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

                   ASSESSING U.S. EFFORTS TO COUNTER CHINA'S
                       COERCIVE BELT AND ROAD DIPLOMACY

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

                                    HEARING

                                   BEFORE THE

                          COMMITTEE ON FOREIGN AFFAIRS
                            HOUSE OF REPRESENTATIVES

                        ONE HUNDRED EIGHTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 June 14, 2023

                                   __________

                               Serial No. 118-33

                                   __________

            Printed for the use of the Committee on Foreign Affairs

                   [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

     Available:  http://www.foreignaffairs.house.gov/, http://docs.house.gov,
                          or http://www.govinfo.gov

                                   ______

                     U.S. GOVERNMENT PUBLISHING OFFICE

    53-672PDF                 WASHINGTON : 2023

                          COMMITTEE ON FOREIGN AFFAIRS

                       MICHAEL T. McCAUL, Texas, Chairman

    CHRISTOPHER H. SMITH, New Jersey     GREGORY MEEKS, New York, 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		     AMI BERA, California
    KEN BUCK, Colorado		     JOAQUIN CASTRO, Texas
    TIM BURCHETT, Tennessee		     DINA TITUS, Nevada
    MARK E. GREEN, Tennessee	     TED LIEU, California
    ANDY BARR, Kentucky		     SUSAN WILD, Pennsylvania
    RONNY JACKSON, Texas		     DEAN PHILLIPS, Minnesota
    YOUNG KIM, California		     COLIN ALLRED, Texas
    MARIA ELVIRA SALAZAR, Florida	     ANDY KIM, New Jersey
    BILL HUIZENGA, Michigan		     SARA JACOBS, California
    AUMUA AMATA COLEMAN RADEWAGEN, 	     KATHY MANNING, North Carolina
        American Samoa		     SHEILA CHERFILUS-McCORMICK, Florida
    FRENCH HILL, Arkansas		     GREG STANTON, Arizona
    WARREN DAVIDSON, Ohio		     MADELEINE DEAN, Pennsylvania
    JIM BAIRD, Indiana		     JARED MOSKOWITZ, Florida
    MICHAEL WALTZ, Florida		     JONATHAN JACKSON, Illinois
    THOMAS KEAN, JR., New Jersey	     SYDNEY KAMLAGER-DOVE, California
    MICHAEL LAWLER, New York	     JIM COSTA, California
    CORY MILLS, Florida		     JASON CROW, Colorado
    RICH McCORMICK, Georgia		     BRAD SCHNEIDER. Illinois
    NATHANIEL MORAN, Texas
    JOHN JAMES, Michigan
    KEITH SELF, Texas

                        Brendan Shields, Staff Director

                        Sophia Lafargue, Staff Director

                                C O N T E N T S

                                  ----------
                                                                       Page

                                   WITNESSES

    Pyatt, Honorable Geoffrey, Assistant Secretary, Bureau of Energy
      Resources, U.S. Department of State............................     8
    Venkataraman, The Honorable Arun, Assistant Secretary of Commerce
      for Global Markets, and Director General, U.S. and Foreign
      Commercial Service.............................................    19
    Herscowitz, Andrew, Chief Development Officer, U.S. International
      Development Finance Corporation................................    27

                                    APPENDIX

    Hearing Notice...................................................    69
    Hearing Minutes..................................................    71
    Hearing Attendance...............................................    72

        STATEMENT SUBMITTED FOR THE RECORD FROM REPRESENTATIVE CONNOLLY

    statement submitted for the record from Representative Connolly..    73

                RESPONSES TO QUESTIONS SUBMITTED FOR THE RECORD

    Responses to questions submitted for the record..................    75

                   ASSESSING U.S. EFFORTS TO COUNTER CHINA'S
                       COERCIVE BELT AND ROAD DIPLOMACY

                            Wednesday, June 14, 2023

                              House of Representatives,
                          Committee on Foreign Affairs,
                                                        Washington, DC.

        The committee met, pursuant to notice, at 2:12 p.m., in
    room 210, House Visitor Center, Hon. Michael McCaul (chairman
    of the committee) presiding.
        Chairman McCaul. The Committee on Foreign Affairs will come
    to order.
        The purpose of this hearing is to understand the threats
    posed by China's Belt and Road Initiative and review the
    strategies and actions taken by the Biden Administration,
    specifically looking at the role of the Foreign Commercial
    Service, State Department's Energy Resources Bureau, and the
    International Development Finance Corporation, or DFC, the role
    they play in countering China's coercive Belt and Road
    Initiative.
        I now recognize myself for an opening statement. There's no
    denying that the threat from the Chinese Communist Party is
    real. The tentacles of the CCP reach every corner of the globe
    as they continue to pull nations into their sphere of
    influence.
        Just this past week we learned a Chinese spy station
    located 100 miles off the coast of Florida in Havana, Cuba.
    China's malign influence is growing exponentially and its
    encroachment into the Western Hemisphere poses a clear and
    present danger.
        Now is the time to act and address this with the
    seriousness it deserves. We need a whole of government approach
    including a concerted effort among the State Department, the
    Commerce Department, the Development Finance Corporation to
    successfully counter CCP's Belt and Road.
        The BRI seeks to develop a system of PRC-controlled
    infrastructure, energy, transportation, trade, and production
    networks across the globe. The BRI initiative encompasses over
    150 nations with a significant focus across Africa and the
    Indo-Pacific and a growing focus on Latin America, the
    Caribbean, and even Europe.
        This debt trap diplomacy is saddling developing nations
    with unsustainable debt, which China then leverages into
    increasing its influence. BRI initiatives often lock countries
    into reliance on PRC systems, leaving countries vulnerable to
    exploitation by the PRC.
        Specifically, PRC uses its investments across strategic
    sectors to secure PRC exclusive or near exclusive to and
    control over dual use infrastructure and programs that can be
    used in conjunction with the PRC's military-civil fusion
    program to help the PRC project coercive power into critical
    global regions.
        Some of these projects include 85 percent of Hungary's
    largest ever infrastructure project. A $1.9 billion railway
    link to Serbia will be financed with a loan from China's
    Export-Import Bank.
        Huawei has constructed up to 70 percent of Africa's
    information technology 4G infrastructure including telecom,
    national and government networks which have been used for
    surveillance of opposition leaders.
        While China has focused on consolidating power we have
    prioritized a $100 billion climate fund to help developing
    nations transition to clean energy and strengthen their climate
    resiliency, offering Palestinians $100,000 to promote
    diversity, equity, and inclusion in arts and sports, and a
    State Department grant of over $20,000 for drag shows in
    Ecuador.
        How are we supposed to lead when this Administration
    prioritizes green projects and social issues rather than
    applying our resources to counter the malign influence of the
    CCP?
        This must change, and I want to refer to the Wall Street
    Journal article that was written by the president of Uganda and
    it's entitled ``Solar and Wind Force Poverty on Africa.'' He
    says Africa cannot sacrifice its future prosperity for Western
    climate goals.
        The DFC was created, and I was part of it, to counter the
    CCP's BRI and advance U.S. security interests and transition
    countries from aid to trade through strategic development
    investments.
        We must make it clear that our assistance is designed to
    build bridges to prosperity. Additionally, the Foreign
    Commercial Service is prioritizing developing nations. We have
    22 officers in Paris but only 12 in all of Africa. We are not
    showing up in Africa and they tell me that repeatedly.
        We need to be on the ground and on the field working to
    counter BRI and the CCP's influence. That was the intent of
    Congress, not to advance some social, gender, or some
    environmental but to advance private investment to counter
    China's aggression.
        And look at this map. All of the green and blue are
    projects throughout the globe spanning across Asia into Europe
    and Africa and into Latin America, over 150 countries now.
        For every nation FCS is involved in the CCP does not just
    have a footprint but a regional stranglehold as the FCS is
    woefully outnumbered and so is the DFC.
        Regions where the CCP but the FCS is not engaged are rife
    with opportunities for U.S. business. U.S. investment will
    further embolden our relations and strengthen these economies
    on an array of industrial areas including, and importantly,
    critical minerals and I find it startling that China controls
    the vast majority of global critical mineral refining. It
    refines 68 percent of nickel globally, 40 percent of copper, 59
    percent of lithium, 73 percent of cobalt.
        If China controls the global supply of critical minerals it
    will give them an edge in the development of advanced
    technology, and following the deadly withdrawal of Afghanistan
    China is moving in quickly. The CCP link to a 25-year-long
    contract to extract oil and are negotiating a deal for access
    to lithium reserves that could be worth up to a trillion
    dollars.
        They're also looking, consistent with Belt and Road
    practices, and it's foreseeable--they are looking to take over
    Bagram Airbase. After 20 years of blood and treasure and
    sacrifice this is how it ended.
        This is the Administration's greatest failure. We cannot
    remain silent on China. We must prioritize developing our own
    supply chains where we are not reliant on our greatest
    adversaries like the Chinese Communist Party.
        Let's get back to the intent of Congress and what Congress
    intended to get private American investment to compete against
    Communist China.
        And with that, I now recognize the Ranking Member, Mr.
    Meeks.
        Mr. Meeks. Thank you. Let me begin by thanking Chairman
    McCaul for organizing this hearing and the witnesses for
    appearing before us today.
        This discussion is pivotal to how the United States
    undertakes a strategic competition with China because the Belt
    and Road Initiative, a.k.a. BRI, is central to Beijing's
    strategy to grow its economic and strategic influence globally.
        I want to start by talking about what we know about BRI. We
    know that BRI has increased the likelihood of debt crises
    globally. We know that BRI lowered infrastructure financing and
    negotiation standards.
        We know that BRI projects have extracted natural resources,
    harmed the environment, and undermined labor standards in many
    countries.
        We know that BRI has exploited corruption and poor
    governance and has created economic dependencies and political
    leverage that Beijing uses to its political and strategic
    advantage.
        After 10 years of BRI this is old news so I hope we will
    not spend today's hearing bemoaning all the things we know
    while simply admiring the challenge facing the United States
    because complaining isn't competing, and to be able to be most
    effectively to compete we have to know the terms of the
    competition.
        This is first and foremost a competition about results.
    It's about how the United States engages in diplomacy,
    development, trade, and investment that leads to better
    outcomes for the American people and people around the world.
        Whether you're a citizen in sub-Saharan Africa or Southeast
    Asia or Central America, you do not need the United States to
    tell you about the problems of BRI. You've experienced them
    firsthand.
        The reason BRI has grown into such an expansive global
    initiative despite these failures is because it taps into
    legitimate development needs around the world. China has
    responded to the global demand for assistance, for
    infrastructure, and for greater trade and investment networks.
        The United States does not want to force countries to
    choose between China and the United States. But we must make
    clear that they have a choice. In order to do that what we need
    is a proactive agenda for global diplomacy, for global
    development, and economic growth.
        We can only compete with China if we offer other nations a
    credible alternative. We must demonstrate that the United
    States' assistance and infrastructure lead to better
    development outcomes, stronger governance, as well as better
    social and environmental outcomes for local communities, and we
    must leverage our partnerships with like-minded nations and
    multilateral institutions.
        So what does this mean? It means working together with our
    allies to resource the Partnership for Global Infrastructure
    Investment. That means making the Minerals Security Partnership
    more inclusive and collaborative.
        It means expanding and resourcing new initiatives such as
    the partners in the Blue Pacific, who we met with in a
    bipartisan way yesterday. It means Power Africa and Prosper
    Africa. That means legislating an equity fix for the DFC to
    improve its capacity and its ability to compete with the BRI on
    infrastructure.
        One thing we cannot do is say we're competing but then tie
    our agencies' hands through budget cuts. According to witness
    testimony China's tradeoffices outnumber ours three to one and
    China spends more than $110 million annually in support of its
    companies at global trade fairs.
        How much does the United States spend, $5 million to $7
    million? And, of course, DFC's budget pales--it pales in
    comparison to the amount of money China is spending on
    infrastructure.
        But instead of joining in a bipartisan fashion to meet this
    challenge, unfortunately, when I look at what our Republican
    majority has sought to dramatically slash, development and
    diplomacy spending, when I looked at proposed--it slashes
    substantially development and diplomacy spending.
        That's a warning. We cannot compete with China if we do not
    believe in dollars for development and we do not believe in
    diplomacy, and why believing is not just talking. It's by
    putting your money where your values are. That's how we make
    that determination.
        So what was shocking to me yesterday, according to reports,
    the House Appropriations Committee's top line allocations, the
    Republican proposal is worse than what I thought.
        It would be the most poorly resourced diplomacy because
    what they want to do is cut U.S. foreign assistance by 31
    percent. It would be the worst poorly resourced diplomacy and
    development budget in a generation, and if the final budget
    aligns with the Republicans' proposed cuts it would serve as a
    self-inflicted wound to the United States and a danger to
    American interests and global standing.
        And with that, I yield back the balance of my time.
        Chairman McCaul. The gentleman yields back. Other members
    of the committee are reminded that opening statements may be
    submitted for the record.
        We're pleased to have a distinguished panel of witnesses
    before us today on this important topic.
        First, Mr. Geoffrey Pyatt is the Assistant Secretary for
    the Bureau of Energy Resources at the State Department and has
    had a long distinguished career as an ambassador. Mr. Arun
    Venkataraman is the Assistant Secretary of Commerce for Global
    Markets and Director General at the U.S. and Foreign Commercial
    Service. Thank you.
        And Mr. Andrew Herscowitz is the chief development officer
    of the U.S. International Development Finance Corporation.
        Your full statements will be made part of the record. I ask
    that you keep your remarks to 5 minutes.
        I now recognize Mr. Pyatt for his opening statement.

    STATEMENT OF THE HONORABLE GEOFFREY PYATT, ASSISTANT SECRETARY,
          BUREAU OF ENERGY RESOURCES, U.S. DEPARTMENT OF STATE

        Mr. Pyatt. Thank you very much.
        Chairman McCaul, Ranking Member Meeks, members of the
    committee, thank you for the opportunity to discuss the
    Administration's efforts to strengthen global energy security
    and counter the PRC's attempts to create economic dependencies
    and coerce others through its Belt and Road Initiative.
        Prevailing in our economic competition with China and
    ensuring that the United States remains the partner of choice
    on issues of energy security and energy transition has been a
    priority for me from day one in the ENR Bureau.
        Secretary Blinken frames our economic relationship with the
    PRC in three words: invest, align, and compete. National
    Security Adviser Sullivan emphasizes the goal is to derisk not
    to decouple, and he notes that this effort extends beyond our
    borders and includes working with like-minded partners to
    advance our collective technology and industrial base.
        ENR's work on energy security and energy transition,
    including its congressionally funded technical assistance
    programs, are integral to that effort.
        We have all seen what happens when malign actors weaponize
    their energy resources. Russia attempted to do this with
    natural gas in Europe last year and failed, thanks in part to
    the work of American LNG producers.
        ENR is similarly engaged around the world to expand
    countries' options and counter the PRC's efforts to monopolize
    the next generation of clean energy technologies. In Latin
    America and the Caribbean the United States remains the energy
    partner of choice, a message I heard repeatedly during my
    recent trip to Guyana and Trinidad and Tobago.
        But we also see the PRC targeting Latin America for
    investments in critical minerals, energy grids, and renewables.
        ENR assistance in Ecuador, for instance, helped the
    government design and conduct the country's first ever
    competitive and transparent tenders for new generation
    capacity. And DFC recently announced that it will provide
    financing for a 200-megawatt solar power project that was
    awarded through that process, providing a strong example of how
    U.S. Government tools can complement each other to counter the
    PRC model.
        We also recognize that some of China's larger investments
    in energy supply chains are being led by ostensibly private
    companies with ties to the PRC.
        For example, in August 2022 PRC manufacturer CATL announced
    plans to invest over $7 billion in a new battery gigafactory in
    Hungary intended to lock in supplies for BMW and Mercedes.
        PRC investments in critical infrastructure in Europe create
    clear security risks and ENR has engaged with allies and
    partners to facilitate U.S. alternatives.
        In Romania, for example, we're working actively with EXIM
    and DFC on nuclear power projects to advance our climate goals
    and level the playing field for U.S. exporters.
        Similarly, in Greece we work closely with DFC to complete
    the Elefsina Shipyard investment that otherwise might have
    fallen into PRC hands in a country that Beijing labeled the
    dragon's head of the Belt and Road Initiative in Europe.
        We're also competing with the PRC model for energy
    investment and development in Central Asia. The United States
    has long supported U.S. oil and natural gas investment in
    Central Asia and now we're looking to renewables and critical
    minerals.
        But the PRC has made some headway, for instance locking in
    75 percent of Turkmenistan's pipeline gas.
        Further east ENR is strongly focused on support for a free,
    open, and prosperous Indo-Pacific. Since taking this role I've
    traveled to Japan, the Republic of Korea, Pakistan, and India
    to advance our cooperation on energy security and renewables.
        I held an inaugural strategic energy dialog with Japan in
    December and continued our important dialog with the Republic
    of Korea, two countries that are key to reducing PRC dominance
    of clean technology supply chains.
        ENR efforts in the Indo-Pacific increase resilience against
    PRC economic coercion and dependencies. We do this by
    leveraging U.S. interagency expertise including through the
    Department of Commerce's Commercial Law Development Program and
    DOE's national laboratories.
        Despite pledges to the contrary the PRC has continued to
    deploy coal-powered projects overseas. In Pakistan this has had
    serious financial repercussions because of its reliance on
    imported coal.
        During my visit to Islamabad Prime Minister Sharif appealed
    for more U.S. engagement to support Pakistan's clean energy
    transition including in emerging areas like clean hydrogen.
        After December's U.S.-Africa Leaders Summit the United
    States pledged to step up its energy engagement in sub-Saharan
    Africa. With this in mind next week I will travel to Nigeria to
    advance cooperation on clean energy and carbon abatement and to
    explore future energy partnership possibilities.
        The PRC owns mines throughout Africa and dominates the
    processing of the battery minerals we need to drive the energy
    transition. As part of our response to this challenge ENR
    administers the intergovernmental Minerals Security
    Partnership.
        In marked contrast to the PRC approach, the MSP aims to
    support not only developing countries' extraction but also
    higher value activities such as downstream processing and
    recycling.
        The MSP works with our partners to identify bankable
    projects around the world and ENR is also engaging with
    American mining companies to advance the MSP as I did last
    month in Alaska, ensuring that our work supports growth here at
    home as well.
        In addition to diplomatic engagement we will need financing
    to bolster these critical mineral supply chains and that's why
    ENR's partnership with EXIM, DFC, and our colleagues working on
    the PGII will be crucial to the success of these efforts.
        We need to increase their ability to assist both by
    providing more resources and reforming rules that unnecessarily
    restrict their ability to support projects.
        We should, for a start, temporarily raise the default rate
    cap that currently limits EXIM's exposure to default risk from
    2 percent to 4 percent as requested in the President's Fiscal
    Year 2024 budget.
        In the case of DFC, we encourage support for the creation
    of a new $2 billion revolving equity fund to expand equity
    investments by DFC.
        In sum, the State Department will continue to work and
    trade with the PRC in areas of mutual interest but we will also
    compete relentlessly with them economically, a contest where
    the State Department and our embassies abroad are key assets.
        Thank you very much for your attention and I look forward
    to addressing your questions.
        [The prepared statement of Mr. Pyatt follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman McCaul. Thank you.
        The chair now recognizes Mr. Venkataraman for his opening
    statement.

        STATEMENT OF THE HONORABLE ARUN VENKATARAMAN, ASSISTANT
    SECRETARY OF COMMERCE FOR GLOBAL MARKETS, AND DIRECTOR GENERAL,
                  U.S. AND FOREIGN COMMERCIAL SERVICE

        Mr. Venkataraman. Thank you.
        Chairman McCaul, Ranking Member Meeks, and members of the
    committee, thank you for inviting me here today.
        I am pleased to have the opportunity to discuss with you
    how we are competing against China's Belt and Road Initiative
    at the U.S. Department of Commerce's International Trade
    Administration and more specifically in our global markets
    business unit, which includes the U.S. and Foreign Commercial
    Service. My remarks are reflected in my full written statement
    provided to the committee.
        Notwithstanding China's efforts to portray BRI as a
    solution to advance infrastructure development and economic
    growth our trading partners increasingly share our view that
    BRI poses more risk than opportunity.
        First, China's BRI can threaten our trading partners'
    economic development. BRI projects contribute to unsustainable
    debt levels in many recipient countries, as the chair and
    ranking member have noted, and these can position China to
    press for greater control over that infrastructure against the
    interests of borrowing governments.
        Second, China's BRI threatens U.S. economic and national
    security interests. BRI investments in infrastructure, together
    with its transnational subsidies, have reinforced China's
    control over critical supply chains choke points.
        Third, China's BRI hinders U.S. companies from competing in
    markets overseas. Combined with longstanding anti-competitive
    practices BRI has used its financing to open doors for China's
    State-owned or State-controlled firms while ensuring those
    doors remain closed for market-based competitors from other
    countries including the United States.
        In the face of these challenges how do we counter the BRI
    and help American companies compete and compete to win? Our
    strategy for success rests on three pillars: one, pursuing
    market share; two, promoting market openness; and three,
    preserving market security.
        We are pursuing market share by aligning U.S. Government
    export promotion efforts to help U.S. businesses succeed in
    sectors targeted by China's State-backed entities.
        Critical to these efforts are partnerships with the
    Department of Defense, including regional commands in SOUTHCOM
    and INDOPACOM as well as with the range of agencies that form
    the deal teams at U.S. embassies around the world.
        We are also intensifying our commercial diplomacy efforts
    to promote market openness by engaging with foreign
    counterparts in critical sectors and on infrastructure
    projects.
        We are using all the tools available to us across the
    Commerce Department and the interagency, often in
    collaboration, to build necessary regulatory capacities,
    increase transparency, and enable commercial environments in
    markets around the world.
        Finally, we are focused on preserving market security both
    here at home and in overseas markets. We are promoting U.S.
    capabilities across strategic areas important to our national
    security.
        We are also focusing our efforts, including through our
    advocacy center, to ensure that China's BRI does not threaten
    either the reliable performance of critical infrastructure in
    foreign markets or the secure supply of inputs for U.S.
    production critical to our long-term economic and national
    security.
        In each of these pillars of our strategy the Championing
    American Business Through Diplomacy Act, or CABTDA, has brought
    focus to the importance of new partnerships among the State
    Department, Commerce, USTR, and others that has helped us
    collaborate and innovate in support of U.S. businesses in a
    more strategic and impactful way.
        We cannot speak about countering BRI or their commercial
    tools deployed by China without underscoring its resources. As
    Ranking Member Meeks noted this includes China's tradeofficers
    outnumbering us three to one and spending more than $110
    million annually in support of its companies at global trade
    fairs, compared to the approximately $5 million to $7 million
    annually that our budget allows.
        I am thankful that Congress provided Global Markets with
    $6.5 million in Fiscal Year 2023 to expand our capacity to help
    U.S. business compete.
        With those funds we plan to open new operations in Cote
    d'Ivoire, Guyana, and Zambia while making additional
    investments to existing operations in the Indo-Pacific region,
    Eastern Europe, and Central America, subject to approval of our
    Fiscal Year 2023 spend plan.
        Moreover, the President's Fiscal Year 2024 budget request
    includes a $16.8 million increase for Global Markets to
    continue investing in our work force at a time when we must
    show up and show up often if we are to help U.S. businesses
    compete in markets around the world.
        Thank you, Mr. Chairman and members of the committee, for
    the opportunity to speak with you today. I'd be pleased to
    answer any questions you have.
        [The prepared statement of Mr. Venkataraman follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman McCaul. Thank you.
        The chair now recognizes Mr. Herscowitz for his opening
    statement.

    STATEMENT OF ANDREW HERSCOWITZ, CHIEF DEVELOPMENT OFFICER, U.S.
             INTERNATIONAL DEVELOPMENT FINANCE CORPORATION

        Mr. Herscowitz. Chairman McCaul, Ranking Member Meeks,
    members of the committee, thank you so much for convening this
    hearing and inviting me to testify on behalf of the U.S.
    International Development Finance Corporation that we all call
    DFC.
        A key reason that you all, Congress, created DFC through
    the BUILD Act was to offer a better and more sustainable
    alternative to the People's Republic of China's Belt and Road
    Initiative.
        Since DFC was established just 3 years ago we have been
    catalyzing investment from the private sector and empowering
    developing countries.
        Unlike the PRC we focused on helping countries take
    advantage of their own resources--their human resources, their
    commodities--so they can tackle poverty, accelerate inclusive
    and sustainable economic growth, and become stable U.S. trading
    partners, all through private investment.
        DFC provides countries with an alternative to the terrible
    choice many of them faced, which was to either forego economic
    growth or embrace the PRC model that required countries to risk
    their financial independence, to suffer the loss of their
    resources and commodities, to endure environmental degradation,
    and sometimes even to suffer harm to their local communities.
        DFC and its partners give countries an alternative,
    sustainable economic growth and empowerment. The PRC model
    burdens countries with excessive sovereign debt for projects
    that are often unsuitable or even unnecessary for local
    populations.
        The PRC supports projects with one beneficiary in mind, the
    PRC. DFC, on the other hand, supports private entities,
    mobilizes private capital, and builds resilient market
    economies, creating local jobs and building local knowledge and
    human capacity.
        DFC's track record investing in critical infrastructure
    demonstrates the impact that it can have. In Ecuador we
    recently made a $150 million commitment to modernize a port,
    which will create 1,250 jobs and generate $750 million in
    foreign direct investment--private capital.
        In Sierra Leone, one of the poorest countries in the world,
    we have invested in providing broadband access to a significant
    swath of the population, we have helped increase the country's
    capacity to generate power by nearly 25 percent, and we're
    working to improve the country's main airport to connect the
    people of Sierra Leone to global markets and opportunities.
        DFC is also supporting projects that diversify supply
    chains away from the PRC including for critical minerals and
    solar panels. DFC focuses on working with the private sector
    because closing the $40 trillion global infrastructure
    financing gap is beyond the capacity of any government or any
    public institution.
        We amplify our impact by working closely with development
    finance institutions of our allies and our partners including
    our G-7 partners so that we can do more together. By working
    with like-minded countries we give countries where we work even
    more alternatives to the PRC and we generate new trade and
    investment leads for U.S. companies.
        Mobilizing private capital is an effective way to achieve
    durable development outcomes, allowing governments to focus
    their resources on other public needs like education. Our
    investments carry forward U.S. values of openness, respect for
    local conditions, transparency, and internationally recognized
    environmental, social, and labor standards.
        By championing these values we enhance the long-term
    sustainability of our projects, we amplify development impacts,
    and we guard against the danger that projects will harm local
    populations.
        I've highlighted a few examples in my written testimony of
    where we're doing this type of work. While we're confident in
    the strength of our model we know that we need to strengthen
    DFC's ability to counter BRI effectively and at scale, and to
    enable DFC to do more faster DFC is building its internal
    capacity and aligning its organizational structures to meet
    demand in sectors where there are enduring needs including
    infrastructure, energy, health, food and agriculture, ICT, and
    support for small businesses.
        In the energy sector we're pursuing a balanced approach
    that recognizing that the PRC is competing aggressively to
    dominate the clean energy industries while also recognizing
    there are circumstances which countries--when countries need
    fossil fuels to further their development.
        Congress and this committee have recognized the close
    linkage between development and U.S. strategic interests and we
    thank you for your support of DFC.
        Through continued partnership with Congress we're
    positioning DFC to be an effective, respected, and powerful
    presence for the U.S. in developing countries.
        The U.S. can compete effectively with the PRC model or any
    other model. Our model drives economic development in a way
    that benefits Americans and the people of the countries where
    we work.
        We treat the countries and their people as partners and we
    advance the strategic interests of the United States.
        Thank you again for the opportunity to testify and I look
    forward to your questions.
        [The prepared statement of Mr. Herscowitz follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman McCaul. Thank you. I now recognize myself for 5
    minutes of questioning.
        Let me say, first, the DFC--the equity issue is long
    overdue to be fixed. I am determined in a bipartisan fashion to
    get that fix marked up out of this committee and I believe Mr.
    Barr is leading that and I know on the other side, Mr. Meeks.
        Let me just start by saying when you look at China they are
    a--for purposes of the United Nations a developing nation,
    which qualifies them for World Bank loans at nearly zero to
    interest-free loans that they then use to turn around and loan
    to truly developing nations at a usurious interest rate that
    finances this whole scam.
        They know how to manipulate global institutions. Then they
    get the countries in a, through predatory lending, in a debt
    trap. They rape the rare earth minerals. They bring their own
    workers in.
        They take over a port or military base and then, at the end
    of the day, if they default or they go into bankruptcy the IMF
    bails them out. This is incredible.
        This is really an incredible story that is not out there.
    But they are really manipulating it and when they're in 150
    countries that gives them power at the United Nations.
        Twenty African nations voted against the resolution on
    Ukraine because China has them under their thumb. You know,
    I've been very invested in Development Finance Corporation.
    It's supposed to be OPIC on steroids. You know, I passed the
    Champion U.S. Business Through Diplomacy Act.
        Sir, you know, Keith Krach really ran that office well. I
    was with him just last weekend. But, in my judgment, we're
    losing this competition. If they're in 150 countries--and by
    the way, they have to sign a contract denouncing Taiwan and
    they get on the digital yuan as a direct threat to our global
    U.S. currency.
        I've really got two quick questions. One, our intention was
    to get investment in these countries--private investment to
    compete. I was with a group of African financial leaders at the
    Milken Institute. Speaking to them I asked, have any of you
    worked with the Development Finance Corporation. Not one hand
    was raised.
        I talk to Ambassadors. The ranking member does, too. They
    say, we'd rather do business with you but you're not on the
    field and if we're not on the field we cannot win. We cannot
    compete.
        This has to change, and when I looked at the president of
    Uganda's op-ed saying that this policy will force poverty on
    Africa, talking about, only certain energies can be invested
    in, or these African nations said, we do not like you imposing
    your social value system on us, and that's not what Congress
    intended.
        We passed this for national security reasons to compete
    with China and I'd like to hear comments from all of you on
    this.
        And my second question is the Partnership for Global
    Infrastructure and Investment--PGII. Now, that was supposed to
    bring together all these entities and I got to tell you, it's
    confusing even--I think I'm pretty educated but you got USAID,
    you got MCC, you got DFC, you got EXIM Bank, and a whole host
    of about 17 different--you know, that needs to be coordinated
    and it's hard to even know what are the roles of each of these,
    departments and how do they all fit together under this one
    umbrella that needs to be coordinated in this what I say are
    not Republican and Democratic issue--an American issue in this
    great power competition.
        Maybe if I can just go down straight the line if you could
    address both of those issues.
        Mr. Herscowitz. Thank you.
        Why do not I address the Partnership for Global
    Infrastructure and Investment first? I think it has the
    potential to be an extremely powerful tool for the U.S.
    Government, and I do not know if you know my background but
    before I was in this position I was the coordinator for Power
    Africa for 7 years under the Obama and Trump Administrations
    and we learned a tremendous amount about what it means to try
    to mobilize partners to try to advance infrastructure, having
    helped over 120 power projects reach financial close.
        It's challenging to coordinate the U.S. Government agencies
    but we did it very, very well and we did it with strong
    bipartisan support from Congress as well and it was a
    partnership where we sought input.
        The Commerce Department contributed in big ways by helping
    educate African ministries about how to enter into power
    purchasing agreements. State Department provided advocacy.
        So we're working from something that we have done before
    but the additional element of PGII is also bringing in our G-7
    partners and so one of the things that we at DFC have been
    doing is we have actually been mapping out what each of our
    partners, whether it's France or Japan or the U.K., can offer
    as an alternative to the BRI as well so that we can find trade
    leads and investment leads for DFC and for one another and we
    can step in when the other one cannot be there.
        So already in the last year when we look at PGII of that
    $7.4 billion that DFC did in deals last year $5.2 billion of
    those projects qualified as PGII, and so going back to your
    first question, of course, we're growing. Our portfolio has
    grown year after year. We're becoming more and more strategic.
        I can talk about some of the other specific projects but
    I'd like to leave time for my colleagues to discuss as well.
        Chairman McCaul. And my time has--it's already expired. If
    I could have a quick comment from the two of you. Thank you.
        Mr. Venkataraman. Thank you.
        Just to respond on the work that we're doing on
    infrastructure and in particular to counter BRI, one of the
    things we have at the embassies are these deal teams which are
    literally interagency teams that work together that harness the
    tools that each of us has and the first thing we do is try to
    identify the early leads, the early projects that we are aware
    of on the ground so that we can bring them to the American
    companies that we want to bid on those projects.
        We worked with foreign governments to shape their tenders
    so that their tenders are open and transparent. We also pushed
    back on China's attempts to drive single source tenders and so
    we have examples where China has gotten into government-to-
    government agreements with our trading partners to require
    single source tenders for projects that would advantage China
    and we have pushed back on that and been able to undo those
    single source tenders to make sure that American companies can
    compete and win.
        Chairman McCaul. And Mr. Pyatt? Very briefly.
        Mr. Pyatt. Yes. Thank you, Mr. Chairman. I really
    appreciate the question about the strategic purpose of the DFC
    because I have a unique perspective on this issue.
        I was an ambassador serving abroad when you passed the
    BUILD Act. I remember what an incredibly powerful impact it had
    on my work in pushing back on China in Greece, a country where
    COSCO, a Chinese company, had acquired control of what is now
    the largest transshipment port in the Mediterranean.
        It made all the difference in the world to have a positive
    offer to put on the table that attached to American values and
    American investment.
        It takes time because the DFC team has higher standards
    than the PRC does, has a fiduciary responsibility to the
    taxpayers, has to deal with transparency. We have environmental
    issues.
        And I was just talking to my successor in Athens,
    Ambassador Tsunis and now DFC has completed that shipyard
    project in Greece. He sees it as transformative in terms of the
    perception of the United States. But I also saw how once we put
    that on the table China's hand was dramatically weakened.
        Chairman McCaul. Well, so when--I'm always asked, how are
    you countering China, specifically Belt and Road, and it's
    right here. This is the response.
        So we need to prevail in this great power competition. So
    we need to work with you to strengthen your hand because, in my
    judgment, we're not--we're not winning right now.
        So with that, I recognize the ranking member.
        Mr. Meeks. Thank you, Mr. Chairman, and, you know, let me
    be clear, and I think that we all agree that we do not want to
    replicate China's infrastructure model. We know that's not
    good.
        So we need our own approach that plays to what our
    strengths and comparative advantages are to deliver the
    financial and environmentally sustainable development that
    lifts up communities and facilitates trade.
        To that end, you know, we keep talking about this. How do
    we demonstrate to nations that our development and assistance--
    the models that we have--are better for them, as we know in the
    long run, and their populations as opposed to China?
        How do we--first, how do we demonstrate that? So whoever
    wants to take it first.
        Mr. Herscowitz. At the most basic level one of the main
    issue--one of the main differences with DFC is that we're
    looking at the outputs, not just the inputs.
        It's not how much money that we're investing and how much
    money that we're spending--that's important because that moves
    capital--but how are people benefiting from that?
        Every single deal that we do looks at what the development
    metrics are going to be or the foreign policy metric, how many
    people are getting access to water, to electricity, to the
    internet so that we can tell that story as well.
        That's not something that the PRC is doing. We're making
    sure that our transactions are designed for that impact and we
    evaluate every single one of them in that way, and we're seeing
    huge results whether it's in healthcare, helping nearly 2
    million patients get consultations for the first time or
    helping smallholder farmers get access to credit for the first
    time.
        People feel those results and that's what really makes
    people want to get the financing. Obviously, when we support a
    huge port like we're doing in the Republic of Georgia, like
    we're doing also in Ecuador right now--an airport in Sierra
    Leone--people see the impact of our investments in those
    infrastructure projects. There's a lot more we can do but we're
    on that right path.
        Mr. Meeks. So and I guess I'll Mr. Pyatt this question and
    then I'll come--how do you--you know, again, we're in this
    competitive piece and we're talking to these countries and when
    you talk to them how would you characterize the United States'
    comparative advantages and unique strengths in the sustainable
    infrastructure development assistance space going on what we
    were just talking about so that they could say, well, we want
    you, United States?
        Because that's not--I agree with Mr. McCaul what he said
    earlier. Most of them said to the United States, you're not
    there to compete.
        We do not have an alternative. You're not giving us an
    alternative, and we need to try. So how do we do that so that
    not only can we say it we can do it?
        Mr. Pyatt. So, Ranking Member, let me start by thanking you
    for your reference to the Minerals Security Partnership because
    I think that's a great example of what you're talking about,
    and I had the opportunity to join Secretary Blinken and Reta Jo
    Lewis, the chair of the EXIM Bank, and Under Secretary
    Fernandez in New York in September when we had the first big
    public event to roll out the Minerals Security Partnership with
    some of the resource-endowed countries from the developing
    world that we're looking to work with.
        And one of the most powerful moments in that event for me
    was when one of the African ministers came up to me afterwards
    and said, you know, I just want to say thank you for showing up
    because for too long we have only had one interlocutor on these
    issues of mining and extractive industries and it's China, and
    you are giving us an alternative, and both you and the chairman
    used that idea as well in your presentation.
        So I think the first thing we have to do is show up. We
    need to mobilize resources, and, Ranking Member Meeks, I really
    appreciate your reference also to the importance of the State
    Department budget in this context.
        I had the opportunity yesterday--as you know, we have all
    of our Ambassadors in town right now and I did a roundtable
    with some of our Ambassadors focused on these issues of Belt
    and Road, critical minerals, clean tech supply chains and one
    of the--one of the chiefs of mission I asked to present was
    Lucy Tamlyn, our Ambassador in the DRC, and Ambassador Tamlyn
    made the point that today her mission has two economic officers
    covering all of the issues in that large and consequential
    country, one of the--a country with the critical endowment of
    the battery minerals that we are going to need to power our
    energy transition.
        The junior officer who covers mineral issues is very widely
    regarded and that position will have a gap of 7 months coming
    up. So we will have one person working on all of these issues
    in a country that's absolutely critical.
        So we need to resource the State Department, and then we
    have to bring things to the table and this is where the
    partnership between our three agencies and DOE is so critically
    important because it lets us bring to the table the strengths
    of the United States, our entrepreneurial ecosystem, the
    transparency of our companies.
        And I have spent a lot of time since starting this job
    traveling around the world and talking to countries that also
    are being approached by China and the answer I consistently
    hear is, please bring us more, America. Nobody ever asks for
    less U.S. investment or less----
        Mr. Meeks. Let me just as quickly because I guess I'm just
    about out of time also. I'm out of time.
        Mr. Venkataraman, how would the Foreign Commercial
    Service--how are you building on the strengths that we just
    heard about or innovating new approaches in our programs and
    initiatives around the world?
        Mr. Venkataraman. Thank you, Ranking Member.
        Well, first, I just wanted to add that showing up, really,
    in a lot of these countries means our companies showing up.
    It's important for our government to be there. It's important
    for us to be on the ground.
        But it is equally important if not more important for our
    companies to show up because, at the end of the day, as my
    colleague from DFC mentioned, it is the private investment--it
    is the private companies that are going to effectuate change on
    the ground.
        And so what we have done at the Commerce Department is make
    sure that we take what these--projects are available on the
    ground, bring them to our companies at home, bring them to
    these--to the continent or to other markets through our trade
    missions and through other vehicles where we show them these
    projects that they're aware of.
        We introduce them to the government decisionmakers. We
    provide the opportunity for the U.S. private sector to see
    opportunity where they may not be aware of it and then these
    governments know that when American companies invest they do
    not invest for the short term.
        They invest for the long term and they are able to make
    change on the ground in ways that are long lasting and are to
    the benefit of those economies.
        Mr. Meeks. Let me just say this, and I agree with the
    chairman again. I go from company--anybody that comes into my
    office, whatever company it is, financial institution,
    whatever, I ask them are they investing in Africa or in any of
    the emerging nations.
        I've yet to find one that say, yes, I'm investing. Yes, I'm
    working with the DFC. I do not find anybody that says yes to me
    and, you know, it's puzzling. You know, we've talked about the
    cuts and there's no additions, you know, from the private
    sector.
        It seems to me somebody would say, yes, I'm investing. So I
    yield back. But I couldn't agree with you more on that.
        Chairman McCaul. Yes. I think you see this is a bipartisan
    point of view.
        There are 13 votes on the House floor so the committee will
    stand in recess until after votes. Thank you.
        [Recess.]
        Chairman McCaul. I want to thank the witnesses for your
    patience during that long vote series and for staying here. The
    committee will come to order.
        The chair now recognizes Mr. Smith.
        Mr. Smith. Thank you very, very much, Mr. Chairman, and for
    calling this important hearing.
        Let me just ask a question because our last two--the
    chairman and the ranking member and, of course, Mr. Pyatt, you
    did mention it as well the importance of these minerals and--
    like lithium and cobalt.
        As we all know, they're two of the world's most precious
    resources powering the lithium ion batteries which energize our
    phones, laptops, and EVs. Stable supplies are central to
    America's economic future as the International Energy Agency
    predicts a 40 and 20 fold increases in respective demand for
    lithium and cobalt by 2040.
        The Democratic Republic of Congo--and I have been there
    like I know many of you have been there as well. I've been to
    Goma. We know that the mines are very seriously being exploited
    by the Chinese Communist Party.
        Well, 70 percent of the world's cobalt is produced by DR
    Congo and excavation in newfound lithium deposits will begin
    this year. Typically, the often labor intensive artisanal mines
    rely on the toil of an estimated 40,000 children, some as young
    as six, working 12-hour days in gruesome conditions including
    exposure to life-threatening toxins, coercion, and physical
    abuse.
        Despite pervasive victimization the People's Republic of
    China has heavily invested, as you know, in these cobalt and
    lithium reserves. PRC firms own 15 of the DRC's 19 mines, five
    of which hold lines of credit totaling $124 billion from PRC
    State-owned banks.
        Instead of correcting the abuses multiple human rights
    watchdogs have reported that PRC investment coincided with a
    significant exponential increase in injuries and deaths and the
    possibility of even worse cover ups.
        Now, I've been working on a bill now for several weeks that
    I hope to be introducing shortly called Countering China's
    Exploitation of Strategic Metals and Minerals in Child and
    Forced Labor in the Democratic Republic of Congo Act. It's a
    working title.
        I did chair a hearing last July at which we heard from
    people from DR Congo and other human rights activists who
    talked about the savagery that's being imposed, all at the
    behest of the Chinese Communist Party.
        And so, you know, and many of this--this cobalt and
    lithium, especially cobalt now, will find its way into our
    batteries and so what I'm asking, you know, if you could look
    at this bill.
        I know that there are some initiatives you're taking. I'm
    meeting with our Ambassador to DR Congo tomorrow. I know she's
    in town, and I'm so happy to be doing that.
        But the bill would enforce Section 307 of the Tariff Act of
    1930, require the president to present an annual report to
    Congress on foreign persons found facilitating the exploitation
    of child labor in DRC mineral mining or evading--the evasion of
    U.S. importation laws and a number of other important
    provisions as well.
        And I, you know, will share this with you. I hope that we
    can work together on coming up with a legislative initiative.
    But I also know that you're concerned about this as well.
        Again, that hearing was an eye opener. I've had hearings on
    the mining industry many, many times in the past. But that one
    just blew me away to hear about these children who are dying,
    getting sick, getting cancers--you know, the inhalation issue,
    and then at the behest of the Chinese Communist Party, you
    know, the beatings that occurred in order to enforce compliance
    and hard-working conditions.
        Your thoughts, Mr. Secretary?
        Mr. Pyatt. First of all, Congressman, thank you very much
    for devoting so much attention to this, for taking the trouble
    to go to DRC, for meeting with Ambassador Tamlyn.
        Just showing up, as we have all talked about, is of
    critical importance. And then the other aspect of this issue,
    which Chairman McCaul alluded to in his opening statement, is
    the fact that China controls so much of the processing of these
    minerals as well.
        So their business model is to extract raw minerals and then
    take all the processing and the value addition back to China
    and then to control the global supply chain.
        We are trying to create, as both the chairman and the
    ranking member described, a better alternative. That's why we
    are, for instance, working with both DRC and Zambia on a
    battery MOU and a battery council to bring the governments
    together to identify opportunities to bring back to Africa more
    of the processing and the value addition and to create a real
    alternative to PRC's--to the PRC's role in this space.
        The other thing I would really like to put a spotlight on
    today, and you alluded to it yourself, is the critical
    importance of these technologies to American economic
    competitiveness.
        In this role I've met with Ford. I've met with GM. I've met
    with Tesla. All of our companies are chasing the EV marketplace
    because that's where consumers are going and China has used its
    years of investment in these upstream battery minerals
    resources in order to also dominate the larger story of
    electrification of vehicles.
        And in my prepared statement I noted just the reporting
    last week from the Wall Street Journal putting a spotlight on
    the rise of Chinese auto manufacturers, companies that most
    Americans have never heard of like BYD or Chery Automotive and
    as I travel around the world it's concerning to me to see how
    much headway these companies are also making in grabbing market
    share.
        So this is about strategic competition at the highest end
    of our respective economies and it's one where we're trying to
    build partnerships and also working not just with the resource-
    endowed countries but with other companies that have--other
    countries that have a similar outlook, allies like Japan, like
    Korea, like the European Union. So thank you.
        Mr. Smith. I thank you. I know I'm out of time. We'll look
    to work together because I think we need to have a united front
    on this, especially with so much exploitation and so much
    corruption.
        Thank you. I yield back.
        Chairman McCaul. The gentleman yields back.
        The chair recognizes Mr. Sherman.
        Mr. Sherman. Earlier in--at the early years of this century
    I chaired the subcommittee that oversaw what was then called
    OPIC, the least fortunately named organization in American
    government since it sounded so much like OPEC.
        We--I was able to craft legislation to reauthorize OPIC. We
    got it through the House and I'm pleased that so many of its
    provisions are now in the charter of the Development Finance
    Corporation.
        Mr. Chair, I look forward to working with you to make sure
    that the Development Finance Corporation is able to make equity
    investments.
        President Biden in his 2024 budget includes a new mandatory
    proposal to outcompete the PRC including $2 billion of support
    for high-quality strategic hard infrastructure projects
    globally and $2 billion for a new revolving fund at the DFC to
    boost equity investments, and I look forward to working with
    you to make this a reality and it will have to go through our
    committee.
        But one thing I might disagree with the chairman on is I'm
    not interested in advice from--these days from the government
    of Uganda. It is most famous around the world for calling for
    the--for passing legislation calling for the execution of
    people simply because they are part of the LGBT community.
        [Side comments.]
        Mr. Sherman. And I look forward to working with Mr. Meeks
    on our other committee to push for the creation of mutual funds
    that specialize in publicly traded companies based in Africa
    and give Americans a chance to invest in private equity
    companies that will focus on Africa.
        There are six big differences between how we do business
    and China does business. First, we're a coalition of our
    government, our allies' governments, and truly independent
    private sector companies, and even when you just focus on the
    U.S. Government it's divided between two parties.
        China is a one-party State and when it comes to the
    independence of their companies not so much. So it's one entity
    versus a coalition.
        Second, we're opposed to corruption. That's why we have a
    Foreign Corrupt Practices Act. The Chinese are not only free to
    bribe, they do it and it was a subcommittee in this room where
    I presented the letter from the outgoing president of the
    Federated States of Micronesia where he details how his--people
    in his own government are being bribed by China.
        One thing that concerns me is that we do almost nothing to
    publicize this and I'm not sure that our intel community is
    really getting us all the information they could on Chinese
    bribery.
        Related to that is we're dedicated to democracy and the
    rule of law, which puts us at a real disadvantage in appealing
    and making alliances with those who want to be corrupt
    dictators in foreign countries.
        We should have a strategic alliance with the peoples of
    those countries that would like to be governed by somebody
    other than a corrupt dictator. But, of course, we do not
    publicize that we have a Foreign Corrupt Practices Act and
    China has a practice of corruption. So we get no benefit.
        We engage in genuine philanthropy. I'm going to ask our
    witnesses to raise their hands if they could give me a real
    example of where China did something just to help people and
    not for its own economic and strategic advantage.
        And I see no hands going up to volunteer to answer that
    question.
        Fourth, we care about climate. China funds new coal-fired
    plants. But I will point out for those who like to see coal-
    fired plants, et cetera, the biggest investors in the Third
    World in fossil fuels are American oil and mining companies.
        And, finally, while China is crafty to make sure its
    foreign efforts advance its national interest, America, not so
    much.
        We do almost nothing to publicize their role in climate
    versus ours, our role on democracy versus theirs, and
    especially the corruption, and I have not in 26 years been
    briefed by our Intel Community on the details they've been able
    to find where you can say this Chinese entity bribed this
    foreign leader. If they do not tell me they do not tell the
    world, and I'm not sure they're gathering it.
        And finally, when it comes to being strategic, as the
    ranking member pointed out there are those pushing for a 31
    percent cut in our foreign aid, foreign development, and
    diplomacy efforts. That is not strategic.
        I do have a question, believe it or not, and that is China
    has these unfair loans. The question is why do countries pay
    them back.
        Now, the number-one reason to pay China back is so you can
    get another loan from China. But if their first loan to you was
    an anathema that does not--the real reason I've been told they
    pay back is they do not want their bond ratings reduced. They
    want to be able to borrow from the international communities
    outside of China.
        So I'll ask a reaction from our witnesses to a proposal
    where we would simply instruct the bond rating agencies that
    they cannot downgrade any country's debt rating because they
    decide to extend the middle finger in the direction of Beijing.
        Do we have--is there a witness that wants to respond to
    that? And can you think of any other reason why a country that
    gets an unfair loan from China would choose to pay them back?
        Mr. Herscowitz. So I would agree with you that the terms of
    the loans are extremely unfavorable and I think it's not only
    the terms of the loans unfavorable but they also lack
    transparency and we look at countries like Zambia and Angola
    and the significant amount of debt that they owe to the PRC.
    It's just absolutely debilitating and it prevents the countries
    as well from taking on additional debt and so it makes it
    challenging for us.
        It also leads into default on projects where their
    governments are guarantors and pushes them up against IMF debt.
        Mr. Sherman. So is the answer to simply urge these
    countries----
        Mr. Herscowitz. So the answer--my answer, though, is this
    would be a question for the Treasury Department and not for DFC
    to opine on something like this.
        Mr. Sherman. I look forward to taking that up and I look
    forward to our intel agencies briefing you as I certainly
    haven't--briefing us, as I know they haven't and in most--many
    cases exposing to the world the details of the incredible
    corruption that China pays for and supports while we do the
    opposite.
        It's time for the people of the world to understand that. I
    yield back.
        Chairman McCaul. The gentleman yields. The chair recognizes
    Mrs. Wagner.
        Mrs. Wagner. I thank you, Mr. Chairman, and I thank our
    witnesses for their service.
        Members of this committee were among the very first to
    sound the alarm bells on China's insidious Belt and Road
    Initiative, Xi Jinping's plan to extend China's influence
    across the globe through predatory investments, debt trap
    diplomacy. We have just talked about an outright bribery and
    coercion.
        China is no longer hiding the fact that it seeks to replace
    the United States of America as the world's dominant power.
    This would be an unmitigated disaster for human rights,
    international security, and global economic development.
        America's allies and partners are eager for the U.S. to
    demonstrate leadership and commitment, specifically seeking
    assurances that the U.S. will remain present and engaged in the
    long term as they work to limit their reliance on China.
        Assistant Secretary Venkataraman, how many Foreign
    Commercial Service officers do you have across Southeast Asia?
        Mr. Venkataraman. I do not have that exact number for you
    but I'd be happy to get that to you.
        Mrs. Wagner. The next question was going to be how many
    comparable PRC ministry of commerce staffers are in the same
    region?
        Mr. Venkataraman. I can tell you it's a lot more----
        Mrs. Wagner. OK. Well, that's good to know. I'd like to
    know how many we have and if there's a way to find a comparable
    number that represents that it's a lot more, you know, because
    the point is is the FSC's Southeast Asia presence--is it
    sufficient to help U.S. businesses compete with PRC entities? I
    assume the answer is no.
        Mr. Venkataraman. The short answer is no.
        Mrs. Wagner. Yes.
        Mr. Venkataraman. We--as you know, we--the President has
    put forward a budget that reflects expansion--excuse me, an
    expansion of the Foreign Commercial Service precisely for this
    reason and the Indo-Pacific is one area where we need to
    strengthen our presence to do a better job.
        Mrs. Wagner. If you could get us those numbers I'd
    appreciate it.
        Mr. Venkataraman. I sure will.
        Mrs. Wagner. Many Pacific Island countries are so small
    that they struggle to attract private sector investments in
    essential services like banking.
        Again, Assistant Secretary Venkataraman, are you concerned
    that Pacific Island countries will have no choice but to
    partner with Chinese entities to access, let's say, banking or
    IT, any other critical industries?
        Are you seeing any efforts from the U.S. businesses in the
    banking industry competing for bids in the Pacific Islands and
    how are you encouraging those efforts?
        Mr. Venkataraman. Thank you, Congresswoman, and I can tell
    you that I cannot speak directly to the banking industry but I
    will tell you I share your concern very much about American
    companies being present and visible in the Pacific Island
    countries and we are already taking steps to change that
    situation on the ground.
        We, in the past year, have added our first two permanent
    positions in the Pacific Island countries so that we have
    commerce representation on the ground. We are looking very
    closely at what additional representation might be required.
        Last September Secretary Raimondo also announced the
    launching of negotiations on bilateral MOUs with these
    countries so that we could strengthen the commercial
    partnerships and really work on setting the right conditions
    and creating these interagency frameworks where we can make
    sure that the conditions are right for American companies to go
    in and I would assume that would include the banking companies.
        Mrs. Wagner. OK. Well, as a followup, Assistant Secretary
    Venkataraman, in areas across the Pacific Island countries
    where there isn't a U.S. Global Markets office but there is a
    Chinese ministry of commerce, you know, what are we doing to
    mitigate the gap?
        And you said you've got the presence now of at least two.
    Is that right?
        Mr. Venkataraman. Yes. And, Congresswoman, I should say
    that while we are speaking about the presence of those two on
    the ground the Pacific Island countries are not in any way
    ignored by the Foreign Commercial Service.
        We do have a team out of Australia that does cover that
    region. So while they're not present in all of the Pacific
    Island countries those countries are very much part of our
    attention and particularly as we negotiate these MOUs they are
    top of mind.
        Mrs. Wagner. In 2018 China laid out an ambitious plan to
    extend the Belt and Road Initiative to the Arctic.
        Assistant Secretary Pyatt, how well has China's plan been
    able to--how well have they been able to implement this plan
    and is State tracking any PRC natural resource exploitation in
    the Arctic?
        Secretary Pyatt?
        Mr. Pyatt. Thank you for the question, Congresswoman.
        I should note, as I said in my statement, I was recently in
    Alaska and had the opportunity to talk with Governor Dunleavy
    and some of our mining companies active there about all that
    they are doing working with other Arctic States and dealing
    with both the challenges that that region is facing because of
    a changing climate but also with the opportunities and, in
    particular, the opportunities attached to the energy transition
    and the tremendous growth in demand for minerals that we're
    going to see as a result of that.
        I do not have any specifics for you know on your question--
    --
        Mrs. Wagner. So you do not whether China's plan, which is
    very specific, to extend their Belt and Road Initiative into
    the Arctic--you do not know anything about that plan----
        Mr. Pyatt. No, I am--we are certainly conscious of the
    plan. That is why we have been engaged as forcefully and as
    systematically as we have been.
        Mrs. Wagner. And how is it that you've been engaged?
        Mr. Pyatt. For instance, our new consulate in Nuuk, the
    work that we have done with our Arctic partners.
        I was part of a conversation that Secretary Blinken's
    counselor, Counselor Chollet, led at the U.N. General Assembly
    with all of our partners in the Arctic Council other than
    Russia, of course, to talk about some of these issues and the
    opportunity that it represents.
        I think we're actually in relatively good shape in this
    area precisely because we have these partnerships, and if I can
    allude quickly, Congresswoman, to your question about the South
    Pacific islands as well.
        I think the United States' greatest strength in working on
    these issues and dealing with the challenge that China
    represents is the fact that we're not doing this alone. We're
    doing it with allies and partners.
        In the South Pacific we're working closely with Australia,
    with New Zealand----
        Mrs. Wagner. Yes. New Zealand--I'm very aware of that.
        Mr. Pyatt [continuing]. In the Arctic. We're doing it
    closely with our NATO allies, with Canada, of course and as I
    said with our State of Alaska.
        So we need to continue to invest in those kind of
    partnerships and that's how we deal with the challenge that
    China presents.
        Mrs. Wagner. I'm way over my time. I apologize to the chair
    and I yield back. Thank you.
        Chairman McCaul. The gentlelady yields. The chair
    recognizes Ms. Wild.
        Ms. Wild. Thank you, Mr. Chairman.
        I'd like to start with a question to Mr. Herscowitz. One of
    the--one aspect of the PRC's authoritarianism that I find
    particularly egregious and troubling is its use of forced labor
    and widespread labor violations, which I believe have been very
    well documented, and I think that one of the, hopefully,
    competitive advantages that we should have abroad is in
    contrasting that PRC record with our approach to not only
    affirmatively embracing worker safety and rights but also
    prioritizing hiring local workers, which my understanding is
    has not been something that the PRC has done, although I've
    also heard that perhaps they've started to hire more local
    workers, for instance, in Africa. I may be wrong about that.
        But you in your testimony write while the PRC often brings
    in its own labor force on projects, even having operations
    manuals written in Chinese, the projects we support create
    local jobs, bring more people into the formal economy, and
    train workers so they can build skills, all of which help
    promote economic opportunities and prevent migration or
    participation in illicit activities.
        Can you tell us a specific example of this approach and how
    it's been successful?
        Mr. Herscowitz. Sure. I'm glad that you brought up my old
    testimony because I was thinking that maybe they've been
    listening to my testimony and suddenly they're doing some
    window dressing and hiring some more local employees.
        I spent 6 years living on the African continent traveling
    to a significant number of the countries and I've been back to
    Africa, I think, four or five times this year and I always look
    at this issue and ask about this issue.
        To give you a specific example, I spoke in my--earlier
    about a project that we're going to be financing in Ecuador to
    build a port and that port alone will create about, I think,
    1,250 jobs.
        One of the things that's important to remember is that for
    U.S. companies in particular it's expensive to bring your own
    labor. So even I was--I explained to African countries, like,
    we're not trying to take over your local--we want to build
    skills. We want to have good partners.
        I visited a project in Burundi recently that DFC is
    participating in. It's a solar array. It's the first--it's like
    the largest provider of power in Burundi right now, one of the
    poorest countries in the world and I was really impressed. It's
    an American-Israeli company called Gigawatt Global. All of the
    people who worked at that solar array were local Africans.
        And so this is the model that people see and this is why
    they want more of it because we look to train and empower local
    staff.
        In fact, one of the things that we did early on with Power
    Africa is we created a program to train young women in Africa
    to power in leadership positions and we have watched how these
    women have gone into senior positions in utilities and
    elsewhere.
        So that's what we offer that the PRC does not. We offer the
    ability to have true partnerships, build capacity, and make
    sure that the people who are running the projects are in
    control of their own resources and building that mutual trust.
        Ms. Wild. OK. I'm going to stay with you because I want to
    get to another question and that is on the impact of failed BRI
    projects, some of which have very publicly failed and in some
    cases, like in Sri Lanka, the--their failures have even
    resulted in public backlash, as I understand it, against the
    Chinese government.
        We have continued to hear about infrastructure projects
    that have had construction problems, are financially
    unprofitable, and added to the host nation's debt burdens. What
    has been the result of those failed projects in terms of
    China's reputation at large and whether it's--and the growth or
    not of its influence in these countries?
        Mr. Herscowitz. So there are failed projects and a lot of
    it's anecdotal but a lot of it's real and I think there's been
    a lot published, for example, about the Coca Codo Dam project
    in Ecuador which has cracks in it.
        There's other hydro projects built by Sinohydro that have
    cracks in them and now governments need to fix them. Roads that
    are falling apart as well. Even the African Union building that
    the Chinese built had all kinds of issues with it.
        So everybody knows it and they laugh about it a little bit
    because they know that they're not getting the best quality and
    they want U.S. companies, and one of the projects--and I know I
    just spoke about Ecuador but I'll talk about it again.
        DFC recently approved a 200 megawatt solar project in
    Ecuador, which is a massive solar project for Latin America.
    Chile has got some really large solar but that's really huge
    for Ecuador and that's going to offer less expensive power and,
    in some ways, more reliable power than what you're getting from
    that hydro project. But there are quite a few out there that
    are problematic and it's causing significant reputational harm
    to the PRC.
        Ms. Wild. OK. Thank you very much. I yield back.
        Chairman McCaul. The gentlelady yields.
        The chair recognizes Ms. Radewagen.
        Ms. Radewagen. Thank you, Mr. Chairman.
        [Speaks foreign language.] Good afternoon. I want to thank
    you all for being here today.
        I want to focus on some of the loans that the PRC is making
    to small nations, and just following up on Mrs. Wagner's
    question about specific island nations and thank you for
    mentioning that.
        About a week and a half ago I was in independent Samoa and
    their airport was built using BRI funds. Now, when my good
    friend, Prime Minister Afioga Fiame Naomi Mata'afa was elected
    to lead independent Samoa she canceled many of these BRI
    projects in independent Samoa before they actually destroyed
    Samoa's economy.
        So Mr. Herscowitz, my first question is for you. There have
    been reports and trends that PRC investment into BRI is
    suffering due to their heavy saturation of loans. Has DFC
    outlined or explored any plans to capitalize on this
    opportunity? And if so, can you share some of the details?
        Mr. Herscowitz. So DFC is an important tool for the U.S.
    Government in trying to provide support in the Pacific Islands.
        It's a challenging place to work, as has been highlighted,
    because a lot of the economies are quite small and so we're
    even looking at how we can support some of the islands on a
    regional basis.
        I met with one of the ministers from Tuvalu recently at
    the--at the Least Developed Countries Conference and just
    talking about what we can do, and it's such a small population
    there and we're looking at if there were ways for us to support
    even the development banks in that country or at least a
    regional development bank.
        A significant project, though, and I think one of my
    colleagues mentioned that--it's been mentioned--our
    collaboration with partners who are very active in the region
    like Australia, like Japan, was the work that we have just done
    in Papua New Guinea to basically upgrade a 5G network, which
    outbid a Chinese bidder as well and that was collaboration with
    the Japanese government and Australian governments. We are
    constantly looking for these types of opportunities but there's
    always more we can all do.
        Ms. Radewagen. Thank you. And as a followup--and you can
    all answer but I may not have enough time--can any of you share
    all the current bids for strategic projects that are ports,
    undersea cables, and telecommunications systems?
        Mr. Herscowitz. I do not think we have that--do you have--I
    do not know if Commerce tracks this. One of the--go ahead. I'll
    defer to you first.
        Mr. Venkataraman. Yes. I cannot provide an answer on that
    right now. We'd be happy to look into it. We might have some
    information that's on point or at least gets us close to some
    of that information that our deal teams might be tracking. But
    we'd be happy to followup.
        Ms. Radewagen. OK. Mr. Secretary?
        Mr. Pyatt. So I think what I would highlight in this area
    in particular are the opportunities around new energy
    technologies, and as Andy pointed out, these are very small
    economies. Most of their power historically, as you know, has
    come from diesel generators systems that aren't very clean.
        But now the technology is evolving and so we're working
    with partners including both DFC but also with American
    companies. I should also point out that I was very pleased that
    earlier this year one of my deputies, our Deputy Assistant
    Secretary Laura Lochman, was in the Pacific Islands talking
    about exactly these issues of technological opportunity but
    also trying to build partnerships.
        Ms. Radewagen. Thank you, Mr. Chairman. I yield back the
    balance of my time.
        Chairman McCaul. The gentlelady yields back.
        The chair recognizes Mr. Schneider.
        Mr. Schneider. Thank you, Mr. Chairman. I want to thank the
    witnesses for sharing your perspective today.
        Assistant Secretary Pyatt, it's good to see you. I last saw
    you in Greece seems like forever ago. But it's good to be here.
        Obviously, what we're talking about is a critical issue and
    making sure the United States maintains its leadership role and
    are able to stand up against the BRI. I want to kind of walk
    through an intellectual exercise for a second, though.
        If there was no Belt and Road Initiative what would be our
    international priorities within the context of building
    relationships and assuring U.S. alliances?
        And maybe, Mr. Herscowitz, I'll start with you.
        Mr. Herscowitz. So I would start by saying that prior to
    the Belt and Road Initiative the U.S. Government has for a long
    time invested a significant amount in developing countries,
    going back to the Marshall Plan and doing it for the right
    reasons because we see developing countries as our partners and
    we see that it benefits Americans when the countries throughout
    the world are in a better place economically and that people
    are well educated, they have access to health care.
        So whether it was through USAID or OPIC or DFC the work
    that we have been doing has been building the partnerships that
    we have had and it's helped build the reputation of the United
    States to where it is internationally today.
        We can continue to do more but I would just submit that we
    would--we have been doing this work and we can do more and we
    can do it better.
        Mr. Schneider. Assistant Secretary Venkataraman?
        Mr. Venkataraman. I would just echo that to say that our
    focus even without Belt and Road would be on the emerging
    markets where that is the locus of economic growth. That is
    where U.S. business sees a significant opportunity. That's
    where the middle classes are growing and that's where we would
    be still.
        Mr. Schneider. And Assistant Secretary Pyatt?
        Mr. Pyatt. On the energy and climate issues that I'm
    responsible for, Congressman, much is guided by the priorities
    that Secretary Blinken has given us.
        The top of that list is the competition with our two great
    adversaries, the PRC and Russia, and then another critically
    important consideration, again, in the energy and climate space
    is the large developing countries that are going to have such a
    decisive impact on how successful we are in managing the
    climate crisis--so India, Pakistan, Bangladesh, Nigeria, where
    I'm traveling this weekend, Indonesia, these are of critical
    importance--and then also I would say influenced significantly
    by what we hear from Congress and the priorities that this
    committee and the Foreign Relations Committee give us in terms
    of areas of particular focus.
        Mr. Schneider. And I was looking at some of the numbers and
    the materials we had in preparing for this hearing and it
    struck me our direct investment--foreign direct investment of
    China over the 20 years, 2001 to 2021, grew from $34 billion to
    $2.6 trillion, a 76 times increment.
        The United States is still significantly larger. We're at
    $9.8 trillion FDI in 2021, four times China's, but our relative
    share of the global total has dropped from 32 to 23 percent.
        But I think one of our superpowers as a nation is our
    alliances--we have talked a little bit about this here--is our
    ability to bring others together. I think each of you have
    talked about this of how we--working with others and the
    relationships we build with the countries we partner with and
    the countries we're investing in.
        And the reason I asked about what if there was no Belt and
    Road I think there's overlap. Even if China wasn't doing what
    it was doing we would still be doing what we are doing because
    it serves our interests. It serves our national interest. Our
    strategic interests are served making sure that China does not
    continue to grow.
        In the minute we have left, and maybe I'll start with
    Assistant Secretary Pyatt, coming the other direction, what are
    the most important things? You mentioned the role or positions
    coming out of Congress.
        What do we have to make sure that we address and what do we
    need to say or do to make sure that you all are successful,
    that the United States continues to be successful on the global
    stage?
        Mr. Pyatt. So, Congressman, if I can just circle back to
    Ranking Member Meeks' point, and we had a powerful presentation
    yesterday to our Ambassadors, also from Senator Coons and
    Senator Graham, who talked a little bit from the Senate side,
    their perspectives on where the budget debate stands and the
    potential repercussions for the State Department's operational
    budget.
        And so I think giving us the resources that we need, and as
    I said earlier, I was so grateful to hear about the engagement
    with Ambassador Tamlyn in DRC, which is a critically important
    country in this energy transition game.
        But it's also an embassy that's operating right at the
    fringes in terms of their operational effectiveness for
    resource reasons.
        Mr. Schneider. Anybody else?
        Mr. Herscowitz. I just wanted to add that one of the most
    powerful changes that I thought took place when DFC was
    established in contrast with OPIC is opening up the ability for
    DFC to work not only with U.S. companies what that's done is
    it's opened the door for us to work with companies from--both
    local companies.
        From a development standpoint you build long-term
    sustainability but with like-minded partners as well and the
    reason why intuitively it seems like that does not favor U.S.
    companies it actually does because when we're in on a project
    early it gives us an opportunity to find out who the EPC
    contractor was going to be, who the vendors are going to be, so
    that we can then pass trade leads on to the Commerce Department
    so that U.S. companies can get in there.
        OPIC had a vast majority of its business with a relatively
    small number of companies. I'm really proud of the fact that
    over the last 3 years DFC has added at least, I think, 200 or
    so new clients and I think that's really making a big
    difference in terms of our collaboration with like-minded
    partners and making sure that the U.S. has some touch in terms
    of what's going on in countries.
        Mr. Schneider. Thank you. I do not want to take--I'm over
    time but if--with permission if you want to add anything or----
        Chairman McCaul. Very briefly.
        Mr. Schneider. OK.
        Chairman McCaul. We have a congressional baseball game
    tonight.
        Mr. Schneider. Thank you for the extra time and, Chairman
    McCaul, thank you for having this hearing. This as a critical
    issue that we need to stay united in a single voice here.
        Thank you very much.
        Chairman McCaul. The gentleman yields. The chair recognizes
    Mr. Davidson.
        Mr. Davidson. I thank the Chairman. I thank the witnesses I
    appreciate you guys being here and the work that you're at
    least supposed to focus on. Hopefully, we'll find 100 percent
    alignment.
        Does the Administration assess that our partners and allies
    in the Western Hemisphere are in alignment with the United
    States on the need to address the threats posed by China?
        Mr. Venkataraman. Thank you, Congressman. I think there are
    different perspectives throughout the hemisphere on this
    question. I think what we hear most often is that our trading
    partners will look to China for assistance with certain
    projects and for that investment that does come from China.
        But it is also the case that many of our trading partners
    in the region do understand some of the risks associated with
    that investment or with that----
        Mr. Davidson. I mean, it's great that they understand the
    risks but, nevertheless, they do not assess China as a
    significant threat. They're continuing to actually increase
    their ties with the United--with China and in some cases
    diminish their ties with the United States.
        I'm glad you recognize that and acknowledge it. I guess my
    concern is that the Administration seems OK with it and I'll
    point out that during a background press call on the Summit of
    the Americas a senior White House official said, quote, ``Any
    country that is investing in the economic prosperity, security,
    and social wellbeing of the countries of the region are
    advancing U.S. national security interests and are welcome as
    far as we're concerned.''
        That does not sound like there is a policy from the United
    States to counter China's influence. It seems like it's
    inviting it like, hey, I do not know. If you're going to invest
    and grow the economy here come on over.
        That's concerning. This official also quoted National
    Security Adviser Jake Sullivan, who said on a previous
    occasion, quote, ``We're not asking the countries of the region
    to choose between the United States and China.''
        Is it the policy of the Biden Administration to permit the
    Chinese Communist Party to expand their malign influence in the
    Western Hemisphere? Is that a policy position?
        Mr. Venkataraman. Congressman, I would just say that we
    spend every day pushing back on that. That was what we do with
    our American companies.
        We provide these governments in the region with an
    alternative to what is presented by China. So we are not in the
    business of standing back and letting China take over the
    Western Hemisphere with their investments.
        Mr. Davidson. Mr. Pyatt?
        Mr. Pyatt. Congressman, the policy of the United States is
    to invest, align, and compete and we're competing every single
    day with the PRC, including here in the Western Hemisphere.
        I mentioned earlier my travel recently to Guyana, a small
    developing country that has just discovered 11 billion barrels
    equivalent of oil and gas.
        The conversations I had there everybody used the phrase
    that China was a partner of necessity, not a partner of choice.
    There was great appreciation for the fact that I was there, the
    most senior U.S. official to go to that country in a long time.
        Mr. Davidson. Thank you. Mr. Herscowitz?
        Mr. Herscowitz. It's part of DFC's mandate, a key part of
    our mandate, to counter malign influence and to use private
    sector solutions to advance development and the strategic
    interests of the United States.
        Mr. Davidson. Is China's influence malign?
        Mr. Herscowitz. Absolutely.
        Mr. Davidson. All right. I'm glad we agree.
        This is encouraging, because some of the statements, as I
    said, lends credibility to the idea that the Biden
    Administration may not have a formal policy that's OK with the
    Chinese Communist Party growing their influence in the Central
    and South America and the Western Hemisphere.
        It's certainly happening. It is happening, right? I mean,
    China's influence in the region is growing, right? Does anyone
    disagree with that? Everyone agrees?
        So we're not succeeding, you know, so--you know, I'm
    concerned about that. I'll just close on natural resources.
    Control of national resources critical to maintain power and
    leverage and the People's Republic of China has choke points
    and limitations on some of these.
        You know, you mentioned Guyana but we're also concerned
    about rare earth minerals and, you know, maybe not quite rare
    earth, whether you're talking around the world--cobalt,
    lithium, the things that are going, frankly, out of the green
    new deal that the Biden ministration loves. They're driving
    investment into China, into areas that China has garnered
    market.
        So when you look inside the Western Hemisphere are our
    policies effectively allowing China's influence to grow or are
    we doing things to counter it?
        Mr. Pyatt. Congressman, we are working very hard to counter
    it, including with the Lithium Triangle countries that you
    alluded to, working with Argentina, working with Chile, working
    here in the--in the near neighborhood including, of course,
    with Mexico.
        So our intent is to respond to the opportunities that the
    energy transition represents and I would suggest to you,
    Congressman, that the growth in demand that we're seeing for
    those battery minerals is not coming so much because of any
    government's policy.
        It's becoming because of consumer choice and that's
    certainly what I hear when I talk to Ford or General Motors----
        Mr. Davidson. Interesting perspective. I yield my time.
        Chairman McCaul. The gentleman yields.
        The chair recognizes Mr. Castro.
        Mr. Castro. Thank you, Chairman. I thank all of you for
    your testimony today and for being with us.
        I've often said that the United States should engage in
    competition with China, when necessary prioritize our sources
    of strength at home and provide funding to countries that need
    our support.
        The United States has an opportunity to present ourselves
    as a viable and better partner for the realities many nations
    face. To succeed, the United States must regain confidence with
    other countries and discourage actions that undermine agreed
    norms.
        So, in other words, competition between the United States
    and China should be fair. China should be able to compete with
    the United States without cheating the world and the
    Development Finance Corporation is a critical tool for the
    United States, which I strongly support.
        But I would caution the Administration in tying the DFC too
    closely to U.S.-China competition, and we saw with the
    Millennium Challenge Corporation's experiences in Nepal and Sri
    Lanka. Giving the impression that our development efforts are
    intended to counter China paints a big target on the backs of
    our work and can be counterproductive.
        So for my questions, Mr. Herscowitz, you testified that the
    DFC is working on improving its overall capabilities and
    recognizing--organizing its structure to counter the Belt and
    Road Initiative.
        The DFC is first and foremost a development agency. I
    understand the pressures to finance projects that provide
    alternatives to the PRC but in doing so the DFC cannot lose
    sight of the development mandate that the law requires.
        How do you view your role as the chief development officer
    in ensuring the DFC does not lose sight of its development
    mandate?
        Mr. Herscowitz. So let me start by saying that I'm really
    pleased of the direction that DFC has taken and the progress
    that it's made over the last few years in terms of making sure
    that every single project that we do is evaluated for its
    development impact, and development impact and strategic
    interest tend to be mutually reinforcing as well.
        And so when we look at every project it's evaluated using a
    system that gives it different values, depending on how many
    people are going to benefit, whether it's innovative, whether
    it's to promote economic growth.
        It happens with every single project and I've watched the
    quality of those projects from a development standpoint
    increasingly improve. I see us reaching into areas that are
    tougher places to work.
        I view DFC's mandate to be, yes, to counter influence of
    PRC and other malign influence but it's also to make sure that
    we're reaching some of the most underserved populations.
        And why is that important? Why do countries swing back and
    forth from left and right in Latin America? I spent 12 years
    living in Latin America. I've lived in South America, Central
    America. I've lived in Nicaragua. I've lived in the Caribbean.
        Why do they do it? Because they're not necessarily catering
    to the populations who are underserved who vote for their
    presidents and as they see that they are left behind they
    continue to vote in the other direction and that's just basic
    politics.
        And so what DFC is doing is looking at how we can reach the
    underserved populations in a lot of these countries, whether
    it's indigenous groups or Afro-descendant populations in South
    America, to make sure that we see greater stability and that
    people get jobs and we're not dealing with as many people who
    want to migrate across the border to the U.S.
        Creating jobs and making sure that people are happy where
    they are is what creates stable----
        Mr. Castro. Sure----
        Mr. Herscowitz [continuing]. For us.
        Mr. Castro. No, and I'm encouraged to hear that. I'm
    encouraged with many of the projects that DFC has taken on. But
    I just want to reiterate that the main mission of the DFC is
    not to be reactionary to China.
        That's not the main mission of the DFC, and the danger
    there is that we start following what China does and only
    investing in countries where China is making a play, so to
    speak, and I do not want us to get to that point.
        But let me--let me move on to my second question. During
    the last Congress I led an effort with my colleagues on this
    committee to change how equity appropriations to the DFC are
    scored so we can treat equity appropriations fairly and unlock
    more resources.
        I was glad to see this proposal raised by Secretary Blinken
    at the budget hearing earlier this year. What would changing
    how equity appropriations are treated do to help the United
    States' development priorities and provide alternatives to PRC
    financing?
        Mr. Herscowitz. I think most people in this room agree that
    the equity authority that was given to DFC was a great new
    authority but that we haven't been able to deploy it for
    reasons that nobody anticipated and that has to do with how
    equity is scored, which means that when we make an equity
    investment it gets treated as if it's a grant. It's assuming
    that we're going to lose all that money and everybody knows
    that's not the case.
        When you make an equity investment often you get the
    greatest return of any type of investment. Solving this issue
    is going to--would have would have a dramatic impact.
        First of all, it will allow us to get involved in--and I'm
    going to mention the strategic first--strategic projects where
    there's a lot of risk, whether it's mining or geothermal
    projects.
        There's a lot of up front sunken costs where people do not
    want to give them loans and you need to be able to get that
    equity in there and demonstrate some success over time.
        But it's also designed to help reach those small
    businesses, those entrepreneurs who have the good ideas, who
    cannot go to a bank right away and if you can give a----
        Mr. Castro. Sure.
        Mr. Herscowitz [continuing]. Full amount of equity to them
    that helps them grow their business.
        Mr. Castro. I apologize. I've run out of time. I know that
    people want to ask their questions. But thank you so much for
    your answers. I yield back.
        Chairman McCaul. The gentleman yields.
        The chair recognizes Mr. Hill.
        Mr. Hill. Mr. Chairman, thank you for holding this hearing,
    and it certainly echoes the work we do over on House Financial
    Services Committee as well in trying to strategize and work
    collectively with our friends here on the House Foreign Affairs
    on countering Belt and Road and one of the key things is China
    not being a member of the Paris Club is just not an acceptable
    reality.
        We need those of you engaged at--in the Foreign Commercial
    Service and at State advocating that in the interagency to
    really press the U.S. to press China to join the Paris Club for
    debt restructuring so we have fewer Ecuadors, fewer Sri Lankas,
    fewer catastrophic situations.
        I do not want to belabor that fact but we know about the
    predatory loan process of China. We know about their lack of
    transparent lending, their predatory terms, and all these
    things are things that this Congress have been active on.
        My Chinese Debt Transparency Act was signed into law in
    2020. Young Kim's bill, PRC Is Not a Developing Country Act,
    passed the House in March. So we are taking actions to counter
    this.
        But we need to build a consensus within the U.S.
    Government, American business, and our allies and partners
    around the world on how best to counter it, and on the House
    Intelligence Committee I work--in my area of geography I work
    in Africa and I was on a CODEL to the Republic of Congo in 2017
    And everywhere we went in that little place--corner of the
    world, where we only have 14 people in our embassy, by the way,
    you see millions of dollars' worth of Chinese construction.
        They built elaborate concrete bridges, freeways, sporting
    complexes, and even the Presidential palace and the foreign
    ministry building, and we were directed, oh, go up this
    beautiful highway and we did.
        We drove this highway. It goes to this major new Chinese-
    built construction project of our community college and we come
    to the end of the road because the road is just purely a
    Potemkin Village fake concrete freeway and it goes to this
    beautiful campus.
        From the distance you see these white buildings on the
    green hillside and guess what? It's--there's nothing there.
    They're just empty concrete buildings built by China. There are
    no students. There's no teachers. There's nothing.
        There's not even a Chinese restaurant in the country. I
    mean, they left nothing except deteriorating concrete that as
    you know you would not have in any way, shape, or form.
        So in addition to predatory terms of Belt and Road the
    construction techniques are bad. So what are we doing to--with
    countries in the Global South to inform them?
        What are you doing in your daily work to inform the
    countries in the Global South about the dangers of financing
    things from China and using Chinese construction companies?
        Who wants to start on that?
        Mr. Pyatt. Congressman, I can start with that one and just
    to say both in my former Ambassadorial role but also knowing
    what my colleagues around the world are doing one of our most
    powerful weapons on that kind of advocacy that you've described
    are our Ambassadors who are on the ground every single day
    making exactly that point and bringing to the table the better
    offer that Secretary Blinken talks about all the time.
        And thank you for raising the debt issue, and I would cite
    an example right next door to where you were in DRC in Zambia,
    a reforming government that has not been able to extract
    concessions from the PRC on its debt overhang.
        And if you will excuse one more example from Guyana, which
    I mentioned to Congressman Davidson just a minute ago, when I
    was in--when I was in Georgetown there too you have an airport
    that was built by the Chinese.
        It was so shoddy that the president actually went out to
    the airport and was pointing out all of the defective air
    conditioning and jetways and other problems. They also built
    the building that the parliament meets in.
        So we have an adversary there. But I was also very
    encouraged because today it's Bechtel that's developing the
    construction plans for the new highways and the new ports and
    the new--the new waterfront.
        Mr. Hill. Thank you.
        Let me, in my remaining time, do all of you support an all
    of the above energy strategy for financing by U.S. Government
    financing arms? Yes or no--do you support nuclear financing?
        Mr. Herscowitz. Yes.
        Mr. Hill. Do you support oil and gas finance?
        Mr. Herscowitz. We support whatever project is appropriate
    for the situation in a country and that's what we look at. We
    are market driven and we're financing fossil fuel projects.
        We're looking at nuclear--we changed our nuclear policy.
    We're looking at nuclear policy. We also look at geothermal,
    solar, hydro----
        Mr. Hill. Sure. I'm not saying look----
        Mr. Herscowitz [continuing]. Looking at--we look at----
        Mr. Hill. So you support an all of the above energy
    strategy for multilateral assets of the U.S., how we
    participate in the----
        Mr. Herscowitz. So for us we're generally supporting, you
    know, IPP--you know, independent power projects. So we look at
    whether this project is going to be commercially viable and
    whether it makes the most sense for the country. So we financed
    a gas project in Sierra Leone just 2 years----
        Mr. Hill. Thank you. If you have other thoughts on that I'd
    like you to respond in writing. And my time's expired and I
    thank the chairman for his largesse.
        Chairman McCaul. The gentleman yields.
        The chair recognizes Mr. Jackson.
        Mr. Jackson of Illinois. Thank you, Mr. Chairman. Thank you
    for your testimoneys this afternoon.
        In light of the potential Fiscal Year 2024 operations bill,
    if there are cuts--draconian cuts to our foreign assistance by
    $18 billion--30 percent--can you share with me how that will
    affect your outlook and what challenges we'll be confronting in
    your operations in Africa?
        Mr. Pyatt. Congressman, I'll just say we have just begun
    that conversation at the State Department but there will be a
    severe impact including a negative impact on our ability to
    engage in the competition with China that we have been talking
    about this afternoon.
        Mr. Jackson of Illinois. Can you be specific in which
    regions? If we had to look at a 30 percent cut where would we
    divest ourselves of, where would we concentrate, reallocate our
    resources in light of the potential cut?
        This is on the table now. This is realistic that it's being
    proposed to have a 30 percent cut.
        Mr. Pyatt. Congressman, as far as I know, on the State
    Department side we have not begun that rack and stack exercise.
        But as I mentioned earlier, we had a presentation yesterday
    from Senator Coons and Senator Graham, which made very clear
    that this would--be this would have a significant impact on the
    effectiveness of our diplomacy.
        Mr. Jackson of Illinois. Thank you. Would anyone else like
    to comment?
        Mr. Venkataraman. Thank you, Congressman. I would just say
    that we do not have a specific answer for you on that point but
    I do know that that is something we'd have to consult very
    closely with our colleagues at the State Department, in
    particular with respect to the operations of our foreign field.
        Mr. Herscowitz. In terms of DFC, any reduction in our
    budget is going to impact our ability to make investments. It's
    going to impact our ability to have more people overseas and to
    invest overseas as well. So it will have--any reduction will
    have a direct impact.
        Mr. Jackson of Illinois. Thank you so much.
        So as we are talking about as their influence grows and we
    are entertaining the possibility of reducing our ability to
    give you funding, let's think of a blue sky. What would you
    like to see the funding level increase to to give you all the
    tools and support that you need to attract U.S. business?
        And from my personal travels in Africa and experience they
    would love to do business with Americans but we haven't
    extended the hand, shall we say.
        They've not been a priority and under the previous
    Administration we did not fund the embassies, we did not staff
    them, and many people in the continent were left with no other
    choice. How do we make up time and lost ground?
        Mr. Pyatt. So, Congressman, I'll--thank you for that
    question and I'll give you a specific response in the case of
    the State Department and the ENR Bureau.
        The President's budget proposal includes $35.5 million for
    programs in the area of critical minerals and our ability to
    compete in that space, and a lot of that resource would go to
    Africa because that's where so many of the minerals are.
        Mr. Jackson of Illinois. Anyone else like to comment?
        Thank you. I yield back my time, Mr. Chairman.
        Chairman McCaul. The gentleman yields back.
        The chair recognizes Mr. Baird.
        Mr. Baird. Thank you, Mr. Chairman, and thank the witnesses
    for being here today. Appreciate your comments.
        You know, the CCP's Belt and Road, and we have been talking
    about that all evening, has led to a tremendous amount of
    Chinese influence in Africa, including the countries of Kenya,
    Namibia, Zimbabwe, Mozambique, Congo, and many more.
        So the Chinese have made it clear that Africa is a key part
    of their BRI and they leverage investments backed by collateral
    and commitments that is implemented in such a way that it's
    almost impossible to repay and, you know, this impacts American
    agriculture and American production because what they are doing
    in these countries is trying to gain access to the land and the
    production of food and so that impacts the American
    agriculture.
        And on top of that, they have built four military ports in
    2022 and they did not have any in 2021. So this is an obvious
    attempt for China to expand its military presence. So my
    question is this.
        Eight out of 10 of these countries that are afforded the
    highest levels of Chinese diplomatic partnerships are eligible
    for AGOA--the African Growth Opportunity Act.
        So my question is what is it--what are we doing, what's the
    Administration doing, to effectively counter Chinese
    involvement with these countries that have duty-free access to
    the U.S. market?
        Mr. Venkataraman. Thank you, Congressman. I know that the
    Administration is taking a very close look at AGOA but that is
    a question that I would defer to my colleagues at USTR.
        Mr. Herscowitz. One of the most important things that DFC
    has been doing, in my opinion, has been the growth of its food
    security and agriculture portfolio. When I arrived at DFC a few
    years ago we had very, very few deals.
        We have now grown our portfolio to be doing almost a
    billion dollars of transactions that have been approved in the
    last 3 years and most of those transactions are benefiting
    smallholder farmers.
        I mean, when you have smallholder farmers who are getting
    access to credit it puts them in a position also to push back
    on the influence of others who are going to come and try to buy
    their land.
        So I'm actually really quite proud of the work that DFC has
    been doing to support smallholder farmers throughout Africa and
    all over the world.
        Mr. Baird. Anyone else?
        My next question then focuses on the digital Silk Road and,
    you know, China's involvement in Africa that Huawei has got,
    what, 70 percent of the 4G network. And so I think it's
    important that we counteract some of their activities there.
        So I just ask how the department is monitoring the supply
    chain to ensure that American components do not end up in
    products which ultimately end up used to spy on African
    citizens.
        Mr. Pyatt. Congressman, maybe I'll take that one and again
    refer back to my experience as a chief of mission overseas and
    the work that we did during the Trump Administration to really
    raise consciousness regarding the vulnerabilities that some of
    Huawei's 5G systems bring along and the ability that our
    embassies overseas have had to bring in the technical experts
    who could have the conversations with the intelligence
    counterparts, with the telecommunications executives.
        But it also comes back to the point of having a competitive
    alternative product and it's not in my ENR responsibilities
    today.
        But I am quite aware that there's significant effort across
    the U.S. Government to figure out how we bring American and
    Western alternatives to the table to compete, including in this
    space around advanced telecommunications.
        Mr. Herscowitz. So I just wanted to add that while the PRC
    is extremely competitive with Huawei and that type of
    equipment, which is problematic for us, I mentioned the project
    that we supported working with the Australians and the Japanese
    and Papua New Guinea.
        We did a project in Brazil, the Smart Rio Transaction,
    where we're helping build out smart cities that'll provide some
    level of digitization and wifi access using non-PRC equipment.
        And then we're doing a lot of work with data centers as
    well. In Africa, we'd provide a $300 million loan to Africa
    data centers because where you store all that data it's
    increasingly important that that's secure in a way. And so
    that's another area of growth for DFC.
        Mr. Baird. Thank you, and my time is up. So thank you, Mr.
    Chairman. I yield back.
        Chairman McCaul. The gentleman yields.
        The chair recognizes Mr. Keating.
        Mr. Keating. Thank you, Mr. Chairman. I'd like to thank our
    witnesses for their patience, going through all those roll
    calls and waiting here and still here to provide us some
    insight. I really appreciate that.
        There's been--this has gone over before in some respects
    but I think it's important to emphasize too I agree with the
    comments before that we're not there the way that--when I
    talked to our allies and Africa in particular, talk to them,
    they said, you just--we want you to be our partners. You're not
    there.
        And but if we're going to put a--you know, if we're going
    to be there and we're going to put ourselves on the field you
    have to fund a team and I'm concerned about--and I do not think
    it's all the Republican members here but there are Republican
    proposals that went through that would have had the effect of
    22 percent budget cut on USAID, Commerce, State Department.
        And if you could briefly just say--the Chinese aren't
    cutting their investment by that amount in terms of doing
    this--that this really puts us at a competitive disadvantage
    that we have to deal with.
        So without going into too much detail that's a--that cut
    would really hamper what you're trying to do overall in
    continents like Africa and the countries there, correct?
        Mr. Pyatt. Severely.
        Mr. Keating. Yes, and I think that's--if we're going to be
    competitive we have to fund the team on the ground.
        But we do have advantages. You know, the Chinese with their
    plans, besides the predatory loans, promises of local
    employment and then bringing in their own people, in the macro
    sense they're coming out with a lot of profits out of this.
        They are in effect taking the rare earth, the minerals,
    shipping them, and the rest of the processing is being done
    elsewhere. So, in effect, they're probably leaving those
    countries with 20 percent of the profit they could get.
        The U.S., on the other hand, with the efforts that you're
    working on we want to really try and encourage growth in the
    country so these other types of manufacturing, these other
    kinds of processing, the other parts of their economy will
    benefit and they could probably get, like, 80 percent instead
    of 20 percent.
        So we're going to be successful if we have the tools to do
    it, I believe, and we should never forget that. China has
    certain advantages but so do we and I think we're dealing from
    a stronger position and, hopefully, we'll take advantage of
    that.
        The biggest advantage we have among the fact that we view
    the ability of them to profit better themselves as countries
    and benefit their own people is the fact that we have something
    the Chinese do not have.
        We have a coalition and we're seeing the coalition in play
    now in the military sense in Europe. We're seeing it expand
    beyond Europe, over 50 countries with our involvement Ukraine.
        The Chinese do not have that. So if you could briefly--the
    importance of teaming up, particularly with the EU because with
    the EU and the U.S. together that's over half the world's GDP.
        Instead of sanctioning China, instead of trying to compete
    with them in a micro sense, we should be dealing with strength
    and that's our greatest strength, together with our own shared
    values.
        Do you want to comment on that?
        Mr. Pyatt. So, Congressman, you really delivered my talking
    points in so many ways in that presentation but just let me
    highlight your last one in particular, which is the advantage
    that we have in terms of our ability to build coalitions.
        That's exactly what we are doing through the Minerals
    Security Partnership--12 other countries plus the European
    Union--and it's not just--it's not just Europeans. It's Japan.
    It's Korea. It's Australia. It's Canada.
        So these are all countries that bring to the table the
    values that we hold in common and, in fact, the first thing
    that we agreed on as an MSP coalition are a set of environment,
    social, and governance standards. Those ESGs are public.
    They're on the internet.
        But we're also agreed to work together to bring together
    the resources of our development finance institutions and then
    also to mobilize our private sectors, and I'm not sure if you
    were here when I made the point earlier that when we started
    the MSP with Secretary Blinken and Reta Jo Lewis----
        Mr. Keating. I was. I'm running out of time.
        Mr. Pyatt. Yes. So I'll stop there.
        Mr. Keating. Three hundred percent. But the other thing is
    the State Department are working for a rule of law, stability.
    That's what's going to encourage private investment. They're
    going to want those things in place if they're going to invest
    private funds.
        Last, just--if you can get time for a response, perhaps,
    but an observation that's important now with Russia's illegal
    war in Ukraine, this war will be over someday.
        Ukraine will have the second strongest military probably in
    Europe. The work we do in State there is going to be so
    critical in terms of having them--have a country with a civil
    strength, a rule of law, going forward.
        In the absence of that Chinese said they're prepared to
    invest in reconstruction after the war is over. We have to be
    there first.
        Do you think that those statements attributed to some
    Chinese officials that they will be prepared to come in after
    the war is over and invest in that reconstruction presents a
    real challenge?
        Mr. Pyatt. So, Congressman, we could have a whole separate
    hearing on this. As you know, I was Ambassador in Ukraine from
    2013 to 2016. I'm enormously proud of the role the U.S. has
    played and I, having spoken with the prime minister, deputy
    prime minister, the United States is the preferred partner by
    far in the reconstruction process and we will talk about that
    with our allies and partners next week on Tuesday and Wednesday
    when I join Secretary Blinken at the London Ukraine Recovery
    Conference.
        Mr. Keating. Thank you all for your service. I yield back.
        Chairman McCaul. The gentleman yields.
        Let me just say that we are working on a bill that would
    use frozen Russian Federation assets to help fund the
    reconstruction.
        So with that, the chair recognizes Mr. Mast.
        Mr. Mast. Thank you, Chairman. I'd just start by, No. 1,
    saying I think it's naive to think that China's just building
    cheap things to put people in their pocket. I consider this
    much more long term.
        I think they're looking to recreate the road system. Where
    they did not have inroads they're creating roads, whether it be
    through China and Pakistan or through Sri Lanka or to many
    places in Europe.
        This for the long term. They're looking to be embedded into
    resource countries because that is what they do. They export a
    tremendous amount of refined goods, of value added goods, and
    for the long term to do that they need those resource countries
    feeding them. They're not trying to do something to say, hey,
    we're going to get you for a couple of years.
        So in that, let me ask you all a question. What--the
    various MOUs that these countries have signed across the Belt
    and Road Initiative what countries have you seen leave the Belt
    and Road Initiative after their MOUs expired?
        Mr. Pyatt. So, Congressman, one example is in Europe with
    the 17+1, which last time I checked I think is the 14+1 and
    it's on the way to becoming the none plus one.
        Mr. Mast. Which ones? Which countries?
        Mr. Pyatt. I'll have to get back to you on that. I do not
    want to give you the wrong data. But----
        Mr. Mast. What do you think they are? This is important
    information. Which ones do you think they are?
        Mr. Pyatt. So 17+1 was a corridor of countries up and down
    Central and Eastern Europe and a series of the 17+1 partners
    have basically decided this is not a profitable avenue that
    they want to pursue, in part because of a lot of consistent
    diplomacy by American and other officials saying this is
    inconsistent with our values and interests.
        Mr. Mast. Yes. Let's continue on that in part. What
    countries do you see joining in 2023?
        Mr. Pyatt. I hope zero.
        Mr. Mast. But I'm asking for a real assessment, not a hope.
        Mr. Pyatt. What are the--Congressman, if you're asking what
    are the places where I think we need to----
        Mr. Mast. I'm asking specifically what countries do you
    think join in 2023 specifically?
        Mr. Pyatt. So let me--Congressman, let me try to be
    responsive in this way. I would cite an example of Pakistan, a
    country highly vulnerable because of years of indebtedness to
    China and a country which is looking for engagement including
    from the DFC or DFC----
        Mr. Mast. Doesn't Pakistan already have an MOU?
        Mr. Pyatt. Yes, they do and they have a--they have a port,
    which is not producing value for them, which the Chinese have
    constructed. They also have those roads that you described.
        Mr. Mast. So who are they adding in 1923. Pakistan is
    already on the list.
        Mr. Pyatt. As I said, I think the--our goal would be that
    that universe continues to shrink as it is shrinking in the
    reduction of the 17+1.
        Mr. Mast. Can you tell me--I want to dig a little bit into
    some of these MOUs--which ones do you worry about being able to
    be weaponized?
        They build a port, they build a train, they build a road,
    they build tremendous amount of infrastructure projects, you
    know, thousands, literally. Which one of those do you believe
    can be weaponized, are you most concerned about being
    weaponized, being able to translate to military capabilities?
        Mr. Pyatt. When I was Ambassador in Greece I was very
    concerned about the PRC presence in the Port of Piraeus in
    particular because of the critical role that NSA Naval Base
    Souda Bay plays as part of our military force projection
    platform in the eastern Mediterranean and also because the
    vulnerabilities that Greece was suffering from when I arrived
    as a heavily indebted country that nearly fell out of the
    Eurozone.
        We dealt with that including in partnership with the DFC
    but also with a lot of persistent American diplomacy, working
    in lockstep with our European allies.
        Mr. Mast. Let me ask a reform question and this is, of
    course, open to any of you all. This has been open to any of
    you. Anything that I ask that you have an answer to that I did
    not get an answer to please feel free to chime in.
        Do you think that we should be encouraging reform at the
    IMF or the World Bank to respond better to the way China is
    getting countries to participate in the Belt and Road?
        There's fundamentally different approaches between the way
    the IMF and the World Bank approach building infrastructure and
    how China. Do you think there should be reformed within the IMF
    and the World Bank?
        Mr. Pyatt. Congressman, this is really a U.S. Treasury
    issue. But I will just say I have heard Secretary Yellen speak
    eloquently about the need for reform at the MDBs.
        Mr. Mast. OK.
        Mr. Venkataraman. Congressman, I would just--I would just
    add, the one area of reform I would highlight is in the World
    Bank where we have been working very closely with them to
    change their approach to infrastructure development.
        Mr. Mast. Give us those changes before my time ends,
    please.
        Mr. Venkataraman. Yes. So particularly with respect to
    factoring in the life cycle cost for infrastructure projects so
    that it's not just based on lowest cost but it's based on an
    overall cost, which is what creates better advantage for
    American companies.
        Mr. Mast. Thank you for the time, Chairman.
        Chairman McCaul. The gentleman yields.
        The chair recognizes Ms. Manning.
        Ms. Manning. Thank you, Mr. Chairman, and thank you to our
    witnesses for your patience in staying with us today.
        Ambassador Pyatt, our colleges and universities are among
    our greatest assets in our strategic competition with China,
    helping us win hearts and minds by bringing talented young
    people from around the world to study in the U.S., and not only
    do we educate them but they learn our culture. They make
    friends. They build lifelong ties to our country and our way of
    life.
        Yet, I was recently on a CODEL to Japan, an ally that has
    now increasing importance in light of China's military
    aggression, and we learned that Japanese students are no longer
    coming to the U.S. to go to school for a variety of reasons,
    including the high cost of our colleges and our universities.
        What steps is the Administration taking to encourage more
    foreign students to choose to study in the U.S. instead of
    China?
        Mr. Pyatt. So, Congresswoman, this one also is out of my
    ENR lane but it's very much in my role as a U.S. Ambassador
    that I had in the past. I am a--I agree with you completely.
        I am a huge fan of every cent that we invest in our
    educational partnerships. I think the Fulbright program is one
    of the most lucrative developments that the U.S. has ever
    committed to in terms of how we build partnerships around the
    world because you're investing in future generations.
        I know that all of my colleagues at the State Department
    today who work on these issues are critically focused on
    continuing to open these opportunities in the United States and
    I also know, because I've been part of the preparations for
    Prime Minister Modi's visit, that we will use that visit as
    well to highlight the tremendous example that India provides of
    a country that's sending lots of students to the United States.
        I would also say as a parent who's finished paying for
    university for two children and then as somebody who's watched
    the role of international education that I see tremendous value
    also having more American students be given the opportunity to
    study overseas.
        Ms. Manning. Since you brought up the issue of India, I
    wonder if you can comment on whether it's become more difficult
    for students who study at our colleges to get immigration visas
    to stay and work in the U.S. after they graduate. Do you think
    this is a disincentive for foreign students to come to the
    U.S.?
        Mr. Pyatt. Congresswoman, I'm going to--I'm going to punt
    that one to my colleagues in the SCA bureau who work on these
    issues every single day.
        But I do know, and on this I can speak for Secretary
    Blinken and the rest of the Administration, there is a very,
    very strong commitment to continuing to build those educational
    partnerships because they contribute to American economic
    competitiveness.
        Ms. Manning. Thank you.
        Mr. Herscowitz, how can DFC help provide financing to more
    companies that offer loans to help foreign students study at
    our colleges and universities?
        Mr. Herscowitz. So DFC actually has some active projects
    that provide loans to help people finance graduate education,
    including in the United States. So this is a--we have existing
    projects in that regard.
        We have to be careful, obviously, that we're not giving
    opportunities to people that we might not otherwise provide to
    Americans as well.
        So we're very careful about when we do these types of
    projects to make sure that they're targeting the right
    populations of people who also with the ultimate goal of coming
    back to their home country so that they're going to help
    develop the local expertise and we do not promote a brain drain
    in those countries.
        Ms. Manning. OK. Understood.
        Ambassador Pyatt, what is the State Department doing to
    help other countries take steps to guard against China's
    growing influence over foreign think tanks, academia, Confucius
    Institutes, and media outlets?
        Mr. Pyatt. So, again, Congressman--Congresswoman, this is
    one where I will speak in my capacity as a former Ambassador
    because I dealt with exactly these issues in Greece where we
    worked very hard, including private conversations that I had
    with senior university leaders, raising the concerns that we
    had around some of the Confucius Institutes and the way in
    which the Chinese--the PRC embassy was seeking to some extent
    to limit academic freedom.
        It's a core principle of the United States, the open
    exchange of ideas, but we want to compete on a level playing
    field. It's exactly the same principle that applies to the
    economic and commercial issues that all of us work on.
        Ms. Manning. Thank you. I have more questions but we have a
    baseball game to get to. So I yield back.
        Chairman McCaul. Thanks for reminding us. The gentlelady
    yields.
        The chair recognizes Mr. Mills.
        Mr. Mills. Thank you so much, Mr. Chairman.
        So I wanted to go through my understanding of the Belt and
    Road Initiative. It's something that I had written on for many
    years and I've published, you know, dozens of articles on the
    ideas of the--also the geopolitical alignments that are
    involved in this when we talk about Russia, China, Iran, and
    North Korea and what their overarching goal is, which we know
    is to eliminate the U.S. dollar as a global currency.
        But we're seeing where we have already got an expansion of
    Eurasia, which is one of the key elements that they were
    looking for, that they're continuing to try and utilize the
    proxy of Russia to be able to try and advance for them.
        You already have a tremendous amount of growth when it
    comes to Africa and the economic coercion that was undermining
    a lot of the U.S. security cooperations and others, and then
    you see the continual strengthening in Oceania, which is really
    an idea of trying to choke off Western Hemisphere supply chain.
        And then that marriage of convenience that they currently
    have we know helps them a lot in our own hemisphere when we
    talk about the Chavez of Venezuela, when we talk about Petro in
    Colombia, when we talk about that Russian involvement as we--as
    I mentioned.
        But they also have now Panama and Honduras whereby they're
    going to continue to utilize these relationships to potentially
    look at the promotion of increased taxes, tariffs, and
    passageway when it comes to the canal.
        So there's almost an encirclement attempt with conjunction
    of further type of malign activity regarding WHO and WF and how
    they utilize those but also attacking the petro dollar with
    OPEC to try and see if they can supplement it and/or replace
    it.
        And so when you know that these are a lot of the
    strategies--and we have been in an economic resource and cyber-
    based warfare with China for quite a long time.
        We continue to try and refer to it as competition, which is
    why it kind of disturbs me slightly when I hear something like
    what you Stated earlier about Sullivan saying that we should
    derisk and not decouple because I do think that we do have
    opportunities to be able to not only protect America and get
    back control of our economic and supply chain capabilities but
    also to really thrust China into an economic collision because
    if you look they're in a far worse position than we are when it
    comes to debt. They just aren't allowing their valuations to be
    properly audited that would actually disclose a lot of these
    things.
        And so, you know, I'm concerned with a lot of the things
    that we're doing that does not seem to be in line with us
    actually trying to save America and more on a China first
    agenda when it comes to this Administration when we talk about
    the significant importance of energy dominance and, meanwhile,
    one of the first things that was done was to cut the Keystone
    XL pipeline.
        You know, when we talk about the ideas of economic warfare
    and yet we haven't recognized yet that it's not the dollar or
    the baht or the dinar or the ruble. The common global currency
    is energy and I'm just not seeing where this Administration is
    really grasping that understanding.
        Now, I would argue that we have a lot of things and
    Chairman Xi has said it himself, that he can outpace us
    militarily and economically, but his biggest fear is America's
    innovation and I think that we have opportunities, as we all
    know, to advance ourselves and almost treat the quantum race
    the same way that Reagan treated the space race when it came to
    helping to bankrupt, again, looking at the ideas of quantum
    entanglement, AI autonomous drone capabilities, but also the
    ideas that we know they control 15 of the 16 rare earth mineral
    mines.
        But we do not even explore the ideas of subsurface
    harvesting where you actually have the ability to take the 100
    percent manganese control out of Chinese hands by actually
    utilizing that at the 10,000-to 12,000-meter depth levels,
    something we have the capability of doing but also would
    refocus China's attention.
        Because if we decouple--the way to hurt China, because they
    want to get into a nonkinetic element of things. They do not
    want to go gun to gun with us. They want us to basically go
    ahead and collapse ourselves financially, which means that they
    essentially have won by not only buying up our lands and
    controlling the farmlands but controlling us and our behaviors.
        So I wanted to know whether or not we feel that energy
    dominance, getting to a point of reliable--not just the race
    for renewables where we buy a lot of the materials from China,
    and the ideas of subsurface harvesting, quantum race, and these
    types of elements where we understand that decoupling and
    hurting China economically is far, far more superior than
    anything else is something that you would agree with.
        Mr. Pyatt. So, Congressman, I said, I think, in the opening
    sentence of my statement that I see my job and ENR's role as to
    ensure that the United States continues to be the partner of
    choice around the world on issues of energy and energy
    security.
        We had that status during the fossil fuel era and we are
    now working as hard as we can to ensure that that remains the
    case. As we enter this era of technological change we see more
    work being done in areas ranging from small modular reactors to
    green hydrogen to geothermal to wind and solar and all the
    other technologies that will----
        Mr. Mills. Those are more renewables than were reliables. I
    mean, when we look at the actual impacts of things but also
    where the actual sources are originating. I mean, again, we
    know cobalt, nickel, and lithium, especially after we gave $1.1
    trillion in lithium to the Chinese with the handover of
    Afghanistan, does not work in our favor.
        But we do have LNG. We do have natural gas. We do have the
    ideas of drilling more and actually getting resource
    harvesting, and this cash diplomacy effort that the U.S.A.--
    where we think we can buy our adversaries with $800 million or,
    you know, whatever the case may be for Pakistan and the others
    has shown not to work.
        But what has worked is the model that Germany and Russia
    have whereby you actually provided reliable cost effective
    energy sources and that gained a lot of alliances, especially
    for those countries that were moving away from their own
    productivities of coal and nuclear, et cetera.
        So I do not think that the strategy that we're utilizing--
    if the idea is to understand that we're looking to try and be
    the prevented--prevent China's expansion actually get to a
    point of being the global dominant, I do not think the idea is
    trying to derisk our involvement but decouple away from the
    economic reliancy on China.
        And so I do not think that preventing clean energy
    dominance is necessarily the only mechanism. It's actually
    utilizing and supplying our own internal energy when it comes
    to oil and fossil fuels and the things that we need to be able
    to be dominant to the point where that's our recognized
    strengths.
        And so I'm sorry when I disagree with the solar power
    projects that majority of those isn't made in America, and
    we're not in competition with China. We're in economic resource
    warfare with China and we need to acknowledge that and stop
    trying to hide away from it.
        Thank you for the additional time, Mr. Chairman. With that,
    I yield back.
        Chairman McCaul. The gentleman yields back.
        The chair recognizes Mr. Moskowitz.
        Mr. Moskowitz. Thank you, Mr. Chairman.
        So about a month ago now I got back from Egypt, Italy,
    Israel, and Jordan with the Speaker of the House and we talked
    a lot about China and a number of these countries.
        We talked about the Belt and Road Initiative, and I have a
    specific question for you all but I want to--I want to build it
    up for a second.
        So, you know, we learned about, obviously, what China is
    trying to do in Egypt with China--with the Belt and Road
    Initiative in Italy. We talked about China and Israel's
    technology. We talked about how China is winning contracts
    through procurement, and as I was sitting and listening to all
    of these things and getting educated what I recognized is that
    one of the significant challenges we have in this fight with
    China is that the American people know none of us.
        They know none of it. They do not know that China is on its
    way to taking control of the African continent through
    whatever--through loans, through dollars, you know, through 5G,
    whatever which way.
        They do not--they do not know that we're starting to hear
    from countries that we cannot sell them weapons fast enough
    because either we cannot get them approved or we cannot get
    them manufactured and so, you know, China is an option.
        They do not know that when China--when the United States
    pulls back China comes in. They do not know that. They do not
    know that Chinese workers are around the world building
    projects in other countries.
        They have no idea, and you know how I know they have no
    idea? Because I had no idea until I started learning about it
    through this committee and through talking to other people.
        You do not--so what I want to ask you guys is as we have
    this huge debate in this country on whether we should pull back
    from the world how do we--how do you look at how we're going to
    get the American people to understand that every time we pull
    back China comes in and what that is going to result in in the
    future.
        And that's for all of you or any of you.
        Mr. Pyatt. So, Congressman, let me start out by just
    thanking you for raising the issue and pointing out the concern
    because I think there's a fundamental principle that I've
    learned over the course of my diplomatic career, which is that
    when the United States pulls out and isn't someplace bad things
    happen.
        We have learned that history over various--we have learned
    that lesson over various times in American history. I hope very
    much we will not have to learn it again and I think the burden
    is on all of us, whether in Congress, in the Administration.
        Mr. Moskowitz. I do not mean to interrupt but it's
    happening, though. It's happening. One of the--one of the
    issues we heard from the leaders in the Middle East is that
    Ukraine is very important.
        They're happy with our position. They're supporting our
    position. They understand the repercussions not just in Europe
    but other places if we were to leave that area and let Russia
    just take Ukraine.
        But they were deeply concerned that while we were, you
    know, asking them not to, you know, listen to the Chinese they
    were deeply concerned that we're taking our eye off the ball in
    Africa or we're taking our eye off the ball in the Middle East
    because the United States is having problems of walking and
    chewing gum at the same time.
        Mr. Pyatt. So I would just say this is why Secretary
    Blinken is constantly reminding us to keep our focus on ROW--
    the rest of the world--and I think especially in an environment
    where so many of the challenges to American security and the
    safety and security of American citizens are coming not only
    from countries now but from transnational challenges.
        Whether that is climate change, energy insecurity,
    pandemics and disease, food insecurity, all of these issues
    ripple across global markets.
        I'm glad to hear you were in Egypt because that's a perfect
    example of a country that's sort of a Petri dish for all of
    these different forces but which were the government is looking
    to engage with the United States and is looking for strong
    partnership.
        Mr. Moskowitz. Yet, every country we went to it was clear
    they would rather do business with us than China. It's not even
    close, right? It was unequivocal.
        But the subtext also was that if we cannot deliver they
    just cannot not--they cannot do--they cannot not just do
    anything. They got to buy weapons from somewhere. They got to
    get loans from somewhere.
        And so, you know, we're having this debate through Ukraine
    about isolationism. You know, we should spend our money here.
    We shouldn't spend it over there.
        And how do we get the American people to really understand
    that in this battle with China, right, that every time we're
    going to pull back or every time we're going to look a
    different direction that it's not just bad things are going to
    happen. We know that it's going to be China who comes in.
        How do we get the American people to understand that when
    we're--when we're talking about foreign policy? When that's not
    on MSNBC every night, it's not on Fox News every night, it's
    not on social media, how do we get them to understand this?
        Mr. Pyatt. So, Congressman, I guess the only lesson I would
    offer from my own diplomatic career is actually here in our
    pockets and it's this.
        It's the sense of connectivity that the technology
    revolution has brought and I think about, for instance, my own
    involvement with India, which goes back to 1992 and what
    happens when you have hundreds of millions of people who are
    suddenly connected globally.
        I'm a technology optimist--I think--and I think the United
    States will continue to lead the creation of value in that
    technology space.
        But we also have to recognize that we--our economy, our
    prosperity here at home, is more tied to the rest of the global
    system than it has ever been before.
        And, again, my portfolio working on energy, energy
    transition issues, dramatically illustrates this as the United
    States is now the largest gas exporter in the world, as the
    United States will remain a critical center of technological
    innovation on issues of energy, on issues of energy transition.
        Mr. Moskowitz. Thank you, Mr. Chairman. I yield back.
        Chairman McCaul. The gentleman yields.
        The chair recognizes Mrs. Kim.
        Mrs. Kim of California. Thank you, Chairman. I want to
    thank all the witnesses for staying with us this long.
        You know, as I serve as chairwoman of the Indo-Pacific
    Subcommittee it is really important that, you know, we carry on
    our priorities not only from the subcommittee but overall
    committee to, you know, give our allies the tools and resources
    they need so they can counter the Belt and Road Initiative and
    other types of economic coercion, and our strategy for
    countering the Belt and Road Initiative must also include how
    we can bring the full force of the American private sector to
    compete with the CCP-owned and affiliated companies.
        Pacific Islands, for example, it's very, very essential to
    the success of the Belt and Road Initiative, especially given
    their strategic importance to the United States and its allies,
    and combined with overt political pressure and bribery the CCP
    is successfully using the economic leverage over Pacific
    Islands to achieve their political goals.
        So most notably, you know, the Solomon Islands they joined
    BRI in 2019 and severed their ties with Taiwan and last year
    they announced a security agreement with PRC that would allow
    the PLA to station personnel and assets in the Solomon Islands.
    This is very concerning to me.
        But, Mr. Herscowitz, what projects is DFC undertaking in
    the Pacific Islands and do you coordinate those projects with
    Foreign Commercial Service?
        Mr. Herscowitz. So I mentioned the project that we're doing
    in Papua New Guinea in collaboration with the Australians and
    the Japanese, a $50 million guarantee to upgrade to 5G network
    there as well.
        We have someone who's based in Indo-Pacific who travels
    frequently to the Indo-Pacific Islands and I actually speak to
    him on a fairly regular basis. Because a lot of the
    transactions in these small--in the smaller islands tend to be
    small and we're private sector driven so we're always looking
    for creative opportunities about how we can make sure that
    financing goes where it needs to go.
        In a country with a population of 100,000, 200,000 people
    there aren't the same large-scale projects that you might find
    in other countries and so we're looking at how we can work
    potentially with regional development banks to make sure that
    small businesses are getting the financing that they need as
    well.
        Mrs. Kim of California. I want to--I want to continue that
    and then I want to ask Mr. Venkataraman can you describe the
    FCS engagement in the Pacific Islands and what are the biggest
    challenges the American sector faces in engaging in more
    commercial activity in the Pacific Islands?
        Mr. Venkataraman. Thank you, Congresswoman.
        We are very focused on shifting the dynamic in our
    relationship with the Pacific Islands and paying much more
    attention and bringing American companies to do business in the
    Pacific Islands.
        As we are in other markets we are out there to make sure
    that the Pacific Islands see us as the partner of choice. But
    as my colleague said it is a heavy lift. We are engaged right
    now--we have staffed--we have added two staff to Fiji and Papua
    New Guinea.
        We are now in the process of negotiating MOUs to strengthen
    our commercial relationship with a number of the Pacific
    Islands and we're looking ahead to additional staffing to see
    if that would assist the efforts of U.S. companies to get into
    those markets.
        However, the problem remains, as my colleague mentioned,
    the size of those markets being as small as they are. In those
    markets even more than in other markets the importance of
    derisking mechanisms such as DFC, such as EXIM, cannot be
    overStated.
        American companies are always eager to do business where
    there's opportunity but where these opportunities do not
    translate into, you know, ways that make it amenable for them
    to do the deals that they want to do we have to find ways to
    bridge that gap. And so that's----
        Mrs. Kim of California. Can you talk about those, like,
    changes or additional tools that you will need for the DFC to
    compete against PRC in those projects and in that region?
        Mr. Venkataraman. Yes. So, I mean, I'll leave it to my
    colleague to amplify, but I think the point is that the DFC
    performs such a critical function that our businesses
    appreciate to take these environments and these economies
    around the world and make them accessible to our businesses by
    virtue of the financing that they provide and by virtue of
    making those projects bankable and it's a critical role that
    DFC plays without which our companies could not engage in most
    markets in the world but all the more so in a small market like
    the Pacific Island countries.
        Mr. Herscowitz. Sorry. So, again, DFC takes a market-driven
    approach. So what we're doing is we're evaluating what is the
    need in the market and who's willing to invest there.
        Now, we want to give it a lot of nudging. We want to work
    with Commerce Department and with others and with our embassies
    to identify opportunities and we really look hard at any
    potential opportunity with frequent travel to the region as
    well to try to identify opportunities where we can have that
    private sector investment that the countries want and need.
        Mrs. Kim of California. Thank you. My time is expired so I
    will yield back. Thanks.
        Chairman McCaul. The gentlelady yields back.
        Let me thank the witnesses for your patience. I know it's
    been a very long afternoon with that long vote series. But this
    has been very valuable and very important.
        You are the counter to the malign influence of China. We
    want to work with you and we want to support you and we want to
    get that full equity. I will do everything in my power to move
    that bill out of this committee.
        And so, again, I want to thank the witnesses. Members may
    have additional questions in writing. I would ask you to
    respond. Members have 5 days to submit statements and questions
    for the record.
        And without objection, the committee stands adjourned.
        [Whereupon, at 6:11 p.m., the committee was adjourned.]

                                    APPENDIX

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             STATEMENT FOR THE RECORD FROM REPRESENTATIVE CONNOLLY

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                RESPONSES TO QUESTIONS SUBMITTED FOR THE RECORD

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