[House Hearing, 119 Congress]
[From the U.S. Government Publishing Office]
EXAMINING POLICIES TO COUNTER CHINA
=======================================================================
HEARING
before the
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED NINETEENTH CONGRESS
FIRST SESSION
----------
FEBRUARY 25, 2025
----------
Serial No. 119-5
Printed for the use of the Committee on Financial Services
[GRAPHIC(S) NOT AVAILANLE IN TIFF FORMAT
EXAMINING POLICIES TO COUNTER CHINA
______
EXAMINING POLICIES TO COUNTER CHINA
=======================================================================
HEARING
before the
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED NINETEENTH CONGRESS
FIRST SESSION
__________
FEBRUARY 25, 2025
__________
Serial No. 119-5
Printed for the use of the Committee on Financial Services
www.govinfo.gov
U.S. GOVERNMENT PUBLISHING OFFICE
WASHINGTON : 2025
59-601
HOUSE COMMITTEE ON FINANCIAL SERVICES
FRENCH HILL, Arkansas, Chairman
BILL HUIZENGA, Michigan, Vice MAXINE WATERS, California, Ranking
Chairman Member
FRANK D. LUCAS, Oklahoma SYLVIA R. GARCIA, Texas, Vice
PETE SESSIONS, Texas Ranking Member
ANN WAGNER, Missouri NYDIA M. VELAZQUEZ, New York
ANDY BARR, Kentucky BRAD SHERMAN, California
ROGER WILLIAMS, Texas GREGORY W. MEEKS, New York
TOM EMMER, Minnesota DAVID SCOTT, Georgia
BARRY LOUDERMILK, Georgia STEPHEN F. LYNCH, Massachusetts
WARREN DAVIDSON, Ohio AL GREEN, Texas
JOHN W. ROSE, Tennessee EMANUEL CLEAVER, Missouri
BRYAN STEIL, Wisconsin JAMES A. HIMES, Connecticut
WILLIAM R. TIMMONS, IV, South BILL FOSTER, Illinois
Carolina JOYCE BEATTY, Ohio
MARLIN STUTZMAN, Indiana JUAN VARGAS, California
RALPH NORMAN, South Carolina JOSH GOTTHEIMER, New Jersey
DANIEL MEUSER, Pennsylvania VICENTE GONZALEZ, Texas
YOUNG KIM, California SEAN CASTEN, Illinois
BYRON DONALDS, Florida AYANNA, Massachusetts
ANDREW R. GARBARINO, New York RASHIDA TLAIB, Michigan
SCOTT FITZGERALD, Wisconsin RITCHIE TORRES, New York
MIKE FLOOD, Nebraska NIKEMA WILLIAMS, Georgia
MICHAEL LAWLER, New York BRITTANY PETTERSEN, Colorado
MONICA DE LA CRUZ, Texas CLEO FIELDS, Louisiana
ANDREW OGLES, Tennessee JANELLE BYNUM, Oregon
ZACHARY NUNN, Iowa SAM LICCARDO, California
LISA McCLAIN, Michigan
MARIA SALAZAR, Florida
TROY DOWNING, Montana
MIKE HARIDOPOLOS, Florida
TIM MOORE, North Carolina
Ben Johnson, Staff Director
C O N T E N T S
----------
Tuesday, February 25, 2025
Page
OPENING STATEMENTS
Hon. French Hill, Chairman of the Committee on Financial
Services, a U.S. Representative from Arkansas.................. 1
Hon. Maxine Waters, Ranking Member of the Committee on Financial
Services, a U.S. Representative from California................ 3
STATEMENTS
Hon. Joyce Beatty, Ranking Member of the Subcommittee on National
Security, Illicit Finance, and International Financial
Institutions, a U.S. Representative from Ohio.................. 78
WITNESSES
Mr. John Miller, Senior Vice President of Policy, Trust, Data,
and Technology, and General Counsel, Information Technology
Industry Council............................................... 4
Prepared Statement........................................... 7
Mr. Nicholas McMurray, Managing Director, International and
Nuclear Policy, ClearPath...................................... 13
Prepared Statement........................................... 15
Mr. John Cassara, Special Agent, United States Department of
Treasury (Retired)............................................. 25
Prepared Statement........................................... 27
Mr. Martin Muhleisen, Nonresident Senior Fellow, GeoEconomics
Center, Atlantic Council....................................... 62
Prepared Statement........................................... 64
Dr. Rush Doshi, C.V. Starr Senior Fellow for Asia Studies, and
Director of the China Strategy Initiative at the Council on
Foreign Relations, and Assistant Professor, Edmund A. Walsh
School of Foreign Service, Georgetown University............... 70
Prepared Statement........................................... 73
APPENDIX
MATERIALS SUBMITTED FOR THE RECORD
Hon. French Hill:
Build Back Nuclear, March 1, 2021............................ 136
Our Energy Future, January 16, 2025.......................... 140
Hon. Bill Huizenga:
The IMF Reform and Integrity Act............................. 142
Hon. David Scott:
Treasury Secretary Scott Bessent Letter...................... 148
Hon. Ayanna Pressley:
Elon Musk's China Threat..................................... 152
China May Welcome Elon Musk's Cuts........................... 159
How Elon Musk's deep ties-to and admiration for-China could
complicate Trump's Beijing Policy.......................... 162
Elon Musk: A Chinese Puppet?................................. 166
Elon Musk Is a National Security Risk........................ 171
Mr. Martin Muhleisen:
CFS Funding Disclosure....................................... 173
Mr. John Miller:
ITI's Policy Recommendation for U.S. Economic Security....... 176
Washington Institute for Near East Policy:
Washington Institute for Near East Policy Letter............. 186
Beijing's Passive-Aggressive Middle East Policy.............. 187
China's Security Presence in the Middle East................. 190
North Africa in an Era of Great Power Competition............ 214
G42 and the China-UAE-US Triangle............................ 265
How Russia's Invasion of Ukraine is Reshaping the Global Arms
Market..................................................... 270
CATO Institute: Chinese Ownership of U.S. Farmland: Separating
the Wheat from the Chaff 290
Alliance for Peace Building 297
CJPA Global Advisors LLC 302
Transparency International U.S. (``TI US'') 304
Center for American Progress (CAP) 308
Prepare Statement from Ms. Celina B. Realuyo, Adjunct Professor,
The George Washington University Elliott School of
International Affairs Statement 330
RESPONSES TO QUESTIONS FOR THE RECORD
Written responses to questions for the record from Representative
Maxine Waters
Mr. John Miller.............................................. 346
Mr. Nicolas McMurray......................................... 348
Mr. John Cassara............................................. 350
Mr. Martin Muhleisen......................................... 353
Dr. Rush Doshi............................................... 354
Written responses to questions for the record from Representative
Warren Davidson
Mr. John Miller.............................................. 358
Written responses to questions for the record from Representative
Troy Downing
Mr. Nicolas McMurray......................................... 362
Mr. John Miller.............................................. 364
Mr. John Cassara............................................. 366
LEGISLATION
H.R. ------, the PROTECT Taiwan Act.............................. 368
H.R. ------, the Agricultural Risk Review Act of 2025............ 371
H.R. 910, the Taiwan Non-Discrimination Act...................... 375
H.R. ------, the Taiwan Conflict Deterrence Act of 2025.......... 384
H.R. ------, the International Nuclear Energy Financing Act of
2025........................................................... 394
H.R. ------, the Protecting America's Medical Supply Chains Act
of 2025........................................................ 402
H.R. ------, the Stop Fentanyl Money Laundering Act of 2025...... 409
H.R. ------, the Stop Chinese Fentanyl Act of 2025............... 414
H.R. ------, the Combating Money Laundering in Cyber Crime Act of
2025........................................................... 422
H.R. ------, the China Financial Threat Mitigation Act of 2025... 425
H.R. ------, the Neutralizing Unfair Chinese Export Subsidies Act
of 2025........................................................ 428
H.R. ------, the Financial Privacy Act of 2025................... 433
H.R. ------, the Financial Technology Protection Act of 2025..... 439
H.R. ------, the International Financial Institutions Governance
Act of 2025.................................................... 448
H.R. ------, the Aligning SEC Regulations for the World bank's
International Development Association Act...................... 453
H.R. ------, the OFAC Licensure for Investigators Act............ 456
H.R. ------, the African Development Fund Replenishment Act of
2025........................................................... 460
EXAMING POLICIES TO COUNTER CHINA
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Tuesday, February 25, 2025
U.S. House of Representatives,
Committee on Financial Services,
Washington, D.C.
The committee met, pursuant to notice, at 10:02 a.m., in
room 2128, Rayburn House Office Building, Hon. J. French Hill
[chairman of the committee] presiding.
Present: Representatives Hill, Lucas, Sessions, Huizenga,
Wagner, Barr, Williams of Texas, Davidson, Rose, Steil,
Timmons, Stutzman, Norman, Meuser, Kim, Garbarino, Fitzgerald,
Flood, Lawler, De La Cruz, Nunn, McClain, Downing, Haridopolos,
Moore, Waters, Velazquez, Sherman, Meeks, Scott, Lynch, Green,
Cleaver, Himes, Foster, Beatty, Vargas, Gottheimer, Gonzalez,
Casten, Pressley, Tlaib, Garcia, Williams of Georgia, Fields,
Bynum, and Liccardo.
Chairman Hill. Without objection, the chair is authorized
to declare a recess of the committee at any time.
This hearing is entitled ``Examining Policies to Counter
China.''
Without objection, all members will have 5 legislative days
within which to submit extraneous materials to the chair for
inclusion in the record.
I now recognize myself for 4 minutes for an opening
statement.
OPENING STATEMENT OF HON. FRENCH HILL, CHAIRMAN OF THE
COMMITTEE ON FINANCIAL SERVICES, A U.S. REPRESENTATIVE FROM
ARKANSAS
I want to welcome our members to this hearing on China, and
I will look forward to our testimony.
From the very first Trump Administration, many will recall
a key China policy issue as the global race to fifth generation
(5G) of wireless network technology. We urged caution to our
foreign partners by both the executive and the legislative
branch and our friends around the world about telecom
infrastructure. We said there is a right way, and there is a
Huawei. Yet, other technologies before 5G showed that there is
always a country that launches an innovation first is not
always the one that wins. Rather, it is the economy that has
got the economic system to transform those technological
advances into winning new products and services resulting in
economic and productivity gains.
I open with this example of 5G because, in the broader
context of our economic and geopolitical rivalry with China, it
is often neglected. Instead, narrow questions end up taking an
existential importance. One day, it is the race to 5G; the next
day, it is concern over a trendy Chinese app like TikTok; or,
today, it is DeepSeek's ability to answer a question in more or
less time than a U.S. competitor.
Of course, these things merit our close attention but if
these are the trees, then Congress must really still see the
forest. For example, if we edge out China in artificial
intelligence, but Washington prevents our companies from
commercializing it, what happens? If we secure a 1-year lead in
hypersonics, but a defense procurement obstacle course makes
its deployment a pipe dream? What if we attract to our shores
the greatest technical minds in the world, but our tangle of
red tape regulations means that their startups being taken
public is out of the question? In short, winning a race is no
substitute for choosing a better way of life with a better
political and economic system.
At our hearing today, we will examine tools to counter
China. Make no mistake, those tools are embedded in an American
system, and it is the health of our thriving system that
ultimately decides who will prevail.
We will use sanctions, for example, but sanctions did not
build a $30 trillion economy. We can use export controls, but
it was not export controls that created eight American
exceptional technology companies, each worth more than a
trillion dollars. We can use the Committee on Foreign
Investment in the United States (CFIUS), but CFIUS did not make
the dollar the world's premier reserve currency.
Today's hearing is based on the idea that beating China
means doubling down on American strengths. First, we must
ensure that our Federal budget, our fiscal house, is in order
and on a sustainable path. Next, we must lead a global
financial system where like-minded economies reject
nontransparent, predatory lending, and mercantilism while
crafting and enforcing rules that safeguard economic growth and
stability.
Second, our investors, our markets, our institutions, both
large and small, must be able to nurture cutting-edge ideas and
help take them from friends-and-family backed startups to an
initial public offering.
Third, we must ensure that access to capital is coupled
with access to energy. That means the United States must
champion an all-the-above energy strategy, offering real
alternatives to failed Chinese lending and white elephants.
Last but not least, our strength depends on prioritizing
Americans' health and safety of our hometowns and our cities,
which have been so devastated by an opioid surge that China has
helped unleash.
Each of these elements is key to any real China strategy,
and it is critical that they are all addressed today.
I yield back, and the chair now recognizes the ranking
member of the committee, the gentlewoman from California, for a
4 minute opening statement.
OPENING STATMENT OF HON. MAXINE WATERS, RANKING MEMBER OF THE
COMMITTEE ON FINANCIAL SERVICES, A U.S. REPRESENTATIVE FROM
CALIFORNIA
Ms. Waters. Thank you, Mr. Chairman, for this hearing. This
is very important.
Good morning, everyone. I and committee Democrats have long
recognized the national security concerns and threats to our
economy from the Chinese Communist Party. We are very
supportive of efforts to prevent Wall Street from investing
Americans' hard-earned savings in the Chinese military. I have
also pressed for the United States to use an influence at the
IMF--that is the International Monetary Fund--the World Bank,
and other multilateral institutions to stop the worst lending,
contracting, and other industrial practices of China.
Mr. Chair, while I would love to work with you in a
bipartisan way to advance efforts to stop China's aggression, I
am concerned that our efforts would be meaningless as President
Trump and his unelected billionaire Co-President, Elon Musk,
destroy the U.S. Government and our alliances. In just the past
month, Trump has imposed import taxes on our closest allies,
frozen aid for impoverished nations, illegally shuddered U.S.
Agency for International Development (USAID) and Consumer
Financial Protection Bureau (CFPB), and threatened to illegally
seize Greenland, Canada, and the Panama Canal. Inexplicably, he
has also sided with Russia's President Putin over allies in
Ukraine and Europe, withholding military assistance and blaming
Russia's murderous invasion on the victims of its war.
As Trump tears up treaties and alliances, embraces
dictators, and abandons America's global leadership role, he
has given China a free pass to fill the void left by his
retreat. We are here to talk about China and discuss bills
about countering Chinese Government aggression, all while
Trump, Musk, and congressional--some--congressional Republicans
give China the green light to seize other of our allies--such
as Taiwan. Trump and Musk have so eagerly sold-out America's
values and workers to China because they are singularly focused
on billionaire tax cuts and amassing more personal wealth.
As it stands, Elon Musk makes billions in China, where more
than half of Tesla vehicles are produced. Nearly 40 percent of
Tesla's battery supply relies on Chinese companies, and Chinese
buyers represent Elon Musk's largest markets. While Tesla's
sales continue to collapse in the United States, last year,
there was a 90 percent increase in China, and Trump is ready to
forcibly remove Gazans to build golf courses for Trump and his
billionaire friends and investors, just as the CCP--that is the
Chinese Communist Party--forced removal of Uyghurs from their
land.
Racist nationalism, antidemocratic activity, and even
genocide and war are not a concern if it means power and wealth
for them and their billionaire class. While this is to be
expected from people like Musk and Trump, I am deeply
disappointed that my Republican colleagues, many of whom have
previously been outspoken about the important role the United
States plays as a beacon of freedom and defender of democracy
around the globe. Republicans did not even speak up when the
Trump Pentagon refused to allow one of its trafficking experts
to join us today to speak about Chinese fentanyl precursors and
Chinese money laundering.
Committee Democrats believe that together we can solve the
world's greatest problems. To counter China, we must stand with
our allies and fight for a vibrant, effective democracy with
respected civil servants who carry out our foreign policy.
Democrats will not rest until we stop the unlawful effort to
dismantle our government here and overseas. Hopefully, our
Republican colleagues will come to their senses and join us in
this effort.
Thank you for the additional time, Mr. Chair.
Chairman Hill. The gentlewoman yields back. Today we----
Ms. Waters. I yield back.
Chairman Hill [continuing]. we welcome the testimony of
John Miller, Senior Vice President of Policy, Trust, Data, and
Technology, and General Counsel, Information Technology
Industry Council; Nicholas McMurray, the Managing Director of
International and Nuclear Policy, ClearPath; John Cassara, a
retired Special Agent formally with the U.S. Treasury
Department; Martin Muhleisen, a Nonresident Senior Fellow at
the GeoEconomic Centers at the Atlantic Council; and Dr. Rush
Doshi, the Cornelius Vander (C.V.) Starr Senior Fellow For
Asian Studies, and Director of the China Strategy Initiative at
the Council on Foreign Relations, and an Assistant Professor at
Georgetown University.
We thank each of you for taking time with us today. Each of
you will be recognized for 5 minutes to give an oral
presentation of your testimony.
Without objection, your written statements will all be made
part of the record.
Mr. Miller, you are now recognized for 5 minutes.
STATEMENT OF JOHN MILLER, SENIOR VICE PRESIDENT OF POLICY,
TRUST, DATA, AND TECHNOLOGY, AND GENERAL COUNSEL, INFORMATION
TECHNOLOGY INDUSTRY COUNCIL
Mr. Miller. Chairman Hill, Ranking Member Waters, and
distinguished members of the committee, on behalf of the
Information Technology Industry Council, or ITI, thank you for
the opportunity to testify today on examining U.S.' policies to
counter China.
This is a timely topic, and I commend the committee for its
thoughtful and sustained engagement in this area.
ITI is a global policy and advocacy organization
representing eighty of the world's leading tech companies. I
lead ITI's Trust Data and Technology Policy Team, including our
work on security, artificial intelligence, and data policy in
the United States and globally.
ITI's members represent every vertical of the tech
ecosystem from cloud and artificial intelligence (AI) to
consumer electronics, from semiconductors and data centers to
cybersecurity. Our membership represents around 10 percent of
the U.S. Gross Domestic Product (GDP), directly employs 9
million Americans, and accounts for roughly 32 percent of the
market capitalization of the 500, Standard and Poor's (S&P)
500.
As of 2024, there were seven companies that had reached or
exceeded global market cap of $1 trillion. Six of those seven
are U.S. tech companies who are ITI members. Policymakers
should recognize the preeminence of these companies and the
innovation economy they anchor as an asset and the envy of
other nations.
Indeed, the strength of the innovation economy bolsters the
broader U.S. economy and drives the U.S. competitive advantage
in tools and capabilities that underpin U.S. national security,
such as semiconductors, AI, quantum and advanced manufacturing.
Do not take for granted the current U.S. technology lead
over China. China's longstanding disregard for international
norms governing free trade and market access and its theft of
information technology (IT) has been well established and must
be addressed. However, regardless of whether China plays by the
rules, we should be clear eyed that, over the past two decades,
China has improved in technological development, innovation,
and growth, and that these gains have not been achieved simply
by virtue of stealing U.S. technologies.
Make no mistake, ITI and the companies we represent take
seriously the U.S. Government's obligation to protect national
security. Successful policies to counter China's technological
rise must enable companies to better compete globally--not wall
the United States off from competing with China or
inadvertently erect hurdles to U.S. tech, innovation, and
investment.
U.S. investments, supply chain, tax and trade policies, and
regulations must be crafted to maintain the current asymmetric
advantage as a key driver of U.S. economic security. We believe
the government and industry must work together to achieve these
objectives in a way that supports the innovation, investment,
and economic growth that are foundational elements of economic
security.
This morning, ITI released a paper offering our members'
consensus policy recommendations for U.S. economic security.
Our paper defines economic security as encompassing elements of
the economy that affect the stability, technological
competitiveness, and resilience that enable the government to
better protect national security. The ideal policy environment
to foster U.S. economic security is one in which the global
success of American and multinational companies operating in
the United States supports technological leadership and
innovation, and the government and private sector work side by
side to safeguard critical technologies.
Our paper, which is incorporated as part of my written
statement, offers ten recommendations, three of which I will
highlight now. First, in the area of financial policy,
investment and transaction reviews should strengthen economic
ties with allies by establishing clear and targeted national
security criteria for what is reviewable.
Capital investments, both inbound and outbound, are
foundational and help companies in the United States diversify
the supply chain, engage the research and development
ecosystem, gain access to global talent, and gather global
market intelligence.
Overly broad investment restrictions, whether through CFIUS
or the Outbound Investment Security Program, will impede
domestic and overseas investment in and by U.S. companies and
consequently decrease economic security.
Second, reinvigorate U.S. trade leadership and open new
markets to optimize for both trade and economic security. ITI
encourages the U.S. Government to negotiate robust finding
commitments that facilitate trade through new strategic and
targeted bilateral and multilateral market access agreements to
enable U.S. companies to compete on an even playing field.
Third, continue to incentivize innovation and investment in
foundational and emerging technology. One near-term priority
should be restoring the immediate tax deduction of research and
development (R&D) expenses to drive innovation and create high-
wage jobs in the United States. Another should be maintaining
and improving the Creating Helpful Incentives to Produce
Semiconductors (CHIPS) program by pursuing meaningful
permitting reform and streamlined reporting requirements. Doing
so will help promote these multibillion-dollar investments in
semiconductors, the building blocks of the modern digital
economy, as a strategic economic security asset.
Thank you again for the opportunity to testify today. I
look forward to your questions.
[The prepared statement of Mr. Miller follows:]
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[The information referred to can be found in the appendix.]
Chairman Hill. Thank you, Mr. Miller.
Mr. McMurray, you are now recognized for 5 minutes.
STATEMENT OF NICHOLAS McMURRAY, MANAGING DIRECTOR,
INTERNATIONAL AND NUCLEAR POLICY, CLEARPATH
Mr. McMurray. Good morning, Chairman Hill, Ranking Member
Waters, and members of the committee. Thank you for the
invitation to testify today. My name is Nicholas McMurray. I am
the Managing Director of International and Nuclear Policy at
ClearPath.
At ClearPath, we believe in markets over mandates and
innovation over regulation. When it comes to energy, we want to
make it here, sell it globally, and compete with China. The
global energy landscape is rapidly evolving. Demand growth is
skyrocketing----
Chairman Hill. Could you pull your mic a little closer
please?
Mr. McMurray. Supply chains are shifting, and we are in a
global competition. Countries want more reliable, affordable,
and cleaner energy to fuel their economies. This is a major
opportunity for U.S. companies to lead. Strategic financing
tools can help the United States strengthen its energy
leadership, open new markets, and counter China.
Let me put this into context: China currently has 57
operating nuclear reactors and 28 reactors under construction.
While the United States has 94 operating reactors, it currently
has no commercial reactors under construction, but several
demonstrations are close.
The world's electricity consumption is at an all-time high.
The International Energy Agency says global electricity demand
could increase up to 76 percent, and we could see double in
U.S. electricity demand by 2050.
American private sector innovation is the key, and it
extends beyond domestic borders. Take advancements in liquefied
natural gas (LNG), for example. In 2023, the United States
surged its LNG exports. As a result, Russia's market share in
the EU, European Union, was reduced from 40 percent in 2021 to
8 percent in 2023. There is also a huge economic opportunity
for American companies and other technologies.
If the United States does not act now; the world will
choose cheap options from China. China is already taking an
all-of-the-above energy approach. For example, last year, China
started construction on about 94 gigawatts of coal capacity and
also invested $940 billion in clean energy. Without a focused
effort to expand domestic energy production, U.S. companies
risk being sidelined in global markets.
To level the playing field, the United States must
strengthen its trade and development finance toolkit. Export
and development financing plays a pivotal role in advancing
America's strategy for global energy dominance. Export-Import
Bank (EXIM), and Development Finance Corporation (DFC), can
strengthen U.S. leadership in global energy markets. America
must take a more agile approach using financing tools to derisk
projects and attract private capital.
Export and development finance prioritizes investments in
infrastructure, manufacturing, energy security, and economic
partnerships. EXIM Bank and DFC provide loans and guarantees
that must be repaid, ensuring taxpayers dollars are used
efficiently while expanding opportunities for U.S. businesses.
This approach creates American jobs, strengthens economic ties,
and positions the United States as the global energy partner.
Both the EXIM Bank and DFC are due for reauthorization this
Congress, creating a prime opportunity to refine America's
foreign policy toolkit. While EXIM Bank is one of the best
tools for increasing export competitiveness, its current
capabilities limit the Bank from achieving energy dominance.
The following five recommendations could bolster U.S.
energy leadership, enhance energy security, and create domestic
jobs. First, create a national interest account to consider the
geostrategic value of investments. Second, expand the China and
Transformational Exports Program to include broader
technologies. Third, increase the default cap rate for nuclear
projects. Fourth, reinforce the U.S. jobs mandate. Fifth,
bolster domestic manufacturing and overall modernize the bank's
mission.
I would be remiss if I did not mention DFC's
reauthorization this year. Created during the first Trump
Administration to counter China's Belt and Road Initiative, DFC
has established itself as an effective tool in countering
China. For example, it now supports nuclear projects after
removing its nuclear moratorium in 2020.
The World Bank also plays a critical role, but its outdated
policies have left a gap that China has eagerly exploited,
particularly its self-imposed restrictions on financing nuclear
power. In order to achieve energy dominance, the government
must provide a predictable environment for developers to
attract private investment. The work in this committee will be
critical to providing stability for companies seeking to raise
capital and compete globally.
In conclusion, the United States must build domestically
and sell globally to compete with China. Meeting growing energy
demand and strengthening global energy leadership requires bold
action.
Finally, Congress has a unique opportunity to strengthen
American solutions by modernizing export and developing
financing to support nuclear, LNG, geothermal, and other
technologies.
I look forward to today's discussion. Thank you.
[The prepared statement of Mr. McMurray follows:]
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Chairman Hill. The gentleman yields back.
Mr. Cassara, you are recognized for 5 minutes.
STATEMENT OF JOHN CASSARA, SPECIAL AGENT, UNITED STATES
DEPARTMENT OF TREASURY (RETIRED)
Mr. Cassara. Good morning, Chairman Hill, Ranking Member
Waters, and distinguished members of the Financial Services
Committee. It is an honor for me to testify.
Communist China is an ideological, military, economic,
commercial, high tech, intelligence, and diplomatic rival of
the United States and the West. The People's Republic of China
has a growing exploitative presence in the developing world.
While these threats are known, the Chinese Communist
Party's, involvement in transnational crime and money
laundering is generally not recognized, understood, or
investigated. My most recent book is ``China--Specified
Unlawful Activities: CCP Inc. Transnational Crime and Money
Laundering.'' I found in writing that book the criminal
activity has seemingly become part of the CCP's overall
strategy to grow its power.
Regarding fentanyl, the Mexican cartels are still dependent
on Chinese precursor chemicals and manufacturing expertise.
Fentanyl and fentanyl-laced products are smuggled into the
United States. In calendar year 2023 alone, the Drug
Enforcement Administration (DEA) seized more than 77 million
fentanyl pills and nearly 12,000 pounds of fentanyl powder.
This is the most fentanyl the DEA has ever seized in a single
year and more than enough to kill every single American. As it
is, in 2023, more than 107,000 Americans lost their lives to
drug overdose with 70 percent of those deaths attributed to
opioids such as fentanyl. Each death a tragedy. Each individual
that died has a story. Families and communities are devastated.
This scourge affects every one of the Members' districts and
our country as a whole. Of course, it all comes back to the
money.
Fentanyl production generates enormous proceeds, and the
Chinese are becoming the money launderers of choice for the
cartels. They leverage an underground banking system that has
long served China's immigrant diaspora. They have developed
other Chinese-centric money laundering methodologies that
enable the laundering of their illicit proceeds, not only in
the United States but around the world.
In my written statement, I give an overview of some of the
most pernicious enablers as they relate to fentanyl
trafficking, such as trade-based money laundering, black market
exchanges, underground financial systems like Fei-Chien or
flying money, and mirror swaps that are facilitated by Chinese
mobile phone apps. While my testimony focuses on U.S. efforts
to counter illicit fentanyl trafficking and money laundering, I
urge that we do not look at the fentanyl issue in a vacuum or
as an isolated concern. The CCP's business model that fuels the
fentanyl crisis is also active in many other sectors of crime,
including counterfeit goods, intellectual property theft, human
trafficking, illicit tobacco, and trade fraud. In fact, data
indicates that China leads the world in 11 of the 12 largest
categories of transnational crime. Each of these categories are
also specified unlawful activities or predicate offenses to
charge money laundering. CCP Inc.'s involvement in these crimes
is approximately $2 trillion a year. To put that in
perspective, $2 trillion is very roughly half the estimated $4
trillion that is laundered annually around the world.
I call corruption a great enabler for money laundering. CCP
Inc. has taken their domestic corruption and exported it
overseas. They excel in so-called influence operations, which
is probably a major reason for the lack of focus on CCP Inc.'s
criminality and money laundering. Once again, these specified
unlawful activities, methodologies, and enablers cannot be
viewed in isolation. Rather, they are intertwined and must be
addressed collectively. CCP international law breaking makes
them exposed; it makes them vulnerable.
I conclude my written testimony with recommendations that
emphasize law enforcement and more effectively following the
money and value trails.
Thank you very much.
[The prepared statement of Mr. Cassara follows:]
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Chairman Hill. The gentleman yields back.
Mr. Muhleisen, you are recognized for 5 minutes.
STATEMENT OF MARTIN MUHLEISEN, NONRESIDENT SENIOR FELLOW,
GEOECONOMICS CENTER, ATLANTIC COUNCIL
Mr. Muhleisen. Thank you, Mr. Chairman, Ranking Member
Waters, and members of the committee, thank you for inviting me
today. My name is Martin Muhleisen. Before joining the Atlantic
Council's GeoEconomics Center, I retired from the International
Monetary Fund in 2021, having served as chief of staff and
director for strategy policy and review, among others. The
following are my personal views and not those of the Atlantic
Council or any other organization.
On the topic of multilateral institutions, I would like to
focus on three recommendations. First, China should be held
responsible for its bad lending decisions. Chinese loans have
contributed to rising debt vulnerabilities in low-income
countries. In several cases, their unsustainable debt put a
hold on new loans by multilateral lenders. The speed of debt
workouts has picked up in recent years, but China remains
unwilling to provide haircuts to restore solvency when needed.
The United States should encourage the IMF to make full use
of its debt policies when countries need deeper debt
restructuring. For example, under certain conditions, the IMF's
Lending Into Official Arrears Policy allows programs to proceed
even if a country is in default to another IMF member. A more
robust application of this policy could strengthen the
negotiation position of debtor countries, eliciting more
ambitious debt relief from China.
Second, focus on quality, not quantity, of multilateral
programs. The World Bank and other development banks have been
leveraging their capital base to increase lending to low-income
countries who also benefited from a $650 billion issue of IMF
special drawing rights. These efforts are intended to meet
large financing needs of poorer countries, often with
relatively little conditionality. Higher debts to multilateral
institutions, however, can drive out private lenders, resulting
in the end in higher dependence on China.
To attract private capital, the institution's main focus
should therefore be on raising countries' long-term growth
prospects, including through loan conditionality, but stepped-
up lending by multilateral organizations alone will not win the
struggle for hearts and minds in the global south.
The United States should work with multilateral lenders to
incentivize needed reforms. If multilateral programs were
flanked by cofinancing, investment funds, specific trade
preferences, or private capital, they would have a larger
chance of succeeding. Especially in Africa and Southeast Asia,
with their growing populations, this could unlock important
markets for U.S. exports in the future.
Third, protect the dominant role of the dollar. Large
emerging markets have exhibited a remarkable degree of economic
stability in recent years. Countries among this group are still
vulnerable to external shocks. However, in case of severe
crisis, some might need access to U.S. dollar sources to avoid
sharp devaluations, and their financing needs could be large.
In this case, the IMF could deploy its lending capacity,
its full lending capacity of around $1 trillion to avoid
contagion and preserve global financial stability. This amount
leverages the U.S.' contribution to the IMF by a factor of more
than 5 to 1. In the absence of this safety net, countries would
either have to acquire additional foreign exchange reserves,
putting upward pressure on the U.S. dollar, or they would need
to seek help from China, which could become a factor in
undermining U.S. dollar dominance over the long term. It would,
therefore, be in the U.S. interest if Congress ratified the
increase in IMF quotas agreed last year, which would provide a
stronger capital cushion and make loans available at short
notice, if needed.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Muhleisen follows:]
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Chairman Hill. The gentleman yields back.
Dr. Doshi, you are recognized for 5 minutes.
STATEMENT OF DR. RUSH DOSHI, C.V. STARR SENIOR FELLOW FOR ASIA
STUDIES, AND DIRECTOR OF THE CHINA STRATEGY INITIATIVE AT THE
COUNCIL ON FOREIGN RELATIONS, AND ASSISTANT PROFESSOR, EDMUND
A. WALSH SCHOOL OF FOREIGN SERVICE, GEORGETOWN UNIVERSITY
Dr. Doshi. Chairman Hill, Ranking Member Waters,
distinguished members of the committee, thank you very much for
the opportunity to testify at today's hearing. I will focus my
remarks on four questions related to China. First, what are
Beijing's economic and technology ambitions? Second, what is
its strategy to achieve them? Third, how is the strategy
working? Finally, what should we do about it?
First, what are Beijing's ambitions? The People's Republic
of China (PRC) has a grand strategy to displace U.S.-led order.
It seeks to catch up and surpass the United States
technologically, to reduce dependence on others while
increasing their dependence on China economically, and to
acquire the capability to defeat U.S.' forces militarily.
Beijing believes economic and technology competition is
about power--not prosperity. It believes there have been four
industrial revolutions that determine the fate of nations. The
first was steam power, which led to British dominance. The
second and third were electrification and mass manufacturing,
which led to American dominance. Now we are in the fourth, AI,
quantum computing, smart manufacturing, biotechnology, which
China aims to win.
Second, what is Beijing's economic and technology strategy?
There are three parts. First, Beijing acquires technology. It
buys foreign companies to get it, it forces them to transfer it
in exchange for market access, or it steals it outright through
human intelligence and cyber espionage. Second, Beijing
protects its companies. It uses tariffs, nontariff barriers,
and exchange rate manipulation to keep out foreign competition.
Third, Beijing wields industrial policy. It uses massive
industry support, subsidies, tax breaks, R&D, support, cheap
credit, State investment so that its companies can undercut
rivals on price.
Taken together, PRC companies will lose money in their home
market. They will lose money in foreign markets, but they will
use that win in both their home and foreign markets, and
eventually they know they can stay solvent longer than foreign
rivals that do not have similar State backing. Dominance in one
sector helps them climb the ladder to the next rung.
The scale of China's industrial policy efforts is
breathtaking. Beijing likely stole more than a trillion
dollars' worth of U.S.' intellectual property. Its industrial
support is about 2 percent of the PRC economy every year. That
is a conservative estimate, but it is more than any other
country around the world. It is twice as much as U.S. support.
It is probably about $400 billion a year. That is more in
comparison with the CHIPS and Science Act, which is about $50
billion over multiple years.
Third, is this strategy working? In short, yes. In the last
two decades after China joined the World Trade Organization
(WTO), the U.S. share of global manufacturing fell by half,
from 30 percent to 15 percent. That so-called China shock cost
millions of jobs and shuddered thousands of factories.
Meanwhile, in the exact same period, China's share of global
manufacturing quintupled from 6 percent to 30 percent. China is
a manufacturing superpower. Its capacity exceeds that of the
next nine countries combined, and it can leverage that
manufacturing dominance to innovate and to gain military
advantage.
Take innovation, China is at the leading edge of fields
like robotics, AI, and quantum computing. It leads the United
States in high-impact patents and scientific papers. It
accounts for half of all industrial robot installations
worldwide, 60 percent of all global electric vehicle
production, 75 percent of global battery production, and over
90 percent of solar panel, rare earth, and antibiotic
production.
Then take the military competition, the PRC has 200 times
the shipbuilding capacity of the United States and is leading
in new technologies like hypersonics.
Now Beijing's economy has problems. It is slowing. Its
population is aging, but we should not feel confident. Beijing
is pouring money into industry and exports to find growth. That
strategy is causing a second China shock that is de-
industrializing economies around the world, including our own.
Fourth and finally, what do we do about it? First, we
cannot go it alone. China surpasses the United States on some
industrial metrics, but the United States combined with its
allies and partners has three times China's GDP, half of all
global manufacturing, more than twice China's likely military
spending, twice China's patents and top-cited publications, and
massive market power. If we pull our markets, protect our
technology, coordinate our research, and create defensive
barriers to PRC excess capacity, we can handily weather the
second China shock and reindustrialize and lead in technology.
Second, we need new institutions. The United States could
benefit from a Federal industrial investment bank that can make
long-term loans, take equity in strategic industries, and, most
importantly, coordinate with private capital. That could allow
us to also fund reshoring from China to the United States or to
allied countries.
Third, we need a change in incentives. China can play the
long game while our companies focus on quarterly earning
cycles. We can consider tax policies to change that. We also
need to invest more in basic science research where China
outspends the United States now.
Finally, we have to play defense. That involves calibrated
tariffs to protect our industry from excess capacity from
China. It requires stronger export controls, research
protection, and regulation of inbound and outbound investment
to maintain our lead.
The United States has never faced an adversary quite as
formidable technologically and industrially as China. We have
everything that we need to succeed. We just have to make
different choices in some cases.
I want to thank you for your time, and I look forward to
your questions.
[The prepared statement of Dr. Doshi follows:]
[GRAPHIC(S) NOT AVAILANLE IN TIFF FORMAT
Chairman Hill. Thank you, sir. The gentleman yields back.
The chair recognizes Mrs. Beatty, the Ranking Member of the
National Security, Illicit Finance, and International Financial
Institutions Subcommittee, for 1 minute.
STATEMENT OF HON. JOYCE BEATTY, RANKING MEMBER OF THE
SUBCOMMITTEE ON NATIONAL SECURITY, ILLICIT FINANCE, AND
INTERNATIONAL FINANCIAL INSTITUTIONS, A U.S. REPRESENTATIVE
FROM OHIO
Mrs. Beatty. Thank you, Mr. Chairman.
First, let me say, I would like to echo Ranking Member
Waters' comments and note the incredible irony of us holding
this hearing while Team Trump-Musk are presiding. It is--and
they are demolishing the U.S. leadership on the international
stage. The White House and Department of Government Efficiency
(DOGE) are illegally deleting entire agencies in violation of
the Constitution, siding with adversaries, calling our allies
dictators, and abruptly and ruthlessly rescinding U.S. aid that
fosters global goodwill and advances our national security
goals--all of which unquestionably allows China to fill the
void and hands them the prize of global leadership on a silver
platter, all while colleagues across the aisle who have a long
record in Congress of loudly supporting soft power initiatives,
like USAID and assistance for Ukraine, are stunningly silent
now. This is unthinkable, and I yield back.
Chairman Hill. The gentlewoman yields back.
The chair recognizes himself for 5 minutes of questions.
Mr. Muhleisen, the IMF last major report on China comes
from 2024 on their economy, and it reads like it is a parallel
universe to me. The report says, ``Directors''--meaning IMF
directors--positively noted that China is a key player in
addressing global challenges and welcomed its constructive role
in supporting sovereign debt restructuring and low-income in
vulnerable countries in tackling the global climate crisis.
That is a quote from the report. They also emphasize China's
important role in strengthening multilateral trading system in
close cooperation with international partners. That sounds
preposterous to me.
Mr. Muhleisen, what is your view on that.
Mr. Muhleisen. Thank you, Mr. Chairman.
I think--and I am not speaking for my colleagues. I want to
just emphasize that for my former colleagues. I think that the
staff report wanted to point out that China did make some
progress on the debt restructuring issue. There have been
improvements, as I mentioned earlier, because China is
participating under the Group of Twenty (G20), common framework
for debt restructuring, and some country cases have been
resolved.
Chairman Hill. You would not argue that the common
framework has been successful, would you?
Mr. Muhleisen. It has been a difficult effort to get China
to contribute. It is not like the Paris Club, but it has some
of the same principles.
Chairman Hill. Should not China belong to the Paris Club?
Should they not participate in the Paris Club?
Mr. Muhleisen. I would welcome them if they did.
Chairman Hill. Wouldn't that make all of this a lot easier?
We would not have to have a made-up framework like the common
framework from the G20.
Mr. Muhleisen. I think I pointed out in my statement that I
think there are still shortcomings in the way China does handle
its loans to troubled countries. I would agree that having them
in the Paris Club would make them play with the rules that are
well established and functioning, but, obviously, this is
China's own decision. I think at some point they considered it,
but it was then rejected within China.
Chairman Hill. Yes, I agree with you. I think it was a
mistake, and I think the IMF and the IMF members should put
more pressure on China to participate through the Paris Club.
What should the IMF be doing now as it relates to this past
4 years of effort that really has not been very successful?
Mr. Muhleisen. As I mentioned, I think the only real tool
that the IMF has is Lending Into Official Arrears Policy.
Chairman Hill. Do they have the right information from the
countries they are trying to lend to if the terms that China
has are not transparent and are not disclosed?
Mr. Muhleisen. There has been some improvement in
disclosure. Again, I do not want to put my hand in the fire and
say that everybody knows exactly what China is doing in member
countries. That improvement has helped, especially to bring
private creditors on board because now there is more of a level
playing field. Now people understand more what the mass of
loans is and how to negotiate that restructuring, but there is
still a long way to go.
Chairman Hill. Thank you.
Mr. McMurray, I was pleased to be sponsoring in this
Congress a bipartisan bill with Mr. Torres of New York that
would support nuclear energy financing through the World Bank
and the European Bank for Reconstruction and Development. This
legislation would not only help lift the World Bank's
prohibition on same financing, but it would kickstart a trust
fund to add in the assistance that you referenced in your good
testimony.
I would like to insert in the record two articles I have
written on the importance on nuclear financing, ``Build Back
Nuclear'' from 2021, and ``Our Energy Future'' from January
2025.
Without objection, it will be added to the record.
[The information referred to can be found in the appendix.]
Chairman Hill. Mr. McMurray, can you help us understand why
funding for nuclear and other energy projects is so critical in
countering China's influence in the world?
Mr. McMurray. Thank you, Chairman, and thank you for your
leadership on this issue.
China is actively building almost 30 nuclear reactors
today, poising them to prepare to export and build their
technologies elsewhere. The World Bank has a really important
role to fund large global infrastructure projects so, by them
not supporting nuclear, that limits the effectiveness of the
World Bank and cedes that leadership to China.
As you mentioned, the trust fund is actually an excellent
tool for the World Bank to do two things: One, build that
internal expertise so it can start educating its own staff as
well as its members; and then, two, lay out some of those early
stage projects so ultimately entities like the EXIM Bank can
start funding and support additional projects globally.
Chairman Hill. Thank you very much. My time has expired
I now yield to the Ranking Member of the full committee for
5 minutes.
Ms. Waters. Thank you very much, Mr. Chairman.
Dr. Doshi, in the Caribbean, nations increasingly
disillusioned by the U.S.' unpredictability are turning to what
is known as BRICS--that is Brazil, Russia, India, China, South
Africa--including of course both in a very, very real way China
and Russia for investment and financial support. China's Belt
and Road Initiative have brought investments to the region,
from ports and energy resources to hotels and highways,
although often with predatory loan arrangements. In light of
these developments, what strategic actions should the United
States take to counterbalance China's growing influence and
provide a more reliable, attractive alternative for Caribbean
nations and other regions? I just want you to know that, when
any of us participate in activities with our Caribbean
countries, that is all we hear: ``What are you guys doing?
Cannot you help us to avoid what China is doing in the
Caribbean?'' What do you know about this?
Dr. Doshi. Thank you very much, Ranking Member Waters. Let
me just say this is a very important issue. Every great power
adversary the United States has ever faced has wanted a role in
the Caribbean, whether that was Germany, even the First World
War, but especially the Second, with the Soviet Union and the
Cold War. China is no different. They also want a role in the
Caribbean because they know it is a weak spot for us
potentially. They know about our reliance on the Panama Canal.
The history here shows that China will want to be involved and
if looking at their own statements, you know it.
I would add a few things. China's involvement picked up
really in the early 2000s. They have accelerated their
involvement in recent years. As you correctly noted, they are
focused on a whole-of-government approach in the Caribbean.
That means military assistance in some cases to a Caribbean
country. That means law enforcement and military assistance. It
also means investment, significant investment in Jamaica,
investment in port infrastructure, including the operation of
ports in the Caribbean, so they are there. They are present. In
many ways, their economic relationship is growing rapidly.
Tourism is another component.
What do we do about it? There are a few things. First, a
little bit of support from us goes a long way. These are not
large economies. Taken together, the entire GDP of the region
is about the GDP of Kansas, maybe a little bit less. We can do
more by being present and by increasing our aid activity.
Second, Caribbean countries, as you know well, want
commercial engagement with the United States. We should find
ways to make it easier, whether that is through EXIM Bank, DFC,
or other institutions, for our businesses to be involved in the
Caribbean.
Finally, we should remember that we have an asymmetric
advantage. Those countries, as you noted, they want to be with
us--not with China. They are not happy about the corruption
that China sometimes brings to their economies. Transparency
and sunlight are the best disinfectants. We should fight in the
information space that people know that we stand for anti-
corruption and that the Chinese stand for corruption.
Finally, we have to worry about the military role that
China is building there, and we should make sure that our
Department of Defense is doing everything it can to strengthen
military diplomacy with our Caribbean friends.
Ms. Waters. Thank you very much and speaking about what
more we can do. Some of our Caribbean Island states do not
receive foreign aid because they say they make a little too
much money. They are hit with storms, and they are in great
debt as they try to reconstruct and renovate and all of that.
Is this an area that we could help them in because of the debt
that is incurred with all of these Mother Nature events?
Dr. Doshi. Thank you very much, Ranking Member Waters. You
brought an important point up, which is debt. Many of these
countries are heavily indebted to China, increasingly indebted.
Jamaica is another good example of that. In many cases,
Suriname is another recent example. In many cases, they cannot
pay back the debt, so that is a problem. It speaks to the
previous discussion earlier about China's nonparticipation in
the Paris Club, but I would just add that, yes, storm relief,
we can do more there. Finally, very quickly, we might want to
consider changing the thresholds for aid for some of these
countries so that we can make sure that we can be more useful
to them.
Ms. Waters. Thank you very much. Quickly, do we have a
security problem with China getting so much influence in the
Caribbean and being so close to us, should we be concerned
about that?
Dr. Doshi. We should, in my opinion. It has somewhat
compromised some of the activities that we undertake in the
Caribbean. We have U.S. Southern Command (SOUTHCOM) operations
and others that are worried about this. In particular, I would
note just two things: First, that the PRC operates out of Cuba
a number of sensitive sites, and we should worry about those
and their ability to collect on our operations in the
Caribbean. Second, I would also add to that the PRC's ownership
of port infrastructure in the region, including on the Panama
Canal, can pose security threats as the Trump Administration
and the Biden Administration have identified.
Ms. Waters. Thank you. I yield back.
Chairman Hill. The gentlewoman yields back.
The gentleman from Michigan, the vice chair of the full
committee, Mr. Huizenga, is recognized for 5 minutes.
Mr. Huizenga. Hey, everybody. I want to get to IMF reform
and some other things but, Dr. Doshi, I want to very, very
quickly hit on this. I learned a new phrase recently, which is
the lie-flat generation in China. My question is, can China
survive economically from the downturn that they are seeing? It
seems to me, as a child of the Cold War, in that era, the
difference between our space race and the Cold War race that we
had with Russia is they had a much smaller economy. I am very
curious, very quickly, your view on China with that.
Dr. Doshi. Thank you, Congressman. It is a very important
question. Very quickly, I would say that, yes, they can
survive. We have generally underestimated China's ability to
compete. Very importantly, China has scale, and every rising
power that has scale tends to do pretty well.
The Soviets did not have the scale that China does. Happy
to go into more detail.
Mr. Huizenga. Okay, all right. Mr. Muhleisen, I want to
turn to you about your work at IMF and your views from the IMF,
not necessarily your particular work there. According to the
Wilson Center, 80 percent of China's government supported loans
are to countries that are in some sort of debt stress. The IMF
has failed to convince China to work on restricting this debt,
which some estimate is in excess of a trillion dollars. To me,
having worked with IMF and World Bank and others over the
years, I would argue it seems to be a strategy, not a
coincidence, that oftentimes they are lending into these
countries that have a debt strain and then they are then
utilizing the loan documents and the profile of that to then
flip that into an asset that they either control or own. My
question is, what roles should these International Financial
Institutions (IFIs) play here? Should they simply just back
away from countries when that sustainability is unclear?
Mr. Muhleisen. Thank you, Congressman.
I would put it this way, I do not see China engaging in
some kind of debt trap, if that is what you meant, where they
entrap countries.
Mr. Huizenga. I think a clear-eyed look at what is
happening in Africa and the rest of Asia would contradict that.
Mr. Muhleisen. What I would rather look--how I would rather
look at it is they are getting a lot of benefits out of that
engagement because what they do is, of course, they have these
trade relations also with countries----
Mr. Huizenga. I am sorry, are you saying that they have a
higher risk profile than the rest of the world does?
Mr. Muhleisen. To some extent, I think China was not even
aware of the risks they got into. I could speak to that in a
second, but what I meant is the strategic advantage is they are
getting access to ports and access to other facilities----
Mr. Huizenga. Including in Latin America and other places
now.
Mr. Muhleisen. Exactly and Caribbean. That is, I think, the
main benefit. It is not like they would kind of own a port that
a country has to hand over because they cannot pay their debt.
Mr. Huizenga. Staying with you, in your testimony, you
mentioned that the United States should insist on, ``improved
transparency'' at the IMF. I am also curious, what can the U.S.
Treasury do to encourage the IMF to adopt a more forceful
approach, including that transparency?
Mr. Muhleisen. I did not mean to say that the United States
should push the IMF to be more transparent. It is actually the
debt transparency of China that needs----
Mr. Huizenga. Yes, I understand that, but the IMF is the
tool for that, correct?
Mr. Muhleisen. Yes. I myself----
Mr. Huizenga. Is the IMF doing enough to push that
transparency and to push a country like China to give that
transparency?
Mr. Muhleisen. I myself have worked with Chinese officials
in my formal capacity to help them understand how much actually
countries are owed to China because, within China, their
facilities as lenders of all these different institutions that
are lending are kind of not as far developed as we in the West
would have it. They are not kind of set up to do that. They are
only slowly getting into the business of lending.
Mr. Huizenga. I have got 45 seconds. I think the Chinese
are far better businesspeople than what you seem to be
implying, but--the latest shareholder review at the IMF did not
increase China's voting power. They were pushing to do so. What
conditions should the IMF insist on in the future if China
lobbies for more shares would be a question, but I am going to
actually get that in writing because I do have to hit this, Mr.
Chairman. I previously introduced a bill, the IMF Reform and
Integrity Act, that would prevent any shareholder increase at
the IMF for a country such as the PRC that does not meet basic
obligations codified in the organization's articles of
agreement. I believe, and this goes back to my time working
with Madame Lagarde, when she was there, the IMF needs to get
tougher and tighter about enforcing its own rules. I would like
to include--submit a copy of my bill.
Chairman Hill. Without objection.
[The information referred to can be found in the appendix.]
Mr. Huizenga. I yield back.
Chairman Hill. The gentleman yields back.
The chair recognizes the gentlewoman from New York, the
Ranking Member of the Small Business Committee, Ms. Velazquez,
for 5 minutes.
Ms. Velazquez. Thank you, Mr. Chairman.
Let me start off by saying that I am glad we are having
this hearing discussing the rising threat of China, but holding
this hearing is not enough. If we want to talk about countering
China, then we need to be discussing how President Trump and
his unelected President, Elon Musk, are the biggest threat to
the United States in countering China. President Trump has
abandoned our closest allies in favor of cozying up to
dictators, illegally closed down USAID, and cutting off aid for
needy nations, destroyed our national security apparatus, and
installed conspiracy theorists, like Kash Patel, at the top
levels of our government. Dismantling this institution that has
helped keep our Nation and the world safe since World War II
opened the door for China. Countries across Africa and Latin
America are turning to China for financing and leadership, a
geopolitical move China is facilitating and exploiting.
Mr. Cassara, by hollowing out the government through
illegal firings and layoffs, Elon Musk and DOGE are making
Americans less safe from financial scams coming from China and
encouraging corruption both home and abroad.
An article printed in The Wall Street Journal, not exactly
a bastion of liberal media, last week describes how illegal
proceeds from fentanyl sales are being laundered through China
for reinvestment in real estate and other vehicles here in the
United States. The proceeds and flow of illegal fentanyl from
China is an issue Members on both sides of the aisle care
about. How can Congress bolster current Bank Secrecy Act (BSA)/
Anit-money Laundering (AML) statutes to reduce the reinvestment
of illegal fentanyl proceeds here in the United States?
Mr. Cassara. Thank you for the question. Regarding BSA,
Bank Secrecy Act, financial intelligence reporting
requirements, I think one of the best things that could happen
to counteract some of the issues that are developing is for
real estate agents, for example, to not--no longer be exempted
from Know Your Customer (KYC), reporting requirements, and to
follow suspicious activity reports.
I think something else needs to be done that is more
efficient utilization of suspicious activity reports in
general, which is going to require additional personnel. It is
going to require technology. Most importantly, it is going to
require additional resources on the ground for agents to work
cases.
Ms. Velazquez. Would not you agree that to reduce the
laundering of money from Chinese fentanyl sales, we are going
to need to continue to crack down on anonymous shell companies
here in the United States?
Mr. Cassara. Absolutely, in money laundering, there are
three stages of money laundering, placement, layering, and
integration. Shell companies, LLCs, Delaware corporations,
whatever you want to call them, are one of the premier tools of
choice by money launderers in the layering stage of money
laundering. It makes it very, very difficult for criminal
investigators to follow the money trail. Same thing with the
integration stage. Once the money is layered and integrated
into the economy, we do not know who owns that shopping center,
who owns that yacht, who owns that property. We need beneficial
ownership information.
Ms. Velazquez. Thank you for that answer.
Dr. Doshi, how important is it for both the United States
and the allied nations to adopt and enforce transparency
measures like beneficial ownership registries and anti-
corruption laws to prevent bad actors from abusing our
financial system.
Dr. Doshi. Thank you, Congresswoman. I think it is
incredibly important. Every step that we want to take, whether
on law enforcement with anti-money-laundering, with export
controls or with investment restrictions, all of those steps
are going to require knowing essentially the beneficial owner.
If we do not have that, then the PRC can always set up shell
companies and get around our restrictions, and they have been
doing that. I think it is indispensable to our competitiveness
agenda.
Ms. Velazquez. Thank you. I yield back.
Chairman Hill. The gentlewoman yields back.
The gentleman from Oklahoma, Mr. Lucas, the Chair of the
Task Force on Monetary Policy, is recognized for 5 minutes.
Mr. Lucas. Thank you for holding this hearing, Mr.
Chairman, and thank you to our witnesses for testifying today.
As the former Chairman of the Science Committee and
representing an energy-dominant State, I am particularly
sensitive how China weaponizes energy as a geopolitical tool.
The United States must continue to prioritize targeted
investments in clean, reliable, and affordable nuclear energy,
which will contribute to enhanced energy security, geopolitical
stability, and emissions reductions.
Mr. McMurray, can you touch on why maintaining U.S.
leadership in energy production is so critical in countering
China in energy security national issues?
Mr. McMurray. Thank you, Congressman and thank you for your
leadership on clean energy innovation, especially as the former
Chair of Science, Space and Technology (SST) Committee.
China is activity building projects, and right now,
countries around the world want and need more energy for either
energy access, as they are just having more manufacturing or as
they are growing. They are going to look at whatever options
are cheap and available. Right now, in many cases, that is
China. The United States has to look at, how does the
government support private companies, which are developing all
sorts of innovative technologies, such as nuclear energy, to be
able to make it easier to compete on an unlevel playing field.
Some of the best tools are EXIM Bank and DFC to kind of help
with that financing piece, but, ultimately, we have to be able
to make these technologies here and build them here. That
requires support from the Department of Energy and National
Labs so we can demonstrate these technologies so we can
ultimately sell them.
Mr. Lucas. Thank you.
Authorities at the Oklahoma Bureau of Narcotics have
identified transnational criminals that are moving illicit
drugs on the black market and laundering money in China. Mr.
Cassara, how can Congress address the financial streams that
are the foundation of this illegal activity so we can cutoff
these very sophisticated criminal enterprises? I know it is a
complex question.
Mr. Cassara. It is a complex question, but I think to get
to the heart of the matter, I think we have made a mistake over
the last so many years. Our enforcement agencies have been
putting emphasis on what I call the product, for example,
illegal drugs, and the people, meaning like drug kingpins and
those involved with it. I think what we have been missing is to
really truly and finally go after the money because all of
these organizations are motivated by greed and avarice. The way
to hurt these individuals, these organizations, better than
anything is to identify their assets and take them away. The
reason we have not been doing this is because going after the
money is hard. Enforcement agencies are statistic-driven,
metric-driven. They want measurements of success. Instead of
going after a meaningful, long-term complex money laundering
investigations that may take 2 years or more, they are content
to go after these quickie little buy-bust cases that really do
not make any difference. We have to change the incentives for
law enforcement.
Mr. Lucas. Play chess, not checkers.
Mr. Cassara. Yes.
Mr. Lucas. Turning back to the EXIM Bank for a moment, Mr.
McMurray, in the most recent re--or authorization of EXIM Bank,
Congress built the China Transformational Exports Program, or
CTEP. That program reserves at least 20 percent of EXIM's
authority to neutralize China's export subsidies. How can we
improve on that program and scale it up to match their actions?
Mr. McMurray. Thank you, Congressman. CTEP has been an
excellent tool to compete with the very competitive financing
that China is able to offer. Right now, CTEP focuses on only a
certain subset of technologies. One of the best ways to
increase the competitiveness of U.S. companies is to expand
that, for example, including nuclear energy as part of CTEP's
mandate. I would also want to just mention DFC was also created
under the first Trump Administration directly as a counter to
China's Belt and Road, and there is an opportunity as well to
strengthen DFC to make U.S. companies, again, more competitive.
Mr. Lucas. I just want to simply note in my closing
comments; we cannot afford to get caught flat footed on the
issues we are discussing today. Outcompeting China in export
markets, financing energy investments must be a top priority. I
am thankful to the chairman for focusing on this in our hearing
today.
I yield back, Mr. Chairman.
Chairman Hill. Mr. Lucas yields back.
The gentleman from California, Mr. Sherman, the Ranking
Member on our Capital Markets Subcommittee, is recognized for 5
minutes.
Mr. Sherman. Thank you, Mr. Chairman.
Some of our witnesses seem to be here advocating what they
would advocate in any other committee that was not even talking
about China. If you are paid to convince Congress to let you
drill for oil in Yellowstone National Park, you can then come
to a hearing on China and say, ``Well, that is the way to take
care of China.''
Mr. Chairman, thank you for focusing on the importance of
the U.S.' world reserve currency, and we should remember that
the announced purpose of crypto is to partially displaces the
U.S. dollar. There is a bill in the Senate to make crypto the
reserve currency of the dollar, and I think you understand how
important it is that nothing displace the dollar as the world's
reserve currency.
Likewise, I think it was Mr. Cassara who focused on money
laundering. Crypto is advocated by its own supporters as a way
to do massive transactions or large transactions out of the
view of the U.S. Government, and that is perhaps why 100
percent of the ransomware attacks in recent years have demand
payment in crypto.
Mr. Muhleisen, I would like--I hear what you say about
China debt. Too many small countries are being told, ``Well,
you borrowed China's money, so you have to give us your port.''
What we need to do is say to every lender and every credit
rating agency that, when China makes an unfair loan and you do
not repay, that cannot be used against the country's credit
rating. Countries who face this circumstance will, instead of
giving China their port, they can give China their middle
finger and still borrow from American corporations, banks, and
international lending institutions.
We have made some unforced errors, one of those, as The
Wall Street Journal points out, is we should be focused on
China, and, instead, we go to economic war with Canada and
Mexico. Second, we have cut aid in some cases to tiny countries
in the Pacific, to the Cook Islands, to Solomon Islands, to
Tonga, where we just have million-dollar programs. These are
the islands where my father's friends gave their blood in the
last war in the Pacific, and now we are turning over control of
those islands to China for a few--to save a few million
dollars.
The original sin was giving China most-favored-nation
status. Before then, their economy was tiny. The majority, the
vast majority of Democrats voted against that, and we stood up
to our own President. I turn to my Republican colleagues and
say, perhaps your proudest moment this year will be when you
stand up to one of--to a Republican President.
In capital flows, it is nice to say, ``Well, we should not
send any capital to China.'' Keep in mind, because of that huge
trade deficit, which I might add was much bigger under Trump
than it was under Biden and was even bigger still in the pre-
coronavirus disease (pre-COVID) years of Trump. Trump gave us
the worst trade deficit in history vis-a-vis China. We are
dependent for over $1.5 trillion of investment in our debt
instruments on China, but we have got to look at equity flows.
Believe it or--right now, we subsidize Americans who invest
in Chinese stocks. We do so through our tax system and the
capital gains allowance. I am going to ask all witnesses here,
please raise your hand if you believe that we should provide
subsidies to Americans who choose to invest in Chinese stocks.
Let the record show, no hand went up.
Yet, I have great difficulty--I have only gotten one
Republican cosponsor for the bill that I am going to
reintroduce--I hope all of you join me in cosponsoring this--to
say no capital gains allowance for investment in Chinese
stocks. Now, I know that offends the billionaire class, but you
cannot go--you cannot stand up to China if you are unwilling to
offend the billionaire class.
Dr. Doshi--I am not able to read your sign so well, so I
might have mispronounced your name--are there unique risks for
Americans when they invest in Chinese stocks, such as
appropriation, that should be part of the disclosures they get
from the U.S. Securities and Exchange Commission (SEC)?
Dr. Doshi. Thank you, Congresswoman. I think that there are
significant risks. I am not sure that we have--I mean, that
market itself is highly volatile, unpredictable. There is no
adequate auditing of these companies. Our due diligence----
Mr. Sherman. The auditing, Senator Kennedy and I did
something about.
Dr. Doshi. Yes.
Mr. Sherman. But there is everything else.
Dr. Doshi. And----
Chairman Hill. The gentleman's time has expired.
The gentleman from Texas, Mr. Sessions, is recognized for 5
minutes.
Mr. Sessions. Mr. Chairman, thank you very much. I am
delighted we are having this hearing today. I think that the
panel is well positioned to provide a lot of information to us.
Mr. McMurray, I want to go directly to your testimony, and
we are talking about China. China currently has 57 nuclear
reactors in operation and 28 reactors under construction. The
United States has 94 reactors, none currently evidently on the
books to replace them. What is the major reason why we cannot
build economic--the funding that is necessary for these? Is the
market not robust? Is there not an understanding? What is the
reason why America would not be building at least one or two?
Mr. McMurray. Yes. Thank you, Congressman. China over the
last several years has made a concentrated focus on building
new nuclear, and that has played out in the number of reactors
under construction. I would say, the United States has also
done that. There has been significant bipartisan policy for the
past several years focused along every step to build new
nuclear, whether it is demonstrating early technologies,
developing the fuel supply chain, providing tax credits,
improving the regulatory framework. Congress has really focused
on this for the last several years.
Mr. Sessions. The market has not gathered itself together
to take advantage of this?
Mr. McMurray. Today there are several projects that are
very close to breaking ground. There are two research reactors
that are under construction. There are several reactors through
the Department of Energy's Advance Reactor Demonstration
Program that are also nearing construction, as well as several
private companies that are also looking to build, so the United
States is close.
Mr. Sessions. They are trying to go to next-generation
(NextGen). They are waiting for the newest research in
development.
Mr. McMurray. There is an interest in all sorts of
technologies, after the Vogtle plants came online in Georgia,
pairing that with the projected demand increases for
electricity in the United States. There is also a renewed
interest in large reactors as well. It is important for policy
in the market to kind of recognize all of these different
technologies have a role to play domestically because there is
also an interest in all of these technologies internationally.
Mr. Sessions. Yes. In Texas, we have a lot of land, but a
lot of that land is being grabbed up 30,000 and 40,000 acres at
a time for solar panels, taking then agricultural ability off
that land. We know, as you alluded to, we are going to double
the amount of electricity that is necessary.
Tell me about the proposed Trump tax cuts. Will that
provide more capital available for these kinds of projects to
where they do not have to come to the Federal Government?
Mr. McMurray. Focus on Texas for a moment. There has been a
lot of great work out of the State to build new nuclear,
including through the Governor directing the Public Utilities
Commission to figure out what State policies would help attract
new nuclear. I think, on the Federal level, we have seen
significant support going back to nuclear specific tax credits
that have supported the Vogtle plants, as well as existing
policies that support the new technologies today. I think
Congress has the opportunity to continue that support and
continue that focus so it can provide certainty and
predictability for the companies looking to build.
Mr. Sessions. Great. We need them, because we cannot
continue to grab 30,000, 40,000, 50,000 acres to meet the needs
of not just the electrical system, electrical grid system, but
we need it because we are going to grow exponentially, and we
have that issue.
I want to thank you. I think that the--if we are going to
be a capitalist nation and we want to grow and meet the demand
for all this, we need to move toward what I would call all of
the above, and that has to be a better reliance upon what we
are doing with nuclear. I want to thank you very much for being
here today.
Mr. Chairman, I yield back my time.
Chairman Hill. The gentleman yields back.
The gentleman from New York, Mr. Meeks, the Ranking Member
on the House Foreign Affairs Committee, is recognized for 5
minutes.
Mr. Meeks. Thank you, Mr. Chairman.
As the chairman has just indicated, I now serve as the
Ranking Member of the--and formerly Chairman of the House
Foreign Affairs Committee. When we are discussing the topic at
hand, I have to say, I come here gravely concerned about our
great country. China and Russia, both nuclear-armed permanent
members of the U.N. (United Nations) Security Council have a
vastly different vision of the world than we do--at least that
used to be the case.
The first month of the Trump Administration, however, has
confirmed my worst fears, that it has severely undermined
American global leadership, not just for the next 4 years but
for decades to come. Just yesterday, the United States, along
with a few other tin-pot dictators, Russia and Russian
satellite states, voted at the U.N. not to condemn Russia's
aggressive, unprovoked, and unjustifiable invasion into the
Ukraine.
Dr. Doshi, just give me a yes or a no, do you believe it is
in our interest to stand with Russia over Ukraine?
Dr. Doshi. To stand with Ukraine.
Mr. Meeks. I would also ask--just yesterday, I dropped a
resolution. I would ask my colleagues on the other side of the
aisle to join us on this resolution that just basically says we
are--because this is the third year of Russia's invasion into
Ukraine. Join our resolution. All it says is that we condemn
Russia's invasion of Ukraine, of which the U.N. tried to pass,
and we voted--or the Administration voted against.
Dr. Doshi, let me ask you another question, this time as
you are an expert on China. Do you believe that China will read
into our failure to stand up to--Ukraine as it thinks about
aggressive action against Taiwan or in the South China Sea?
Dr. Doshi. I am always reluctant to say that credibility
transfers like that. In this case, however, everything I have
ever learned about the Chinese Communist Party tells me two
things: First, they are disproportionately focused on the
United States use of power; that is, if they think we are
weakening, they are more bold; and, number two, if they think
domestically we cannot rise to the occasion against Russia,
they will think we would not rise in defense of Taiwan.
If we do not stand for Ukraine, they will be emboldened in
the Taiwan Strait and the South China Sea. That is a strong
belief that I have based on everything I have ever studied
about them.
Mr. Meeks. Thank you for that. All we have to do is let us
review our record of our President and his positions on China.
Back in 2017, he signed a deal to let Zhongxing
Telecommunications Equipment Corporation (ZTE) off the hook,
despite their record of violating U.S. sanctions, which to this
very day undermines telecommunications security around the
globe.
In 2020, he repeatedly praised Xi for the job he did
regarding COVID-19 instead of criticizing China's secretive
response and failure to allow an impartial investigation into
the origins of the coronavirus. Since returning to office,
President Trump allowed TikTok to continue to operate in the
United States, despite clear congressional intent to the
opposite effect.
Second, he has severely undermined economic trust in the
United States among allies worldwide by aggressively
threatening tariffs on our allies. This includes tariff threats
on semiconductors from our close Taiwanese partners. He has
allowed Elon Musk to decimate USAID, which is the tip of the
spear of American soft power and good will around the globe.
Dr. Doshi, do you think it is in the U.S.' interest to
compete with China for commercial and soft power projects
around the globe?
Dr. Doshi. Yes, I do.
Mr. Meeks. I do, too. Mr. Miller, do you agree?
Mr. Miller. Yes, absolutely, it is in our interest to
compete.
Mr. Meeks. Mr. McMurray, do you agree?
Mr. McMurray. Yes, we need to make sure we can compete.
Mr. Meeks. Now I am hearing that the President wants to
sign a big deal with China to get them to buy more of our
commodities while allowing the PRC to build up its military and
undercut our workers. All of this is encouraged by Elon Musk
and others who have enormous business interests there.
Let me be clear, I think we need to continue to trade with
China, and I am not supportive of the trend of stoking
xenophobia or undermining our economy just to spite the PRC.
The Chamberlain policy of appeasement coming out of the White
House is about self-enrichment, affinity for dictators, not
Americans' economic growth or national security, and we should
be competing with the PRC across the globe, not shutting down
agencies. We should be cracking down on the China-Russia no-
limits partnership, not trying to join it.
I yield back.
Chairman Hill. The gentleman's time has expired.
The gentlewoman from Missouri, Mrs. Wagner, the Chair of
the Subcommittee on Capital Markets, is recognized for 5
minutes.
Mrs. Wagner. I thank you, Mr. Chairman, for holding this
vitally important hearing, and I want to thank our witnesses
certainly for being here today.
Back in my home State of Missouri, it is estimated that
three people lose their lives every single day from an
overdose. I have heard from countless constituents who tell me
about a neighbor, a friend, a family member who has lost their
life due to an accidental overdose of fentanyl. Transnational
criminal organizations, many of them based in China, make
millions of dollars off the illegal production and trafficking
of this deadly narcotic. The CCP knows this and is allowing it
to continue.
There are many different ways in which Federal policy needs
to be strengthened to combat this crisis, but to quote the
testimony of one of our previous witnesses, ``Financing serves
as the oxygen for criminal networks. We must coordinate our
government response to identify, isolate, and interdict the
financing, manufacturing, and trafficking apparatus of fentanyl
and its precursors from China through Mexico and into our
neighborhoods. We must cutoff the oxygen to these criminal
networks.''
Mr. Cassara, can you describe how Chinese entities exploit
both the Chinese and American financial systems to launder
illicit funds gained through fentanyl trafficking, being
mindful of my time?
Mr. Cassara. Thank you for the question. I think one of the
primary ways they undermine the integrity of our financial
system is they use a lot of methodologies and enablers that are
Chinese centric, and many of these are designed to bypass our
financial transparency reporting requirements. Meaning, they
use things like trade-based money laundering, underground
financial systems, value transfers, mobile phone apps. These
types of things that we are not set up to capture from our
primarily money-laundering countermeasures, financial
intelligence.
Mrs. Wagner. In what ways is the Chinese Government
complicit in this illicit financing?
Mr. Cassara. As you said yourself, China, CCP is its
command State. They are aware of what they are doing. They are
aware of criminal triads and criminal organizations committing
crime and laundering money. If they wanted to shut a lot of
this stuff down, they could. Nothing happens in China, or for
that matter, with their diaspora, without their permission.
Mrs. Wagner. How does the U.S. Government need to change or
alter its current oversight or enforcement to ensure Chinese
entities are not laundering funds in these illicit ways, as you
have outlined, through American companies?
Mr. Cassara. There is a number of things that I put in my
written statement as far as recommendations, but if you are
talking about underground financial systems, illegal or
unregistered money remitted services; for example, we need to
do a much better job of enforcing the fact that these companies
need to be registered with Financial Crimes Enforcement Network
(FinCEN) and, I think, licensed in 49 of the 50 States. We are
not ensuring that is done.
Mrs. Wagner. On his first day in office, President Trump
issued an executive order to designate drug cartels as foreign
terrorist organizations. Mr. Cassara, how will terrorist
designations affect the flow of funds between China and drug
cartels in Mexico?
Mr. Cassara. I think we have to wait a little bit to see
how this plays out, but I think it will give the Administration
and the executive branch, including law enforcement and intel,
and even our diplomatic corps, more tools to go after these
organizations.
Mrs. Wagner. Clearly, that is the intention. Does this
designation impact any potential U.S. intermediaries that the
drug cartels use to launder funds?
Mr. Cassara. I think it depends on the specifics, but I
think this is focused on those cartel organizations if they use
third parties or whatever. We will see what happens.
Mrs. Wagner. Are there stronger steps, sir, that Congress
can take to disrupt these financial networks?
Mr. Cassara. I would go back, again, to some of the
recommendations I put in my statement, but I think we need to
enhance and prioritize law enforcement. This is where they are
most vulnerable, but we are not making cases, and there is a
lot--there is a number of reasons for this. Some of it we are
just not aware of it. We do not have the tools. Most
importantly, law enforcement does not have the resources.
Mrs. Wagner. I thank you, and hopefully we are going to be
getting them, the resources, here soon to dig even deeper now
that we have designated them as terrorist organizations.
My time has expired, Mr. Chairman, and I yield back.
Chairman Hill. The gentlewoman yields back.
The gentleman from Georgia, Mr. Scott, is recognized for 5
minutes.
Mr. Scott. Ladies and gentlemen, China is taking advantage
of us. They are looking at the United States now as weaker than
ever. Reports now indicate an increase in efforts by Chinese
hackers to infiltrate U.S. Government networks and classified
systems with backing directly from the Chinese Government. Need
I look at fentanyl that is destroying the very fabric of our
Nation, our young people, in record numbers? It is almost like
China has declared war on the United States and, damnit, we
need to declare war back. I hope this hearing will go far and
loud. We are tired of China taking advantage of the United
States. Our young people are too precious. As you know, CFIUS
recently experienced a CCP-backed cyber breach meant to
undermine the committee's integrity. This is too significant a
threat to our national security and economic security--some of
you all may remember, I sat right here in this committee when
we let the damn balloon go over there after China had taken all
their data from our farmland, our food, and from our sensitive
areas, our military bases, and waited until they got over there
off of Myrtle Beach and the Atlantic Ocean, then we shoot it
down. They take these things as a sign of weakness.
Mr. Miller, let me get to my first question here. How
effective has CFIUS been at reviewing--listen to me carefully--
Chinese companies' attempts to invest in U.S. businesses,
particularly involving critical infrastructure, large amounts
of personal data, or sensitive technologies?
Mr. Miller. Thank you for the question, Congressman. I
think that the CFIUS investment review regime has been
effective particularly in recent years at making those types of
reviews and particularly after CFIUS was revised after the, via
the Foreign Investment Risk Review Modernization Act (FIRRMA).
Mr. Scott. Let me just interrupt----
Mr. Miller. Yep. Sure.
Mr. Scott [continuing]. you briefly on that. I have got to
get to this other question. I might have taken too long in the
first--Earlier this month, Congressman Frank Lucas and I sent a
letter to Treasury Secretary Scott Bessent signed by both
Democrats and Republicans on this very committee urging him to
take a stronger, more proactive approach to embattling future
cyber breaches.
I would like to insert the letter for the record, Mr.
Chairman.
Chairman Hill. Without objection.
[The information referred to can be found in the appendix.]
Mr. Scott. Now, our letter asks the Secretary to give a
firm commitment to CFIUS would continue to move on with longer
review processes and detailed investigations of Chinese
Government-linked investments. How can Treasury improve the
parameters in oversight necessary in its service providers and
refocus training to better identify potential Chinese cyber
threats, particularly those targeting CFIUS?
Mr. Miller. Thank you for that, as well. We need to take
all cyber threats very seriously, and that means starting with
getting full visibility of the networks, including the networks
at Treasury monitoring systems. As always, using a risk-based
approach is really important, and also, just using the tools
that we have, the basic risk management tools such as end-to-
end encryption, multifactor authentication, and logging. It
sounds like a broken record----
Chairman Hill. The gentleman's time has expired.
Mr. Miller [continuing]. because we say this all the time,
but we need to do this.
Mr. Scott. Mr. Chairman.
Chairman Hill. The gentleman's time has expired.
Mr. Scott. I just want to end with this; it is very
important that we understand China is targeting our food supply
system--and our national security----
Chairman Hill. The gentleman's time has expired, and his
closing remarks are so noted. Thank you.
The gentleman from Kentucky, Mr. Barr, the Chair of the
Subcommittee on Financial Institutions, is recognized for 5
minutes.
Mr. Barr. Thank you, Mr. Chairman.
Last Friday, Mr. Miller, President Donald Trump issued an
executive order titled ``America First Investment Policy.'' He
also issued a national security policy memorandum in which he
stated that we will adopt new rules to stop U.S. companies from
pouring investments into China, stop China from buying up
America, and allowing at the same time all of those investments
that serve American interests.
It seems to me this is exactly the right policy. This is
the America First policy. It is the policy that says that
investments that help advance our national and economic
security should go forward, green light, and investments that
undermine our national security should not go forward, red
light. A red light/green light system.
I appreciate that because it is common sense, and this
Congress has been focused on an outbound screening tool and
legislation over the past several years. I introduced the
Chinese Military and Surveillance Company Sanctions Act, which
was a sanctions-entity-based approach. We also introduced the
Comprehensive Outbound Investment National Security (COINS)
Act, at the end of the last Congress working with the Speaker's
Office. It was a bipartisan effort and a bicameral effort, and
we added an additional focus on specifically defined
technologies.
Now, what I have always said on this committee and on the
Select Committee on the Strategic Competition with the Chinese
Communist Party is that our advantage is that we are
capitalists, and we allocate capital effectively and
efficiently. Their disadvantage is that they are Communists,
and they misallocate capital. This is perhaps why Chairman Xi's
crackdown has actually backfired on the Chinese economy and why
U.S. venture capital deals have fallen in China by 87 percent,
and, by 2023, net foreign investment into China turned negative
for the first time on record. It is also true that U.S.
investments made in China still are valued at about $127
billion.
I want you to address specifically this first comment you
make in your written testimony, Mr. Miller, that overly broad
investment restrictions could actually decrease economic
security and that policymakers should be mindful of the
economic security value of outbound investments. Explain that a
little bit.
Mr. Miller. Thank you for the question, Congressman Barr.
Yes, if--I think that--in my experience anyway companies
absolutely want to and make their best efforts to comply with
these regimes, but if the scope is overly broad or it is not
clear and defined as to what exactly the companies are supposed
to be doing, it really does create some headwinds there in
terms of compliance. I think specifically with respect to the
outbound regime that you are talking about, it is----
Mr. Barr. I think one thing that you said that I agree with
is that some outbound investment could provide insights into
competitor activities.
Mr. Miller. Right.
Mr. Barr. Not all outbound investment is bad. I think
clarity is very, very important. That is why I talked about why
the President's approach, green light/red light, is the right
approach, and that is what we tried to do in our sanctions
bill. Sanctions do provide clarity. Companies know how to
comply with it and, if properly defined in terms of these
technologies, we can also provide private investors with
clarity. There are also advantages of multilateralism with
sanctions approach.
Here is the next question. In a post-Chevron world--and
this is for anyone--what is the benefit of having a statute
that guides this policy consistent with executive order as
opposed to just relying on the Biden executive order or the
Trump executive order? Any one of you.
Mr. Miller. I will take that. Yes, you are right, in a
post-Chevron world, under Loper Bright, the onus really is on
Congress to write these rules as clearly as possible so that
there really is not--it is not left to executive agency
discretion which might be overturned by the courts.
Mr. Barr. I think, here is the bottom line in my remaining
30 seconds. Is the President's approach in his national
security memorandum and executive order exactly right? It is
America First. It recognizes that some outbound investment
actually is in the interest of our country. Some foreign direct
investment is in the interest of the country, but not all of
it. We need to provide clarity, and we need to do it through a
statute consistent with the Treasury Department's guidance
here. That is what we are going to be working on, and we invite
the expertise of the panel to work with us on that, and we look
forward to getting this policy exactly right.
With that, I yield.
Chairman Hill. The gentleman's time has expired.
The gentleman from Massachusetts, Mr. Lynch, the Ranking
Member of the Subcommittee on Digital Assets, Financial
Technologies, and Artificial Intelligence, is recognized for 5
minutes.
Mr. Lynch. By the time you announce me, I will not have
time to speak. That is a pretty long title. Thank you, Mr.
Chairman, and I want to thank the Ranking Member. This is a
great hearing and one that is both timely and incredibly
important.
I want to thank the witnesses for your very thoughtful
testimony, not always in agreement, but always thoughtful.
China has developed extensive cyber capabilities
offensively over the past 10 years or so and now I think is
admittedly a world leader in vulnerability exploitation, either
directly or through proxies. The Chinese Government's targets
in the United States have included infrastructure, our
government agencies, companies, private organizations, and
individuals as well.
They use tools and methods that breach international law.
These malicious acts can be aimed at control or just simply
disruption and exposing vulnerabilities in our electrical grid
and critical infrastructure. It also involves economic
espionage and international property theft. Those are among the
most concerning intrusions.
Most recently, China had a state-backed Chinese malicious
cyber group. They hacked the U.S. Treasury Department, and they
gained access to hundreds of workstations and sensitive but
unclassified documents from the Committee on Foreign
Investments in the United States, CFIUS, and the Office of
Foreign Asset Control.
With that backdrop, we have right now Elon Musk, who has
got massive, massive investments in China. He has this giga
factory that produces two of his most popular cars there. He
has billions and billions of dollars in investment in China. He
has employees there. He is now inside Treasury and has had, at
least for a while, before the judge stopped him, access to U.S.
Treasury payment systems.
It really worries me that he has young kids in there who--I
have a letter here from five Treasury Secretaries that are
expressing concern that these individuals with no training and
no ethics requirements and no security requirements are all
inside Treasury. Meanwhile, they work for a guy that has
billions of dollars of investments in China. It just looks like
a bad, bad situation.
Dr. Doshi, as Elon Musk and DOGE continue to have access to
personal and payments data inside Treasury, along with
sensitive information about what we are doing with defense
contractors and other initiatives, what sanctions could they
potentially open up holes in our security system and make
Americans' financial information vulnerable to attacks from
China?
Dr. Doshi. Thank you, Congressman. China is the most
capable cyber actor the United States faces. I think that there
is a risk that efforts to kind of take data off government
systems and put them perhaps even on private systems so they
can be run through artificial intelligence will create
additional vulnerabilities that China will be very happy to
exploit.
Mr. Lynch. What are the strongest measures we can take in
terms of requiring the people who have access to that system to
maintain the integrity of the financial system itself?
Dr. Doshi. Thank you, Congressman. I think that there are a
number of technical steps that have to be taken on the end-to-
end encryption side, on securitization--security essentially
for that equipment, technology, the data. There is also a human
element as well, and I worry about mass firings leading to
insider threats particularly of people with clearances.
Mr. Lynch. Should those individuals, if they have access to
any of that, all go through a lengthy and robust security
clearance process?
Dr. Doshi. My personal view, based on my time working in
the National Security Council (NSC), is that more and more of
U.S. Government work in these sensitive areas should be moved
to classified systems. That does not mean it cannot be
democratically accountable, but the unclassified systems are
compromised whether at State Department, Treasury, or the U.S.
Trade Rep, which gives China insight into what we are doing and
an advantage in negotiation. We should move that into a more
secure system.
Mr. Lynch. All right. Mr. Chairman, that just about wraps
up my time. Thank you. I yield back.
Chairman Hill. The gentleman yields back.
The gentleman from Texas, Mr. Williams, Chairman of the
House Small Business Committee, is recognized for 5 minutes.
Mr. Williams of Texas. Thank you, Mr. Chairman, and thank
all of you for being here today. I appreciate it.
The lack of transparency into the Chinese economy is a
large concern of mine and one of the world's largest creditors.
This lack of insight presents extreme risk to the U.S.' economy
and our national security. This is why I introduced the China
Financial Threat Mitigation Act, which my colleague,
Representative Gottheimer, and I have joined together. This is
a bipartisan legislation that would require a study on the
exposure of the U.S. financial sector to risks from China.
Reliable data is crucial for the U.S. Government to accurately
assess our financial exposure to the Chinese, and through this,
we will be able to better protect the U.S.' financial interest
and our own national security.
Mr. Muhleisen, how can the United States best hold China
accountable for the lack of transparency in their financial
system?
Mr. Muhleisen. The IMF has certain tools, like, for
example, the financial sector assessment programs and the like,
that look at whether member countries live up to standards by
the Basel Committee, for example, among others. Of course, as a
multilateral organization, it has limits as far as it can go,
because it needs to look at these standards and can only assess
those that exist.
The IMF as such has no direct tools to increase
transparency, but it can publish their findings. It can rely on
peer pressure and shareholders in the IMF to then exert
pressure on China to improve its policies.
Mr. Williams of Texas. Thank you.
China has continuously exploited global supply chains to
advance their strategic ambitions using economic coercion or
slavery and predatory trade practices to dominate key
industries. This has created vulnerability to the United States
and puts American businesses and consumers at the mercy of the
Chinese Communist Party policies. In addition to their use of
global supply chains, the CCP's opaque lending practices and
state-subsidized competition have undercut American
manufacturers, making it increasingly difficult for them to
compete on a level playing field.
Mr. Miller, what specific policy should Congress pursue to
counteract China's stranglehold on critical goods and
manufacturing? Additionally, how can we create a stronger
incentive for American companies to diversify their supply
chains and reduce dependence on China?
Mr. Miller. Thanks very much for the question, Congressman.
It is absolutely critical that we focus on supply chain
resiliency and security. I think companies, certainly in the
technology sector, for some time have been working to increase
supply chain diversity. We have to be realistic that we have
complex global supply chains right now, and it will not be an
overnight process. Moving certain parts of manufacturing and
supply to friends and allies as well as the United States is
something that is already underway.
Mr. Williams of Texas. In the short time I have left,
throughout your career, Mr. Cassara, you have investigated
international money laundering networks and underground
financial systems that enable transnational crime. Today we see
Chinese financial networks playing a key role in laundering
fentanyl profits from Mexican cartels using trade-based money
laundering and underground banking to move illicit funds while
evading U.S. authorities.
Given China's history of shielding these operations from
scrutiny, what steps should the United States take to disrupt
these financial channels, and what is China's end game, do you
believe, in weaponizing fentanyl in the United States?
Mr. Cassara. Thank you for the question. Regarding
fentanyl, I believe it is a form of asymmetric warfare that the
Chinese are employing against the United States. Maybe some of
this goes back to the opium wars of a century or so ago. I
think it is, in effect retribution.
To answer your question about what can we do for
underground financial systems, we could talk for a great length
of time about this. I think one of the most important
initiatives that we came up with a number of years ago is trade
transparency units. Basically, having customs information
exchanged back and forth just like the Egmont Group of
financial intelligence units, where we exchange financial
intelligence, exchange customs-related information, imports and
exports to help look for anomalies in specific trade
transactions, over and under invoicing, for example.
This initiative has been stalled. In my opinion, one of the
reasons it has been stalled is because legacy customs have been
shortchanged through an emphasis on immigration enforcement
under Immigration and Customs Enforcement (ICE).
Mr. Williams of Texas. My time is up. Thank you for your
testimony.
Chairman Hill. The gentleman's time has expired.
The gentleman from Missouri, Mr. Cleaver, Ranking Member on
the Housing and Insurance Subcommittee, is recognized for 5
minutes.
Mr. Cleaver. Thank you, Mr. Chairman.
A couple of years ago, I was in Addis, in Ethiopia, Addis
Ababa, and as I moved around the city, I was walking by a
building, large, majestic building, and the Ethiopian friends
who were carrying me around said, ``Do you want to go in?'' and
I said, ``Sure.'' We went in. It was the African Union
building. As you walk into the building, there is a sign about
the gift of this building to Ethiopia by the Chinese.
When I went on down south to Tanzania, or Tanzania, where I
have about 50, 75 family members--actually, our Ranking Member
met some of my family members from Tanzania--all they could
talk about was the money China was spending in Tanzania. The
Ambassador appointed by Bill Clinton, Charles Stith, Dr.
Charles Stith, had really revved up everything he could in
Tanzania to attract the attention of the United States because
China was steadily investing in Tanzania.
Unfortunately, as China was investing, we were
decelerating. If you go all the way through the continent, you
will see that China has created quite a relationship with the
entire continent. Dr. Stith wrote a book called ``For Such A
Time As This,'' and I think that book would be contrary to what
we have just seen with USAID so we cannot take advantage of
anything now.
China has had some failures. They did establish 25 economic
zones on the continent and in 16 different countries, by the
way. When USAID shut down, let me find out from those of you if
we move on down, how many of you think that it was a mistake--
it is a mistake for us to cancel out all of the work that
people have been trying to do, like Dr. Stith, in Africa, and
all of a sudden we make a statement that we are first. We do
not--we are not that interested in helping anybody except
ourselves? How do you think that is coming across, and does it
impact the economy of the continent when obviously China is
trying to take over? Anybody? Did we make a mistake? Is there a
mistake with USAID?
Please.
Dr. Doshi. Yes, Congressman, I think it is a mistake to cut
USAID in this fashion. It needs reform, but this is not the
way.
Mr. Muhleisen. I think it will hurt unless it is replaced
by something else relatively quickly.
Mr. McMurray. I think we need to take all the available
tools to compete with China.
Mr. Miller. I agree. We need to compete with China
everywhere we can by using all the tools that we have.
Mr. Cleaver. We had a good chance if we would work. Most
people probably do not even know. One of the Members of
Congress during the 1990s, Mickey Leland, had become so
familiar with Africa, he and Donald Payne, Sr., that they were
invited to everything that went on in the continent. In fact,
Mickey Leland's plane went down just outside of Addis Ababa,
and there is a statute of him built in downtown Addis Ababa. We
were moving through Africa and making friends, and all of a
sudden, that had just been blown to pieces.
I know, I am not trying to get any of you in politics. I do
not like politics, but I do think that this is more than
political. I think it is a futuristic look of where we need to
go back.
Thank you, Mr. Chairman.
Mr. Williams of Texas [presiding]. The gentleman's time has
expired.
The chair now recognizes the gentleman from Ohio, Mr.
Davidson, Chairman of the Subcommittee on National Security,
for 5 minutes.
Mr. Davidson. I thank the chairman.
I really appreciate our witnesses.
Confronting China is certainly one of the central things
for American foreign policy and frankly for governments around
the world. They are confronting the same kinds of practices by
China. When they were admitted into the World Trade
Organization as a, quote, ``developing country,'' they promised
to become a market economy, and clearly, they are not a market
economy. In fact, they use the same kinds of practices
everywhere to block market access, to use a whole-of-government
approach, using their intelligence services and everything
else, to steal intellectual property, and then to subsidize and
dump to take over market shares strategically. Confronting
outbound investment is one of the most important things that
this committee, and frankly this Congress, is going to deal
with, and it comes in the context of a whole host of other
policies.
I want to go back to the Dodd-Frank Act. When I was in
manufacturing, prior to coming to Congress, I owned a group of
small manufacturing companies in Ohio. Early on, after one
acquisition, someone came to me with a form and said, ``You
need to sign this form saying that none of the steel that we
buy contains, quote, `conflict minerals.' ''
Now, at that time, we had under 50 employees, and they are
coming to me, and I am like, ``I am buying steel from U.S.
Steel, and you are asking me, a small manufacturing guy in
western Ohio, where the tin that coats the steel comes from?''
Might it come from this place in Central Africa? How am I
supposed to know that? Why are not you--if the government cares
to know that, why is not the government doing that?
This is the fallacy behind one of the approaches to our
Outbound Investment Act. This is the Cornyn approach in the
Senate. This has been one of the approaches presented through
the Foreign Affairs Committee. Thankfully, in this committee,
this Financial Services Committee, where we follow the money,
we know that really does not work. It just shifts the burden to
the private sector. The reality is the private sector does not
even have the resources to know the answer to some of these
things. We do not do that when it comes to sanctions. We use an
aggressive licensing approach that targets specific actors. It
does take a lot of work, and the sanctions regime itself is
stressed. It goes back to 1975.
I am going to butcher your name, but, Mr. Muhleisen, I
cannot find the note here, and I cannot see you without reading
glasses, so can you highlight the problem with this approach
where you put the burden on the companies.
Mr. Muhleisen. Thank you, Congressman. I am not really an
expert on regulation of American companies, but I do think that
light regulation in general and something that is in the power
of companies to live up to and fulfill is the right way to go.
Mr. Davidson. Thank you.
One of the other challenges that we confront as we deal
with outbound investment is our international institutions, and
we have since, the end of World War II, structured things like
the International Monetary Fund, the World Bank. We have
development--Inter-American Development Bank. We have the Asian
Development Bank. The idea that we are subsidizing China with
this makes little sense to me.
From 1981 to 2001, the World Bank lent China over $40
billion for 280 projects. Since 1986, almost 40 years now, the
Asian Development Bank has committed 1,218 public sector grants
totaling $44.3 billion. Right now, the current portfolio, as of
right now, 77 loans worth $12.55 billion. We have the Chinese
Currency Accountability Act, where the IMF wants to grow the
influence. I guess, Mr. Muhleisen, why would that make sense?
Mr. Muhleisen. Personally, I do not wish for China to gain
a bigger share in these institutions at the moment, in part for
the reasons you mentioned, also in part of the strategic
competition that the United States and other countries are
engaged with against China. The IMF and other institutions are,
I think, really important assets for the United States where a
lot of capital and human capital is invested in. It would be, I
think, not right to allow China to interfere with the work of
these institutions if they wanted, if they would get a bigger
voting share.
Mr. Davidson. Yes, thank you for that.
Mr. Miller, unfortunately, I missed the question to you,
but on the outbound investment if you could respond, we will
send a note following the hearing. My time sadly has expired,
and I yield back.
Mr. Williams of Texas. The gentleman's time has expired.
The chair now recognizes the gentleman from Illinois, Mr.
Foster, Ranking Member on the Subcommittee on Financial
Institutions and an old colleague of mine from the Science
Committee. You are recognized for 5 minutes, sir.
Mr. Foster. Thank you.
I would like to--I will focus on artificial intelligence
and anti-corruption efforts. Mr. Miller and Dr. Doshi probably,
are the right ones for this. Artificial intelligence is coming
at us, and we are not ready for it. It is probably the most
important area of competition between China and the United
States. The first country that gets what amounts to an
artificial general intelligence (AGI), this is an ability to
simply--an artificial intelligence agent that can outperform
humans in most things.
I think computer coding is arguably already here. Just in
the last few days, there was an announcement about a--from
Google about a co-scientist, a device that actually
outperformed a small scientific group who worked for 4 years at
a problem that it solved in 48 hours. We are almost there, and
whichever country gets that capability first will have
effectively an infinite army of highly skilled technical
workers that will make all of our efforts at workforce
education irrelevant. This is the battle we cannot lose.
Now, the free world is in a very fortunate position that
the production of the graphics processing unit (GPU) is the key
core elements of these, is almost entirely in the free world.
We rely on the Dutch systems, the German optics, the Tokyo
Electron, and a number of companies in the United States, and
final production of many of these chips in Korea and Taiwan. We
have, by luck maybe or maybe by not luck, we have all of the
chokepoints to control that technology and potentially keep it
out of Chinese hands.
However, we tried to do that with normal export controls
and found that people are simply smuggling those devices out.
You saw deepfake is widely believed--deepfake--sorry, DeepSeek
is widely believed to have trained their cutting-edge model
using systems smuggled out of the United States because our
export controls exist but are not enforceable. What are the
things that we can do that will actually get enforceable
controls on these, assuming that we get the entire free world
to buy into the need to keep these out of Chinese hands?
Dr. Doshi, you and I have been on a panel discussing this
recently, and so I will start with you.
Dr. Doshi. Thank you, Congressman, and I appreciate your
leadership on this issue. As you know I am partial to a
solution that is technical, that would make it difficult for
GPUs to be operated in jurisdictions where there is hardware
built into it preventing the operation unless, again, it is in
the correct jurisdiction. There are----
Mr. Foster. If they were smuggled into China, they would
simply stop working----
Dr. Doshi. Exactly.
Mr. Foster [continuing]. or smuggled outside of their
licensed area, they would simply stop working.
Dr. Doshi. In addition to enforcement mechanisms, which we
need to strengthen. In addition to better controls, which we
have not really tried. We should also look at these hardware-
based solutions to keep our chokepoints strong.
Mr. Foster. Yes. There was a very impressive hardware
demonstration near the Executive Office Building with one of
these systems that showed this can be done if we choose to do
it.
Mr. Miller, any comments?
Mr. Miller. Yes. Thank you for the question, Congressman.
Just to go back to your lead-up to the question talking about
the fact that we are working with allies in Taiwan and in
Germany and the Netherlands, et cetera. I think it underscores
the fact that for any export control to really be effective, it
should be, of course, targeted at the bad actors and the
national security risks that we are trying to control. It
really needs to be multilateral, and we need to get buy-in from
all of our partners and allies on a unified approach if we are
really going to be successful.
Mr. Foster. Yes. That is why things like voting along with
all the rogue states in the United Nations are not a good step
forward. The way this Administration is frankly destroying the
confidence in our allies is not going to make those necessary
negotiations work easier.
Let us say, I would like, Mr. Muhleisen, one of the best
areas that IMF has been involved in is anti-corruption. You
correctly point out in your testimony that the Chinese Belt and
Road loans should be treated very skeptically by the
international community because they are frequently involved--
created through corrupt payments and that result in white
elephants built by Chinese contractors and unpayable loans
behind them.
Traditionally, the United States has been at the forefront
of anti-corruption efforts. Can you just say quickly how the
United States benefits from leadership in anti-corruption
efforts as opposed to what we have seen with the Administration
announcing recently they are no longer going to enforce the
Foreign Corrupt Practices Act, because apparently the President
believes that it has blocked some deals that he wanted to do?
Mr. Muhleisen. I think----
Mr. Foster. You have got a few seconds here, so----
Mr. Muhleisen. I think it is important to pursue the avenue
that bad loans start from the corrupt practices, and China has
demonstrated that. While there is a need to respond and to
expand U.S. loans and projects, one has to very carefully weigh
the pros and cons of what has just been proposed.
Mr. Lucas [presiding]. The gentleman's time has expired.
The chair now recognizes the gentleman from Tennessee, Mr.
Rose, for 5 minutes.
Mr. Rose. Thank you, Chairman, and thanks to Chairman Hill
and Ranking Member Waters for holding this hearing and thank
you to our witnesses for taking time to be with us.
Last Congress, Ari Rubenstein testified that we should be
more concerned about how prepared American capital markets are
for a Chinese invasion of Taiwan. Dr. Doshi, I know that you
believe the Chinese market is highly volatile. As we look to
prepare our markets for geopolitical instability, would it not
be beneficial to have better market data regarding our
systematic and material risk exposure to China?
Dr. Doshi. Congressman, I think you are exactly right, we
need better information about our vulnerabilities across a
variety of sectors, in the financial sector, supply chains. In
addition, this is harder to do because our due diligence firms
in China where--are being shut down.
Mr. Rose. I think we are woefully underprepared in the
event of a Chinese invasion of Taiwan, and I know that my
colleagues plan to introduce widely supported legislation that
would provide us with key data on exposure risk. I believe
that, coupled with a heavy-handed tariff strategy, will
incentivize American industry to return home and protect our
markets.
Just to further comment, I am just always kind of struck by
the difficulty in getting visibility for the exposure to China.
I sit on the board of a nonprofit with investments across a
range of assets and I have been asking this question now for a
number of years and have yet to get a really clear dial in on
exactly what our exposure is. I think if there was a terrible
event vis-a-vis Taiwan, we would find out really quickly
exactly what that exposure looks like, but that would be too
late, of course.
Shifting gears now. In Tennessee, we are proud to be a
leader in nuclear energy innovation through the Oak Ridge
National Laboratory and the efforts at the Tennessee Valley
Authority; however, we are not innovating fast enough, in my
view. China is building dozens of nuclear reactors, you have
testified to that today, witnesses have. Looking to finance--
China is looking to finance even more abroad. We are learning
now that China is expanding its nuclear influence
internationally by funding projects in Pakistan and Argentina.
Mr. McMurray, how does China incentivize foreign nations to
accept their funding for these international nuclear projects?
Mr. McMurray. Thank you, Congressman. China is able to
offer very competitive financing packages, and they have done
that, for example, in Pakistan, to--some loans, 2 percent
interest, for example. That is very hard for private U.S.
companies to compete with. That said, there is a real
opportunity, then, to leverage other financial institutions
such as EXIM Bank and DFC.
Two really recent examples are in Romania where the
Department of Energy and the EXIM Bank worked together to,
essentially, finish a project in Romania where China was also
competing. The United States ultimately won that project,
issued a loan for some preconstruction work that directly
benefited U.S. jobs, then also signed a letter of interest for
a multi-billion dollar loan there as well.
We have seen examples where, when U.S. companies are on
more of level playing field, they are able to compete in other
countries.
Mr. Rose. Do you think that our technology and our focus on
maintaining American superiority in terms of just the
technology available, is that an issue, number one. Number two,
our own failure to move forward with projects here
domestically, how big of an impact does that have on our
ability to provide or to win projects overseas?
Mr. McMurray. Yes. The private companies developing new
technologies are one of the United States' greatest assets.
That gives us the ability to compete globally, because
countries want to work with the United States and build these
technologies. The challenge is, if we are not at the table by
either building them or developing them, they are going to turn
to other options. Recently, that has been, Russia and China are
well poised to take that if the United States does not make
sure we have the tools to be able to compete.
Mr. Rose. As we have been discussing, part of what has made
Oak Ridge National Lab in Tennessee so successful is how it
leverages public-private partnerships to resolve technical
hurdles and develop industry-leading technology.
Mr. McMurray, using Oak Ridge National Lab as an example,
how can the government improve American private corporations'
abilities to compete with China?
Mr. McMurray. Yes. The Department of Energy and the
national lab system are incredible resources for private
companies. The public-private partnerships to develop
technologies allow these early ideas to really get to market.
A great example recently out of Oak Ridge is the
development of Tri-structural ISOtropic (TRISO) fuel, which is
the type of fuel for a lot of new reactors. There is going to
be a fuel facility being built near Oak Ridge, Tennessee, and
this technology is going to be built here in the United States
as well. Taking those ideas from market or from the lab to the
domestic market and then to the global market really should be
the goal for a lot of these public-private partnerships.
Mr. Rose. Thank you. My time has expired. I yield back, Mr.
Chairman.
Mr. Lucas. The gentleman yields back.
The chair now recognizes the gentlelady from Ohio, Mrs.
Beatty, Ranking Member of the Subcommittee on National
Security, for 5 minutes.
Mrs. Beatty. Thank you, Mr. Chairman.
My first question here goes to you, Mr. Cassara. As a
member of this committee, I am proud to support legislation
that would protect Ohioans from dirty money and harmful effects
that it has on our communities. For example, the Corporate
Transparency Act passed by Congress with bipartisan support and
signed into law by President Trump will help us understand who
really owns anonymous shell companies and will give our law
enforcement more tools to keep our community safe.
For example, in my home State of Ohio, which has suffered
the brunt of the Nation's lethal opioid epidemic, the threat of
anonymous shell companies is very, very real. In just one
instance a Chinese synthetic opioid trafficker manufactured and
shipped deadly fentanyl analogs to 37 United States, using
shell companies formed in Massachusetts to run their operation.
This scheme led, as you can imagine, to multiple fatal
overdoses in Ohio.
Now, I agree that we must work with small businesses to
help them comply with reporting requirements but cannot abandon
these landmark anti-money laundering policies all together,
because the human cost is just unacceptable.
Here is my question. Mr. Cassara, you have worked to
counter illicit finance for decades. Can you please address why
understanding the true owners behind U.S. anonymous companies
would be important for countering China's role in the fentanyl
trade?
Mr. Cassara. Thank you for the question. I have looked at
anti-money laundering, counterterrorism finance for over 30
years. In my opinion, lack of beneficial ownership information
surrounding anonymous shell companies is kind of like the last
hurdle. I remember back in the day when we started passing a
series of laws, rules, and regulations but kind of, in my
estimation, this is the last major hurdle that we have to
overcome.
The current legislation, in my opinion again, is not
perfect, but it is something. It is something that we can work
with going forward. The reason it is so important is, again,
following the money and the value trails and finding out who is
actually behind all this. Myself, my colleagues, constantly we
get to a certain stage in an investigation, and they bump into
one of these anonymous companies and we cannot go any further.
As I explained earlier in testimony, they are very active in
the layering stage of money laundering, and they are very
active in the integration stage of money laundering. We need
something, some tools to avail ourselves.
The other thing is--very, very quickly--we are being
criticized around the world for lack of beneficial ownership
information. We failed the most recent mutual evaluation from
Financial Action Task Force without having this type of
information available. Personally, when I have been overseas
mentoring, teaching our colleagues overseas, talking about the
importance of transparency, they come back to me and say, well,
Mr. John, we are doing an investigation into your company--in
your country and it goes to these anonymous shell companies.
Can you help us?
Mrs. Beatty. Sure.
Mr. Cassara. There is nothing I can do.
Mrs. Beatty. Thank you. I have time for maybe one more
question.
Let me go to you, Mr. Muhleisen. In your testimony, you
outlined that China has become the largest sovereign lender to
emerging and developing countries over the past two decades.
Now, we all know that Project 2025's agenda, which
President Trump denies ownership of despite executing its
provision by provision by provision by provision, proposed that
the United States withdraw from the IMF and the World Bank. Can
you discuss how the United States withdrawing from these IFIs
would affect our ability to preserve dominance of the U.S.
dollar and compete with China on the global stage?
Mr. Muhleisen. First of all, I mentioned earlier that the
institutions really leverage U.S. contributions by a large
amount. Second, if the United States were to exit from the
institutions, they would still exist. The headquarters would
move to the largest second shareholder, but probably they would
not be able to access easily the dollar anymore. Therefore,
they would have to loan in other currencies. That would be, for
example, one way that other currencies would gain in stature.
Of course, the effect of the fall in U.S. leadership would
contribute also to that.
Mrs. Beatty. It would affect it. Can you give me a yes or
no on that?
Mr. Muhleisen. Yes.
Mrs. Beatty. Okay, thank you. My time is up.
Mr. Lucas. The gentlelady's time has expired.
The chair now recognizes the gentleman from South Carolina,
Mr. Timmons, for 5 minutes.
Mr. Timmons. Thank you, Mr. Chairman, and I want to thank
the witnesses for being here today.
China poses the most significant risk to both global
financial markets and our country's economic future. With its
growing influence over the global economy, technology, and key
industries, China has the potential to disrupt financial
systems worldwide. Institutions like the IMF and the World Bank
help maintain stability, but China's increasing role within
these organizations raises concerns about the direction of the
global economy.
That said, we should not be anti-China. Instead, we need to
hold China accountable for issues like currency manipulation,
unfair trade practices, and the rising debt they impose on
other countries. This is important. The United States cannot do
all of this alone. We must work with our allies to protect the
global economy, without creating unnecessary conflict, by
pushing for greater transparency and fairness in international
financial institutions.
Mr. Miller, could you please explain the role China's Belt
and Road Initiative has played in exporting emerging Chinese
technologies to developing nations worldwide, and how
significant is the cyber security risk these technologies pose
within the economic frameworks of these countries?
Mr. Murray. Thank you for the question. Yes, China Belt and
Road Initiative is--has definitely increased the availability
of Chinese technologies around the world. When it comes to
cybersecurity, I think, the first principles are always that we
need to mitigate risks and be as targeted as possible in doing
so.
As we saw during the 5G debates here, when it was
determined that there were risks involved in certain of those
Chinese technologies, steps were taken to both mitigate the
cyber risks--I am happy to get into more details on that--but
also to exclude equipment when there has been a judgment made
that it is causing those types of issues.
Mr. Timmons. Thank you for that. We are talking about
Huawei, a global player in 5G technology, and the risks posed
by the Chinese Communist Party. In 2019, the U.S. Government
lead the effort, alongside allies like the United Kingdom
(U.K.) and Australia, to restrict Huawei's access to global
supply chains, citing national security concerns over the
potential for espionage through 5G networks. Despite this, many
developing countries continue to adopt Huawei's technology,
drawn in by the lower cost, because the Chinese Government
subsidizes the entire thing and the company's alleged
commitment to investing in local infrastructure when they just
want a back door into their system.
Huawei's growing presence in the global infrastructure,
particularly in developing nations, has caught the attention of
the IMF. The IMF highlights the complex relationship between
economic development and geopolitical risks. For many of these
countries, Huawei's affordable and advanced 5G technology is
vital for building telecommunications networks, which are
crucial for economic growth and modernization. At the same
time, the United States has urged nations to reconsider their
reliance on Huawei, citing concerns over espionage and Chinese
influence on communication systems.
This has created a challenge for the IMF because they have
to balance the need for financing and long-term stability with
the political and security risk that could impede development.
In 2020, I introduced the Promoting Secure 5G Act to
counter China's efforts to expand its telecom influence in
countries receiving aid from international financial
institutions, particularly the IMF and the Interagency Security
Committee (ISC). I was pleased to see that bill was passed into
law as a part of the 2022 National Defense Authorization Act
(NDAA).
Mr. Muhleisen, how has the IMF approached the challenge of
balancing its mission to support global development with
concerns raised by Western nations about potential security
risks linked to Huawei and other innovative Chinese companies
that have close ties to the CCP?
Mr. Muhleisen. I think the IMF as a multilateral
institution cannot really assess the technological risks. The
money that is being provided is for balance of payment support,
and, of course, it is up to the countries how to spend it and
use it. The IMF as a macroeconomic organization cannot go into
the details of how it is used.
Mr. Timmons. Thank you for that.
I think the Huawei example is a perfect way to chart a path
forward to hold China accountable. Obviously, Huawei was
engaging in untoward behavior in exposing the cybersecurity
risks associated with them, essentially giving away 5G to
developing countries and getting our allies to get onboard to
essentially force Huawei to become an arms-linked transaction
in the future. I think it is a perfect example of how we can
ban together with our allies to hold China accountable.
Thank you, Mr. Chairman. I yield back.
Mr. Lucas. The gentleman yields back.
The chair now recognizes the gentleman from Illinois, Mr.
Casten, for 5 minutes.
Mr. Casten. Thank you, Mr. Lucas, and thank you all for
coming here today. I really appreciate the chair bringing up
this important hearing.
I want to focus--there is a lot about sort of theoretical
future risks. I want to talk about real-time ongoing risks and
things that 6 months ago were very bipartisan. I hope they are
still bipartisan.
We had, as part of the continuing resolution, an agreement
to block outbound investment in China. I think Mr. Davidson;
Mr. Barr have alluded to pieces of that. I suspect from their
comments they may not have agreed with all of it, but it was a
very bipartisan agreement that had been developed.
That package was removed under pressure from Elon Musk
right at the end of the last term, and so now we do not have an
outbound investment screen that we would have had but for that
pressure.
Are any of you familiar enough with the terms of that
proposal for me to just ask you a couple of follow up
questions?
You are all--well, let me just share with you the concern
and what is going on there. That provision would have
required--restricted or required notification of U.S.
investments in Chinese companies that were involved in
semiconductors, microelectronics, quantum information
technologies, and AI.
If that is the only thing you know, I see--Dr. Doshi, I see
you nodding your head, so I am going to pick on you here.
Let us say that you owned a U.S. automobile-based company
that got its start in an infusion from capital from a
Department of Energy loan from the Loan Program Office. You
wanted to build factories in China to bring self-driving cars
from China. Does that sound like something that might be
restricted or retained under that program?
Dr. Doshi. I think it is possible under that program that
could be restricted.
Mr. Casten. Okay, and you would also like to build an AI
data center in China to train the algorithm that is needed for
your autonomous vehicles. That sure sounds like something that
would also probably be restricted given the data collection.
Dr. Doshi. Yes, Congressman, I think a sectoral approach
does make sense.
Mr. Casten. Okay. That, of course, is Elon Musk I am
talking about. It makes perfect sense if he is only looking out
for his self-interest that he might have pressured Speaker
Johnson or others to pull that from the floor. I am
speculating, but why else would he. Right?
Now, we also 6 months ago had a very bipartisan agreement
to force the sale of TikTok from a CCP-controlled company. We
had lots of hearings, lots of scary information about the way
that the CCP was taking data, the way they were weaponizing
that data in places like Taiwan and could potentially weaponize
it in the United States. All of sudden, Trump comes into office
and that deal is indefinitely postponed, not legally, because
the law is very clear the sale should have happened. Again, one
questions the motives.
We have had Elon Musk who has said--this is a direct quote
from him. He said that ``Taiwan is an integral part of China.''
From a diplomatic perspective, that sounds an awful lot like
Donald Trump saying Zelenskyy is a dictator.
Dr. Doshi, any comments on what that might do to Chinese
aggression in the region if they hear the United States--the
leader of the United States suggesting that Taiwan is integral
and Russia can take land by force?
Dr. Doshi. Congressman, I think that the PRC looks very
carefully at our statements and actions on Taiwan and in
Ukraine. They think that if we, for example, abandon Ukraine in
a fit of dysfunction, then that means that we are not going to
come to Taiwan's defense. It will embolden them, as will
statements that suggest that Taiwan should pay us for defense.
Mr. Casten. I share the concern.
Last thing that happened. Trump gets into office, issues a
meme coin. The meme coin, as all meme coins do, surges in value
and then collapses because it is a piece of garbage. Along the
way, there are $120 million worth of trades made by Chinese
investors. The Trump family and entities controlled by the
Trump family made over $100 million in brokerage fees. Even
though they did not get the value of the coin, because there is
no value of the coin, they have made $100 million in deal fees.
The World Liberty Financial, Trump's entity, which was
about to hit a liquidity crisis, all of a sudden got a $30
million infusion of capital from Justin Sun, whose Real-time
Operating System Nucleus (TRON) blockchain is used by drug
traffickers and terrorist groups, that all of a sudden gave
Donald Trump access to the cash-flows from that company under
their terms of agreement.
My question for you all--and I say this is an immediate
concern--is there a national security concern if entities
affiliated with the Chinese Communist Party have direct
economic involvement with the President of the United States
and Elon Musk?
If you are hesitating on that question, let me put it
another way. Should we care about national security only when
it is bipartisan or should we care even more when the call is
coming from inside the damn building?
I yield back.
Mr. Lucas. The gentleman yields back.
The chair recognizes the gentleman from Pennsylvania, Mr.
Meuser, Chairman of the Oversight and Investigation
Subcommittee.
Mr. Meuser. Thank you, Mr. Chairman, and thank you to our
witnesses.
China is outpacing us, leveraging trade practices, currency
manipulation, and aggressive state-backed investment to
dominate critical industries. The Biden Administration did
absolutely nothing to change that. Under President Trump, we
are seeing a different approach, one that puts America first,
by attracting over a trillion dollars in foreign and domestic
investment from the likes of Saudi Arabia, Taiwan, Oracle,
Apple, Nippon Steel. Securing critical industries and
leveraging tariffs creates a more competitive playing field.
Mr. McMurray, AI data centers demand significant power, as
we all know, including nuclear to power the investments
President Trump recently secured. I do have a nuclear plant in
my district working to power an AI data center. How critical
would you put it that strong energy infrastructure in
attracting AI investment, in keeping the United States ahead?
How important is----
Mr. McMurray. Thank you, Congressman, for your question.
Access to electricity and power is going to be incredibly
important for technologies like AI. Domestically we have to
make it easier to build the different generation sources to
provide that power, nuclear being one of the many technologies
to do that. Looking at the broader permitting system and making
it easier to build new generation, to build new transmission
lines all needs to happen so the United States can continue to
lead on AI.
Mr. Meuser. Nuclear will play a big role in this?
Mr. McMurray. Hope so.
Mr. Meuser. Okay, great.
Mr. Muhleisen, my bill recently passed the House, the China
Exchange Rate Transparency Act, directing the U.S.
representative of the IMF to hold China accountable for
currency manipulation. With China's unreliable economic data,
opaque exchange rate practices, first off, do you agree with
that, and how can the IMF be effective in stopping such
currency manipulation by China?
Mr. Muhleisen. Yes, IMF assesses the exchange rate policies
of its members annually in the external sector report. It has
not found evidence of strong misalignment. There are issues
with some of the data that go into that assessment. There is a
very interesting debate about the discrepancy between China's
current account and trade account. That is an ongoing
discussion, but truly in terms of macroeconomic variables,
imbalances have come down and there is no evidence of currency
manipulation, which I think has also been found----
Mr. Meuser. Excuse me. That is like saying there is no
gambling at Rick's. That is just not correct, sir.
Mr. Miller, I am going to move on to you. CFIUS is focused
more on scrutinizing allies and stopping China from bypassing
investment restrictions. President Trump's National Security
Memorandum correcting this by expediting allied investments
over 1 billion, like tightening controls on Chinese
investments, is critical, sectors like AI and healthcare. Does
this--do you think this addresses flaws in CFIUS?
Mr. Murray. Congressman, thank you for the question. I
absolutely agree that we should be incentivizing investments
with U.S. allies. The National Security Presidential Memorandum
(NSPM), that you mentioned, I think it is commendable in that
it seems to address a risk-based approach. Allied investments
would seem to present a very low risk, so why would we not want
to fast-track those types of investments. I think--so I do
think that there are improvements there for the overall CFIUS
process.
Mr. Meuser. Okay. Mr. Muhleisen, I know I cut you off fast.
I will send you the facts and evidence that I have, which show
that it does happen in a very slick manner, but it is a regular
activity that takes place.
Mr. Miller, President Trump's approach to outbound
investment focus specifically on ensuring U.S. dollars do not
fund the CCP's military buildup. How does this targeted
approach better protect national security and economic interest
compared to a broad one-size-fits-all investment ban?
Mr. Murray. You are absolutely right that one-size-fits-all
approach is not the right approach to outbound investment, and
I would suggest not the right approach to really any economic
security issues. We really need to target these policies to
clearly identifiable risks so that we do not accidentally
undermine the U.S. investment and competitiveness that we know
is so key.
I do think that the implementation details will matter as
we see more details regarding the NSPM but--and also
enforcement resources, right. If we do not have the resources
to enforce these policies, then it also can be very difficult.
Mr. Meuser. All right. I am out of time. Mr. Chairman, I
yield back.
Mr. Lucas. The gentleman's time expired.
The chair now recognizes the gentlewoman from Michigan, Ms.
Tlaib, for 5 minutes.
Ms. Tlaib. Thank you, Mr. Chair.
I just came from my office in meeting some of my
constituents, and I can tell you overwhelmingly right now, this
week, I am not getting calls about this particular issue. I
wish we were using the power to convene and discuss the issues
that matter to many of our families in our district more
directly. Right now, they are very worried about the budget
proposal. They are very worried about families being impacted
by the illegal firings. It is just important to say for them
the biggest threat right now is, again, unchecked balances. You
have court decisions after court decisions saying that there
are unconstitutional moves in regard to this Administration. I
really stress to my colleagues, anything we can do to be more
transparent with our residents about what is going on
specifically right now with our Federal Government.
Instead of--right now sometimes I feel like we are
scapegoating foreigners, and we continually target people that
are sometimes even our most vulnerable among us. Again, I think
the real threat right now in our country is what is going on
with this Administration and the lack of accountability on the
part of Congress to hold them in check.
I do want to ask Mr.--is it Muhleisen? Am I saying it
right? Thank you. One of the things that I think that is
critically important about United States and China and how we
can tackle global challenges, from the climate crisis to public
health crises, that we continue to see unequal growth, require
multilateral collaboration and so forth. We have got to create
some sort of opportunities to have some sort of dialog to,
again, address some of these concerns.
For instance, take the global overcapacity. Many United
States critics demand that China end its industrial policies to
reduce excess production. Instead of making this a zero-sum
problem where one country must produce less, we could work
together so that all countries--they all can consume more. That
means focusing on development, higher wages, and more global
public goods.
How can you see the United States working more closely with
China and other countries to reduce global overcapacity by
expanding global consumer demand?
Mr. Muhleisen. Expanding global consumer demand in the
current situation could be potentially inflationary. Having
said that, of course there is a need to ensure that China does
not unfairly subsidize its manufacturing exports. I think the
multilateral approach would, of course, be through the World
Trade Organization, but I think in the forthcoming trade
negotiations between the United States and China this should be
a key focus.
Given the current situation, multilateral institutions can
only be of limited help in contributing to a bilateral trade
dispute. Although, I personally, of course, very much support
the objectives of getting China to play fair and by the rules.
Ms. Tlaib. Dr. Doshi, in the long game, you state that
countries could engage in co investment with China on Belt and
Road Initiative projects in exchange for improved standards. Do
you see an opportunity for co investment by United States to
improve standards, including labor standards?
Dr. Doshi. Thank you very much, Congresswoman. I think it
is possible. When I wrote that 4 or 5 years ago, it seemed like
it was more plausible than it is today, given the competitive
dynamics between the United States and China. I do think that
if there were some projects where the United States came in and
said, we will come in, but it has to be done in X, Y, and Z
way, with perhaps certain U.S. companies, with certain U.S.
labor standards, the Chinese would be interested, because for
them it would help legitimize some of the projects.
That being said, I think this is a very hard thing to do
because they are not necessarily as inclined to work with us in
some of these places because they are using their
infrastructure loans to get ports and other things for their
own strategic benefit.
Ms. Tlaib. Yes, I have seen that. Let us talk a little bit,
Dr. Doshi, about nuclear deescalation. Of course, there is--do
you see any openings for us in regard to arms control talks
with China?
Dr. Doshi. When I worked for President Biden and we were
thinking about stuff like this, we were unable to really get
the Chinese to engage. When they did engage, they did it for
one simple reason, they wanted to whitewash their mass of
nuclear buildup, and they could look like they were being
responsible.
That being said, there is a lot we have to do, and I was
grateful to work on the ability for the United States to
basically come with China and say, nuclear weapons should not
be connected to artificial intelligence. There are things we
can do like that we should keep working on, and I think the
Trump Administration will build on that foundation.
Ms. Tlaib. Yes. I will just lead with folks. As we talk
about these issues and they are real issues, I just hope we do
not racialize it. One of the things, just as a Muslim American
in the United States, I know, for instance, when many countries
are doing, bad things or--it is not reflective on a whole
people. I say that because there are so many folks, I think,
directly impacted sometimes in how we approach accountability
with China.
Thank you.
Mr. Lucas. The gentlelady yields back.
The chair now recognizes the gentleman from New York, Mr.
Garbarino, Vice Chairman of the Subcommittee on Capital
Markets, for 5 minutes.
Mr. Garbarino. Thank you, Mr. Chairman.
For years we have heard warnings to the intelligence
community on the threat of state-sponsored cyber actors
conducting malicious activity on our Nation's critical
infrastructure. These warnings have now become reality.
Cybersecurity and Infrastructure Security Agency (CISA),
National Security Agency (NSA), and the Federal Bureau of
Investigation (FBI), and other governmental agencies confirmed
the People's Republic of China have successfully infiltrated
the networks of U.S. critical infrastructure. PRC-sponsored
Volt Typhoon hackers are prepositioning themselves on IT
networks to enable lateral movement to OT (operational
technology) assets that is to disrupt functions within our
water, energy, communication sectors. Then you have Flax
Typhoon hackers who take directions from the Ministry of State
Security and have unleashed a large-scale botnet targeting
American Taiwanese computer networks.
As a result of these discoveries, Treasury issued a series
of sanctions aimed at combating increasingly aggressive cyber
activity by PRC-sponsored actors. We must do everything in our
power to hold nation-states like the PRC accountable. Recent
events prove that cyber risk is an evolving and persistent
problem that is not isolated to one sector nor one threat
actor.
Mr. Miller, what should the United States do to best
mitigate the impact of PRC cyber incursions now that we have
acknowledged so publicly that they are currently in our
networks?
Mr. Murray. Thank you for the question, Congressman
Garbarino.
Yes. As you know well and as you mentioned, state-sponsored
cyber attacks from China and elsewhere have been a problem for
quite a while. In terms of mitigating these risks I would say
we really do need to go back to some cyber-first principles,
right. There are--once they have breached the networks, which
they obviously have in this case, organizations need to,
frankly, follow the advice of CISA and others and do things
like using end-to-end encryption. It is something that has been
flagged a number of different times. Multifactor authentication
logging so that you can really figure it out. Then maybe even
more fundamentally it is so important to get visibility into
your network and your assets to really understand the scope of
the breach.
Those are some of the very basic cyber things that we all
need to be doing and doubling down on.
Mr. Garbarino. Yes, absolutely. Cyber hygiene, I have
always pushed, is something that everybody needs to do. Better
cyber hygiene. FBI disrupted Flax Typhoon's grasp on these
compromised devices. They were being run by a company called
Integrity Technology Group, which was sanctioned by the
Treasury office. This is, I think, now the second major Chinese
hacking group that has been disrupted and sanctioned.
I am wondering, do you think sanctions, more sanctions
could deter China from future attacks? Do you think that is
worth it, or is there something that we can do to deterring
Chinese actors?
Mr. Murray. I think particularly when we have been able to
verify or, more specifically, when national security and law
enforcement agencies are able to verify the attribution of an
attack, absolutely, sanctions targeted at those bad actors are
a way to not only hold them accountable but to deter other
actors. I do not think we should look at sanctions as a silver
bullet solution here. Something that we all know is that this
is a continuous process when we are dealing with cybersecurity.
I do not think we are ever going to eliminate all risks.
We are always going to have to be manage these risks, and
there probably are always going to be new actors too, but the
more we can do to hold them accountable the better.
Mr. Garbarino. Absolutely. I appreciate that answer. Thank
you very much. I wish there was a silver bullet.
Nuclear energy is one of our largest sources of clean power
and advanced nuclear energy shows a lot of promise. The
International Atomic Energy Agency says that nearly 30
countries are looking to build nuclear power. However, over the
last several years, the export markets for this energy have
been dominated by Russia and China. We must do more to make
sure that we have a robust supply chain to build new nuclear
reactors domestically so that we can become leaders in the
international marketplace.
Mr. McMurray, how does innovation at home translate to our
ability to export these technologies internationally?
Mr. McMurray. Thank you, Congressman. Ultimately, we need
to make it easier for private U.S. companies to compete
globally. I think especially for countries that are interested
in building nuclear power for the first time. The United States
can offer a lot of other things, whether it is the Department
of Energy and the national labs and the technical expertise
there, the regulatory expertise from the Nuclear Regulatory
Commission, and just the operations expertise that we have from
our existing fleet.
When we look to compete, we have to think broader than just
competing financially, although EXIM Bank and DFC can help play
a role in that, but really try to focus on the broader suite of
offerings and technologies that we have.
Mr. Garbarino. I appreciate that. I am out of time. Thank
you very much for your interest.
Thank you, Mr. Chairman. I yield back.
Mr. Lucas. The gentleman's time has expired.
The chair now recognizes the gentleman from California, Mr.
Liccardo, for 5 minutes.
Mr. Liccardo. Thank you very much, Mr. Chair.
Mr. Miller, I very much appreciate your testimony. As
someone who lives in Silicon Valley and represents Silicon
Valley, particularly to your emphasis on ensuring U.S.
competitiveness through better tax policy, financial policy,
and particularly the deductibility of research and development
expenditures, which I know is of great interest to many
entrepreneurs and small companies in my district. As I recall,
those expenditures--I am sorry--the expensing of the
deductibility of those expenditures was phased out in 2022. Is
that right?
Mr. Murray. I am not 100 percent sure on the year, but I
believe that did happen, yes.
Mr. Liccardo. It happened as a result of the passage of the
Trump tax law in 2017.
Mr. Murray. I believe so.
Mr. Liccardo. In fact, we are now faced with proposals to
extend those tax cuts for the next decade or so at a cost of
$4.6 trillion or so. In fact, the expensing deductibility of
research and development expenditures, that was largely
sacrificed as a way to pay for those very expensive tax cuts in
2017, was it not?
Mr. Murray. I am not certain that is the exact exchange
there, but both those things did happen, yes.
Mr. Liccardo. They happened to happen in the same tax law;
that is, we gave very large tax cuts in other areas and we got
rid of this critical provision that has been part of the U.S.
Tax Code for more than half a century to provide entrepreneurs
and small companies the ability to expense in the current year
research and development expenditures.
Mr. Murray. We released a paper on economic security today,
and one of our recommendations is that we should absolutely
reinstate that ability to expense in the year that the--, to
not amortize over 15 years, yes.
Mr. Liccardo. I very much share your perspective on that,
so I appreciate your point.
As we think about competitiveness with China, certainly
those kinds of tax provisions are very important. How important
is it that we would exempt the first $13 million of someone's
estate from an estate tax to our competitiveness with China?
Mr. Murray. I am not a tax expert, I will be honest with
you, but so--I am happy to take some of these tax questions
back and get you an answer for sure.
Mr. Liccardo. Okay. Thank you, sir.
I very much appreciate your advocacy, and I hope that all
of us will come to the same conclusion that we need sensible
tax policy that makes us more competitive and not tax giveaways
that simply amount to handouts for very, very wealthy
individuals.
Dr. Doshi, I appreciate that you have certainly been
studying and working in this space for many, many years. You
undoubtedly remember a situation more than a decade and a half
ago, I think, with Huawei and several other Chinese companies
that were essentially caught in trade secret theft. As we think
about our intellectual property (IP), many of those companies
are still operating in the United States, are they not?
Dr. Doshi. They are sir.
Mr. Liccardo. They would be subject to U.S. laws and to
Federal investigation.
Dr. Doshi. They should be Congressman.
Mr. Liccardo. If we have a challenge being able to find FBI
agents or assistant U.S. attorneys to be able to investigate
and prosecute those cases, that will not help in our efforts to
crack down on trade secret theft and the IP theft.
Dr. Doshi. Congressman, yes. The FBI has indicated it needs
more resources for the China challenge across Administrations.
Mr. Liccardo. The current Administration's position so far
has been to essentially fire thousands of FBI agents and
Federal prosecutors. Is that right?
Dr. Doshi. Yes, Congressman, and to reprioritize the FBI
for other missions.
Mr. Liccardo. Is that going to make us better or worse at
halting trade secret theft in this country?
Dr. Doshi. I think it is important to invest in
enforcement. The Chinese Communist Party is one of the most
formidable challengers for IP theft that the country has ever
faced, and so more enforcement on this issue is always better.
Mr. Liccardo. Thank you. Thank you very much, Mr. Chairman.
Mr. Lucas. The gentleman yields back.
The chair now recognizes the gentlewoman from California,
Mrs. Kim, for 5 minutes.
Mrs. Kim. Thank you, chairman and I want to thank our
witnesses for joining us today to talk about some of the ways
that we can compete against China.
Dr. Doshi, good to see you again.
Mr. Miller, I know I read your testimony, and I agree with
you about not taking our current U.S. technology edge over
China and other competitors for granted. We all saw how China
shocked the world in global markets when it unveiled DeepSeek
as a competitor to many of our domestic AI companies. Can you
elaborate on what policies should the United States implement
and/or expand on to better compete against China, and why do
you believe DeepSeek has found success competing against our
more established AI companies?
Mr. Miller. Thank you for the question, Congresswoman. In
terms of the policies that we should be pursuing, as I
mentioned to your colleague, just a moment ago, ITI released a
paper just today with 10 different recommendations to promote
economic security and innovation, including on a number of
different areas. Many of those relate specifically to
competition in emerging technologies and promoting competition
in emerging technologies such as AI.
In the economic security context what we really want to do
is calibrate our policies so that we are--whether it is
investment restrictions or export controls targeting national
security risks but not doing anything to undermine the U.S.
ability to compete. We have the leading innovation companies in
the world and that is a source of strength not only for the
economy----
Mrs. Kim. Mr. Miller, we are introducing the legislation
that I co-led with Congresswoman Beatty on the other side of
the aisle, this is a bipartisan bill, the Strengthening Exports
Against China Act. This is to give the EXIM Bank the tools to
better support exports of American emerging technologies like
AI, 5G, and advanced semiconductors. Do you believe this type
of legislation will be helpful to implement or complement our
competition against China?
Mr. Miller. Yes. Obviously, exports are a key part of that
U.S. economic strength in technology. We want to really promote
all tools that we can to really help facilitate companies of
all sizes in making those exports abroad.
Mrs. Kim. Thank you. Since 2015, the Chinese Communist
Party has been the largest creditor to low-income countries.
According to the World Bank's figures, the total external
government debt of low and middle-income countries increased
from 1.7 trillion in 2011 to 3.5 trillion in 2021. A large part
of that is a huge increase that can be directly attributed to
the CCP's irresponsible and opaque lending programs like the
BRI, Belt and Road Initiative.
I want to ask this question to Mr. Muhleisen? Right there,
Okay. In your testimony, you mentioned that since China joined
the G20 common framework for debt restructuring in 2020, the
speed of debt workouts has picked up somewhat. Why have our
debt workouts picked up at full speed? Can you start that?
Mr. Muhleisen. It would be ideal if China would be part of
the Paris Club that has long experience in procedures for how
to restructure that. The common framework is kind of, I would
say, a follow up attempt to bring China into some process, but
it is not as elaborate as the Paris Club.
China is finding its way how to contribute to it. It is
very reluctant for deep discounts, which makes it difficult to
get countries to a sustainable debt level. There is a lot of
progress still needed. That improvement is noteworthy, it has
been for a few countries, but it needs to be sustained, and it
needs to be accompanied by deeper willingness to do the
restructuring.
Mrs. Kim. Can you tell us what are some of the hurdles, the
biggest hurdles to ensure that the CCP agrees to collecting
debt restructuring, and if you can tell us how debtor countries
are affected when the CCP delays debt restructuring due to the
bilateral actions?
Mr. Muhleisen. My understanding is that Chinese officials
that work for various State banks and other entities do not
want to take a loss, a nominal loss on their loans. They are
totally reluctant to do that, so they are trying to do all
sorts of other things that are not as beneficial for the debtor
countries to restructure their debt. It is really an internal
Chinese issue that needs to be overcome.
Mrs. Kim. Thank you. My time is up. I yield back.
Mr. Lucas. The gentlelady's time is expired.
The chair now recognizes the gentlewoman from
Massachusetts, Ms. Pressley, for 5 minutes.
Ms. Pressley. Thank you, Mr. Chair, and thank you to the
witnesses for being here today, sharing your expertise on
information technology, trade policy, international relations
and more.
The threat the Chinese Communist Party poses to the United
States is one that my colleagues and I take seriously, from
egregious violations of human rights to manipulation of our
global economy to supporting drug trafficking and stealing
intellectual property. The United States must take action to
confront these issues.
While many of these problems have been around for years or
even decades, there is a new threat emerging, deeply
intertwined with the Chinese Government that deserves our full
attention, and that threat is Elon Musk.
Chair, I ask unanimous consent to enter into the record the
following articles: Elon Musk's China Threat; China May Welcome
Elon Musk's Cuts; How Elon Musk deep ties to--and admiration
for--China could complicate Trump's Beijing policy; Elon Musk:
A Chinese puppet; and Elon Musk, A National Security Threat.
Mr. Lucas. Seeing no objection, so ordered.
[The information referred to can be found in the appendix.]
Ms. Pressley. Witnesses, I am going to ask you to answer
the following questions to the best of your ability. Please do
not feel like you have to pretend that you know the answer but
also do not pretend that you do not know the answer. You have
taken an oath to be honest, and the American public is
watching.
Dr. Doshi, who is the CEO of Tesla and makes the majority
of its profits through manufacturing in China?
Dr. Doshi. That would be Elon Musk, Congresswoman.
Ms. Pressley. Elon Musk and not just the vehicles. Forty
percent of his battery supply chain is with Chinese companies.
Mr. Miller, who worked with the Chinese Communist Party to
receive $1.4 billion in loans to support his Tesla business?
Mr. Miller?
Mr. Miller. I--I am not--I do not have the information.
Ms. Pressley. Reclaiming my time. Elon Musk.
Mr. Miller. Okay, right.
Ms. Pressley. OK?
Ms. Realuyo, who did Republican Senator Tom Cotton accuse
of chasing Chinese dollars to help his businesses, Tesla and
SpaceX?
Oh, Okay. It is Elon Musk.
In our global economy it is not uncommon that a rich CEO
would do business in China. In this case, it is a five-alarm
fire when that rich CEO doing business with China is also
running the U.S. Federal Government.
Mr. Muhleisen, do you know what billionaire had a private
meeting with China's Vice President literally the day before
Trump's inauguration?
Mr. Muhleisen. I do not know.
Ms. Pressley. Elon Musk.
Then on inauguration day, who became the head of DOGE, a
Federal agency created by Trump? Elon Musk.
Mr. Miller, as head of DOGE, who has accessed private,
sensitive government data, including U.S. Treasury payment
systems?
Reclaiming my time. Elon Musk.
Dr. Doshi, given all this information, who do you think
should undergo a rigorous investigation?
Dr. Doshi. I think anybody with conflicts potentially in
China should be investigated if they are having a position of
influencing government. I would say the CEO of Tesla, Elon
Musk.
Ms. Pressley. Elon Musk.
Unfortunately, Elon Musk has not even gone through a simple
Federal background check. He is a citizen of three countries,
has business dealings with adversarial governments, and is
leading an assault on our Federal Government workers.
The Financial Services Committee is one of the most
powerful committees in Congress. There should be an
investigation into Elon Musk's conflicts of interest with China
or at least, how about a Federal background check. This should
not be a partisan issue. No billionaire, Republican or
Democrat, should get a free pass.
If Republicans are serious about countering China's threat
to the United States; you all will support this investigation
of Elon Musk. Elon Musk has already bought the Presidency, and
we should all be concerned, he will sell out that Presidency
and our Nation to China.
I yield back.
Mr. Lucas. The gentlelady yields back.
The chair now recognizes the gentleman from Wisconsin, Mr.
Fitzgerald, for 5 minutes.
Mr. Fitzgerald. Thank you, Mr. Chairman, and thank you,
gentlemen, for being here. I know it is a long day.
U.S. Secret Service investigates a variety of cyber-related
criminal activities, including the illicit use of digital
assets through its global network of 44 cyber fraud task
forces. Significant aspects of this illicit activity involve
unlicensed money transferring businesses, the illicit
structuring of transactions, and other criminal activity
against organizations that are not federally insured financial
institutions but are financial institutions as defined under
the Bank Secrecy Act.
To address this problem, I was pleased to work last
Congress and this Congress with colleagues to advance Combating
Money Laundering in Cyber Crime Act out of both Financial
Services and Judiciary Committee, of which I am a member of
both.
This bill could harmonize kind of the criminal activity and
the banking statutes to clarify kind of specifically where
Secret Service has the ability to investigate authority over
crimes related to illicit digital asset transactions.
Mr. Cassara, could you just briefly touch on the important
role that the Secret Service plays in fighting these illicit
transactions?
Mr. Cassara. Congressman Fitzgerald, thank you for the
question.
I actually started my career in Treasury as a special agent
for the U.S. Secret Service back in the 1980s--mid 80s. I am
very, very aware of the dual missions of the Secret Service;
basically, enforcement and investigations. A lot of people do
not recognize how important financial crimes investigations are
to the U.S. Secret Service. It got its start right after the
Civil War investigating counterfeit, and that has progressed
over the years. The Secret Service has gotten involved with
forgery of U.S. Treasury checks, credit card fraud, computer
fraud, identity fraud.
More recently, I think it was started about 2004, 2005,
they initiated the Cyber Investigative Section, one of the
first U.S. law enforcement units dedicated to strategically
tackling significant cyber crime actors and groups. This type
of threat is becoming more and more important. Cyber
currencies, for example, definitely involved with things like
ransomware, all these types of payments.
Mr. Fitzgerald. Does the Department of Justice and law
enforcement prioritize kind of the financing side of the
relationship which we are exploring right now related to the
fentanyl crisis, or is the emphasis right now placed on kind of
the interdiction of drugs themselves? There is this kind of
discussion that has been going on in Congress for the last
couple of Congresses on that.
Mr. Cassara. Yes, this is an issue that has been discussed
within law enforcement many times. Per a kind of a previous
answer of mine, law enforcement has been emphasizing the
product, for example, drugs and people, instead of following
the money trail. There are lots of different reasons for that.
In my opinion, one of the primary reasons is because
investigating the product, interdiction, for example, is much
easier than going after the money trails.
These are long-term, complex investigations. Sometimes they
do not bear any results. It takes extreme commitment to put the
manpower and the resources into these investigations, but these
are the investigations that actually pay dividends over time,
taking the motivation away from the criminals.
Mr. Fitzgerald. There is a lot of discussion, obviously,
about the border. Specifically, the most alarming thing that a
lot of the border agents, when I have been there and other
Members of Congress have been down there; one of the most
alarming is the Chinese nationals that were being caught on a
regular basis.
The fentanyl crisis is obviously something that we are all
aware of. It is really Beijing and the flow of dollars that are
coming across with the drug trade that, in my estimation, has
really underscored the whole idea that this is in fact
happening in a larger and larger kind of magnified area,
specific to the San Diego sector, which we see a lot of that
happening right now.
Any thoughts on that piece?
Mr. Cassara. I think I would just like to pick up on one of
your comments as far as the Chinese nationals of military age
males primarily----
Mr. Fitzgerald. Right.
Mr. Cassara [continuing]. are the largest ethnic group, if
you will, we will use for lack of a better term, other than
Latinos that are coming across our southern border. Once again,
it frightens me because the CCP, China, Communist China, is
skilled with asymmetric warfare. We do not know who these
people are, we do not know where they are, we do not know what
they are doing.
Any Chinese that come to this country, basically come with
permission of the Chinese Government. Once they are here, they
are obligated by Chinese intelligence law to answer to and take
orders from Chinese intelligence services.
Mr. Fitzgerald. Very good. Thank you.
Mr. Lucas. The gentleman's time is expired.
Mr. Fitzgerald. I yield back, Chairman. Thank you.
Mr. Lucas. The chair now recognizes the gentlewoman from
Texas, Ms. Garcia, for 5 minutes.
Ms. Garcia. Thank you, Mr. Chairman. Thank you to the
witnesses.
One of the things that I am most concerned about, and I
have watched over the years when it comes to China and,
frankly, even other--even Russia, is the rise of its influence
in Latin America. By 2021, China has become the second largest
trading partner for the entire region, just behind the United
States, by $150 million in imports and $399 billion in exports.
China is also making foreign investments in Latin America
within the infrastructure, energy, and military sectors.
Clearly, China's Belt and Road Initiative is working. China
is slowly but surely expanding its influence throughout Latin
America. It is only a matter of time before China surpasses the
United States as the top trade partner in Latin America. In my
view, tariffs on Mexico does not help one bit.
We must reprioritize investing and recommit to our partners
in Latin America to stop China's growing influence.
Dr. Doshi, what can we do to better counter growing Chinese
investments and influence in Latin America?
Dr. Doshi. Thank you very much for the question,
Congresswoman.
I will note a few things. First, a significant amount of
Chinese investment in Africa--sorry, in Latin America involves
a degree of corruption, not all of it but a lot of it. If you
look at, for example, a significant dam project in Ecuador, the
dam did not work, there were a lot of cracks, and there was
also direct evidence of corruption.
One thing that we can do is bring some sunlight as a
disinfectant. The more people know about what is happening in
their backyard, the more that they see that there is sort of
corruption behind some of this investment, the easier it is to
push back.
The second thing we have to do is we cannot fight something
with nothing. It is important for us to reauthorize the DFC and
other institutions as well, EXIM Bank, to be players in this
space, help our companies compete commercially, and make sure
we provide aid where it is necessary.
Ms. Garcia. You think we can do it?
Dr. Doshi. I think that the United States can certainly
outcompete the PRC for influence in Latin America. We are still
the preferred partner of choice. I will note that, in addition
to the problems that we have with the development financing
that we need to offer or on the commercial side, China is a
major goods exporter to Latin America. The fact that China is
the world's biggest manufacturer and superpower with a $1
trillion global goods surplus gives them a lot that they can
send to Latin America. We have to figure out how we are going
to deal with their manufacturing heft if we want to retain our
influence in that region.
Ms. Garcia. Right. Of course, we have talked a lot this
morning about fentanyl, and we know that the drug trade is
global. Money laundering is a global issue. Despite the global
reach that illicit finance has, our financial institutions have
their hands tied and cannot share information or seamlessly
track concerning actors.
The existing guidance from the Financial Crimes Enforcement
Network and other Federal regulators prohibits U.S. financial
institutions from sharing the SARs, the suspicious activity
reports, with foreign branches, subsidiaries, and affiliates.
It is a slow and hard process to counter illicit finance.
Mr. Cassara--where are you? There you are--would it not be
useful to let financial institutions share information on a
case-by-case basis via a pilot program established through the
Anti-Money Laundering Act?
Mr. Cassara. Yes, Congressman--Congresswoman, excuse me. I
believe it would be very, very useful to share information on
that pilot program, taking into consideration issues like
privacy, third party, and this type of thing. Yes, I think it
would be very useful to make SARs more effective for law
enforcement.
Ms. Garcia. More beneficial and helpful to law enforcement.
Mr. Cassara. More beneficial and--yes.
Ms. Garcia. All right. Would not you agree that this is a
potential solution to helping financial institutions better
detect intentionally opaque connections to foreign terrorist
organizations----
Mr. Cassara. I think it----
Ms. Garcia [continuing]. and other illicit actors across
national borders?
Mr. Cassara. I think it could certainly help, yes.
Ms. Garcia. Mr. Chairman, that is why I am excited to
reintroduce my bill, the Foreign Affiliates Pilot Sharing
Program Extension Act, very soon. The bill extends a pilot
program that allows financial institutions to share information
about suspicious activity reports with their foreign affiliates
to combat illicit financial activity. The pilot program, which
was authorized through the Anti-Money Laundering Act but was
never executed, would only allow financial institutions to
share that there is a concern about an illicit actor but not
what the concern is.
I look forward to working with you, Mr. Chairman. This bill
was passed under suspension last Congress, so I look forward to
working with you and the Ranking Member to pass it again this
Congress.
With that, I yield back.
Mr. Meuser [presiding]. The gentlelady yields.
The gentlewoman from Michigan, Mrs. McClain, Conference
Chair, is now recognized for 5 minutes.
Mrs. McClain. Thank you, Mr. Chair.
I think we all know China is a threat to our country, and
every other country, educationally, militarily, and
economically, yet we enable China by letting them benefit from
these very institutions. For example, Xi Jinping's daughter
went to Harvard. Countless other children of their elite seek
education in this country, and high-ranking officials in the
CCP have burrowed themselves into our financial institutions.
While they brainwash their poverty-stricken citizens about the
evils of the West, they themselves benefit from our
institutions. If they move against our democratic ally Taiwan,
their free ride, I believe, should come to an end.
Mr. Muhleisen--I hope I am saying that correctly--in your
opinion, how would cutting off high-ranking CCP officials from
our financial sector affect their behavior both individually
and overreaching government policies?
Mr. Muhleisen. Congresswoman, that is an answer I cannot
respond to. This is really not in my expertise.
Mrs. McClain. You do not have an opinion on how we should
deal with high-ranking officials----
Mr. Muhleisen. To the extent that they are pursuing illegal
or corrupt practices, I am sure the United States has enough
tools to go against them. My expertise is in multilateral
institutions, not so much in financial institutions. That is
why I do not really--I am not really in a position to answer
your question.
Mrs. McClain. Do you have an opinion on that?
Mr. Muhleisen. I think it is--from a moral perspective, it
is--I think if Chinese ordinary citizens would hear about that,
they would certainly question what is going on. In that sense,
it is something that conflicts between what you do and what you
say, and I found that, of course, morally reprehensible.
Mrs. McClain. Is it safe to say, and I do not want to put
words in your mouth, that actions should have consequences?
Mr. Muhleisen. Certainly, Chinese citizens should see
whether they could not----
Mrs. McClain. What about the high-ranking officials?
Mr. Muhleisen. That is what I mean.
Mrs. McClain. Okay.
Mr. Muhleisen. The consequences should be in China, because
that is, in a way, where the disadvantages are for their
citizens.
Mrs. McClain. I am looking as well to protect our citizens,
our financial institutions, and really try to deter the Chinese
and disincentivize them for taking advantage of our
institutions, whether it be educationally, or our financial
institutions, and try to hold them accountable. We know they
are bad actors, so how do we hold them accountable, and what
incentives or disincentives do we put in place for the CCP to
get them to be good actors, which they have proven time and
time again that they are not good actors?
What I have tried to do, and what I am doing, is I am proud
to lead the Taiwan Conflict Deterrence Act along with my
colleague Sherman in this Congress. I think it is very
important. In the event that China moves against Taiwan, this
bill would take effect and publish the financial institutions
providing services to senior Chinese Government officials--we
are all about transparency, right--and it would prevent them
from being able to live here in the United States.
It will show the Chinese citizens who live under the
repression and suffer daily that their hypocritical, tyrannical
leaders live lavishly by gifting and grifting off of their
U.S.' colleagues. This bill has an exemption, carveout, for
those who cooperate--being the operative word--with the United
States. I would love to see which members of the elite have
more loyalty to the U.S. dollar than they do to Chairman Xi
Jinping. I think that would be kind of interesting.
Is there more, in your opinion, that Congress or other
countries can do to use financial tools to sway or incentivize
or disincentivize the CCP, Mr.----
Mr. Muhleisen. I cannot really answer your question,
Congresswoman.
Mrs. McClain. Wonderful. Thank you.
I am out of time. I yield.
Mr. Meuser. The gentlelady yields.
The gentlewoman from Georgia, Ms. Williams, is now
recognized for 5 minutes.
Ms. Williams of Georgia. Thank you.
With today's hearing, my Republican colleagues are trying
to find the most inflammatory way to say something that we all
should agree on. You all, the United States' competitiveness in
a global economy is a shared goal amongst Democrats and
Republicans, Independents, people who do not even care about
politics. Why do we get partisan hearing titles like
``Examining Policies to Counter China?''
My Republican colleagues would rather demonize an entire
country for the fact the United States is lagging behind in
global competitiveness than talk about the real problem. The
real problem, you might ask, is that my colleagues in the
Republican Party have refused to invest in America for decades.
When Congress made historic investments in roads, bridges,
ports, rail, you all, we were on the right track but just
catching up. Unfortunately, President Trump and his Co-
President Elon Musk refused to build on that progress. Instead,
they are gearing up today for a budget resolution that would
roll back Congress' historic investments over the last 4 years,
and that is not to mention that they are crippling the very
agencies that are making these investments by firing as many
Federal employees as possible.
Let us really ask ourselves, how do we make America
competitive in a global economy? Let us start by fixing this
hearing title, ``Examining Policies to Counter Elon Musk''
because that is what really needs to happen. If we do not want
our government and economy to become the laughingstock that
Twitter became when Elon Musk took over, it is time for us to
take back our power as Congress, Article I, Section 1 of the
U.S. Constitution.
Elon Musk does not want a serious discussion in this
hearing because, you all, he makes money when his Tesla stocks
do well in China. Let us stop pretending that the whole country
of China is the problem when Elon Musk is right here in our
country and is a huge problem. Let us talk about policies to
counter Musk and his agenda of destroying investments in
America. You all, the way that I was raised, you take care of
home first.
Let us talk about a few policies that hit right at the
heart of what Musk is doing to my fighting Fifth District in
Atlanta. Atlanta is home to the Centers for Disease Control and
Prevention (CDC) and every dollar that we invest in public
health yields up to $88 that benefits our society. Congress has
been investing nearly $10 billion per year in the CDC, so we
are talking about a potential value of $880 billion.
Dr. Doshi, what do you think? If we stop making those
investments, who is going to step up and get access to that
$880 billion in investments? The research that we are doing,
how does that help our competitiveness with China? Does that
benefit the United States or China?
Dr. Doshi. Thank you for the question, Congresswoman.
I think over the last 8 to 10 years there has been a
growing bipartisan consensus on the need to invest in American
competitiveness, not just to focus on China, although that is a
principal challenge for us, but also to make ourselves more
prosperous, more secure, and quite frankly, more advanced when
it comes to technology.
I think it is important for us to think about the CHIPS and
Science Act as a critical way of strengthening American
investment in the future of technology, along with the
Inflation Reduction Act, which make the United States more
competitive in everything from batteries to electronic vehicles
(EVs). Batteries are relevant also for military advantage, also
infrastructure, basic infrastructure. China invests enormous
sums in infrastructure. We do not invest very much.
That is why right now, Congresswoman, our percentage share
of manufacturing has fallen from 30 percent to 15 percent in
two decades, while China's has gone from 6 percent to 30
percent. I think more investment across the board is a priority
and maybe something that has bipartisan support.
Ms. Williams of Georgia. It absolutely should be
bipartisan, and I look forward to working with my Republican
colleagues on these very policies.
Also, Atlanta is home to the world's busiest and most
efficient airport, providing countless contributions to the
United States' position in the global economy.
Dr. Doshi, if we do not have the air traffic controllers
and the Transportation Security Administration (TSA) agents
that we need to keep travelers safe and coming into America,
are people going to want to keep coming to the United States
for global commerce or could that competitive edge also be
taken by another country like China?
Dr. Doshi. Thank you for the question, Congresswoman. I
think American State capacity is one of those things that needs
to be improved, and some significant cuts to it without
thinking about how to retain capacity in areas we already have
can cause competitive disadvantage across the board, including
in the sector that you identified.
Ms. Williams of Georgia. I have many more questions,
because I also went into the grocery store this weekend, and
there were no eggs on the shelf, so my 9-year-old was quite
upset when he could not get his cheese eggs for breakfast on
Sunday morning. We have a lot of issues that we need to
discuss----
Mr. Meuser. The gentlelady's time has expired.
Ms. Williams of Georgia. My time has expired, and I yield
back, Mr. Chairman.
Mr. Meuser. The gentlelady yields.
The gentlewoman from Texas, Ms. De La Cruz, Vice Chair of
Subcommittee on Housing and Insurance, is now recognized for 5
minutes.
Ms. De La Cruz. Thank you so much, Chairman and thank you
to all the witnesses for being here today.
This is an important topic when we discuss China and the
United States and the competitiveness especially. There is so
much going on in our country, but one of the things that has
affected Americans from Deep South Texas, which is where I am
from, to Chicago, Atlanta, California, is fentanyl and the rise
of fentanyl that has happened under the Biden Administration.
Under the Biden Administration we saw fentanyl pouring into our
borders. We saw deaths due to the fentanyl crisis that happened
under the Biden Administration.
That being said, fentanyl comes from China. It has
destroyed our families. I sat with mothers over the holidays
who had empty chairs at their holiday tables because they lost
a child or a spouse. This is a very important and difficult
topic.
Drug overdoses are the leading cause of deaths between 18
and 45-year-olds, with fentanyl being responsible for 70
percent of those overdoses. One gram of fentanyl can kill
potentially 500 people.
In Deep South Texas, in the last Congress, one of our brave
law enforcement officers found 3 gallons of fentanyl in South
Texas. That was enough to kill two times the size of Houston,
Texas. Can you imagine that just--thousands and thousands of
people who would be affected had that drug successfully gotten
to its destination.
Part of the solution is we need better border security, and
part is that we can do work on this committee to stop the
financing of fentanyl. I am proud to say that last year my
bill, H.R. 1076, Preventing the Financing of Illegal Synthetic
Drugs Act, was signed into law to start taking real steps to
address the financing of these drugs.
To my question. Mr. Cassara, what role does Chinese money
laundering organizations (CMLOs) play in laundering proceeds
from drug trafficking, and how critical are CMLOs to the U.S.
drug trade?
Mr. Cassara. Thank you for the question. I have a
perspective of decades going back, anti-money laundering work,
and I have examined hemispheric laundering, for example, the
Colombian black market peso exchange evolving into the Mexican
black market peso exchange. Then maybe 10 years ago or so, the
Chinese, Chinese presence, Chinese money laundering
organizations started to become the money launderers of choice
for the cartels, and they have pioneered innovative methods of
laundering the proceeds.
Ms. De La Cruz. Why do you think that is?
Mr. Cassara. Why do I think that is?
Ms. De La Cruz. Yes.
Mr. Cassara. I think that the Chinese are very skilled in
what they do. They are very, very good businesspeople, and they
are incentivized to undercut their competitors. They also take
advantage of the Chinese presence here in the United States. A
lot of them are upstanding citizens, but nevertheless, some of
these people wittingly or unwittingly get involved in taking
some of this illicit money, putting it into their regular
business activities, and laundering that money through
underground financial systems and mobile phone apps, other
techniques and enablers that I described in my testimony.
Ms. De La Cruz. Excellent. What vulnerabilities in the
United States are CMLOs most effectively exploiting, and where
do gaps in regulatory oversight persist?
Mr. Cassara. I think the biggest vulnerabilities that we
have vis-a-vis Chinese money laundering organizations in the
United States is their ability to bypass our most important
anti-money laundering countermeasure, which is financial
intelligence, Bank Secrecy Act information. The techniques they
use pretty effectively go around these types of reporting
requirements, whether it be trade-based money laundering, Fei-
Chien, flying money, trade-based value transfer, this type of
thing. We need to crack down in these areas. Once again, in my
written testimony I gave some ideas on how that can be done.
Ms. De La Cruz. Thank you. I yield back.
Mr. Meuser. The gentlelady yields.
The gentleman from Texas, Mr. Green, the Ranking Member on
the Subcommittee on Oversight and Investigations, is now
recognized for 5 minutes.
Mr. Green. Thank you, Mr. Chairman, and thank you for your
very kind and warm expression of an introduction.
I would like to associate myself with the comments of the
Ranking Member as they relate to China. I think she spoke well
and covered much of what I would say. I do agree that there is
a problem with fentanyl, but I am also concerned about Russia.
I am concerned about Russia because it seems that we have
embarked upon a course of conduct that would allow us to reward
Russian aggression. You cannot reward aggression and assume
that you will have peace.
I am concerned about what is happening with Ukraine and
this belief that somehow Ukraine is the aggressor and started
this war. I think that we would have to suspend all of our
common sense to agree with this premise, because we saw the
tanks moving into Ukraine. It is very difficult to even
consider the notion that one would now blame Ukraine for
Russian aggression.
It seems that our President, unfortunately, has embarked
upon a course of appeasement. Russia wants to surrender, no
land taken, President agrees. That is appeasement. Russia is
desiring that there be no security provided Ukraine. Looks like
we are backing off, but as we back away, we will take precious
minerals that Ukraine might have. Russia is of the opinion that
Ukraine should not be a part of North Atlantic Treaty
Organization (NATO), seems like our President agrees. That is
appeasement.
I am really concerned about the President's approach to
Russia. When on--just yesterday, we had a U.N. resolution
blaming Russia for its encroachment, its invasion of Ukraine.
We voted against that resolution, The United States of America.
In 2023, a similar resolution was presented. We voted for it.
Has so much changed in such a short period of time that we
would now support Russian aggression?
I am concerned about China. My colleagues on both sides
have made good points, but we cannot overlook the fact that
China and Russia are in bed together. After China abstained
yesterday on this resolution condemning Russia, President Xi
Jinping called--called Putin, President--called him and
explained, I am with you, we are neighbors.
There has to be some concern shown for what is happening
with this country as it relates to Russia and the way we are
turning our back on our allies.
What has Canada done to deserve this sort of treatment?
Canada has been a loyal, faithful ally of the United States for
years upon years, yet we find ourselves now cozying up to Putin
directly. I am not sure that there is a lot of space between
the efforts to cozy up to China with the President.
Here is my question, and I will ask the question of--I am
hoping that I will pronounce your name correctly, sir. Let us
see. I have it here. At the very end. Yes, sir, would you
pronounce your name for me, sir?
Dr. Doshi. Dr. Doshi, sir. Thank you.
Mr. Green. Okay. Thank you, sir. My question to you, sir.
What signal did we send yesterday when we voted to oppose
blaming Russia for the invasion of Ukraine?
Dr. Doshi. Thank you, Congressman, for the question.
I think China was watching that very closely. They are
interested in whether or not we will successfully pry Russia
from China. I think, as you note, that is very hard to do, and
we might be sending the signal that we would not necessarily
stand with Taiwan if the question were called.
Thank you.
Mr. Green. Thank you, Mr. Chairman. I yield back.
Mr. Meuser. The gentleman yields.
The gentleman from Wisconsin, Mr. Steil, Chair of the
Subcommittee on Digital Assets, Financial Technology and
Artificial Intelligence, is now recognized for 5 minutes.
Mr. Steil. Thank you very much, Mr. Chairman.
Thank you all for being here. This is a really important
hearing.
I want to start with you, Mr. Muhleisen, if I can. In your
testimony today, you spoke about the importance of the U.S.
dollar being the world reserve currency, how we maintain that
position. We are seeing advancements in China in artificial
intelligence, in AI, a position where the United States has
really been a leader for some time. As we look at the
development of Web 3.0, as we look at the need for the future
in the financial services space, I think we have to focus on
what is going to make sure that the United States maintains its
dominant position.
If we look back to Web 1, Web 2.0, what you saw was a
development that occurred inside the United States. Whatever
your issue is with Big Tech, and I have plenty of them. One of
them, with one exception really being TikTok, is that these
tech companies are at least domiciled in the United States.
Whether or not that is Google or Amazon, et cetera, they are
domiciled here. If we do not have rules and regulations of the
road, we risk allowing other countries to move forward to
being--and to outcompete the United States. It needs to be a
premise, I believe, for policymakers here to make sure that we
are outcompeting other countries, and in particular China.
The question that I would have for you as it relates to
China specifically is, what regulatory approaches are they
taking that can impact their financial services markets or U.S.
consumers?
Mr. Muhleisen. I am not an expert on the Chinese financial
system, but it would behoove China as a big player to make
sure--also for the stability of its financial institutions--to
make sure that the investments are sound and that they follow
international standards. China's financial sector has many
weaknesses, because of the crisis from the real estate sector,
and the market for artificial intelligence, cryptocurrencies
and the like is very volatile. From a prudential perspective
that would also minimize the potential spillovers to the rest
of the world, one would hope that China adopts very prudential
regulations and enforces those.
Mr. Steil. They are not today, right? I think that is one
of the big distinctions is that they are not really enforcing
in a manner that the U.S. markets are, which is a benefit to
U.S. consumers and U.S. investors, right?
Mr. Muhleisen. I do not know exactly what standards you
mean that they are enforcing. Again, I do not know too much
about the Chinese financial sector, per se.
Mr. Steil. Okay. Let me shift and come to you, Mr. Cassara,
if I can. You wrote an essay last year, ``China's Digital
Authoritarianism Is Coming Our Way.'' Can you just put a little
meat on the bone on digital authoritarianism and what financial
levers the CCP has at its disposal? There is a lot of
discussion about Central Bank digital currency, the concern of
that. I share a lot of those concerns. Could you comment?
Mr. Cassara. Thank you for the question. Yes, I am
concerned as well about the Chinese development of the Central
Bank digital currency. That is exactly why I wrote the article.
There are various models, as you know, of Central Bank digital
currencies. What concerns me the most is what I call the
Chinese model, the authoritarian model, because they overlay it
with social monitoring, social control, social scoring,
intensive and intrusive surveillance.
Basically, they are doing this to control their population,
and they can do this basically with the flip of a switch. They
can demonetize a citizen. That individual is not able to get on
a metro, not able to pay for their child's education, not able
to buy groceries, this type of thing. It scares me from a civil
libertarian perspective, and I do not want that model to be
adopted here or anywhere else.
Mr. Steil. I 100 percent share your concern. It is
something that we are going to have to remain vigilant of to
make sure that we do not allow our Federal Government in the
United States to have that type of control.
In my final minute left, I want to come to you, Mr. Miller.
AI is going to be critical for development of new technology
here in the United States. A question that we are going to be
looking at is how do we make sure that we are extending the
Trump tax cuts in particular on the R&D or accelerated
depreciation? In 20 seconds, could you explain the importance
of that as it relates to financial services?
Mr. Miller. Yes, absolutely. We should be doing everything
we can to incentivize R&D, including through the Tax Code.
Every dollar saved, quite frankly, through taxes is being
plowed by American companies back into innovation.
Mr. Steil. In the final 5 seconds, you would agree that it
has a direct impact on the investment that is needed for AI and
the technology----
Mr. Miller. Yes, absolutely.
Mr. Steil. Thank you very much, Mr. Chairman. I yield back.
Mr. Meuser. The gentleman yields.
The gentleman from Nebraska, Mr. Flood, the Chairman of the
Subcommittee on Housing and Insurance, is now recognized for 5
minutes.
Mr. Flood. Thank you, Mr. Chairman.
Maybe somebody has bugged the doors to this chamber. They
seem to keep opening on their own today.
Mr. Cassara, in your testimony, I found it was interesting.
You wrote at length on customs fraud, which is when an importer
and exporter work together to misrepresent the value of goods
transferred for illicit reasons. Now, given President Trump's
interest in using tariffs on Chinese goods, I would imagine
that customs fraud could become even more common the next 4
years.
Do you agree with that assessment? How would authorities
work to combat that, and particularly, how would we combat that
from Chinese vendors looking to avoid tariffs?
Mr. Cassara. Thank you for the question. I believe that
trade-based money laundering and value transfer is probably the
largest, most pervasive money laundering methodology in the
world today, if you take into consideration all the various
iterations of it and various models.
As far as countermeasures go, it is very hard, because what
happens is the occasional illicit transaction gets intermingled
with the overwhelming licit trade transactions. Because trade
volume is so high, it is very, very difficult to pick out those
isolated illicit transactions. Nevertheless, the volume of
trade being so high, the amount of trade-based money laundering
(TBML) is off the charts, and we do not have good
countermeasures in place.
The best countermeasure, in my estimation, is something I
came up with a number of years ago that was adopted by the U.S.
Government, and that is the formulation of trade transparency
units, or TTUs, looking at customs data between countries,
spotting those anomalies between trade. It is going to be very,
very problematic, particularly with countries like China, but
it is something we have to look at.
Mr. Flood. Thank you. I appreciate that.
One of the things I find very interesting about China's
extension of credit to these developing nations is that it has
led to a serious default risk. Sixty percent of China's
overseas lending was owed by countries experiencing debt
distress in 2022, but yet they are all over the African
Continent. They are expanding their reach.
Mr. Muhleisen, at some point inability to pay back hefty
loans will start to become a problem for China, but they can
also use their loans as leverage to obtain unrelated
concessions from developing nations. Is seeking troubled
customers for their loans a feature or a bug as it relates to
China's global strategy?
Mr. Muhleisen. I would say that looking for geopolitical
allies in developing countries and emerging markets is a
feature. Putting countries into debt distress, I do not want to
say it is a feature. It is probably a bit more than a bug. It
is maybe carelessness. It is certainly something that, as I
said in my statement, China should be held responsible for. I
have various proposals there, especially the IMF's Lending Into
Official Arrears Policy.
Mr. Flood. Do you think that--how should that change our
national strategy around international finance? Should we be
more aggressive ourselves or is China's strategy unsustainable
in the long term?
Mr. Muhleisen. China will certainly take losses from its
strategy, like many countries before it has already done over
the last century. The growing demand or the demand for these
loans also reflects a big need on the part of the recipient
countries. The United States has a chance to leverage its own
capital into international financial institutions by extending
loans to these countries to compete, but also by using these
institutions to provide not necessarily monetary incentives but
other geopolitical incentives or trade incentives to get back
into closer relations with low-income and developing countries.
There is a need to compete, because right now there is one kid
on the block with a lot of money in its pockets, and they are
spending it like crazy.
Mr. Flood. I am going to stop you right there. I just want
to say before my time is up, thank you for the discussion. On
one hand, it is clear that many Americans are not interested in
further extending our global reach and feel we need to be more
focused on what is happening here at home. I understand that
sentiment, but China is not going to sit back. China will be
aggressive in expanding their influence through whatever means
they have available, and I am interested in working to figure
out what we can do to project American power in a way that is
cost effective and sensible without running afoul of legitimate
sentiments of many that we need to remain focused on what is
going on at home.
With that, Mr. Chairman, I yield back.
Mr. Meuser. The gentleman yields.
The gentleman from Indiana, Mr. Stutzman, is now recognized
for 5 minutes.
Mr. Stutzman. Thank you, Mr. Chairman.
Thank you, gentlemen, for being here today. A very
important topic and interesting topic, and one that obviously
is going to affect not only us but future generations here in
America.
Mr. McMurray, I would like to come to you and talk a little
bit about how energy security is national security. My district
in Northeast Indiana, we are a heavy manufacturing and
agricultural (AG) district. We have a heavy footprint, and so
we rely on an abundance of energy of all types. We just
actually had a Google announcement. They are going to put in a
data center in the district which consumes a lot of energy, and
so there is concern about our ability to maintain and sustain
strong energy supply and dependence and sustainability.
We have--generally, in Indiana, we rely on affordable
energy, but lately we felt some pain after the previous
Administration. I am really looking forward to working with my
colleagues in Congress to make sure that we here in the United
States dominate in the energy supply and production. As we saw,
President Trump took significant steps to move us in that
direction.
I would like to talk to you or ask a little bit about the
IFIs like the World Bank. What disadvantages do U.S. energy
companies currently face in their attempt to secure
international energy financing projects?
Mr. McMurray. Yes. Thank you, Congressman. As you said,
energy security is national security. Right now, we need to
make it easier for U.S. companies to be able to build and
compete abroad. Right now, that is very challenging when it
comes to different state-owned enterprises that can offer very
lucrative financing packages and leveraging either our
institutions, such as EXIM Bank or DFC or entities like the
World Bank can help put our companies on a level playing field.
Now, there is a big opportunity this Congress with both
EXIM Bank and DFC needing to be reauthorized to give them more
tools so U.S. companies can compete, which will also have
direct benefits for U.S. jobs.
Mr. Stutzman. Do the Chinese firms or in the state-backed
energy firms, do they face similar disadvantages?
Mr. McMurray. In some cases, no. They do not comply by
Organization for Economic Co-operation and Development (OECD)
rules so they can offer financing packages that are more
competitive than what other countries can offer. That is also
where entities like CTEP, China Transformational Exports
Program, part of EXIM Bank, and the DFC are tailored to be able
to try to compete with those financing packages.
Mr. Stutzman. I mean, we know China plays by their own set
of rules. Any suggestions or any reforms that you would suggest
needed here in the United States to maintain and to outpace
China?
Mr. McMurray. Yes. I think, first, domestically we have to
make it easier for U.S. companies to be able to build. In many
cases, countries are going to want to see projects built in the
United States before they are sold abroad. That requires
improving the permitting system. That require continued
investments in support to innovative companies through the
Department of Energy and the national labs, and then it
requires predictability for these companies to be able to make
investments in the long term.
Looking globally, that is where the upcoming
reauthorization has the ability to kind of sharpen some of
those tools to expand eligible technologies that EXIM Bank is
able to support, also make it very clear of what is the right
metric or outcome that EXIM Bank should be focused on, such as
jobs. Taking that together can really help U.S. companies
compete globally and ensure that the United States is a player
when it is looking--when it is considered by other countries.
Mr. Stutzman. Yes. I know that in Indiana, of course, we
used to be a coal-producing State, a lot of coal power, and now
we are shifting more to natural gas. A lot of talk about
nuclear. It seems like the permitting process is always the
piece that hangs us up. Can that be streamlined? What can be
done to make our permitting process better?
Mr. McMurray. Yes. Indiana's Governor is making great
strides in trying to attract nuclear to the State, and as well
as working with other States, which I think is a really
exciting opportunity to----
Mr. Stutzman. Yes.
Mr. McMurray--deploy nuclear here in the United States.
As for the permitting process, I used to work at the
Nuclear Regulatory Commission, so there have been a lot of
prog---there has been a lot of progress at the NRC, U.S.
Nuclear Regulatory Commission. There has also been a lot of
bipartisan support in Congress to improve the licensing
process. Just last Congress, both the House and the Senate
enacted, with overwhelming bipartisan support, the Accelerating
Deployment of Versatile Advanced Nuclear for Clean Energy
(ADVANCE) Act. The Energy and Commerce's bill, the Atomic
Energy Advancement Act, really tried to tailor a couple of key
provisions to improve the licensing and permitting process at
the NRC so those companies can have better outcomes and better
predictability.
Mr. Stutzman. Yes, thank you. I appreciate your comments. I
just know that we have the ability, we have the know-how, we
have everything in place. We just need to make sure government
does not stand in the way of progress, and we need to continue
to make sure our nuclear power is at the forefront of our
minds, and we can outpace China.
Thank you. I yield back.
Mr. Meuser. The gentleman yields.
The gentleman from Iowa, Mr. Nunn, Vice Chair of the
Subcommittee on National Security, is now recognized for 5
minutes.
Mr. Nunn. Thank you, Mr. Chairman, and appreciate you all
joining us for this very important conversation on China and
its role in the world.
I am coming at it from a decade-plus as a
counterintelligence officer working out of facilities, running
operations in Guangzhou. I now serve on the China Select
Committee.
We have all seen firsthand how dangerous China can be in
its predatory lending practices. Here in the United States, we
very much support an open opportunity for free trade for
mercantilism for the opportunity for an entrepreneur to really
take off. Obviously, China has a much more opaque, closed
system, one that not only suppresses its own population, but
one that will cannibalize its own industry and that of others
to try and effectively take over countries and how they
operate.
We have seen this since 2017 as China being the world's
largest official creditor, and this is concerning to the global
financial system, because it is cheap, it is predatory. Its
infrastructural aids aim to buy up global influence, undercut
other countries, export and distort international trade. I
mean, if this was a used car company, it would have been shut
down a long time ago.
The reality is here that they have been able to lead an
entire initiative, the Belt and Road Initiative, that has
targeted a number of areas specifically of interest to China
and developed nations, now over 10 percent of their GDP to the
Chinese State. Pakistan owes China $77 billion and climbing,
Sri Lanka, $11 billion, and Kenya, $9 billion. The list goes on
and on, all areas where China has purchased and now owns its
way to controlling these countries and certainly their
governments.
The time to combat China, I think we all agree, is not
yesterday, but it is today. It is not in the next 10 years. The
greatest threat from China is not its military. I would offer,
Mr. Chairman, it is their economic tactics, including
intellectual property theft to drain skills and inventions
created right here in the United States, as well as pull our
trade jobs and other profits outside of our country. It is one
of the reasons I am so proud to be working with this committee
on a bill that I led called the Neutralizing Unfair Chinese
Subsidy Act of 2025. It is to counter China's predatory lending
practices.
Now, Mr. Muhleisen, you are an expert on Chinese lending.
Do you agree that we need a strategy here in the United States
to combat these destabilizing tactics and ensure that China
follows OECD's arrangement on officially supported export
credits?
Mr. Muhleisen. I agree with what you just said about what
happens, and also, I agree with what you just proposed.
Mr. Nunn. Talk to us a little bit. When we talk about
neutralizing unfair Chinese subsidies, how China has done this
not just in the past but how it continues to be a predatory
lender in this space.
Mr. Muhleisen. China has pursued two objectives. First, it
wanted to export its construction services to generate jobs at
home; and second, it acquired strategic advantages in exchange
for its loans from many countries. It has not, in my opinion,
shrunk back from all sorts of means to sway decisions into
Chinese companies getting orders, but it also has affected the
quality of the projects, and I think it is backfiring on China.
Countries would, I think, prefer not to have to pay a lot
of money for projects that are either not really providing an
economic return or have to be repaired and replaced within a
short period.
Mr. Nunn. Absolutely right. In fact, it ends up costing
everybody more in the long run.
Mr. Miller, you are a leader here when it comes to
addressing what America does, I think, very well in the world,
competitive bids, being able to grow, harnessing innovation in
a way that really takes off. It is one of the reasons why nine
of the top ten companies valued at over $1 trillion reside
right here in the United States. How many reside in China?
Zero. That is a direct result of a state-owned entity which
capitalizes on everything.
I think that there is no accident here that the free market
helps us foster our innovation. Could you explain the
importance of strengthening our American markets on the
international scene with the time that we have left?
Mr. Miller. Sure, I would be happy to do that. I mean, you
are absolutely right that--to say that we need to focus on
economics and economic security and not just view China as a
national security threat, again, not understating that at all.
We really need a balanced and holistic approach to this entire
set of issues. We released a paper today on economic security
that offers 10 recommendations dealing with everything from
sanctions and investment reviews to trade policy and other
innovation-friendly policies, and we really need to double down
on our strengths.
You were not here for the chair's opening statement, but he
mentioned that beating China means doubling down on U.S.
strengths, and I completely agree with that.
Mr. Nunn. Mr. Miller, I yield my time back just to say
thank you for providing a playbook that this government can
start using today.
With that, I yield my time. Thank you, Mr. Chair.
Mr. Meuser. The gentleman yields.
We would like to thank all the witnesses for your testimony
today.
Without objection, all members will have 5 legislative days
to submit additional written questions for the witnesses to the
chair. The questions will be forwarded to the witness for his
response. Witnesses, please respond no later than March 31,
2025.
[The information referred to can be found in the appendix.]
This hearing is adjourned.
[Whereupon, at 1:46 p.m., the committee was adjourned.]
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