[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]


                  STANDING UNITED AGAINST THE PEOPLE'S
                 REPUBLIC OF CHINA'S ECONOMIC AGGRESSION 
                          AND PREDATORY PRACTICES

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

                                HEARING

                               BEFORE THE

                       SUBCOMMITTEE INDO-PACIFIC

                                 OF THE

                      COMMITTEE ON FOREIGN AFFAIRS
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 18, 2023

                               __________

                           Serial No. 118-25

                               __________

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


       Available:  http://www.foreignaffairs.house.gov/, http://
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                               __________

                                
                    U.S. GOVERNMENT PUBLISHING OFFICE                    
53-222PDF                  WASHINGTON : 2023                    
          
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                      Committee on Foreign Affairs

                   MICHAEL T. MCCAUL, Texas, Chairman

CHRISTOPHER H. SMITH, New Jersey     	GREGORY MEEKS, New Yok, Ranking 
JOE WILSON, South Carolina               	Member
SCOTT PERRY, Pennsylvania	 	BRAD SHERMAN, California
DARRELL ISSA, California		GERALD E. CONNOLLY, Virginia
ANN WAGNER, Missouri			WILLIAM KEATING, Massachusetts
BRIAN MAST, Florida			DAVID CICILLINE, Rhode Island
KEN BUCK, Colorado			AMI BERA, California
TIM BURCHETT, Tennessee			JOAQUIN CASTRO, Texas
MARK E. GREEN, Tennessee		DINA TITUS, Nevada
ANDY BARR, Kentucky			TED LIEU, California
RONNY JACKSON, Texas			SUSAN WILD, Pennsylvania
YOUNG KIM, California			DEAN PHILLIPS, Minnesota
MARIA ELVIRA SALAZAR, Florida		COLIN ALLRED, Texas
BILL HUIZENGA, Michigan			ANDY KIM, New Jersey
AUMUA AMATA COLEMAN-RADEWAGEN,   	SARA JACOBS, California
  American Samoa			KATHY MANNING, North Carolina
FRENCH HILL, Arkansas			SHEILA CHERFILUS-MCCORMICK, 
WARREN DAVIDSON, Ohio			 	Florida	
JIM BAIRD, Indiana			GREG STANTON, Arizona
MICHAEL WALTZ, Florida			MADELEINE DEAN, Pennsylvania
THOMAS KEAN, JR., New Jersey		JARED MOSKOWITZ, Florida
MICHAEL LAWLER, New York		JONATHAN JACOBS, Illinois
CORY MILLS, Florida			SYDNEY KAMLAGER-DOVE, California
RICH MCCORMICK, Georgia			JIM COSTA, California
NATHANIEL MORAN, Texas			JASON CROW, Colorado
JOHN JAMES, Michigan			BRAD SCHNEIDER. Illinois
KEITH SELF, Texas      
                                    

                    Brendan Shields, Staff Director
                    Sophia Lafargue, Staff Director
                                 ------                                

                      Subcommittee on Indo-Pacific

                      YOUNG KIM, California, Chair
ANN WAGNER, Missouri                 AMI BERA, California, Ranking 
KEN BUCK, Colorado                       Member
MARK GREEN, Tennessee		     ANDY KIM, New Jersey
ANDY BARR, Kentucky		     BRAD SHERMAN, California
AUMUA AMATA COLEMAN RADAWAGEN, 	     GERALD CONNOLLY, Virginia
    American Samoa		     WILLIAM KEATING, Massachusetts
WARREN DAVIDSON, Ohio                JOAQUIN CASTRO, Texas
MICHAEL WALTZ, Florida

                     Daniel Markus, Staff Director
                           
                           C O N T E N T S

                              ----------                              
                                                                   Page

                  INFORMATION SUBMITTED FOR THE RECORD

Reuters article titled "China Detains Staff, Raids Office of U.S. 
  Due Diligence Firm Mintz Group."...............................     3
Wall Street Journal article titled "Bain's Staff in Shanghai 
  Questioned as China Targets Foreign Businesses."...............     8

                               WITNESSES

Raphael, Alon, CEO, Femtometrix..................................    17
Scissors, Derek, Senior Fellow, American Enterprise Institute....    24
Reynolds, Matthew, Fellow, Economics Program, Center for 
  Strategic and International Studies............................    35
Feith, David, Adjunct Senior Fellow, Center for New American 
  Security.......................................................    46

                                APPENDIX

Hearing Notice...................................................    73
Hearing Minutes..................................................    74
Hearing Attendance...............................................    75

    STATEMENT FOR THE RECORD SUBMITTED FROM REPRESENTATIVE CONNOLLY

Statement for the record submitted from Representative Connolly..    76

                   QUESTION SUBMITTED FOR THE RECORD

Question submitted for the record................................    78

 
                  STANDING UNITED AGAINST THE PEOPLE'S
                REPUBLIC OF CHINA'S ECONOMIC AGGRESSION.
                        AND PREDATORY PRACTICES

                         Thursday, May 18, 2023

                          House of Representatives,
                  Subcommittee on the Indo-Pacific,
                      Committee on Foreign Affairs,
                                                    Washington, DC.

    The subcommittee met, pursuant to notice, at 9:01 a.m., in 
room 210, House Visitor Center, Hon. Young Kim (chair of the 
subcommittee) presiding.
    Mrs. Kim of California. Good morning, everyone.
    The Subcommittee of the Indo-Pacific on the Foreign Affairs 
Committee will come to order.
    The purpose of this hearing is to spotlight different 
dimensions of the People's Republic of China's economic 
coercion, economic coercion tactics, and discuss how we can 
coordinate an allied response.
    I now recognize myself for an opening statement.
    Welcome. This is our Indo-Pacific Subcommittee's hearing 
examining the People's Republic of China's economic aggression 
and predatory practices. Today we will hear from experts on the 
PRC's economic coercion, and my goal for this hearing is to 
give the witnesses an opportunity to sound the alarm on the 
PRC's predatory practices against our partners, allies, and 
even everyday Americans.
    One of our witnesses is a firsthand victim of PRC's 
economic coercion and predatory practices. The PRC often 
successfully intimidates individuals and entities not to speak 
openly. So we thank you, Mr. Alon, for having the courage to 
tell your story publicly.
    I recall in October 2021 my colleague, Mr. Brad Sherman, 
said during the House Financial Services Subcommittee hearing 
on China that several financial industry representatives had 
withdrawn their original commitment to testify because of fear 
of backlash from China. It is unacceptable for the CCP to limit 
Americans' free speech and even more unacceptable that the CCP 
can do it without consequences.
    Last month, U.S. Chamber of Commerce warned that China's 
mounting scrutiny of American companies have dramatically 
raised the risks of doing business in the country.
    I would like to submit for the record a Reuters article 
titled ``China Detains Staff, Raids Office of U.S. Due 
Diligence Firm Mintz Group,'' as well as a Wall Street Journal 
article titled ``Bain's Staff in Shanghai Questioned as China 
Targets Foreign Businesses.''
    [The information referred to follows:]

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]	
    
    Mrs. Kim of California. These headlines are unfortunately 
the new normal for American businesses. And as you will hear 
from our witnesses, we are not doing enough to make these 
predatory practices consequential to the CCP. The CCP must know 
that every act of coercion will result in a countermeasure from 
the United States and its allies, and that the PRC must abide 
by the same international rules and norms that everyone else in 
the international community is bound by.
    We must also recognize the immense economic pressure that 
the PRC puts on our allies, partners, and friends around the 
world. The CCP uses debt-trap diplomacy through the Belt and 
Road Initiative to achieve its political goals abroad, so much 
so that it is willing to crash economies and generate 
instability as it did in Sri Lanka.
    This pressure is especially overt in the Indo-Pacific 
Islands, Pacific Islands, where PRC diplomats host politicians 
for dinner, and those politicians leave with envelopes full of 
cash and promises of major infrastructure projects.
    It is an unfair fight, and we need to show up. We must 
equip our diplomats in these countries to respond to economic 
coercion, and our diplomats need a clear sense of the direction 
we are going.
    To respond to economic coercion, the United States should 
take several steps. As a first step, American money and 
technology that fuels CCP coercion and predation cannot keep 
going to the PRC. It makes no sense to increase the PRC's 
ability to coerce the United States and help it gain more 
leverage over us.
    Second, if the PRC is unwilling to change coercive elements 
of its economy, the United States must make it more costly for 
the PRC to maintain that system. That means action on tech 
transfers and subsidies.
    Third, the United States needs to build a coalition of 
countries, in particular in the Indo-Pacific, that adopt the 
same actions. And I cannot stress enough the importance of 
coordinating our responses to economic coercion with our allies 
and partners in the Indo-Pacific. When even a few countries act 
in concert, we can undermine core CCP strategies and 
objectives. We must stand together to make sure each CCP 
coercive act against an aligned country fails.
    So I look forward to hearing from our panel on how to put 
these objectives into practice.
    The chair now recognizes the ranking member, the gentleman 
from California, Mr. Bera, for his opening statements.
    Mr. Bera. Thank you, Madam Chairwoman, and thank you for 
holding this hearing. This is a topic that I have spent a lot 
of time thinking about, we have introduced legislation on, and 
is incredibly important.
    Let me start by saying, you know, the PRC will, you know, 
try to put out a dialog saying, you know, that the United 
States is trying to, you know, isolate the Chinese 
economically. The truth is, we would like to maintain the 
status quo, which has lifted all the countries in that region 
through a rules-based order. But we have to respond to Chinese 
aggression and Chinese economic coercion, and the countries in 
the Indo-Pacific know firsthand.
    You can look at Chinese economic coercion against the 
Republic of Korea when we deployed THAAD batteries for the 
protection and the defense of Korea. You know, the Japanese 
have faced economic coercion and blowback. The Australians have 
faced economic coercion and blowback.
    You see Chinese aggression in the South China Sea. You see 
them encroaching on Vietnam's exclusive economic zone, the 
Filipinos' exclusive economic zone, and it is incredibly 
important for us to understand how they are using economic 
coercion and how we can counter this.
    Even more so worrisome is what they are doing in recent 
weeks and months. You know, we have seen direct targeting of 
American companies in terms of targeting of Micron. Now we are 
seeing them go after consulting companies like Bain Capital and 
others. And I would argue this is not in China's interest, 
because as they start to target specific companies, it will 
make it much harder for us to continue to think about how we do 
business in China, how investment flows into China, but, again, 
Xi Jinping has kind of signaled where he is headed.
    In the last Congress, we were able to introduce a bill and 
pass a bill, the Countering China Economic Coercion Act. This 
bill authorized the Administration to establish an interagency 
task force to respond to the PRC government's acts of economic 
coercion and required the evaluation of the impacts on U.S. 
business and economic performance.
    This Congress, in bipartisan support for robust response to 
the PRC economic coercion, we have introduced H.R. 1135, the 
Countering Economic Coercion Act of 2023, led by myself, 
Ranking Member Meeks, Chairwoman Kim, and Chairman of the House 
Rules Committee, Tom Cole. There is also a Senate equivalent.
    This bill would give the President new tools to provide 
rapid economic support to partners and allies facing economic 
coercion from the PRC and hold the PRC accountable for its 
actions. This is the type of legislation that we should be 
doing to make sure we can both support our allies but also 
react fairly quickly.
    It is also my hope that as the G7 meets in Hiroshima that 
they will also discuss economic coercion, and hopefully we will 
see, you know, some statements of support for rules-based order 
and how the G7 can work together to support one another, but 
also to support some of those smaller economies and smaller 
countries, should they face Chinese economic coercion.
    So, again, Madam Chairwoman, I appreciate your holding this 
hearing. I think this is an incredibly important topic, and 
this is a bipartisan, bicameral topic.
    So with that, let me yield back. And, again, thank you.
    Mrs. Kim of California. Thank you, Ranking Member.
    And other members of the committee are reminded that 
opening statements may be submitted for the record.
    And we are pleased to have a distinguished panel of 
witnesses before us today on this very important topic. Mr. 
Alon Raphael is the president and CEO of FemtoMetrix, Dr. Derek 
Scissors is a senior fellow at the American Enterprise 
Institute, Mr. Matthew Reynolds is a fellow in the economics 
program at the Center for Strategic and International Studies, 
and Mr. David Feith is an adjunct senior fellow at the Center 
for New American Security and was previously the U.S. Deputy 
Assistant Secretary of State for East Asian and Pacific 
Affairs.
    Thank you all for being here today. Your full statements 
will be made part of the record, and I will ask each of you to 
keep your spoken remarks to 5 minutes in order to allow time 
for members' questions.
    I now recognize Mr. Alon for your opening statement. You 
have 5 minutes.

          STATEMENT OF ALON RAPHAEL, CEO, FEMTOMETRIX

    Mr. Raphael. Chairwoman Kim, Ranking Member Bera, and 
distinguished members of the subcommittee, thank you for the 
opportunity to testify at today's hearing. It is an honor to be 
here and share my story.
    Today I will testify about my company's recent experience 
with trade secrets and intellectual property theft and how that 
theft highlights industry-wide vulnerabilities in developing 
advanced semiconductor production in the United States.
    I am the chief executive officer of FemtoMetrix, 
Incorporated, a small California-based company innovating in-
line process control tools for advanced semiconductor 
production. We produce a complex tool system that is both 
wholly unique and utterly vital to progress in advanced 
microchip manufacturing. Our tool system, the Harmonic F-
Series, uses unique non-destructive techniques to detect 
advanced microchip manufacturing blind spots created by the 
introduction of new materials, new processes, and new 3D 
architectures.
    FemtoMetrix was founded in 2011 building on decades of 
Department of Defense-funded research at various institutions, 
including Boeing, NASA, JPL, and the Institute for Space 
Defense Electronics. FemtoMetrix technology is essential to any 
country wanting to lead in cutting edge, integrated circuit 
manufacturing capability. It provides vital data to advanced 
chipmakers, increasing yields and decreasing the field failure 
rate of chips sold.
    Also, it is the only metrology tool in existence that 
functions in line for critical applications with the newly 
emerging chip structures and designs like Gate All Around, also 
known as Intel RibbonFET and Samsung MBCFET.
    In September 2020, FemtoMetrix's Vice President of System 
and Field, a Chinese national, resigned. Shortly after, another 
Chinese national hired at first's recommendation, also left the 
company, followed by a third. During their duties, the three 
Chinese nationals were trusted team members privy to the inner 
workings of FemtoMetrix's technology.
    The three had significant experience building, calibrating, 
and using the Harmonic F-Series systems, although they worked 
in different areas. One even invested in the company while 
employed there. As we later learned, the three individuals were 
able to piece together the trade secrets they were separately 
privy to and create a competing copycat business in China 
called Weichong Semiconductor.
    They made a business plan presentation that contained 
highly sensitive and proprietary information, which they used 
to solicit FemtoMetrix's customers, all while still employed 
there. In the business plan, they did not even remove 
FemtoMetrix's name from product images.
    FemtoMetrix also discovered that they covertly absconded 
with thousands of files and years' worth of proprietary 
information upon leaving the company and snuck those files to 
Weichong in China. In addition, because one was also an 
investor in the company, he had access to and seems to have 
taken additional materials.
    Weichong has also filed Chinese patents using FemtoMetrix's 
technology to publicize trade secrets and thwart legal 
challenges to enforce American trade secret laws. In 2022, 
FemtoMetrix sued the three Chinese nationals in Federal Court. 
Weichong has retained a multinational law firm to defend the 
lawsuit.
    Counsel for Weichong has Stated their intention to wage a 
legal war of attrition. Nonetheless, FemtoMetrix is committed 
to fighting and defending what is right, because the United 
States cannot afford to lose FemtoMetrix as that would 
critically undermine U.S. semiconductor capabilities and 
leadership.
    Assuming FemtoMetrix obtains a judgment, as a practical 
matter, it will not be enforceable in China. A permanent 
injunction would likely limit Weichong's prospects for 
expansion beyond China, but not within. The American legal 
system is not designed to address deliberate international 
thefts of this kind and is not adequate for the task.
    Foreign companies like Weichong have become accustomed to 
exploiting the court system's slow-paced and high cost. 
Alternative means of addressing such international theft are 
needed. Weichong is not an outlier but an exemplar for the 
theft of American intellectual property.
    It begins in China when someone like a venture capitalist 
knows someone else like a technologist. The technologist works 
to create rapport with the target company. Once the 
technologist has the required access and data, the venture 
capitalist funds a Chinese company supported by the stolen 
technology.
    The venture capitalist funds litigation through the copycat 
company and attacks American intellectual property and 
discloses trade secrets through published papers and patent 
applications. Then, predatory venture funds likely owned or 
controlled by foreign entities approach the undermined American 
company to invest, despite the foreign challenges.
    They seek proprietary information technology, customer 
status, and market position under the guise of due diligence. 
Their primary goal is to utilize leverage created by the first 
venture capitalist to eviscerate the American target company 
further. Developing a novel in-line process control technology 
costs between 20 and $100 million or more and takes 
approximately 8 to 10 years of development.
    During that extended pre-revenue period, new companies are 
vulnerable without significant support from large 
organizations. Small companies like FemtoMetrix are innovating 
against all odds domestically but cannot protect these 
innovations from foreign agents.
    Due to the theft of FemtoMetrix technology, Weichong is now 
a company making a vital tool for advanced semiconductor 
production. While novel hardware is fundamental to 
technological advances, in-line process control tools rely on 
algorithms to function and improve. When a tool is integrated 
into the production line of a microchip fab, its efficacy 
grows. This is because the algorithms learn from access to a 
more extensive data set.
    This means that if the Weichong tool is installed at 
leading-edge microchip makers' fabs instead of the FemtoMetrix 
tool, the FemtoMetrix tool will swiftly become obsolete. 
Moreover, the tool would be a Trojan horse, allowing Weichong 
to use the improved and improving algorithms in other areas, 
further accelerating foreign technological advancement.
    Last, a Chinese firm would be the sole supplier of the 
strategic global resource. There would be no competitive 
American source of this vital tool.
    Thank you.
    [The prepared statement of Mr. Raphael follows:]

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]	
    
    Mrs. Kim of California. Thank you, Mr. Alon.
    I now recognize Dr. Scissors for your 5-minute opening 
statement.

STATEMENT OF DEREK SCISSORS, SENIOR FELLOW, AMERICAN ENTERPRISE 
                           INSTITUTE

    Mr. Scissors. Thank you. The chair stole my thunder, so I 
am--but I will go into more detail. That is to say, if you want 
to respond to Chinese predation, the minimum step is to stop 
helping China become a better predator. We have been doing that 
continuously at times when China was less of a predator than it 
is now. There is no longer any excuse. American money and 
technology should not be allowed to help the PRC become better 
at coercing our allies and us and harming our interests.
    And to give an example, in the case that my colleague on 
the panel is talking about, can American money still flow 
freely to this Chinese firm while it is in U.S. court? Is there 
any warning provided to investors that you might be supporting 
a company that has been accused with merit of taking U.S. IP? 
Nope. Nope. No restrictions. We can pour money into that 
company.
    And, in fact, on the Chinese side, if you are successful in 
stealing IP, you become subsidized and more attractive to 
American investors. So let me flesh out the point--the main 
point.
    Let's start with the fact that we choose not to respond to 
Chinese coercion. We have the capability to do so. The measure 
showing this--I will just be brief. We have a little less debt 
than China, a little less of a debt burden. Hard to believe, 
because our debt burden is very high, but theirs is even worse. 
We are a little bit younger. Both trends of those are in our 
favor.
    The wealth gap as measured by Credit Suisse is widening 
between the U.S. and China. It is not a question of China is 
catching up quickly, catching up slowly. The wealth gap is 
widening.
    The annual GDP gap is about the same as it was 10 years 
ago. So the idea that we cannot stand up to the Chinese, that 
they are the rising power, we are the declining power, on the 
economic side does not make sense. Our allies of course are 
much richer and more prosperous than China's allies. They do 
not call them allies, but close enough, and that would widen 
the gap if we weren't able to work together with our allies.
    Let me say one more point about this. There is a lot of 
talk about the dollar losing its status to the yuan. There is 
no sign of that whatsoever. For that to occur, the Chinese 
would have to be willing to allow money to flow freely out of 
China, and they are afraid to do that. They are afraid to do 
that because they have mismanaged their economy.
    So until you see stories about money flowing freely out of 
China, worry about our support for the dollar, our policies, 
but do not worry about the yuan challenging us.
    With regard to China's industrial policy, the goals I think 
have shifted under Xi Jinping. That is a matter of debate. I do 
not think they have been trying to maximize growth, at least 
for the last 5 years. What they are doing instead looks more 
like gaining economic leverage, taking an indispensable 
position in key supply chains, so that they can threaten you 
and it is harder to threaten China.
    The tools have not changed that much. We have heard about 
one, which is coercive IP transfer. Another one is skewing 
competition in their favor through regulation and subsidies. 
Large swaths of the Chinese economy are guaranteed monopolies. 
State-owned enterprises have a national monopoly or a regional 
monopoly.
    There is a lot of revenue involved that makes them a 
difficult competitor on the revenue side. There are also 
subsidies for expansion globally, far in excess of what we 
considered in the United States.
    On the tech side, the original problem was requiring tech 
transfer to operate in China. Now they have become, as we have 
just heard, more predatory. You do not have to go to China 
anymore to have China steal your IP. They will come to you and 
steal it.
    The U.S. responses, in the last minute and a half, we have 
done very little. The tariffs that were imposed during the 
Trump Administration had little effect on trade. And during 
that--and I use this expressed very sarcastically--during the 
trade war, U.S. investment--so 2017 to 2020--U.S. investment in 
Chinese stocks and bonds rose $780 billion. I really would like 
someone to declare a trade war on me, and I will issue a bond 
and money will pour in. That is not standing up to China.
    The Biden Administration has been extremely hesitant in its 
responses in my view. Congress tightened export controls in 
2018. The Bureau of Industry and Security, first under the 
Trump Administration, and then the Biden Administration, 
ignored part of that tightening with regard to foundational 
technology, and then set it aside.
    We had chip export controls promulgated by the Department 
of Commerce in October of last year, but we have not gotten the 
final version and we are still negotiating with South Korea. 
South Korea is currently exempt from those chip controls, which 
undermines their purpose.
    On the stop helping side, we need to pass binding 
legislation, not an executive order--executive orders are 
always inferior to congressional action--that reviews 
investment, and there is a simple principle. If we do not let 
the Chinese buy it here because we are protecting the 
technology, we should not allow American funding to develop it 
in China. That is not a sensible action on our part, a set of 
policies where you cannot buy the technology, but we will help 
you fund it.
    Last, I would say there are others, but punishing a few 
high-profile beneficiaries of IP coercion, we are not going to 
be able to do this comprehensively. The cat is out of the bag. 
But we would send a signal to the Chinese that there could be 
consequences if you steal American IP.
    [The prepared statement of Mr. Scissors follows:]

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]	
    
    Mrs. Kim of California. Thank you, Dr. Scissors.
    I now recognize Mr. Reynolds for your 5-minute opening 
statement.

   STATEMENT OF MATTHEW REYNOLDS, FELLOW, ECONOMICS PROGRAM, 
         CENTER FOR STRATEGIC AND INTERNATIONAL STUDIES

    Mr. Reynolds. Thank you, Chairwoman Kim, Ranking Member 
Bera, and distinguished members of the subcommittee. It is an 
honor to be here today, and I look forward to discussing this 
important topic with you all.
    I have been asked to talk today about our recent CSIS 
economics program report entitled Deny, Deflect, Deter: 
Countering China's Economic Coercion. China's economic coercion 
carries real costs for the firms and sectors that find 
themselves down range of Beijing's bullying tactics. The threat 
of coercion can deter allies and partners from pushing back 
against Beijing's malign behavior in other domains, whether 
that be human rights violations in Xinjiang or the suppression 
of democracy movements in Hong Kong.
    That said, China's use of economic coercion carries costs 
for Beijing, too. Therefore, a well-informed counterstrategy 
presents an opportunity for the United States to exploit 
Beijing's missteps and assert leadership on the global stage 
while also enhancing our soft power.
    In our report, we looked at eight prominent cases of 
Chinese economic coercion that spanned approximately the past 
13 years. Although each instance of Chinese economic coercion 
is unique, common patterns and characteristics emerged across 
the cases examined. We detail several of those characteristics 
in our report, but I will briefly go over three of the most 
salient here.
    First, China displays a preference for implementing its 
course of measures through informal means. This provides 
Beijing some plausible deniability.
    Second, Beijing prefers to target items in which it enjoys 
an asymmetric advantage in the structure of trade.
    And, third, China displays a cost and risk aversion. This 
complicates its ability to inflict a significant economy-wide 
cost on the countries it targets.
    Our most surprising finding, however, was just how 
ineffective China's economic coercion was. Across the cases, 
Beijing had only mixed results at achieving its short-term 
goals, and in fact Beijing's bullying often carried long-term 
strategic costs for China as well.
    Take Australia's experience, for example. Despite 
restrictions on its wine, coal, and some agriculture products, 
Canberra has refused to back down in its efforts to counter 
Chinese interference in its domestic politics and in its calls 
for an investigation into the origins of COVID-19.
    In fact, Canberra has only been pushed into greater 
strategic alignment with the United States since China's 
bullying began, signing onto the AUKUS security agreement in 
2021.
    Australia's case also highlights another interesting 
finding from our report. That is that China's economic coercion 
intersects with U.S. interests in a more counterintuitive way 
than one might at first expect. China's economic coercion 
certainly works against U.S. interests in the obvious ways, in 
that it challenges the rules-based international economic 
order, divides allies and partners, and makes it more difficult 
for the United States to build coalitions to push back against 
China's malign behavior in other domains.
    However, at the same time, China's economic coercion can 
actually work with U.S. interests by driving trade 
diversification, harming China's global image, and pushing 
targets closer to the United States, again, as we saw in the 
case of Australia.
    That is not to say that China's economic coercion should be 
tolerated. A world free from China's economic coercion is 
preferable to one where the thread of coercion looms over the 
decisionmaking of sovereign nations. Therefore, based on these 
key insights from our report, we recommend a counterstrategy 
which aims to deter China's economic coercion by building 
resilience and providing relief to targeted allies and 
partners.
    The United States can help countries build resilience in 
two primary ways, the first being through the negotiation of 
free trade agreements that offer signatories real market 
access, and the second by preemptively helping to identify the 
mitigate countries' vulnerabilities to China's economic 
coercion. The ongoing supply chain resiliency initiatives that 
have emerged in the wake of COVID-10 offer logical platforms in 
which to embed these efforts.
    When China does coerce, the United States should be ready 
to quickly provide relief to targeted countries. The United 
States has several existing tools it could use to do so, such 
as export financing, temporary tariff relief, and sovereign 
loan guarantees, to name a few. We also recommend augmenting 
this toolkit with the creation of a new coercion relief fund.
    The counterstrategy should also be embedded in a larger 
diplomatic messaging campaign, which draws attention to U.S. 
efforts to build resilience and provide relief to targets while 
also shaming China for its bullying behavior. The United States 
should also seek to multilateralize its response by encouraging 
allied countries to adopt similar strategies.
    It is, therefore, encouraging to see reports this week that 
the G7 is discussing how to jointly counter China's coercion. 
In this way, the United States can mitigate the cost of 
coercion for allies and partners, further reduce the 
effectiveness of China's bullying, and over time demonstrate to 
China the futility of its actions.
    Thank you, and I look forward to your questions.
    [The prepared statement of Mr. Reynolds follows:]

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]	
    
    Mrs. Kim of California. Thank you, Mr. Reynolds.
    I now recognize Mr. Feith for your 5-minute opening 
statement.

STATEMENT OF DAVID FEITH, ADJUNCT SENIOR FELLOW, CENTER FOR NEW 
                       AMERICAN SECURITY

    Mr. Feith. Thank you. Chairwoman Kim, Ranking Member Bera, 
and members of the subcommittee, it is a privilege to testify 
today.
    My testimony has three purposes. First is to define the 
problems of China's economic coercion. This is an enormous 
challenge for U.S. foreign policy and national security. The 
harm we face is broader than the bullying of individual 
countries in a handful of cases.
    Economic coercion is central to Chinese leader Xi Jinping's 
grand strategy. Collecting and exploiting leverage over foreign 
targets is how Xi approaches the outside world. It has helped 
him perpetrate genocide in Xinjiang with impunity. It is part 
of why he may feel confident enough to invade Taiwan and 
discount the risks of world war.
    In the coming years, China wants to become a kind of super 
OPC, controlling key world economic supplies as leverage over 
all of us. These are the stakes.
    My second purpose is to suggest how the United States and 
our allies should counter China's strategy of economic 
coercion. Much of the debate on this matter has focused on 
mitigating the harm done to victims of China's policies. We 
should also seek to deter China by imposing costs on its 
coercive behavior. To do this well, however, U.S. and allied 
policymakers need to know more about relative strengths and 
weaknesses in our economic relationships with China. We can 
improve our knowledge by launching a 301-style investigation in 
Washington, akin to the effective 301 investigation into 
Chinese unfair trade practices undertaken in 2017/2018.
    The U.S. could also lead, perhaps via the G7 or AUKUS, in 
the creation of a standing multilateral body for studying these 
issues together with allies. Most of all, we should limit U.S. 
and allied exposure to Chinese coercion in the first place by 
limiting trade with China in strategic areas. It is important 
to ensure that the U.S. and allied balance of dependence with 
China, especially in key technologies, continues to favor us.
    My third purpose is to warn that current U.S. policies are 
increasing America's exposure to economic predation by China. 
We have important environmental interests, for example, but 
increasing our reliance on Chinese solar panels and Chinese 
components for electric vehicles is dangerous. It creates 
national security perils similar to those that Germany 
inflicted on itself by becoming dependent on Russian energy in 
the years before the Ukraine war.
    My written testimony has more details on all these matters. 
For now, I will note further that this challenge is 
unprecedented in our history. The United States has never faced 
a geostrategic rival with as much economic coercive power as 
Beijing wields today, let alone the economic coercive power 
that Beijing credibly seeks to wield in the future.
    The Communist party's goal is to decrease China's 
dependence on high-tech imports from other countries while 
making other countries more dependent on imports from China, 
especially for critical technologies. The aim is to maximize 
global economic leverage for future coercive use. It bears 
repeating: the goal is for China to become a super OPEC of the 
21st century, a single country that decisively controls crucial 
economic inputs for the world economy.
    Policymakers should constrain these aspirations now, first, 
through coordinated deterrence; second, through strict limits 
on China's access to technology, capital, and data controlled 
by the United States and our allies. We should not wait until 
China has taken fateful steps, such as attacking Taiwan, that 
could lead to superpower conflict.
    We and our allies require a strategy of constrainment to 
counter China's economic coercion. This strategy would take 
note of the realities of economic interdependence and aim to 
adjust them to serve Western security interests. Constrainment 
can provide deterrence, working to deflate the confidence of 
Chinese leaders that they can achieve their aims through 
aggression and war.
    We do not want Chinese leaders to feel optimistic about 
their coercive economic leverage over us and our friends. The 
new U.S. and allied export controls on semiconductor technology 
are a step in the right direction. If enforced diligently, the 
rules could foil China's ambition to make itself a home for 
advanced chip manufacturing. They can ensure that China remains 
dependent on the United States and our allies for these 
critical supplies.
    While we are at it, U.S. and allied policymakers should not 
ignore so-called mature semiconductor production. We do not 
want China to dominate the global production of chips needed 
for lower end electronics such as cars and critical 
infrastructure systems either.
    Constrainment should strive to maintain a favorable balance 
of dependence in a wide range of areas. It should, for example, 
strengthen the dominance of the U.S. dollar as a global reserve 
and trading currency, extending Washington's ability to monitor 
and punish money laundering, weapons proliferation, bribery, 
and other dangerous actions by Beijing.
    Constrainment should remind China of its dependence on 
foreign sources of food and energy while reversing our growing 
reliance on Chinese batteries, solar panels, and other green 
technology. The green technology point is especially crucial 
because trend lines appear to be moving fast in the wrong 
direction.
    As Washington subsidizes solar energy, electric vehicles, 
and other renewable technologies, are we protecting against the 
risk of growing dependency on China? Failure to do so would be 
grave strategic neglect.
    National Security Advisor Jake Sullivan recently gave a 
speech underscoring the importance of both greening U.S. energy 
supplies and limiting ``dependencies that could be exploited 
for economic or geopolitical leverage.'' Yet there appears to 
be little in current policy or in the language of the Inflation 
Reduction Act, or other such bills, to ensure that we are 
protecting ourselves properly.
    We should reduce risks that U.S. subsidies and green energy 
targets give greater coercive power to China. We should 
carefully review the downsides of Chinese renewables exports 
into the U.S. energy market.
    Let's draw on the wisdom of the Hippocratic Oath. China 
already has enormous----
    Mrs. Kim of California. Sir, your time is up.
    Mr. Feith. Thank you.
    Mrs. Kim of California. And we will make note that your 
full written testimony is in the record.
    [The prepared statement of Mr. Feith follows:]

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]	
    
    Mrs. Kim of California. I also do want to make a quick 
announcement that our votes are called at 9:40. So we will go 
as long as we can with member questioning, but we may have to 
take a short break to go and vote and come back.
    I want to thank all the witnesses for joining us and, you 
know, sharing your testimony.
    Mr. Alon, I want to thank you again for coming and for the 
courage to tell your story publicly. And I just want to ask you 
to elaborate on your experience, so we can understand how we 
can stop what happened to you from happening to other American 
companies in the future.
    Mr. Raphael. May I ask which aspect I should elaborate on?
    Mrs. Kim of California. The challenges, the coercion, what 
kind of experience you had where you are doing business with 
China.
    Mr. Raphael. I have not done business with China, but 
apparently China has done business with me.
    [Laughter.]
    Mrs. Kim of California. Is stealing the information you 
have.
    Mr. Raphael. Correct.
    Mrs. Kim of California. So then can you talk about some of 
the laws or regulations that is--I know I was told that you 
were approached by China to try to sell your business to them, 
and you did not do that. So could you talk about that? You 
know, what stopped you from selling your company to a PRC 
venture capital?
    Mr. Raphael. I cannot confirm that they were a PRC venture 
capital, but I know they are Chinese. And what stopped me is 
because I am an American and I sell a critical technology that 
if I am the only source of that ends up in Beijing, and I am 
approaching you saying ni hao, then I have a very different way 
of looking at the world than that of an American.
    Mrs. Kim of California. Thank you. Is there anything else 
that you can share with us about the challenges, so we can have 
the public, especially the American companies, trying to, you 
know, do business with China, or if they are facing with a 
similar economic coercion from China?
    Mr. Raphael. We are relying on policymakers to creatively 
utilize all the tools in the toolbox to help us. So what I can 
suggest is that, you know, my stick is the courts, and it is 
ineffective.
    Mrs. Kim of California. Thank you.
    Mr. Scissors, you know, I recently joined Congressman Ed 
Case to introduce legislation authorizing the President to 
implement a pilot program of economic defense response teams to 
provide emergency technical assistance to countries who are 
subjected to coercive economic measures. You are aware of that, 
though, right? Yes.
    So what is missing in our response to countries under the 
threat or use coercive measures? And do you think the response 
teams referenced in that legislation can improve our response?
    Mr. Scissors. I am sorry to say this, but I think what is 
missing is credibility on our side. You know, we--basically, 
when you are being--if China is coercing another country--
Australia, Lithuania, South Korea, Taiwan--the No. 1 thing the 
U.S. would like to have is to tell people, ``Hey, we have to 
work through our policies. We have to implement our 
legislation. But trust us, we are going to come help you.'' And 
I do not know that we always have that. We do not have that in 
part, as you and I have both mentioned already, because we are 
helping China at the same time we say we are going to help 
whatever country is being targeted.
    We also do not have it because the American policy attitude 
toward trade has changed in roughly the last 10 years, where if 
you say something like, ``Oh, you know, to help out a fairly 
major exporter of a product, we are going to make it easier for 
them to sell to the United States because the Chinese are using 
their market size to coerce them,'' you are going to get 
opposition to that. You know, people are going to say, ``No, 
no, no. The China coercion part is not as important as the 
trade part.''
    And so I think any steps Congress takes, they do not have 
to be large, if they are credible, if they are put into law--
and this is not an attack on any Administration--EOs die off. 
If Congress takes steps that are put into law, that is going to 
help, because I think the first thing we need to do to reassure 
our allies is to say, ``You can trust us. It might take us a 
while, but we are on your side, and we will take steps to show 
that.''
    Mrs. Kim of California. Thank you. You know, one of the 
things that we can do is to ensure that PRC does not have the 
tools to use the coercion in the allies, and especially in the 
Indo-Pacific war in developing countries that need help from 
us, which is why this Congress, we passed--the PRC is not a 
developing country.
    They are using that as a--in a way to game the system, so 
they can use that special status to get the low interest rates 
or no interest rates from the international groups like the 
World Bank, IMF, and then they use that loan to backstop and 
reinvest in those developing countries that truly need help to 
set up the debt trap. That is one of the things that I think we 
are using, but I know there is a lot more that we can do.
    Mr. Feith, I want to ask, how do we get allies to join the 
cause to push back on China?
    Mr. Feith. Well, there is a need for the sort of support 
and consultation that we have talked about, certainly for the 
sort of supply chain resilience. You know, there has been a lot 
of certainly post-COVID greater discussion about shifting 
supply chains, but I think this economic coercion issue raises 
the illustration of how really enormous that issue is.
    It is fundamentally about macro trade relationships in the 
world and unwinding really decades of shifting of greater 
exposure of the U.S. market and of our allied markets to China. 
If that isn't reversed, China's ability to coerce will continue 
to grow.
    Mrs. Kim of California. Thank you.
    Let me now recognize Ranking Member Bera for your 5 minutes 
of questioning.
    Mr. Bera. Thank you, Madam Chairwoman.
    Yes. Sometimes we are slow to recognize the threat, and so 
forth, but I think everyone's eyes are wide open today. You 
know, a decade ago, two decades ago, the hope would have been, 
as, you know, China developed a middle class, an 
entrepreneurial class, they would adopt what a lot of the rest 
of the world has, free market opportunities, and so forth.
    Clearly, we do not have to guess the direction that Xi 
Jinping's PRC is headed. You know, he has certainly signaled 
where he wants to go. And, again, maybe we are a little slow to 
recognize the risk, but I think the world and the United States 
certainly is doing what it can to have the tools and be ready 
to counter that.
    You know, this Congress we have introduced the bipartisan 
Countering Economic Coercion Act of 2023, and, you know, some 
of the specific things in there are authorities that we would 
like to give to the President to, you know, if we see China 
targeting some of our trading partners, you know, the ability 
to reduce or eliminate duties, modify tariff rate quotas, 
requesting appropriations and authorization for foreign aid and 
financing, expediting export licensing decisions, and 
expediting regulatory processes.
    Mr. Scissors--or, Dr. Scissors, I certainly agree that it 
is better for Congress to act and put into legislation. I would 
be curious about your thoughts--I am sure you are aware of that 
bill--your thoughts on that bill and strengths, but what is it 
missing?
    Mr. Scissors. Well, I think the strength is exactly what 
you just said, sir, which is we have to be willing in a time of 
crisis to be nicer to our friends than we are otherwise. That 
does not mean our friends get to do whatever they want. I am 
personally not happy with the South Korean government and their 
companies right now with regard to export controls.
    But in a time of crisis, we need to do more. We need to 
show that we will stand up with them. That is a way to reassure 
them and to deter China.
    So those measures that you talked about of reducing 
barriers to the U.S. market in time of crisis I think are the 
right measures. And of course you have people who are very 
sensitive to that in the U.S. I am not suggesting that we rush 
to reduce barriers when there is a case of Argentina coercing 
Bolivia, but China is in a very different category.
    So I think that is the strength of the legislation and, as 
you said, the fact that it is legislation that could be passed 
on a bipartisan basis would be ideal.
    I think, again, you know, I do not mean to repeat myself, 
but the legislation is addressing a symptom, and the problem 
is, if we take these steps to help our friends, and it happens 
to be in that year--we have $200 billion in new money going to 
China--on net, we are still helping the Chinese become better 
at coercion.
    So I think the legislation is a good idea. I support other 
sorts of legislation from the Congress addressing this issue, 
but I do think we need to look at, if we are helping the 
Chinese more than we are countering them, the net benefit is we 
are hurting our friends.
    Mr. Bera. So I do not disagree. I mean, there is discussion 
on how you slow down outbound investment and outbound flows.
    Maybe, Mr. Reynolds, let me ask you. On that perspective, 
how should we think about, you know, you still see a lot of 
U.S. company investment flowing into China. You know, I am not 
of the thought that says we should be telling companies what 
they can and cannot do, but I also do think there is increased 
risk. So how should we think about outbound investment and 
perhaps approach that?
    Mr. Reynolds. Yes. Thank you, Mr. Congressman. You know, 
first, I may want to go to H.R. 1135. I really--what I really 
like about that bill is the timelines you all built in for a 
speedy response. I think that is really a key part of, you 
know, any sort of counterstrategy to counter China's economic 
coercion.
    Something that you see in the sanctions literature is that, 
you know, sanctions tend to be most effective really basically 
when they are threatened, and then shortly after they are 
imposed. So in that window before markets can adjust, they kind 
of bite the most. So that is really, you know, to borrow a 
medical term, sort of the golden hour that we need to be 
responding and getting relief to the targeted countries, so 
that they do not back down in the face of China's economic 
coercion.
    One other thing I would say that, you know, a big missing 
piece of the response so far, though, is also on this 
resiliency side. I think the U.S. needs to get back into 
business of negotiating free trade agreements. We have seen 
China continue to expand its presence in these trade 
agreements, you know, applying the joint CPTPP-RCEP became 
effective last year. You know, a greater and greater proportion 
of the world's countries now see China as their largest trading 
partner instead of the United States. So that is a big missing 
component.
    Quickly, on outbound investment, I agree, I think there is 
a need to control this outbound investment, especially in these 
critical technologies where China could gain this chokepoint 
leverage over the United States. The Biden Administration I 
know is looking at technologies--semiconductors, biotech, green 
tech.
    I would say one thing on that, though, we also need to make 
sure that we multilateralize those efforts. We see this with 
the export controls. When we do these things unilaterally, 
there can be loopholes. And so I think the same thing for 
outbound investment. We need to be looking to multilateralize 
that.
    Mr. Bera. Great. Thank you.
    I notice I am out of time.
    Mrs. Kim of California. Thank you.
    I now recognize Congressman Barr for your 5 minutes of 
questioning.
    Mr. Barr. Thank you, Madam Chairwoman.
    And I want to followup right where we left off with that 
good question from the ranking member about outbound 
investment. Dr. Scissors, my bill, the Chinese Military and 
Surveillance Company Sanctions Act, sanctions specific 
companies on four specific U.S. Government lists--the DOD 1260H 
Chinese military company list, Treasury's non-SDN Chinese 
military industrial complex companies list, and Commerce's 
entity list and military end user list.
    And the bill harmonizes these lists and imposes OFAC 
sanctions on them to send a signal that not only are these 
companies off limits on U.S. exchanges, but over the counter on 
foreign exchanges and they presumably have a multilateral 
effect insofar as its OFAC sanctions, and so it signals to non-
U.S. investors these are also off limits to them.
    I would like your thoughts on this approach. Does it 
provide the American private sector--specifically, asset 
managers, index aggregators, investors--with sufficient clarity 
and certainty about what Chinese businesses are red light 
businesses and which Chinese entities are green light?
    Mr. Scissors. I think that the bill would be an important 
step forward. I think the key word you used there is 
``clarity.'' Two things that it does. One, it tells us exactly 
what the rationale is for these restrictions; and, two, as I am 
sure you and your staff and everybody who has followed this are 
aware, harmonization of U.S. lists would be a great idea for 
the private sector. Sometimes you will meet private sector 
actors and you will tell them, ``Well, did you check this 
list?'' And they are like, ``What? There is another list?''
    And, you know, we have Commerce, Defense, State, we have 
different--Treasury. We have different agencies creating 
different groups of companies that they want to single out. 
Harmonizing that list for the sake of an action is a positive 
step. Explaining the rationale for your action, which is done 
in the bill, is also a positive step.
    I think on the multilateral side, to get to both outbound 
investment in general, and your bill in particular, we are the 
leader on this. It is not an accident that countries began 
looking at inbound investment reform after we passed CFIUS 
reform.
    We provide the technical information and the know-how to 
most of our partners. So I think there is an automatic 
multilateral benefit when you set out a U.S. policy. Clearly, 
that does not mean they are going to do exactly what we did. It 
means that they can learn from it and be encouraged by it.
    So I think I wouldn't say the bill is, in my view, a 
solution to all the problems because we do have critical 
technologies to consider. That is a difficult debate. I think 
your approach is excellent, because when we say we are--these 
are bad Chinese entities that we shouldn't do business with, we 
are not actually implementing that. The entity list, for 
example, is a licensing process. We do not way to say, ``Oh, 
this company deserves to be on the entity list,'' later give 
them a license, and it turns out American investment is going 
to the company.
    So I think, you know, I see your bill as there are other 
options as well, but it is an excellent first step, because the 
private sector should be able to handle it better than the 
current confusing U.S.----
    Mr. Barr. And our bill not only requires coordination 
entity lists--Commerce, Treasury, and DOD--but it also does 
now--the amendment in the nature of a substitute we are working 
on also requires as these agencies update the lists that they 
look at--they look at special sectors of special concern. So 
these critical technology sectors.
    And I would invite my colleagues--the ranking member, Mr. 
Kim, who is on the Select Committee with me on China. I have 
talked to Ranking Member Krishnamoorthi about my approach. This 
needs to be a bipartisan effort. I think it can and should be, 
Chairwoman Kim.
    So I want to engage with my colleagues on both sides of the 
aisle to make this the right approach, and the approach that is 
consistent with our basic default value of cross-border capital 
flows, but identifying the specific entities of concern, of 
national security concern, Chinese military technology and 
surveillance companies, and excising them from U.S. investors' 
investments.
    Let me just go to Mr. Raphael really quickly. I was 
interested in your testimony that you said the CHIPS Act, while 
generally positive, does not help smaller, more agile 
companies, and eliminate the fear that foreign entities will 
ultimately reap the benefit. Can you amplify that testimony? 
And, obviously, as a victim of Chinese commercial espionage, 
what do we need to do to protect smaller companies like yours 
in the semiconductor space?
    Mr. Raphael. Well, we are relying on policymakers, again, 
to creatively utilize all tools in the toolbox to help protect 
us. I make cool things. I do not know how to protect them per 
se, but what I can say is that the CHIPS Act is a double-edged 
sword, insofar as companies like mine that will innovate and 
grow a garden at the end may be harvested by foreign entities.
    So we I think need to ensure that the resources to grow 
this garden are present, but also the resources to defend it.
    Mr. Barr. Thank you. My time has expired.
    Mrs. Kim of California. Now I recognize Representative Andy 
Kim your 5 minutes.
    Mr. Kim of New Jersey. OK. Thank you. Thank you so much for 
all of you coming on out here.
    Mr. Reynolds, I would like to start with you. You were 
talking earlier today about just kind of analysis of different 
countries and whether or not they have been subjected to 
economic coercion and how they fared, whether that was 
something that was positive or negative in terms of moving that 
direction.
    That was really interesting to me, this kind of question 
of--that I am kind of thinking about right now is our best 
understanding of, you know, which countries are most vulnerable 
to this type of economic coercion? Do we see any types of 
patterns? Is it about, you know, geographic proximity to China? 
Is it about certain size markets or last--you know, a certain 
type of lack of diversification in their economy or other 
things? I am just kind of curious if you have been able to kind 
of elicit any insights on this?
    Mr. Reynolds. Yes. Thanks for your--thanks for your 
question. I would, you know, say just directly the most 
vulnerable countries are going to be the smallest countries, 
and not--you know, small countries can still be resilient if 
they have advanced economies and advanced political system. So 
the most vulnerable countries are really going to be the 
countries that do not have market systems and do not have 
strong political systems.
    So you kind of see when the--in the case studies that we 
have, probably the two where China had the most success of 
coercing and getting the policy outcomes that it wanted was 
against the Philippines and Mongolia. At the time, Mongolia was 
facing a recession and was very susceptible to, you know, 
Chinese threats of cutting off a concessional loan, so they 
quickly apologized for inviting the Dalai Lama and then, you 
know, promised not to invite the Dalai Lama back.
    The Philippines is a little bit more complex because you 
had Duterte, you know, become elected or was elected and then 
kind of switched, you know, the Philippines' alignment. But I 
would say and those two cases had sort of the weakest political 
systems and weakest economies, and China had the most success.
    Mr. Kim of New Jersey. Mr. Feith, I wanted to bring you in 
on this because I was looking through your testimony. It seems 
like you were kind of looking at this similar question, in fact 
some of the same data there. I would like kind of your reaction 
on that from--both in terms of what Mr. Reynolds just said, but 
also in your testimony you said, look, you know, there are some 
examples where they have been able to push back, but there are 
some broader overarching examples as well where it has been 
effective.
    So over to you.
    Mr. Feith. Thanks for the question. Indeed, you know, the 
CSIS report is a really valuable study and allows us to work 
through these questions, which really are sort of interesting 
and nuanced in a detailed way. You know, as that report 
highlights, and as was just discussed, there have been these 
several cases that have gotten a lot of attention, and on those 
cases--you know, roughly 8 or 10 over a decade--China's record 
of apparent success in the particular sort of political aims of 
its coercion against these individual countries is very mixed. 
And there are interesting lessons in there about how 
challenging it is for China to achieve some of its objectives 
in some of these cases.
    So, for example, you know, they generate fear and loathing 
in these foreign capitals. They sometimes make foreign public 
opinion and strategic opinion hardened against Beijing. Similar 
effects can happen when China goes after companies, right? 
China is not looking to make itself right now seem like an 
inhospitable place, say to foreign semiconductor companies.
    So when it takes an action and goes after a micron, it can 
have some coercive bullying effect, but it also has an obvious 
downside of making companies and governments that are 
interested in those companies have less faith in these economic 
relationships with China.
    The problem is the full scope of China's economic coercion, 
the full definition would appear to extend far, far beyond any 
8 or 10 or 12 cases. China is using its economic coercion far 
more broadly. China has been able to continue to carry out its 
human rights abuses in Xinjiang largely because of its economic 
coercive power, the sense that other countries do not want to 
anger Beijing.
    We have had a lot of discussion and interest in the 
Congress in the fact that in the United States, in our media, 
in Hollywood, across corporate America, major leaders with 
influential voices are very careful about what they say about 
China for fear of economic response.
    Mr. Kim of New Jersey. One thing I would just kind of push 
back a little bit on this, I mean, look, we have struggled, you 
know, 20 years ago to address Sudan and the genocide in Darfur. 
You know, we have struggled in a lot of those cases, not 
necessarily because of just, you know, market issues. We have a 
lot of challenges in terms of how to actually address human 
rights abuses all over the world in both large markets and 
smaller countries as well.
    I just want to say this for my colleagues. I think this is 
a really important issue about just, you know, where can we 
have precision? Where can we have the scalpel? Where can we use 
that? And where do we need the broad tools? And I think that 
that is something that we think about in terms of understanding 
all the tools in our toolbox and recognizing it. I think for us 
to have that kind of fidelity would make our policies and our 
strategies stronger.
    And with that, I will yield back.
    Mrs. Kim of California. Thank you, Representative Kim.
    I now recognize Mrs. Radewagen for 5 minutes.
    Mrs. Radewagen. Talofa lava. Good morning. Thank you, 
Chairwoman Kim and Ranking Member Bera, for holding this 
hearing. And thank you all for appearing today.
    Earlier this week we held a hearing in the Natural 
Resources Committee on countering China in the FAS and Pacific 
territories. One of the stories we have heard is how China has 
punished the Republic of Palau by hurting its tourism industry. 
Another example is how when Australia called for an independent 
investigation of COVID-19, China banned Australian goods. So 
this hearing is a good followup to that hearing from earlier 
this week.
    Now, Mr. Feith and Dr. Scissors, my questions are directed 
at you. Given the PRC's extensive economic coercion in the 
Pacific Islands, what option does the United States have to 
work in tandem with Pacific Islands countries to ensure that 
the PRC's aggression is not successful?
    Mr. Feith. Thanks for the question. Certainly, we have seen 
this problem worsen in recent years, and we have seen U.S. 
diplomatic and strategic attention grow toward the Pacific 
Islands and the China-related challenges there, but not yet 
sufficiently. Some of that is actually playing out, you know, 
very much in real time this week, because President Biden was 
going to be the first U.S. President to visit Papua New Guinea. 
He was going to do this in a few days after going to Japan for 
the G7, and he would have attended in Papa New Guinea the 
Pacific Islands Forum. And this, you know, reflects sort of a 
stepping up of U.S. interest that goes back into the previous 
Administration and has in various ways continued since.
    The President canceled that trip in light of the debt 
ceiling questions here back in Washington, which is earning a 
lot of predictable criticism and concern from the region, which 
wants more U.S. engagement. That U.S. engagement can take the 
form certainly of greater economic interest, which is often 
difficult given, you know, companies have a hard time operating 
in some of these environments.
    The U.S., with the Congress, over the last several years 
has strengthened tools like our Export-Import Bank, our 
Development Finance Corporation, but bringing those tools to 
the speed and the magnitude of relevance, including in the 
Pacific Islands, has really been a challenge.
    One obvious solution is working especially closely with our 
allies, including Australia of course in that region, but also 
Japan, when it comes to matters of export credit and 
development finance where the Japanese have been very 
successful over a very long time.
    Mrs. Radewagen. Dr. Scissors.
    Mr. Scissors. Thank you for the question. I think I would 
start with the basics, which is that we should not be 
considering, in the Pacific Islands or anywhere else, that we 
get into a bidding war with the Chinese. We do not want to be 
in a situation where, oh, you offered $100 million worth of 
aid, we will offer 110 million, and around the world we do this 
everywhere, Latin America, sub-Saharan Africa.
    I think the best strategy for the U.S. to keep it simple is 
to try to make the Pacific Islands States as strong and 
prosperous as possible. So our goal should not be to say, ``Oh, 
China is going to build something for you. We will build 
something bigger.'' It should be to say, ``How can we make your 
societies more resilient, but really also more successful, make 
lives better for people?'' and then there won't be a thought 
that, oh, we should reach out to the Chinese and they have some 
magic wand they are going to wave.
    So I think the basics are we should consider our Pacific 
ally--friends and allies, Pacific Islands friends and allies, 
we should consider their well-being. And as they do better, 
they are going to be less interested in Chinese quick fixes.
    Mrs. Radewagen. Thank you. And as a followup, other than 
re-signing the compacts of free association, what steps can the 
United States take to coordinate an allied response that 
safeguards Pacific Islands from Chinese predatory practices?
    Mr. Feith? Dr. Scissors?
    Mr. Feith. I would just note one additional point, which 
relates partly to what Dr. Scissors has mentioned about 
resilience. Our efforts that would apply, not only in the 
Pacific but around the world, to have a better understanding 
and greater transparency around Beijing-backed corrupt 
practices, because one of the ways that the Chinese Communist 
Party takes advantage of countries that do not have strong 
resilience at home and generally works in ways that are 
disadvantageous to us, is they use corrupt practices, they use 
them politically and commercially, and these can be very 
effective, unfortunately, in capturing a lot of local political 
influence to the detriment of those countries and to the 
detriment of our interests.
    Our ability in intelligence terms, in law enforcement 
support terms, in support for public prosecutors in journalism 
and transparency and sunlight in these cases, is really very 
important and another area for U.S. and allied coordination.
    Mrs. Kim of California. The gentlewoman's time has expired.
    I now recognize Mr. Waltz for your 5 minutes.
    Mr. Waltz. Thank you, Madam Chair.
    Mr. Feith, I just wanted to continue with you. I think, you 
know, as we talk about economic coercion, language matters. 
Language from our leadership matters, so I will ask you a 
question I have asked many in the Administration and thought 
leaders in this space. Is the Chinese Communist Party in a cold 
war with the United States? Using just the basic understanding 
of using non-military means to supplant, replace, defeat a foe?
    Mr. Feith. Yes. And Xi Jinping's own words, especially 
spoken to his own leadership, say so. They believe they are in 
a systemic and existential challenge with us and that they will 
win.
    Mr. Waltz. So I think that language matters so much because 
if we are asking investors, researchers, academia, small 
businesses, we can go down the line to essentially walk away 
from a market, from profit for, you know, funding for research 
that they may care about, we need to think about it as a 
society in that light, right?
    Mr. Feith. I would agree.
    Mr. Waltz. Is there anyone that disagrees? Because I hear a 
lot, you know, ``Oh, no, no. We are in a competition.'' 
Competition sounds like a couple of countries in the Olympics. 
I mean, this is a cold war, and they seek to win it, and they 
seek to win it without firing a shot.
    Mr. Feith. That is right. And part of the challenge is 
that, you know, we have habits and institutions that are for 
good, historical reasons driven to see especially U.S. 
Government action that is limited and restrained and surgical 
and careful. And that is generally a good thing, right? We want 
our government intervening, say, in markets in ways that are 
generally limited. It is just that China poses a scale of a 
threat----
    Mr. Waltz. Sure.
    Mr. Feith [continuing]. And a degree of economic 
connectedness to us that we have never faced before.
    Mr. Waltz. Let me just in the sense you are talking about 
agree. I want everyone to make money. No problem. But when it 
comes at the expense of our national security and key 
dependencies, along those lines, there has been--I mean, there 
is a plethora of information out there on the CCP's dominance 
of global critical mineral supply chains, particularly cobalt 
owns now nearly half of the world's mining, owns three-quarters 
of the refining, lithium, manganese. We can go down the list.
    I think my question is, how does the Biden Administration's 
emphasis, billions that we are spending, that we passed out of 
this body on green energy, electric vehicles, including in our 
own military, to combat climate change, increase China's 
economic leverage over the United States, and in accordance 
with their own Made in China 2025, which is not just to in-
source their own manufacturing, it is to create global 
dependencies, right? So how does that increase their leverage?
    Mr. Feith. It would seem unfortunately that a lot of our 
own recent policy decisions are pointing in the direction of 
significantly increasing Beijing's leverage over us and over 
our energy economy. And this was one of the factors after all 
that appears to have made Vladimir Putin confident that he can 
invade Ukraine and survive the consequences was because he 
understood that he had a strong degree of leverage over western 
European energy.
    Mr. Waltz. Have you seen as you study CCP writings very 
closely the actual translations? I mean, they have somewhat 
tried supply chain coercion with the Japanese and the 
Australians. Do you believe that is baked in, they are prepared 
to do that even at risk of damage to their own markets and 
economies with the United States?
    Mr. Feith. Oh, yes. And we have seen them not only do so, 
but especially since COVID, Xi Jinping has been increasingly 
explicit about this. He gave a series of speeches in 2020, and 
the speeches were then reflected in the 14th Five-Year Plan 
that was published by Beijing in March 2021 where he spoke 
explicitly about tying global supply chains and dependencies 
increasingly to China using what he calls the powerful 
gravitational field of China's domestic market in order to make 
other countries dependent on them while reducing the dependency 
of China on others.
    Mr. Waltz. Just in the few seconds I have remaining, 
shifting a bit, the board that oversees the Thrift Savings 
Plan, which is the military's 401(k), has made a series of 
moves to invest their international index into Beijing, amongst 
other, because of this--again, this notion of ``We are just 
here for returns.''
    Our military's own retirement plan to be invested into our 
greatest adversary, do you believe that this board, and boards 
like it, have a moral, have a fiduciary responsibility, to 
disinvest?
    Mr. Feith. Yes. And there were efforts to bring that about 
in 2020, especially that I gather have been undone largely by 
some of the technical changes since then.
    Mr. Waltz. Thank you, Madam Chair.
    Mrs. Kim of California. Thank you. Thank you, 
Representative Waltz.
    I now recognize Representative Castro for 5 minutes.
    Mr. Castro. All right. Well, thank you for being here today 
to speak about this important and timely topic. I know we are 
all watching closely as the G7 meets in Japan this week to 
discuss China and its economic practices.
    And the United States serves as an important counterweight, 
as you all know, to China's aggressive economic tactics around 
the world and in the Indo-Pacific region. The United States 
must continue to be an economic partner, a first choice for 
nations around the world, and work to build trust and goodwill 
between any country looking for transparent, sustained, and 
quality investments. But, as you all know, there is more work 
to be done.
    So, Mr. Reynolds, the United States has multiple tools to 
counter China's economic coercion, which is mostly targeted 
toward smaller nations. In your testimony, you indicated that 
some of these tools include export financing, sovereign loan 
guarantees, and temporary tariff reductions.
    The United States also has many institutions that can 
support a country's development goals, such as with the 
Millennium Challenge Corporation. Though in recent years it has 
become obvious that more countries need access to MCC funding--
and that is why I introduced the Millennium Challenge 
Corporation's Candidate Reform Act, which would modernize MCC's 
statutory criteria and redefine the MCC's candidate country 
pool--and these changes would offer more countries an 
alternative to China-backed financing.
    Can you explain why it is important to ensure more 
countries, especially those vulnerable to Chinese coercion, 
have access to U.S. economic support?
    Mr. Reynolds. Thank you, Mr. Congressman. As you mentioned, 
in our report one thing we did see was that China has a 
preference for targeting smaller countries. And one of our, you 
know, recommendations was that the United States should 
practically seek to build resilience. So, you know, not being 
an expert on MCC, what I would say, any policy that can, you 
know, practically help those countries build a resilience 
should in theory in the long run make them more resilient and 
able to stand up and withstand China's economic coercion.
    One thing I will say is that there could be, you know, 
tradeoffs with expanding the pool of eligible countries. If you 
are raising the threshold to allow richer countries in, you 
also need to make sure that does not come at the expense of 
smaller countries that are the most vulnerable.
    Mr. Castro. I will open it up for anyone else who would 
also like to comment. No? OK.
    My second question is really about Chinese misinformation 
or disinformation and manipulation of certain industries, and 
this time I am going to focus on an industry we do not focus on 
too much around here, but we should focus on more, which is the 
media and entertainment industry in the United States.
    Mr. Scissors, you spoke extensively about the advantages 
and disadvantages between the United States and China's 
economies. You also pointed out non-traditional means of 
economic coercion, such as bullying Hollywood, the 2021 NBA 
spat, and what you described as ``data mercantilism.''
    I am interested in how China might use its market to 
influence aspects of American-made movies, for example, 
identities of certain characters have been changed, movie 
releases have been dropped, and whole scenes have been added to 
stay in good standing with the PRC. Why do these changes 
undermine the role of Hollywood as a source of soft power and 
cultural diplomacy for the United States? And what implications 
does it have for China's economic coercion toolkit?
    Mr. Scissors. Thanks for the question. I could talk a long 
time about the new data mercantilism coming out of China and 
our need to respond, but I will focus on what happened with the 
entertainment industry. You have seen in the NBA--you have seen 
it in Hollywood for a long time, you have seen it in the NBA 
more recently, that gravitational pull of the Chinese market 
that David referred to, which is saying to companies, 
``Wouldn't it be easier if you changed this movie a little bit 
and you could make a lot more money? It is very seductive.''
    And what happens is this is part of what China considers to 
be information warfare. Stop letting people know what is 
actually happening in China. It matters at the level of an 
individual company operating in China where the Chinese say, 
``Stop sending data outside of the country,'' and it matters 
for U.S. entities here who wouldn't appear, like the NBA, to 
have any real direct connection to China.
    Authoritarian governments like information control, and our 
advantage economically and as a society is to fight that off 
and to allow people to express their views freely without 
worrying about, is this going to cost me money?
    Mr. Castro. It is interesting because China has created a 
very competitive situation within Hollywood and American media 
where they will only allow a certain number of movies--American 
movies--per year to be shown in China. And so that is what 
gives them oftentimes a leverage to say, you know, ``We are not 
going to let you--we are not going to show your movie if you do 
not take this out,'' or you change this or that. And there 
seems to be no discernible end in sight necessarily to that 
continuing.
    Mr. Scissors. I think it would get worse. One of the things 
I have noticed in our conversation is just to drive home the 
point that sometimes we are slow in responding because we still 
think China is the same as it was 20 years ago. Xi Jinping's 
China is a different China, and we should expect more of that 
coercion, especially if we do not respond to it.
    Mr. Castro. I yield back.
    Mrs. Kim of California. The gentleman's time has expired.
    Now I recognize Mr. Davidson for 5 minutes.
    Mr. Davidson. I thank the chairwoman. Thank you for our 
witnesses calling attention to, you know, really an incredibly 
important topic. I am glad we are having this hearing today. As 
a guy who was trying to make a manufacturing company work in 
the United States, it was really obvious we weren't just 
competing against other companies. We were competing against 
countries, and nowhere is that more true than China.
    So, at this point, you know--well, let's go back to 2018. 
2018, the Office of the U.S. Trade Representative, tasked with 
monitoring China's compliance with WTO commitments, found China 
to have ``a poor compliance record'' and is ``violating, 
disregarding, and evading WTO rules.'' This committee has 
recognized that they are abusing the developing nation status 
or claims within the WTO.
    So that was 5 years ago when those quotes were cited in 
the--so I guess the real question is, is the WTO still an 
effective, or was it ever an effective mechanism to deal with 
the PRC's predatory economic practices? And what should the 
United States do if the WTO structure is in fact failing? Mr. 
Scissors?
    Mr. Scissors. Wow. Big question. Thank you. I do not think 
the WTO is effective any longer. I do not mean to say it was 
never effective. I do not mean to say it is a terrible idea. I 
think China has moved in a direction of violating WTO 
principles and gaming the WTO, and it is now of a size that it 
is intolerable.
    When China broke WTO rules in 2003, it wasn't great, but it 
wasn't as much of a strain on the system. Now they are more 
aggressive in breaking the rules under Xi than they were under 
Jiang Zemin at the time, and they are much bigger. So I do not 
think the U.S. should just try to destroy the WTO, but I do 
think we should recognize the WTO cannot check Chinese 
behavior. And we are going to have to either act on our own or 
create another organization of some sort to do so.
    Mr. Davidson. Yes. And so do you believe there is a 
coalition--does anyone really believe there is--you know, I 
think not just at the military academy I attended, but probably 
all of them around the world, they would say you are more 
likely to win a war if you multiply your allies than you 
multiply your enemies.
    The curious thing is, how hasn't China multiplied their 
enemies on trade? They have managed to do this to essentially 
every country around the world, yet how is it that we are not 
multiplying our allies to confront China on these abusive 
practices
    Mr. Scissors. My quick answer to that is, again, going back 
to, how much credibility do we have? If the U.S. would take the 
lead on this, not all countries, not everyone, but some 
countries would join us? I think Japan, for example, would be 
very happy if the U.S. would take leadership on confronting 
Chinese predation. But it is hard to say you are taking the 
lead if you are still having money and technology flowing to 
China.
    Other countries see that and they say, ``Well, you are 
saying one thing. This committee may be saying one thing very 
clearly. But the U.S. as a whole is not acting in that same 
way.'' So allies aren't going to rally to us until we are 
willing to take the necessary actions ourselves.
    Mr. Davidson. Yes. So one of the things as I was coming to 
Congress in 2016, the Trans-Pacific Partnership was falling 
apart. And, you know, it was--the idea was we were going to 
solidify some folks in the Indo-Pacific region against what 
China was doing, but we were kind of doing it passively. We 
weren't really confronting China about their abuses.
    We were just going to build some allies there. And I think 
that is a significant part of why TPP unraveled is because it 
did not actually confront China as sort of passive-aggressive, 
sort of this other way, and it failed from both sides. You 
know, both parties started campaigning against TPP in the 2016 
election cycle.
    Is there a path where we might be able to put something 
like that together? Or have we missed the moment? For anyone.
    Mr. Scissors. Well, I did not--I will just say I did not 
like the substance of the Trans-Pacific Partnership. I liked 
the idea. I supported the idea. And then I saw the final 
agreement, did not like it. And the main reason I did not like 
it is exactly what you said. For example, in rules on State-
owned enterprises, we are very weak for the sake of making 
Vietnam and Singapore happy, but it meant that we weren't doing 
anything to limit the behavior of Chinese State-owned 
enterprises.
    I think we could, with the right partners, create an 
organization, but it would have to be an organization that is 
really focused on China. It is not a more general organization. 
As you bring in more countries, they have different interests 
with regard to China. So we would have to stand up and say, 
``Look, we would love a strong TPP. We did not get it. So, as a 
substitute for that, as an arrangement that is directed at 
Chinese economic predation, we are going to propose something 
else.''
    Mr. Davidson. Yes. Thank you. And I wholly concur that is 
really where I landed. And, in 2017, I introduced the Global 
Trade Accountability Act, the counterpart to Senator Lee in the 
Senate. And I do not really think it is timely that Congress 
reclaim the Article I authority we have on trade. And, frankly, 
we represent the people, not just, you know, one person at the 
Administration, but really this body fully engaging on it, 
because I do believe it is one of the most important problems 
that we confront today that is shaping our foreign policy, our 
domestic policy, and our economic future.
    So I hope we do that. I yield back.
    Mrs. Kim of California. Thank you. I now recognize myself 
for 5 minutes, and I want to ask the question to Mr. Alon. You 
know, how would you counsel an entrepreneur looking for talent 
in a high-tech industry like yours?
    Mr. Raphael. Be very cautious who you hire. So 
fundamentally, you know, I can suggest that it is very 
challenging to find talent that is not sharing a risk profile 
in addition to the reward they can bring. So I would only say 
think hard.
    Mrs. Kim of California. Are you having a hard time finding 
talent to work with you at your company?
    Mr. Raphael. Absolutely.
    Mrs. Kim of California. OK. Is there anything that we can 
be of help to you in terms of policy initiatives?
    Mr. Raphael. Well, certainly. Right now I think there is a 
very clear and present danger that we are in front of insofar 
as our defense capabilities. One might recall in Desert Storm 
how the M1A1 Abrams tanks had a firing pin that cost 99 cents, 
and it did not work and what we ended up with was a block of 
metal in the desert.
    I make machines that do process control. They help evaluate 
microchips that are going to go into some of these very 
glamorous, very large, and very critical systems, and I am 
struggling right now to find the resources necessary, and the 
protections necessary, to ensure that that firing pin or the 
equivalent microchip thereof in these large-scale projects does 
not cause another hunk of metal in the desert.
    Mrs. Kim of California. Thank you. Well noted.
    Mr. Feith, you mentioned--obviously, we all know a G7 
meeting is happening right now. And I want to ask you, and then 
maybe the others can chime in, what do you hope to see come out 
of this G7 on economic coercion?
    Mr. Feith. Well, we have been told by the governments 
involved that they do plan to make this a focus and put it on 
the agenda and perhaps issue some sort of special statement 
about the economic coercion problem. It is not clear, though, 
if that statement will mention China, which is not the most 
important thing, but it is a proxy for how much, you know, 
diplomatic weight and, frankly, you know, effort and risk 
countries are willing to put behind these measures.
    If the statement is just a statement and it is hollow and 
not backed by the willingness of the national governments, you 
know, back home to take real measures to push back--to incur 
push back from China, as a result statements at the G7 aren't 
going to matter for much, unfortunately.
    And so it speaks partly of the question from a moment ago 
about which trade coalitions can really work. The G7 would be a 
great one, including if the European Union is willing to be 
involved, but that is 27 member States and that is complicated 
at best, beginning perhaps with AUKUS countries--that is, the 
U.S., Australia, and the U.K.--or with Japan as well. We have 
the Quad, of course, where Japan, Australia, and India fit. 
These might be smaller but more appropriate because more robust 
groupings for doing some of this overdue push back.
    Mrs. Kim of California. Thank you. I yield back the balance 
of my time, and I would like to now recognize Mr. Sherman for 
your 5 minutes of questioning.
    Mr. Sherman. Thank you. Our tax code has a capital gains 
allowance, much lower taxes on the money you make by selling 
stocks, bonds, other investments, designed to encourage you to 
invest in the U.S. economy, create jobs and economic progress.
    Can any witness here--raise your hand if you think you can 
put forward an argument why we provide this capital gains 
allowance to those who invest in the equity securities of 
Chinese-based companies? Can any of you think of a reason why 
that is good U.S. policy? The record should indicate no one 
raised their hands.
    Tariffs are really the only across-the-board way that we 
can disentangle our economy, and disentangling is so important 
because right now China does not need to hire a lobbying firm 
here in Washington, because the biggest American companies feel 
that their profits are dependent upon us kowtowing to China.
    If we had a 1/4 percent tariff--just 1/4 percent tariff--on 
all Chinese goods, and we increased it by 1/4 percent every 
month, then companies that fail to disengage from China would 
find a--they would be at a 40 percent disadvantage by the end 
of the decade.
    Finally, and I do not know if this is--I assume this has 
not been brought up at the hearings. China allows only 40, 
roughly, American movies to go into China every year. So if you 
are a studio, you hope it is yours. So they will never make 
another movie about Tibet. Richard Gere, sorry. Not just 
because they cannot have that movie displayed in China, but 
because if a studio makes a movie about Tibet, none of their 
movies are ever getting into China, and they know that. I am 
saying the quiet part out loud.
    Does anyone on the panel have an idea of what we can do to 
make sure that China does not use that kind of economic 
coercion to affect what Americans see? Whether it is to 
exercise--you know, we have American basketball players and 
officials talking about human rights in China, we have movie 
studios that would like to make this or that movie but would be 
subject to retaliation. Does anybody have a plan just to make 
sure that the First Amendment isn't interfered with by China?
    Mr. Feith. Well, Congressman, one related thought would be 
to find an appropriate way to ban TikTok, because the kind of 
information power, the kind of--what the Chinese Communist 
Party calls global discourse power, and the kind of ability to 
propagandize to Americans and undermine our democracy, 
including undermining our, you know, First Amendment spirit of 
an open debate that is not coerced by foreign adversaries, is 
advanced increasingly by TikTok, which is a kind of foreign 
influence in our democracy no adversary has ever enjoyed.
    Mr. Sherman. I would point out that there are a lot of 
Americans who really enjoy TikTok. They are worried that that 
enjoyment will be taken away from them. But I believe that 
America can be self-sufficient in cat video distribution 
systems. If we did not have TikTok, Americans would create 
TokTik and the kitties would still be there.
    We have a huge trade deficit with China. Other--in fact, it 
is the most lopsided trading relationship in the history of 
mammalian life. Do any of our witnesses have a plan other than 
the tariff idea that I put forward to try to diminish that 
trade deficit? Yes.
    Mr. Scissors. I mean, I have a partial solution, which is, 
you know, the 25 percent and sometimes 15 percent tariffs 
proposed by the Trump Administration did not actually shrink 
the trade----
    Mr. Sherman. And I will point out, the average tariff on 
Chinese goods----
    Mr. Scissors. Is still low.
    Mr. Sherman [continuing]. Is under 5 percent.
    Mr. Scissors. Exactly.
    Mr. Sherman. That was a very selective system. Go on.
    Mr. Scissors. Agreed. I think we can start in an area of I 
hope bipartisan agreement that it will not solve the trade 
deficit problem, but it will certainly reduce it, which is 
identify the goods that we do not want to depend on the Chinese 
for. So there is dollars in goods we may not care as much 
about. There is the debate over what those are. There is also 
dollars in goods we know we care about. We can address both the 
supply chain dependence----
    Mr. Sherman. I understand that selectivity. I will say 
whatever the goods are you run--for every billion dollars of 
trade deficit, we are losing 10,000 jobs. And those who say 
that we have a labor shortage in this country I think are wrong 
until labor wages start going up.
    I yield back.
    Mrs. Kim of California. The gentleman's time has expired.
    I know that votes have now been called, so I wanted to 
thank the witnesses for their valuable testimony, and the 
members for asking those questions.
    Other members of the committee may have some additional 
questions for the witnesses. So we will ask you to respond to 
those in writing.
    And I now recognize Mr. Bera for any closing remarks he may 
have.
    Mr. Bera. Great. Thank you, Madam Chairwoman. Yes. I do not 
think Democrats and Republicans think about this issue in 
different ways. I actually think we are all taking this very 
seriously. And, you know, I think members on both sides of the 
aisle raised legitimate questions and, again, the witnesses, I 
thank them for, you know, raising the issues that we really do 
have to think about in an urgent way.
    There aren't easy answers when we--you know, again, I tend 
to be a free market guy. I tend not to want to use the heavy 
hand of government to tell companies what they can and cannot 
do, where they can and cannot invest, but I also do think it is 
important for us--you know, Mr. Waltz raised, you know, our 
pension funds continue to go into China, continuing to 
disadvantage us.
    I have talked to CEOs about that as well, and, you know, 
often they are just--you know, there is shareholder activism, 
there is just this intense focus on quarterly profits. Again, 
you know, Mr. Sherman raises some issues of how we might be 
able to use the tax code to help influence that.
    I mean, this is worth a bipartisan conversation to think 
about, you know, how we, you know, protect our values, our 
freedoms, but also, you know, do not disadvantage, you know, 
what is, you know, the strategic competition.
    I do not use the cold war language, but we do know we are, 
you know, headed toward a confrontation, and how do we head 
that confrontation off? And I think that is important.
    So, again, thank you for holding this hearing. I would 
encourage all my colleagues to take a look at the legislation 
that we put forward. I think it is a good first step. It is not 
a last step, and there is a lot more for us to do.
    So thank you, and I yield back.
    Mrs. Kim of California. Thank you. And, again, thank you to 
all the witnesses. You know, as we prepare for this hearing, we 
wanted to make sure that we are addressing the economic 
coercion from PRC, and I think hearing from our witness, Mr. 
Alon, it was--it is more than ever important that we need to 
stress that American foreign policy must serve the interest of 
the ordinary Americans and businesses as well.
    And then, also, the United States must also take on the 
PRC's predatory practices, which is why we had a very great 
discussion here. Thank you.
    And, last, I think we need to emphasize that America must 
lead and then bring its allies and partners along, and that is 
very, very important. We need to show to our allies that they 
can trust us, that the United States will be the choice to do 
business with and to rely on us to protect their interests as 
well as showing through the combination of cooperation, that we 
are working with our allies and partners, that our adversaries 
should be able to fear us.
    With that, I want to thank you so much for being with us.
    And pursuant to committee rules, all members may have 5 
days to submit statements, questions, and extraneous materials 
for the record, and subject to the length limitations.
    So without objection, the committee stands adjourned.
    [Whereupon, at 10:27 a.m., the subcommittee was adjourned.]

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