referenced,
Chairman Warner, has really taken this to a new level. The
party now compiles dossiers on millions of foreign citizens
around the world, using the material that it gathers to
influence, and target, and intimidate, reward, blackmail,
flatter, and humiliate, and, ultimately, divide and conquer.
Bill Evanina's written testimony today makes plain that
Beijing has stolen sensitive data sufficient to build a dossier
on every single American adult and on many of our children,
too, who are fair game under Beijing's rules of political
warfare.
Newer to the Communist Party's arsenal is the exploitation
of U.S. social media platforms. Over the past few years,
Beijing has flooded U.S. platforms with overt and covert
propaganda, amplified by proxies and bots. And the propaganda
is focused not only on promoting whitewashed narratives of
Beijing's policies, but also increasingly on exacerbating
social tensions within the United States and other target
nations. The Chinese government and its online proxies, for
example, have for months promoted content that questions the
effectiveness and safety of our Western-made COVID-19 vaccines.
There's been some recent research by the Soufan Center that
also found indications that China-based influence operations
online are now outpacing Russian efforts to amplify some
conspiracy theories.
So what are some of the things that Washington can do to
address Beijing's political warfare?
First, I think we should stop funding technologies in China
that are used to advance the surveillance state and the
military of Beijing. Beijing's turning facial recognition, 5G,
data mining, machine learning technologies, and others, not
only against their own citizens but, increasingly, against
Americans here at home. The executive orders that were issued
by the Trump and Biden administrations that prohibit the U.S.
purchase of stocks and bonds in 59 main Chinese companies is a
good start. But the Treasury Department really needs to expand
that list by orders of magnitude in order to better encompass
the galaxy of Chinese companies that are developing these so-
called dual-use technologies.
Congress should also look at revising the Foreign Agents
Registration Act, or FARA, to include more robust reporting
requirements, steeper penalties for noncompliance, and a
publicly accessible database of FARA registrants and their
activities that's updated regularly.
The United States can also do more to expose and confront
Beijing's information warfare through our social media
platforms. Remember, these are platforms that are themselves
banned inside of China's own borders. U.S. social media
companies have the technological know-how and resources to take
a leading role in exposing and tamping down shadowy influence
operations online, and the U.S. Government should partner more
closely with Silicon Valley companies in this work. Washington
should also partner with U.S. technology giants to make it
easier for the Chinese people to safely access and exchange
news, opinions, history, films, and satire with their fellow
citizens and other people who are outside of China's Great
Firewall.
Finally, we should do more to protect Chinese students and
other Chinese nationals living here in the United States. Many
people of Chinese descent, including some U.S. permanent
residents and even U.S. citizens, live in fear that their
family members back in China will be detained or otherwise
punished for what their American relatives say or do here in
the United States. And this kind of coercion by Beijing, among
other things, has silenced countless Chinese-language news
outlets around the world. So much so that there's almost no
private Chinese-language news outlet left in the United States
or abroad that doesn't toe to the Communist Party line. The
U.S. Government can help by offering grants to promising
private outlets and also reenergizing some of the federally
funded media such as Radio Free Asia.
And U.S. universities, maybe with help from the U.S.
Government, should also hand a second smartphone to every
Chinese national who comes to study in our schools in the
United States so that they have a smartphone that is free from
Chinese apps such as WeChat, which monitor users' activities
and censor their news feeds.
Thanks very much.
[The prepared statement of Mr. Pottinger follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Warner. Again, I want to thank all three of our
witnesses today. And, again, for late-arriving Members, we're
going to go by traditional seniority and five minute rounds.
I also very much appreciate all three of you making the
point that our beef is with the CCP and its leadership and not
the Chinese people and surely not the Chinese diaspora--
Chinese-Americans--and that there is no place for racists or
xenophobic targeting in our country. And that, in many ways,
would simply play into the hands of the CCP.
Let me start with a question, a question different than I
was originally going to start with. I'm going to start with
something that is currently taking place. As we know, or maybe
I'm not sure most Americans know, in roughly 2015-2016, China
changed its, in a sense, corporate legal framework to make
explicitly clear that any Chinese company's first obligation
was not to its shareholders or even its employees, but its
first obligation was to the Communist Party.
Coincident with that same time, we have seen an emergence,
oftentimes driven, as Bill pointed out, by intellectual
property theft--we've seen an emergence of Chinese social
media, delivery, other companies that have had some of the
biggest returns of any companies in the world over the last few
years: the Alibabas, the Baidus, the Tencents. What I'm not
sure most folks have realized is that those companies and many
others--the vast majority of their investors are either
American or Westerners. Something unique has happened, though,
starting with Jack Ma and Ant when they tried to go public a
number of months back, and the government intervened and
stopped that enterprise from going public. A number of other
Chinese tech companies have now been cracked down upon.
You know, is this an ability to try to get their large tech
companies under control the same way we are having that active
debate in this country?
Is it, in a sense, a warning shot across the bow for those
companies that are potentially been trying to go public either
here in the United States or on the Hong Kong exchange as
opposed to inside the PRC?
Or is it even a possibility that this is an effort, since
these companies are not going away, to wash out those Western
and American investors? Because we've seen the values of these
companies in some cases decreased by 50 percent literally over
the last 60 to 90 days, and then to have them, in a sense,
refinanced with Chinese funds themselves with more compliant
tech leadership. And I throw that out to all three of the
members of the panel for comments.
Mr. Pottinger. Senator, I thank you very much for that
question and those points. You know, I think you're exactly
right that what you're seeing now is a deliberate obliteration
of the line, certainly, a blurring, but ultimately an
obliteration of the line between private companies on the one
hand and state-owned companies on the other in China. An
obliteration of the line separating civilian companies on the
one hand and military companies and institutions on the other.
And even a blurring of the line between foreign-invested
companies, you know, multinational companies so to speak, and
domestic Chinese-state champions. Beijing's goal is to re-
concentrate the authority of the party over all of the economic
life of Beijing. And that's really what this is about, much
more than just wanting to assert control over data, although
that's one of the other reasons that Beijing has been taking
these steps against Alibaba and DiDi, and many, many others to
come. There are a number of laws that force those functions
that you referenced. I'd be happy to provide an index of some
of those laws that require companies in China, including
foreign joint ventures to, first and foremost, serve the
national security interests of the party, to serve the party's
broader interests, and to work at the behest of the security
apparatus to do that.
Corporate governance in China is not what is represented in
public filings to the Securities and Exchange Commission. I've
been waiting, turning purple, holding my breath, waiting for
the Securities and Exchange Commission to begin asserting its
authority to actually recognize that the risk factors are not
even remotely adequately addressed in the public filings of
Chinese companies here in the United States.
Chairman Warner. Matt, could I cut you off there? I'm going
to try to adhere to my time, and I want to see if Anna or Bill
have another comment on this topic as well.
Mr. Evanina. Senator, just two foot stomps from your point
and maybe amplify what Matt had mentioned, specifically for
corporate America, the three laws that China initiated, two new
security laws and one cyber law, I think, are critical for CEOs
and investment folks in the United States to understand. Most
importantly is from a technological perspective that every CISO
and CIO in China for a Chinese company in China or abroad is
mandated to provide third-party data to the intelligence
organizations in China. So, if you are a U.S. company and
you're partnering with a company in China, you have to be aware
that any and all of your data will be provided to the
intelligence services in China. That's number one.
Secondly, to your point, 13 of the 15 largest companies in
China are state-owned or operated. There are only two left.
Alibaba is one of the two left, and we see what's happened to
them now overseas in China with the draconian efforts that Xi
is employing.
Ms. Puglisi. I just want to foot stomp on the laws, and
that's something that we can provide to the Committee. But in
some ways, to take a lighter attempt, they've actually said the
quiet part out loud in seeing what's happening to these
companies, because this actually is a really good demonstration
of how different the systems are.
Chairman Warner. I would point out, and before we move to
the Vice Chairman, we had 13 of what we call our classified
roadshows. Every industry, virtually every major college and
university in America, participated in one or more of those--
with the exception of private equity. The very private equity
that funded some of these Chinese tech companies that are now
getting absolutely creamed as the Chinese government reasserts
control. Maybe they would have been better to take advantage of
our repeated offers to meet with private equity in a classified
setting, so they understood perhaps better what they were
getting themselves into. So, I'm not shedding a lot of tears
for some of their losses, but I do hope, on a going-forward
basis, they and others will continue to make sure that they go
in with eyes wide open in terms of dealing with the PRC.
With that, Senator Rubio.
Vice Chairman Rubio. Thank you.
Mr. Pottinger, let me start with you. Did China try to
manipulate public opinion in the United States and around the
world during the early days of the COVID pandemic?
Mr. Pottinger. Senator Rubio, certainly, we saw all sorts
of activity by Beijing. Overt propaganda as well as what I
would call more ``shadowy schemes'' to influence and amplify
messages that in many cases are disguised to appear as though
they are organic discourse between private citizens, but are
really core, very carefully, and well-resourced campaigns
orchestrated by Chinese propaganda officials. Now, you're
referencing the time early in the COVID epidemic. Some of the
ones I can just think of off the top of my head were efforts to
create doubt about the origins of this pandemic, in fact, to
claim that the pandemic originated from the U.S. military. We
saw efforts to undermine, as I mentioned earlier, the
credibility of our vaccines. Certainly, quite a lot of
propaganda, both overt and covert, designed to create distrust
and a lack of faith in democracy as a whole, and to amp up and
elevate the idea of Leninist totalitarianism as a somehow
superior model in spite of what the record has been over the
decades that the Chinese Communist Party has been in power. I'm
thinking of the tens of millions of deaths of its own citizens
from mismanagement from their government. So, the short answer
is Yes, sir.
Vice Chairman Rubio. Thank you. Ms. Puglisi, the National
Counterintelligence and Security Center warned, I think, in
February that China is collecting the medical data, the DNA,
and the genomic data of Americans. Why do they want the DNA and
genomic information of Americans?
Ms. Puglisi. China has amassed the largest genomic holdings
of anywhere in the world. One of the most important questions
in the next generation of both medicine and also biological
research is the genotype to phenotype. So, understanding what
genes do. And so access to that kind of data, both their own
and from other places in the world, gives them an advantage in
figuring out some of those problems. We know from their central
government policies and programs they have emphasized the
importance of next-generation medicine and that is a huge focus
for them.
Vice Chairman Rubio. Meaning the designing of precision
medicine that allows curing specific conditions in people with
specific genetic makeups?
Ms. Puglisi. Yes.
Vice Chairman Rubio. Mr. Evanina, in your opinion, how
confident is China in their ability to get American banks,
American investment firms, and American big business? How
confident are they in their ability to get these to act as
their lobbyists here in Washington?
Mr. Evanina. Senator Rubio, there's no lack of confidence.
I don't believe that the Communist Party of China has any
reticence to believe they can't acquire whatever they want to
acquire. And you see currently now with the new movement of the
Communist Party of China investing into pension funds, both at
the state and local level, as well as into our thrift savings
plan federally. They do it in a sublime manner, sometimes
shrouded in U.S. business investment and shrouded with third-
party front companies to be able to get and corner the market,
so to speak, in our investment funds.
So, they have no lack of confidence in acquiring anything
they need in our financial services sector.
Vice Chairman Rubio. And that's for sure. But I think the
question was how confident are they in their ability to get an
American company, for example, or a finance sector or what have
you, to use the lure of access to the Chinese marketplace to
get them to come back to Washington and lobby policymakers here
against or for decisions that China favors? In essence, they
deputize them to come back and say, ``Don't do this,'' or
``Don't do that.'' Their ability to turn these American
entities into lobbyists for their preferred policy outcome in
our policies.
Mr. Evanina. Again, there's no lack of confidence, and
we've seen that occur in other parts of Chinese lobbying here
in D.C., hiring former Members of Congress, former members of
the Administration, former members of large banks to be able to
come back and lobby and explain China's methodology and their
narrative as to why their funding is more important than any
funding here. And I will reiterate Senator Warner's point that
some of my activities subsequent to retirement, the private
equity venture capital folks are saying they're getting 30
percent ROI from investments in China.
Vice Chairman Rubio. Yes. And so, just real quick, tied to
that. Are they forward-thinking enough to look at a state
legislator, a mayor, a commissioner at a local level and say,
that person may one day be a member of Congress? Let's start
working them now, get close to them, and have them adopt our
favorite narrative of China so that in the future, when they
wind up in that position, they'll be more favorable to our
views?
Mr. Evanina. Absolutely, and it's common practice.
Chairman Warner. I want to note that Senator Cornyn and
Senator Feinstein did some very good work that all of us on the
Committee supported on trying to strengthen some of those
restrictions on that foreign investment with the CFIUS Act.
Senator Wyden.
Senator Wyden. Thank you very much, Mr. Chairman. Thanks to
all our panelists. I'm of the view that data is one of the most
underappreciated threats to America's national security, and
that is especially true when you're talking about Americans'
data being exported to our adversaries. And it's already the
case with the Chinese government, or hackers based in China,
have stolen the personal information of hundreds of millions of
Americans.
As a result, I have been pushing hard to enact a law that
would ensure that Americans' most private data cannot be sold
off in bulk to countries that would use it against us.
So, I want to pick up on one of the earlier questions one
of my colleagues just asked about with respect to genetic data
and because of the importance of this issue.
Mr. Evanina, I know you've spent a lot of time on this. How
does the Chinese government actually obtain the genetic
information of Americans? And tell us for the record why that's
so dangerous to national security.
Mr. Evanina. Thank you, Senator Wyden.
I think there's a couple of aspects to this question. First
is to foot stomp your message of China's demand for data. When
we look at what they've accumulated in the last decade, I'll
point to Equifax: 150 million Americans, all their financial
data has been taken by China. I would say that it's unnecessary
for China to procure or buy our data when they can come in and
take it for free, because our lack of cybersecurity defenses
here provide an open door for them to take through spearfishing
or other vectors to get into our systems and take our data.
With respect to DNA and genomics, they'll use front
companies like BGI, which is a company around the world, to set
up stations to collect COVID samples and do fertility clinics.
And every single time you do that, you're giving away all your
data to that node of that company, which as we said before, is
now beholden to the Communist Party. So, as you provide
genetics, blood typing, or any kind of COVID test, it's going
to possibly go to the Chinese Communist Party, which is why we
must protect what we do here on our soil from companies like
Quest and other diagnostic companies, which are in every single
town, from being procured by the Chinese government.
Senator Wyden. I'm going to also hold the record open
because I feel so strongly about this. For any additional
information you can give us on exactly how they obtain the
genetic information, because that's the threshold question. You
know, when American companies are being purchased, there's the
CFIUS process that addresses the purchase of American
companies. But the purchasing and export of the data itself is
totally unregulated, which is why I feel so strongly about this
legislation. And so, if Mr. Evanina, in the next week or so,
you could give us more information on how they actually go
about doing it.
Question for you, Ms. Puglisi.
It's clear that the American government has been forcing
the transfer of a number of valuable American innovations
through legal acquisitions and illicit tactics. Another
legislative initiative I'm pushing would require companies
doing business in China to report on technology- and IP-
transfers. In your view, wouldn't this requirement help the
U.S. Government get a better sense of the problem and allow for
our government as we try to put together an all-of-government
response to come up with a better approach?
Ms. Puglisi. So, I think that really gets at that
transparency issue and understanding. I think, to step back
from that as well, what's important is understanding what are
the market conditions that are being set, because we know that
China has used its market to force a technology transfer. And
so, having a better understanding of, and also pushing back on
that, will help both with that transparency piece and
understanding the pressures that those U.S. companies are
under.
Senator Wyden. I'm over my time. I'm going to give you all
a written question on hacking, which is sort of the other side
of the coin.
Thank you, Mr. Chairman.
Chairman Warner. Thank you, Senator Wyden. Senator Burr.
Senator Burr. Thank you, Mr. Chairman. Anna, I found your
opening statement to be very clear and very diplomatic, I would
say.
I'm going to read you a statement that I think encompasses
the threat. You tell me what I've left out of it, if you will:
The People's Republic of China is actively conducting multi-
disciplined espionage operations against the United States.
Further, the Chinese Communist Party is engaged in influence
and intelligence operations inside the United States at an
unprecedented scale, targeting numerous sectors of society,
including the academic community, private sector, media
platforms, and policymakers in order to advance its security
and economic objectives and strengthen the CCP's hold on power.
The CCP aims to acquire technology, conduct espionage, and
shape narratives to align the CCP's ideology and objectives.
Is there anything you disagree with in that statement? Is
there anything I've left out?
Ms. Puglisi. The one thing I would like to highlight is
that one of the challenges in dealing with how China targets
our technology is they use a very different methodology. So, if
we focus only on intelligence officers, things that have a
direct military application, and things that are illegal, I
believe we will fail. And so, it's looking at those gray areas
and looking at how what started off as legitimate co-operations
or collaborations or even business deals get moved into that
gray area.
Senator Burr. Well, I think we would agree with you. Bill,
the Department of Justice has used the name and shame program,
the model of highlighting cases of Chinese espionage in the
United States. And it currently makes the public more aware of
CCP's nefarious activities within the U.S.
In your opinion, how effective is ``name and shame,'' and
what, if anything else, can be done to deter the Chinese?
Mr. Evanina. Sir, I'm a big believer in the efficacy of
name and shame. I think that when you look at Xi Jinping and
his regime, what hurts him the most is any kind of negative
consequence. And as we get the word out, not only around the
globe--and as you know, in my previous role, I was head of
counterintelligence for NATO. When I would speak to our NATO
partners, they would be excited because of the naming and
shaming, and the exploitation of criminal behavior by the
Chinese communist regime. You have big cases--whether it be
Huawei or any other kind of espionage investigation insiders of
cyber--that get known around Europe and around South Asia and
South America. So, it allows the U.S. Government, policymakers,
intelligence services to garner support and build coalitions
against China, whether it be Belt and Road or the economic
proclivity in Europe. And I would proffer that the work the
U.S. Government has done on Huawei, in calling out their
nefarious behaviors, has done a whirlwind of efforts in Europe
with the EU and NATO.
Senator Burr. Good.
Matt Pottinger, what technologies do you believe we must do
a better job at protecting? And what's after 5G?
Mr. Pottinger. Thank you, Senator. I think that we know
from China's own strategy and from the actions in implementing
that strategy that they've used semiconductor mastery--that is,
all of the elements including the fabrication of
semiconductors--as the foundational technology upon which
everything else that we're competing against China for in this
century is resting on. So, whether we're talking about
synthetic biology or 6G, 7G, advanced materials, and machine
learning--all of this is built on advanced semiconductors; and
Beijing is quite determined to make itself wholly independent
of any other market for those semiconductors. And in ways that
would also make us increasingly dependent on China so that they
would have enormous coercive leverage over us.
So, I'm a free-market guy, but there's the one exception
that I'm really making is that I believe that we do need to
provide subsidies to bring back a certain amount of the
manufacturing of semiconductors to the United States to remove
that piece of leverage from China. So, semiconductors is number
one.
In the area of 5G and the other generations of wireless and
communications technology that are going to follow, we need to
use our export controls more sharply than I think we've been
using to date. We did some very important things in 2020:
expanding the foreign direct-product rule, making it impossible
essentially for heavily state-owned and state-subsidized
companies like Huawei to obtain high-end semiconductors. We
need to use those tools even more sharply now before we lose
them. Again, we've got some companies in the United States that
make great equipment for making semiconductors and they want to
access the China market. In the long run, that's going to be
very bad for us if we're giving China the means to create a
coercive and wholly independent manufacturing capability. We
want to bring some of that home, forgo some of those short-
term, smaller profits now in order to grow a much larger pie
after that.
Chairman Warner. Thank you. And I just want to clear up one
item, Bill. I think in your response to Senator Wyden, I
believe your point was that we have to be careful about the
Chinese, for example, acquiring certain American labs or other
items. It's not the fact that if you get a COVID test right
now, that data goes to China. So, just to be clear for the
record.
Senator Heinrich.
Senator Heinrich. Thank you, Chairman. I want to yield a
little time to Senator King who has a pressing engagement.
Senator King. I have a meeting that I have to go to, but
I'll be submitting four questions for the record, and I hope
you all will provide some of your good thinking on it. These
are sort of thought questions based upon today's testimony.
Thank you all very much. Thank you, Mr. Chairman. Thank
you.
Senator Heinrich. You bet. You co-authored a recent report
titled, ``China's Foreign Technology Wish List,'' which looks
at how China's science and tech diplomats working out of
embassies and consulates across the world, act as brokers to
acquire foreign technology. And the report notes that
artificial intelligence, machine learning are sort of near the
top of that wish list.
Can you discuss the role that these science and tech
diplomats play in acquiring foreign technology? And what else
are you seeing in the areas of AI and machine learning, in
particular?
Ms. Puglisi. Of course. So, I think the role of S&T
diplomats, what it really highlights is the depth and breadth
of China's tech acquisition bureaucracy, as we laid out in this
report. And this is based on Chinese-language documents that we
have mined and acquired--these are all open-source material--
that there's a demand signal. And so, the entity in China
requests or highlights that they have a gap either in
technology or knowledge that goes to a central database, and
then it's actually farmed out across the world. And what's
interesting about this is it really shows a nuanced
understanding of where that technology is located and where to
find that. And as you mentioned, the two things, the highest
that showed up the most in our research, was both AI and
machine learning and actually biotechnology. And one of the
hubs of activity for that in the United States was the Houston
consulate.
Senator Heinrich. Very interesting. The CCP has leveraged
individuals outside of government to pursue technology
transfer, targeting foreign researchers and business leaders in
order to transfer that technology back to the PRC. Can you walk
us through any examples that are particularly illustrative,
either in academia or in the private sector, just to give folks
a sense for like how this tactic really plays out in real life?
Ms. Puglisi. So, what I'll speak to is a specific
methodology that we see and then--.
[Audio interruption.]
Is that better? Okay. Sorry about that. So, what is
interesting in both as in my previous iteration working for--,
we always get questions about, okay, what is the list, right?
What are the technologies that are being sought? And we do have
that in a very general sense. But what makes that so
challenging is what we call the Chinese use of nontraditional
collectors. And so, these are actually the experts that are
working on a particular area, working on a particular project,
that are the ones that are targeting the technologies.
What makes it so hard to counter a lot of times is
initially, some of these relationships begin as legitimate,
whether they be collaborations or individuals that either join
universities or join companies. But China has a number of
policies, and one of the ones that I think pertains to this
particular type of targeting of technology is one called
``serve in place.'' And it's something that we've seen
reflected in Chinese policy documents since the early `90s. It
articulates that they seek to leverage individuals who are not
living in China, who don't have any intention to go back, and
they reach out to those people to fill strategic gaps.
And increasingly even more so is the technological know-
how. And so the how do you do things? How do you do quality
control? How do you move technology out of the lab?
Senator Heinrich. Wow.
Mr. Pottinger, could you talk a little bit more about
semiconductor manufacturing and fabrication? And how would you
rate our efforts so far at trying to start the process of
bringing that back to domestic production? And what additional
efforts would you recommend?
Mr. Pottinger. Thanks, Senator.
So, the majority of the world's highest-end chips are
actually made in Taiwan, by Taiwan's Semiconductor
Manufacturing Corporation. China has put well over $100 billion
in subsidies into trying to replicate what Taiwan is able to
do, and with very mixed results. In fact, they've not been able
to replicate what Taiwan does. But what they are now trying to
do, having recognized the fact they can't make chips at the
bleeding, cutting edge the way that Taiwan makes them, China is
trying to make chips that are a couple of generations older
than the chips that Taiwan makes.
Now, older does not mean worse. Because, in fact, the
device I'm talking to you on right now, or a personal
smartphone is made up of ten chips, maybe only one of which is
the really cutting-edge chip. The others, which control
graphics and voice, and cameras, and things of that nature are
older-technology chips, which make up a massive segment of the
market. They're still extremely important and they can be
leveraged in ways to make them greater than the sum of their
parts, depending on how creatively you tie these things
together. So, what we do in the United States--we don't make
that many chips anymore. We have a couple of exceptions.
There's a company called GlobalFoundries in upstate New York
that makes chips that are a couple of generations older, but it
turns out that our military, most of our equipment runs on
chips that are a couple of generations or more older because
those systems stayed in place for so long. So, it's been
critical that we have a certain amount of manufacturing here at
home.
Where we really lead is in the design of chips and also in
equipment that's used in the fabrication of the chips. So,
those are areas where we want to do a better job, more
strategic job, of looking holistically at how we can deny China
its very deliberate and clear objective of making itself
completely independent and making us increasingly dependent on
their supply for semiconductors, which until we have another
technology, are absolutely essential to every area where we
want to compete in the innovative economy.
Chairman Warner. Thank you, Senator Heinrich. Senator
Blunt.
Senator Blunt. Thank you, Chairman. Ms. Puglisi, let's talk
about campuses for a minute. Nothing creates more friends for
the United States of America than time in the United States of
America. And this research discussion is one discussion.
Another discussion is there are lots of Chinese students on
campuses that have fine business schools, that have good health
programs of various kinds, and other programs that don't do a
lot of research.
What are the dangers of us closing the door to smart,
young, Chinese people who want to come here and spend a couple
of years and how do we thread that needle?
Ms. Puglisi. Senator, that's a really important point, and
it's really important to distinguish between undergraduates,
graduate students, graduate students that are studying things
that we are concerned with. And I think it circles back to the
remarks that I made about acknowledging how different our
systems are. Because we can't possibly understand, I think my
colleagues also spoke to this, the amount of pressure that some
of those students can be under if their families are still in
China. The most recent Global Human Rights Watch report that
came out talks about surveillance happening on U.S. campuses of
these Chinese students.
Senator Blunt. Well, I think we have to be careful there,
because just like we can't understand the pressure they're
under, they can't understand what the United States is like in
the same way as if they were here. And, Chinese students,
particularly undergraduate students in a non-research setting
on campus, I think that's a different thing than people--
technical research, calling back the results to the mock lab in
China somewhere. I think we need to be really careful about
this.
I'm going to go to Mr. Pottinger next.
It seems to me that there is a likely change in a mindset
here. You know, we all know that China has a huge demographics
problem, and I don't want to go down the demographics trail.
The trail I want to go down is there are millions of young
Chinese adults who in their whole life, they've had two parents
who were totally focused on them. And four grandparents who had
one grandchild also totally focused on them in a country that
had more things to share, more ways to buy things for that one
grandchild.
Are they going to have the same response to the
increasingly repressive Chinese Communist Party the generation
before have had? Are we seeing some likely pushback from young
Chinese adults who've had basically all the attention you could
possibly ask for their entire life and almost everything they
wanted to have from parents and grandparents?
Mr. Pottinger. Senator, there's been recent reporting, some
interesting reports have been written about sort of this ennui
that is afflicting the younger generation of Chinese young men
and women. I think that the Communist Party systematically
removed from Chinese culture so many of the elements that could
enrich people's lives, including faith, including what had been
in the late `90s into the early 2000s, a growing amount of free
exchange and discourse. Those things are now going in reverse.
You're seeing the systematic stamping out of civic life,
whether it's secular or religious. The most extreme example is
the genocide taking place against traditionally ethnic Muslim
minorities in Northwest China, but also against Christians and
others. And access to outside information is getting more
restricted.
Senator Blunt. Thank you. Let me see if I can add one quick
question.
So, Bill Evanina, what of this more restricted society, in
all ways you've looked at that, how is that coming generation
going to react to that in a different way than their parents
and grandparents have?
Mr. Evanina. Senator, thanks for the question. I think your
premise is correct. We are seeing that kind of slow change, but
I would proffer that Xi Jinping is seeing that same change as
well and he's becoming more draconian. They've become the most
impressive surveillance state in the history of the world, not
only domestically in China, but as well, as we heard, here in
the U.S. Those 320,000 students who come to the U.S. are forced
to have Chinese phones with WeChat so the Chinese can monitor
them here.
So, when you are here, whether you're a student or
researcher, and you get a call from the Ministry of Security
asking you to do something for them and your grandmother is
sick or your father needs a job, you are going to do whatever
they ask you to do. So as much as we see a change in the want
of the Chinese young people to get Internet, the quicker we see
that the quicker the Chinese Communist Party disallows them to
have the Internet.
Senator Blunt. Thank you. Thank you, Chairman.
Chairman Warner. Thank you. Senator Bennet.
Senator Bennet. Mr. Chairman, I want to first start by
thanking you for not just holding this hearing, but for the
focus of the Intelligence Committee's attention on this subject
for quite a while. I've been on the Committee now for three
years and what I'm about to say, I didn't know before I had the
benefit of the hearings that we have had, and that is that the
Chinese Communist Party, the Chinese government, will use any
means licit or illicit to pursue their China First policy. The
question for us is whether we're willing or whether we're going
to be collateral damage in all that.
And this isn't just a fight or a competition, let's use
that language--a competition between two economies--it's a
competition between democracy on the one hand and
totalitarianism on the other. It doesn't have anything to do
with, as you said, with the decision the Chinese people are
making, but they are the decisions that the Chinese government
has made, and increasingly, in the last decade, exported around
the world. So we're facing the consequences of that all over
the world. That creates a huge and heavy burden for us and for
our democracy, I think. It calls into question some of the
idiotic battles we've had around this place instead of our
attention being focused where it ought to be focused.
It calls into question whether or not we've done enough to
work with our allies and other democracies around the world and
other economies around the world who share similar equities to
ours with respect to China, which the good news is almost every
other economy and every other democracy in the world. Not
everyone, but almost everyone shares those equities. And that's
why in the end, I'm optimistic. I think we can compete because
I think we've got a much better system than they have--when
it's working, properly when it's working well.
So, I actually, in all of that, have a question. Maybe I'll
start with Mr. Pottinger just because he's not here and anybody
else who would want to answer it. If you disagree with anything
I said, please feel free to do that. This is America, you can
do that and be happy to have it. But if you don't, I'd be
curious what message you would like to send, to go back to the
Chairman's initial question, to private equity firms in the
United States, to their leadership, the leadership of venture
capital firms, and other investment firms that are investing in
Chinese technology. Imagining that somehow, it's not dual-use
technology, imagining that somehow the Communist Party isn't
going to be the beneficiary of this, and telling themselves
that that ROI that Bill talked about, somehow, is worth
whatever the risks are.
So why don't we start, Mr. Pottinger, with you?
Mr. Pottinger. Thanks, Senator. I think that the argument
on returns on investment is rapidly evaporating. We saw the
obliteration of close to a trillion dollars in shareholder
value just in the last several weeks as Chinese stocks were
systematically rectified by regulators in Beijing. So that
argument, I think, over time, is going to atrophy.
But what I would tell private equity investors, including
venture capital investors, is that ultimately, many of the
technologies that they're investing in, in fact, arguably
almost every successful Chinese tech company that exists today,
was seeded with Silicon Valley or other foreign venture capital
money, as well as with Silicon Valley know-how. And we know
that some of those companies have now applied their technology
to some of the most nefarious human rights atrocities since the
mid-20th century. So that is going to come back to haunt
companies reputationally, in ways that I think a lot of
companies aren't yet prepared for.
Senator Bennet. I have got 40 seconds left. I don't know if
either of you would like to comment on that.
Mr. Evanina. I would just like to amplify Matt's message. I
would say, the most painful salt in the wound is when American
investors invest in tech companies in China where that
technology was stolen from the U.S. in the first place. And
then we are forced to buy that technology as consumers at the
end of the day. So, the fruits of our thoughts and our
ideations in technology were stolen, and then they were forced
to purchase them back from the Communist Party of China, is the
painful salt in the wound.
Senator Bennet. Thank you, Mr. Chairman.
Chairman Warner. Senator Cornyn.
Senator Cornyn. Well, in typical Washington fashion, let me
start out with some acronyms: CFIUS, FIRRMA, ECRA, and FARA. I
want to ask two questions about those topics.
One is in 2018, we did export control reforms. We reformed
the Committee on Foreign Investment in the United States and
gave the Treasury Department, which convenes the CFIUS, a lot
more resources. And I'd like to get your analysis of what's
changed and what needs to change, what hasn't changed.
And then, on FARA, we've done a lot of work, I know
particularly in the Judiciary Committee, Senator Feinstein and
Senator Grassley and me trying to get reforms of the Foreign
Agents Registration Act. The Lobbying Disclosure Act, I think
it's called, provides an out for foreign agents to register as
lobbyists but not as foreign agents, and basically impeding the
benefit of our knowing who's a foreign agent and who's not.
I think this is one of the biggest untold problems that we
have dealing with foreign countries, including China, is we
know other countries hire lobbyists and other agents. But if we
don't know who they are and what their agenda is, it's pretty
hard for us to put that in the proper context to protect
ourselves. We're supposed to represent our constituents and
Americans, not the interests of foreign countries, but if we
don't know who's who, it's a real problem.
So I might ask the three of you, if you have something you
could tell us about CFIUS and FIRRMA and export controls, and
if you feel like we are where we need to be if there's more we
need to do. And then, I think I heard Mr. Pottinger talk about
FARA as I was walking in, but I would invite any one of the
three of you to talk about that issue as well.
So maybe, Mr. Evanina, can we start with you?
Mr. Evanina. Thank you, Senator.
Great question. And all three, CFIUS, FARA, and FIRRMA, are
very important aspects of how the government deals with this
epidemic. I do think that subsequent to legislation a few years
ago, I think we still need to appropriate more resources to it.
I think, yes, it was housed in Treasury, but there are multiple
other agencies who can add value to that who did not increase
resources to that effort. So, I do think it's the right
vehicle. There are just not enough people in that vehicle to do
that work. So, caution with that.
Secondarily, I think the premise of some of these is a
little skewed because, as Anna talked about the nontraditional
collectors who come here either wittingly or unwittingly
working for the Communist Party of China, don't know their
lobbyists and don't know they're here registering as a foreign
agent. Most likely, they're not. And oftentimes, they can
conduct high-level research at a ceramics lab or an institute
and then get a phone call one day from someone back home. They
don't know that they're an agent of a foreign power and they
don't know that they're a lobbyist. So, I think, sometimes, the
nomenclature and lexicon need to be shaped and formatted more
toward the nontraditional collector.
Senator Cornyn. Ms. Puglisi, would you care to comment?
Ms. Puglisi. So, it's encouraging, all of the hard work
that everyone on the Committee has done, especially in these
different areas. I think going forward, going back to my
remarks, I think it's important to remember the multifaceted
ways that China targets our technology and how different the
systems are. I think one of the challenges, as we break this
problem down into specific slices, we as a country, because we
are a law-based society, because we are a rules-based society,
try to get things narrow to a specific point. But when we're
dealing with a non-rules-based adversary or entity, it makes
those policies much more difficult to not only enforce but to
have the desired outcome. And so I think as we move forward, we
need to think about what is the desired outcome of the efforts
across the board with technology acquisition and how do we
mitigate some of these activities. And design policies and
programs in addition to the ones that we already have that get
at how do you deal with a non-rules-based entity.
Senator Cornyn. Mr. Pottinger, would you care to comment?
Mr. Pottinger. Senator, thanks for your leadership on
FIRRMA a few years back, which was a real improvement on CFIUS.
I would say that where there's still a loophole is in the area
of venture capital and private equity. Beijing benefits
enormously just from having a seat on those funds. It gives it
a sort of a panopticon to see all of the newly emerging
companies and technologies that they want to then target for
more in-depth scrutiny and investment and theft. On the FARA
front, making it a searchable public database that's frequently
updated so that it becomes much more public and much more
comprehensive. All of that activity that you referring to, some
of which is not currently captured but which needs to be. Thank
you.
Chairman Warner. Senator Casey.
Senator Casey. Mr. Chairman, thanks for having this hearing
and focusing our attention on these issues in this open
setting.
I wanted to start by making reference to Mr. Evanina's
background. He's a Lackawanna County, Pennsylvania native; a
Valley View High School graduate; also a degree from Wilkes
University. So, I just hope after your career is over that you,
at least, retire in Lackawanna County.
But we're grateful for your public service and for the work
you continue to do, I will probably direct what I hope there
would be two questions to Ms. Puglisi and Mr. Pottinger, but
Bill, feel free to weigh in as well.
I wanted to start with an issue that Senator Cornyn and I
worked on, especially in the lead-up to the most recent
competition legislation. We introduced a bill called the
National Critical Capabilities Defense Act. It would establish
an interagency committee to review outbound transactions, not
inbound, but outbound, by U.S. firms to nonmarket economies
like China that would, in my judgment, the judgment that a lot
of people result in the outsourcing of critical supply chains
and create further U.S. dependence upon a nonmarket economy
like China.
I guess my first question is to what extent is that kind of
outbound investment by U.S. companies to nonmarket economies
like China compromising our supply chain security and then
subsequently our national security?
Ms. Puglisi. Thank you, Senator. I am not familiar with the
legislation that you put forward, but I will comment on the
supply chain question, the latter part. I think it's very
important. And we see just most recently with PPE and how
unreliable some of those supplies were. A colleague of mine is
doing a lot of research on medical supply chains, and
especially as we discuss how do we have pandemic responsiveness
when our supply chain, especially for APIs, especially for some
basic drugs, are not located here. And so, I think, that gets
back to the comment that I made in my prepared remarks about as
we're examining the supply chains, we really need to look at
what is the best value for the Nation as opposed to the lowest
cost.
But that also gets at some of the market access issues as
well, because we have seen cases--and I actually put in my
written testimony--about cases where because of that market
access, we have pharmaceutical companies that are sending or
closing down those API, or can view more basic drugs
manufacturing here, and actually manufacturing those in China.
So, with the draw, then they'll be able to sell some of their
more lucrative materials there.
Senator Casey. Thank you. Mr. Pottinger, any thoughts you
have?
Mr. Pottinger. Thank you, Senator. I laud the goal that
you're pursuing here with this legislation, which I haven't yet
read. But look, the Department of Commerce has already declared
six nations that are ``adversaries'' of the United States.
China is at the top of the list, together with others that you
might imagine--Russia and Iran and a few others. One of the
reasons that Beijing may have felt so confident--and it really
didn't bat an eye before destroying almost a trillion dollars
in shareholder value in its publicly listed firms in the United
States--was because it's getting tens of billions of dollars
through other means from more passive sources in the United
States. These are institutional investors who are passively
tying their money in the form of bond purchases and stock
purchases to indexes. These index providers are weighing
Chinese companies much more heavily than they used to, even as
China becomes less and less transparent of an ecosystem to
invest in. Almost every American reporter is now being kicked
out of China. We've no idea what's going on with Chinese
companies. Yet, these index providers keep putting more
prominent weighting on Chinese companies so that more and more
passive investment, ultimately hundreds of billions of dollars,
is going into Chinese stocks and bonds. That's a big problem.
So, I think if we were to have sort of an outbound CFIUS
mechanism, that's definitely worth exploring. The others look
at Hong Kong as well. Hong Kong has now, unfortunately, been
turned into a typical Chinese city, and we should be treating
them the way that we treat mainland China when it comes to
inbound and outbound investment.
Senator Casey. Thanks very much. Mr. Chairman, I'll submit
a question for the record on intellectual property--but we'll
do that for the record.
Chairman Warner. I think you're pursuing an interesting
line of questioning, and I think what Mr. Pottinger just said
there, it wasn't just the folks who went directly into some of
these companies who lost all this value but, oftentimes, the
passive investors. And the thing is these companies are not
going to disappear. They may simply be replaced with more
Chinese investors and a more compliant leadership in those
firms.
Senator Gillibrand.
Senator Gillibrand. Thank you, Mr. Chairman.
Mr. Evanina, you were the head of the National
Counterintelligence and Security Center. In 2018, DOJ required
state-sponsored media outlets like Xinhua News and China Global
Television Network to register as foreign agents. Yet, when
Americans visit those websites, when Americans read or listen
to watch those stories, there isn't even the most basic
labeling information for the consumer that they're visiting a
foreign agent registered news site.
This is true for Russia, too. Russian media outlets like
Sputnik that run influence operations through radio shows in
the U.S. are forced to register as foreign agents by DOJ, but
no one notifies the Americans who are listening to the shows or
who are reading their stories. And I think that's really
irresponsible.
Why is the burden on the U.S. consumer to go to the DOJ
website to hunt down FARA filing forms to know where they're
getting their information?
Mr. Evanina. Senator, thanks for the question. And I think
you were getting at the heart of what I believe to be the new
frontier, which is malign foreign influence. And I think we
look at how countries like China and Russia facilitate their
influence here. It starts with media, and it plagues social
media, TV stations, newspaper print, and we are unable to see
it. And I will proffer that the U.S. government's inability to
look at media due to constitutional issues provides a vast,
gaping hole for who should do that, right?
I think it's unfair, as you said, for constituents to
understand--and they're not going to go to the DOJ website--but
we don't have a reference. State Department has a Global
Engagement Center. We don't have a domestic engagement center
to help, advise, and inform Americans as to how to identify
where that influence is and what might be true or what might
not be true from that website. So, I do think we have a hole to
fill with respect to understanding malign foreign influence and
to help Americans everyday living technology but also with
elections in the future.
Senator Gillibrand. Where would you place that domestic
engagement center, under what agency?
Mr. Evanina. Well, I would have to think more on that,
Senator, but off the top of my head, I would say it would have
to be partly in the Intelligence Community where can garner the
most real-time actionable intelligence from our collection. At
the same time, it has to have a vehicle that could produce that
intelligence unclassified to the consumers around America.
Senator Gillibrand. Right. Because shouldn't this basic
foreign agent information be affirmatively provided to American
consumers, so they can make informed decisions about where the
foreign state-sponsored news is actually coming from?
Mr. Evanina. Yes, and to that point, I think if you look at
things from an agency perspective of the goals,
responsibilities, and the agency's names, I would say
Department of Homeland Security would be the right nomenclature
for that kind of role.
Senator Gillibrand. So do you think that FARA needs to be
strengthened or clarified in some of those loopholes that allow
China and others to push their misinformation without any
consumer protection notice?
Mr. Evanina. Yes. I do think that any of these issues,
whether it be FARA or FIRRMA or CFIUS, should be relooked at
every year, because the technology moves and how we see it, our
adversaries change their tactics based upon legislation we
employ and our policies. We have to update year-by-year basis
to understand how China or Russia or Iran has revectored their
influence so we can act accordingly.
Senator Gillibrand. I think that also should apply in some
respects to our platforms, our social media platforms, because
especially in a current example like the debate about
vaccinations, a lot of Chinese and Russians are actively trying
to mislead Americans. And I think there has to be some
responsibility to the purveyors of this information to have a
way to know if they are foreign agents. Do you agree?
Mr. Evanina. I completely agree. And I look back the last
year or so, as Mr. Pottinger had referenced and as I went
through the election, the ability to siphon through maligned
foreign influence and messages that are factually not correct,
is a very difficult venue. And we look at the abilities of our
adversaries, Russia and China, to no longer cede information
here, but to use our own information to amplify for other
Americans takes on its own new weight of a really difficult
obstacle to be able to do that.
Senator Gillibrand. Ms. Puglisi, obviously, foreign
adversaries have tried to influence our country for a very long
time. This is nothing new. Russia has attempted to steal our
technology through investments, through exchange students,
through cyber operations, attempted to recruit, tried to
intimidate, stifle dissent, unflattering narratives, as does
China. So, obviously, this is problematic and serious, but the
question is what aspects of this threat are new, and is it
simply a question of the scale and breadth of China's
operations and theft of trade secrets that differentiate it?
And how should these distinctions shape our strategy and
counter their efforts?
Ms. Puglisi. Thank you, Senator, for that question. I would
say the aspects that are new is that it's more and more in the
civilian space. And I think if you raise the issue of the
Soviet Union, we look back and that was very heavily military-
focused. And some of my earlier comments about how our
traditional structure of CI is focused on intelligence
officers, on things that were completely illegal, things that
have a direct military application. And the way China targets
our technologies and the way it leverages its own diaspora, I
think, is something that's very new. It's also the scale and
scope, and the fact that these are central government programs
that have been in place for decades, that focus on the
influence piece, the civil technology piece, and really target
the gray areas of our civil society. And you pair that with the
largest crackdown on civil society that we're seeing in China
under Xi, and it's a really toxic mix.
Senator Gillibrand. Thank you. Thank you, Mr. Chairman.
Chairman Warner. Thank you, Senator Gillibrand.
I just have one more question, and I know we have a series
of six votes started, and that's why some of my colleagues
have, I think, gone back to the floor. One, I want to thank all
three of you. I liked one of Matt's ideas a lot--about all
these 360,000 down to 320,000 Chinese students--give every one
of those students an American phone when they got here, so they
are not surveilled constantly. But my sense of the Chinese
economy, one of the challenges we have, frankly, for any
American or for that matter, Western-based company--and I would
point out that while this Committee, I think, got ahead of the
game a little bit on spotting 5G, the first signs of warning
about Huawei didn't actually come as much from the Intelligence
Community. It came from places like Japan and South Korea and
elsewhere. But it seems to me that the Chinese economy has
allowed--I don't know if that's changing dramatically now as we
see the leadership and some of the value taken out of some of
the most successful tech companies in these last few months.
But for the last five to ten years, China would allow a
ferocious level of competition at least within the tax base.
But that competition would be allowed until a national champion
emerges, a la Huawei or ZTE. And in that space, no Western, no
American, for that matter, any Western company could actually
be on the competitive edge; they would never be allowed a
Western American company to kind of win in one of these new
technology areas. Matter of fact, as we know, with Facebook
being excluded or Google trying for a while and then leaving on
their own accord, and others. And the idea that that Chinese
technology winner then suddenly, even if they're independent
gets the full backing of the state--Huawei, we talked about a
hundred billion dollars plus--is really an economic model, kind
of an authoritarian capitalism model that I don't like, but
it's had a pretty successful record recently. Because if you
then combine that not only with the financial support but also
with the Belt and Road Initiative, the Digital Silk Road,
China's increasing power around the world, you suddenly had a
series of maybe not satellite countries in the traditional
mindset, at least countries that were dependent on China's
forbearance, because China happened to be also building a
bridge or building a road in many of those countries. You know,
I think that model is hard to compete against.
I think we've seen it as well, and I think this Committee
spent a lot of time looking around this issue which I raised in
my opening comments, around standards and rules of the game.
Again, within technology, because I would argue that--I'll use
the Sputnik as an example--but post-Sputnik, virtually every
major technology innovation over the last 60 years, if it
wasn't invented in America, we still got to set the rules and
the standards and the protocols. And those rules, whether it
was about transparency and respect for human rights, even in
technology standards, you can embed some of your standards. It
kind of crept up on us in 5G, and I say this is an old telecom
guy, where suddenly China was flooding the zone on these
international standards-setting bodies with engineers with
power.
And they are I would argue in many ways on the 5G issue,
they won the standard-setting component. And, unfortunately,
we're seeing whether it's in AI or facial recognition or a host
of areas where they have now had the audacity to lay out with a
great deal of specificity where they hope to dominate, they are
being fairly successful.
So, the question I have for all three of you, my last
question is, I don't believe we can do this alone. I think some
of our greatest strength has been our alliances--that there is
a moment in time where not just Five Eyes or not just NATO, but
democracies around the world. I would even argue that we may be
entering in an era of post-World War II, that was an era of
military alliances, NATO, SEATO, a series of other--. The 1960s
and 1970s or last century sort of European Union being a
classic example of economic alliances.
I think in 2021 and going forward we need to think about
technology-based alliances, and those alliances ought to be
based upon democracies who share those same sets of values and
goals of democracy. And that needs to start in areas like
standard setting. It is as where we have actually finally put
our money where our mouth is in terms of recent legislation
that virtually everybody on this Committee supported around
support for semiconductors. And we did get a smaller slug in
for 5G and O-RAN.
But I'd ask all three of you, and I'll start, Anna, with
you, then go to Bill, and then let Matt close out. How should
we think about this effort to get our allies better engaged
with us as partners, not into this bifurcation choice, either
going to be on our side or China's side, but do this in some
level of collaboration around technology development, around
standard-setting, around, again, promoting a very alternative
model to the authoritarian communism model or authoritarian
capitalism model that China has, frankly, practiced fairly
well?
Ms. Puglisi. Thank you, Senator.
You raised some really important points. I want to
highlight the model that you described as one that China has
laid out for its strategic emerging industries. It's winning
the China market first, creating that national champion, and
then having that go out and compete on the world stage. And
talking about Huawei, I think, is a great example of that. What
it highlights are those areas and what are those
characteristics of these different industries where profit
margins, national security, in some ways, go in opposite
directions, and how do we actually compete with that. Because
those industrial policies of our like-minded are very, very
different in scale, scope, and flavor than what we're seeing
with China. Forming those tech alliances will be, in my
opinion, very, very important.
We can't out-China China, let's face it. But we don't want
to. We want to double down on the advantages of our own system.
And that is working with our partners and allies in building
those innovation hubs, finding those niche areas. Some
countries will be set for tech alliances in certain areas, some
in different technologies. But it's also, I think, it's part of
that information sharing and risk calculation sharing that we
should have those dialogs about what's at stake, and how we can
use technology that are in line with our values and the values
of our allies and partners.
Chairman Warner. Thank you. Bill?
Mr. Evanina. Senator, first, thanks for having this
hearing. I think it's really important for the American public
to understand the issues that you and the vice chair brought to
the openness since we hadn't had any closed hearings for a few
years. I think your premise is right on our need to cooperate
and collaborate with our allies. However, I will proffer that
we need to lead in that collaboration. I think, with respect to
my colleague Anna's point, China is not going to change. And I
think it was one thing in D.C. that we have bipartisan support
on, is that China is going to be China and they're going to
double down.
We have to make a decision in America. Do we want to change
the way we operate? We're clearly bifurcated for the right
reasons between the government and the private sector. I will
proffer that it's time to change the way we look at that and
really look at how we are willing to change the construct for
partnering with private sector industry and technology to be
able to build coalitions between our government first in the
industry and then show that leadership to our allies in Europe
and other places, so they can use that as a framework.
We won that argument with Huawei for the same reason. I
think the next step with technology is to do the same
methodology: find champions in the U.S. and have the government
partner with so that we look at China as a competitor, not just
as an enemy, and we can compete, because we can compete because
we're America. And we will win if we may put our mind to it.
Secondarily, as we deal with Huawei, other countries and allies
will watch and learn and do the same methodology in their own
country to do the same diplomatic and technological solutions.
So, I do think we have an opportunity here with allies if we
change the way we do business here in the U.S.
Chairman Warner. Very good. Matt? And I recognize I've got
to go run vote in a moment.
Mr. Pottinger. You bet. Thanks, Senator. Very quickly, you
know, I agree with you. I think your vision for these sorts of
coalitions are around certain technologies--coalitions of the
willing, if you like--is the way that we need to go, and
there's precedent for that. During the Cold War, we had what
was called the coordinating committee where industry in Japan
and the United States and other allied countries made sure that
the Soviet Union didn't gain access to our most cutting-edge
semiconductor technology.
Here we are again. It's the same technology:
semiconductors. We've got to win that race. Commerce needs to
be brought firmly into the fold. The Bureau of Industry and
Security has to be really treated and think like a national
security arm of the U.S. Government, not a trade promotion arm.
If we're going to win on semiconductors, we've got to make
peace with the Europeans on these privacy issues and these
things that we're tied up with. Right now, the Europeans are
very inconsistent in how they're viewing privacy. They're
targeting American technology giants but they're not applying
the same standards to Chinese companies, which are going to be
truly harmful to the interests of Europeans and disrespectful
of people's privacy, of their data, and so forth.
So that's an area where we need to break through. But, I
think, I agree with you. With those kinds of coalitions, even
if it's not one neat global approach, but one of different
coalitions, I think we're unbeatable.
Chairman Warner. Well, thank you all. Just two quick last
comments.
One, to not just American industry, but all of the Western
industry that is invested in China, I don't know if we can
have--no problem with that as long as it's not at the price of
your values. As long as you do not surrender to, as Senator
Rubio pointed out, that you turn a blind eye to human rights
abuses or you are willing to be co-opted into taking policies
that you would not take, not only in the United States but, for
that matter, any other country in the world. That we have to be
constantly consistent on. And I think the business community
needs to continue to hear these messages in these open settings
and as appropriate in close settings as well so even further
information can be shared.
And then last point, and again, very much appreciate all
three of the witnesses that in your opening statements, you all
hit on this point. And that is that this beef, our concern, our
challenge, is with the Communist Party of China and its
leadership. And any forces in this country that instead play
into broad-based racist or xenophobic statements about the
Chinese people, the Chinese diaspora, Chinese-Americans, Asian-
Americans, frankly, do a disservice to our country and our
values, but also play right into the CCP's agenda that the only
place you will ever have a firm and permanent home is back in
China. And I think we, and I say this here for speaking on
behalf of all the Senators on this dais who are here today,
need to redouble our efforts to make that distinction and to
make sure that, particularly law enforcement--and I've spent a
lot of time with Director Wray on this issue, with the FBI and
others--reaching out on a very regular basis to the Chinese-
American diaspora in this country. They are under, Bill, as
you've made comments, under a level of pressure sometimes. That
is extraordinary and they are great Americans that they've
contributed enormously to our country, but we need them in this
challenge against the Communist Party's ideology. And any
observant person doesn't need, I think, further proof because
you see the very nature of the treatment of the Uyghurs or the
treatment of the people of Hong Kong. And we need to keep that
lesson and continue to make that point. I thank all of you for
your contribution. There is much, much more to be discussed. We
could have had a whole separate hearing just looking at the
individual technologies that China is investing in and trying
to outcompete us. We will have that opportunity.
But with that, the hearing is adjourned.
Thank you all.
[Whereupon at 4:36 p.m., the hearing was adjourned.]
[all]