China to Its People: Spies Are Everywhere, Help Us Catch Them
As Beijing tries to enlist the “whole of society” to guard against foreign enemies, the line between vigilance and paranoia fades.
The Official Chinese 🇨🇳 Espionage & Cold War Thread
With wary eye on China, U.S. moves closer to former foe Vietnam
Ellen Nakashima
Military honor guards march during a flag-raising ceremony at Ba Dinh Square in Hanoi on Sept. 25, 2018. (Linh Pham for The Washington Post)
The United States and Vietnam are poised to significantly enhance their economic and technological ties, bringing the former foes closer at a time of increased Chinese assertiveness in the region.
The deal, expected to be announced when President Biden makes a state visit to Vietnam next weekend, is the latest step by the Biden administration to deepen relations in Asia. For Hanoi, the closer relationship with Washington serves as a counterweight to Beijing’s influence.
The establishment of a “comprehensive strategic partnership” will give the United States a diplomatic status that Vietnam has so far reserved for only a handful of other countries: China, Russia, India and South Korea. The move was confirmed by a senior Biden administration official and two people in Hanoi familiar with the matter.
It shows that Hanoi is willing to risk angering Beijing but sees the move toward Washington as necessary given how aggressively China is flexing its military muscle in the region, analysts said.
[ Rattled by China, U.S. and allies are beefing up defenses in the Pacific ]
“If you have the United States on the same pedestal as China, that is saying a lot to Beijing, but also to the rest of the region and the world,” said Derek Grossman, a senior defense analyst at Rand Corp. and former U.S. intelligence officer. “That’s saying the U.S.-Vietnam relationship has come a long way since 1995,” when the two countries normalized relations.
The agreement, proposed by the Biden administration in recent months, flows from a U.S. strategy to build economic and security partnerships in the Indo-Pacific that can serve as a bulwark against Chinese economic and military coercion.
For Vietnam, it “serves both symbolic and substantive purposes,” said Le Hong Hiep, a senior fellow at the Singapore-based ISEAS – Yusof Ishak Institute.
The agreement is expected to lead to greater economic activity between the two countries, as the United States seeks to diversify its manufacturing supply chains away from China and as Vietnam aspires to develop advanced technologies. American semiconductor firms have expressed “a willingness to support them in that ambition,” said a senior Biden administration official, speaking on the condition of anonymity because the agreement has not yet been announced.
The United States is now the top destination for exports from Vietnam, which has made a dramatic economic transformation over the past two decades. VinFast, the country’s leading electric vehicle manufacturer, is now selling its sleek SUVs in California and recently held an initial public offering of its stock on Nasdaq. American companies have likewise shown a willingness to do business: Apple and Google suppliers have invested heavily in new factories in Vietnam, and a major announcement is expected from Boeing, which said earlier this year that it intends to expand its footprint in the country.
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The upgrade in relations also stands to boost defense and security cooperation between the United States and Vietnam. Hanoi and Washington are expected to increase U.S. aircraft carrier visits, joint military exercises and arms sales, officials said. Among the top buyers of Russian arms, Vietnam has said publicly it wants to diversify its military arsenal. Last year, Vietnam hosted its first international defense fair, and U.S. defense contractors Raytheon and Lockheed Martin sponsored the two largest booths.
Vietnam does not have treaty allies. Instead, the communist state has a rigid three-tier hierarchy of bilateral ties. Washington was granted “comprehensive” partnership status a decade ago, and normally it takes years for Hanoi to move a country to the next level, dubbed “strategic.” But Hanoi is slated to fast-track an upgrade to the highest tier, with Washington earning the “comprehensive strategic” designation, officials say.
Despite the communist affinity with its big brother to the north, Vietnam has been motivated to find new partners due to Beijing’s aggressive activity over the past decade. But, said the senior administration official, it was also enticed by Washington’s engagement this year with India — another major developing country in the region — that has resulted in agreements to partner in technology, defense and education.
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“We were able to make a credible case” to Hanoi to take the relationship “to the highest level,” the official said.
But the deal is not a steppingstone to a formal defense alliance, Biden administration officials said.
“This is not Vietnam coming to the American side of the playground,” said Gregory Poling, director of the Southeast Asia program at the Center for Strategic and International Studies. “This is Vietnam ensuring that it can balance the two powers [China and the United States] so it can maintain its own autonomy.”
Vietnam, which shares a border with China, has long disputed Beijing’s territorial claims over the Spratly and Paracel islands in the South China Sea. China’s coast guard continually harasses Vietnamese oil and gas drilling operations and regularly boards Vietnamese fishing ships.
Vietnam has expressed interest in increasing cooperation with the United States on maritime surveillance and technology, said Le, the analyst in Singapore. “With the comprehensive strategic partnership in place, this is all on the table,” he added.
Hanoi remains cautious of offending Beijing, which is steadily modernizing its military, analysts say.
[ U.S. Reaches Military Base Access in the Philippines ]
Last week, shortly before the White House announced Biden’s trip to Vietnam, the general secretary of the Communist Party of Vietnam, Nguyen Phu Trong, traveled with the Chinese ambassador to Vietnam, Xiong Bo, in what some saw as an attempt to mitigate potential backlash once the upgrade in relations is announced.
While inspecting a border trading pass in Lang Son province, Trong, widely seen as the most powerful political figure in Vietnam, praised the “comrades and brothers” friendship with China. Biden is scheduled to meet with Trong in Hanoi.
But the deepening relationship has drawn criticism from human rights advocates, who say that Hanoi continues to crack down on dissent and religious freedom and accuse Washington of placing strategic interests ahead of core values.
Ben Swanton, co-director of the 88 Project, a U.S.-based nonprofit that tracks the arrests of activists in Vietnam, said he’s skeptical that closer relations with the United States will lead to greater freedoms for the Vietnamese people. In the past decade, Hanoi’s warming relationship with Washington has done little to deter a rising authoritarian trend led by Communist Party hard-liners, he said.
According to the 88 Project, Vietnam has imprisoned nearly 200 people on political grounds, including several of the country’s most prominent climate activists. In 2016, as part of a highly publicized visit to Vietnam, President Barack Obama met with a group of civil society leaders; many of them are now in jail or in exile.
“The commitment to democracy and human rights,” Swanton said of the Biden administration, “has been cast aside in favor of extending U.S. dominance in the region.”
Administration officials respond with an argument deployed when Indian Prime Minister Narendra Modi, who in 2005 was denied a visa to the United States for his role in deadly communal riots in western India, was welcomed to the White House for a state dinner in June.
[ Modi's White House visit tests Biden's democracy-vs.-autocracy pitch ]
They raise human rights concerns with these leaders, but in private, “quietly, respectfully,” said the administration official. “We question whether public lecturing is the best plan of action with countries that are seeking to work closely with us.”
Washington should insist on seeing progress in human rights and civil liberties, even if done quietly, said Duy Hoang, executive director of Viet Tan, a pro-democracy political group in Vietnam. “To have a free and open Indo-Pacific,” said Duy, “you really need free and open societies.”
Faced With Evolving Threats, U.S. Navy Struggles to Change
A new generation of cheaper and more flexible vessels could be vital in any conflict with China, but the Navy remains lashed to big shipbuilding programs driven by tradition, political influence and jobs.
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This Cold War Is Different | by Mark Leonard - Project Syndicate
Mark Leonard foresees a world order shaped not by superpower-led blocs, but by fragmentation and multipolarity.
www.project-syndicate.org
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Chinese Nationals Posing as Tourists Have Accessed US Military Bases and Other Sensitive Sites: Report
Most of the incidents took place in rural areas, away from tourist hotspots and commercial airports.
WSJ News Exclusive | Pentagon Plans Vast AI Fleet to Counter China Threat
The U.S. is seeking to keep pace with China amid concerns that the Pentagon bureaucracy takes too long on cutting-edge systems.
www.wsj.com
Pentagon Plans Vast AI Fleet to Counter China Threat
Defense Department seeks an array of air-, land- and sea-based autonomous systems to keep pace with adversaries
WASHINGTON—The Pentagon is considering the development of a vast network of AI-powered technology, drones and autonomous systems within the next two years to counter threats from China and other adversaries.
Kathleen Hicks, the deputy secretary of defense, will provide new details in a speech later Wednesday about the department’s plans to spend hundreds of millions of dollars to develop an array of thousands of air-, land- and sea-based artificial-intelligence systems that are intended to be “small, smart, cheap.”
The U.S. is seeking to keep pace with China’s rapidly expanding military amid concerns that the Pentagon bureaucracy takes too long to develop and deploy cutting-edge systems.
“We’re not at war. We are not seeking to be at war, but we have to be able to get this department to move with that same kind of urgency because the PRC isn’t waiting,” Hicks said during an interview Tuesday, referring to the People’s Republic of China.
One approach could be to build on the capabilities demonstrated by Task Force 59, the U.S. Navy’s network of drones and sensors designed to monitor Iran’s military activities in the Middle East.
“Imagine distributed pods of self-propelled [autonomous] systems afloat, powered by the sun and other virtually limitless resources, packed with sensors aplenty, enough to give us new, reliable sources of information in near-real-time,” Hicks is expected to say during the speech before a conference hosted by Defense News in Arlington, Va.
Other capabilities that are being considered are autonomous ground-based systems to provide logistics, space-based autonomous systems that would be so numerous they would be difficult for an adversary to destroy and autonomous systems that could defend against incoming missiles.
Autonomous systems use artificial intelligence to detect and engage enemy targets, and can include self-piloting air- and sea-based drones. The Defense Department has long invested in such systems—including self-piloting ships and no-crew aircraft.
Hicks’s speech is expected to include important new details about the “Replicator” initiative the Pentagon announced last week to offset the growing Chinese military.
These drone boats are the latest unmanned technology being tested by the U.S. Navy. WSJ’s Shelby Holliday traveled to Bahrain to get a rare look at how the U.S. is pairing unmanned surface vessels with artificial intelligence to see “from seabed to space.” Illustration: Adele Morgan
At that time, the Defense Department said it hoped to deploy thousands of the systems but said little about how they might be used.
In her speech Wednesday, Hicks will sketch out some of the air, land and sea capabilities that the Pentagon is looking to develop.
The program is being driven in part by advances made by China, which has more ships than the U.S. Navy and has invested in autonomous systems. A 2022 Pentagon report concluded that China is “displaying growing numbers of autonomous and teaming systems,” including “a substantial amount of development displaying efforts to produce swarming capability for operational applications.”
But some contractors said some key questions about the Pentagon initiative remain unanswered, including whether sufficient funds are being tapped to meet the goal.
“The hundreds of millions of dollars range, while a great start, would only provide hundreds of the truly capable ocean drones we need to establish true deterrence to China and other adversaries,” said Kevin Decker, chief executive of Ocean Aero, which has developed an environmentally powered autonomous underwater and surface vehicle. “They’ve got to start somewhere, and they’ve got to start now.”
The Pentagon plans to prepare a list of initial investments before the end of the year based on what the service chiefs and combatant commanders say they need, Hicks said.
“Overall we are going to deliver in the thousands,” Hicks said during Tuesday’s interview.
Hicks said that funding for Replicator would come from existing funds and cost “hundreds of millions.” The latest Pentagon budget request includes $1.8 billion for artificial intelligence for fiscal 2024.
A Navy admiral created Task Force 59 in 2021 after a deployment of naval ships to the Asia-Pacific region left fewer of them transiting the Middle East. The drones—some of which can float at sea for up to six months—can send back detailed images and other data. It is now seen as the sort of capability that can be further developed and greatly expanded.
“Over time, people will come to the conclusion that it’s cheaper, faster, safer and potentially even higher-quality,” Ocean Aero’s Decker said. “And the cost will come down.”
Shelby Holliday contributed to this article.
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Write to Nancy A. Youssef at nancy.youssef@wsj.com and Michael R. Gordon at michael.gordon@wsj.com
Eva Dou
Chinese chip stocks surged in value after Huawei Technologies introduced its latest Mate 60 Pro phone. According to AnTuTu, a Chinese benchmarking website, the phone features a Kirin 9000s CPU designed by HiSilicon that supports 5G. (Alex Plavevski/EPA-EFE/Shutterstock)
Chinese chip stocks surged in value after Huawei Technologies introduced its latest Mate 60 Pro phone. According to AnTuTu, a Chinese benchmarking website, the phone features a Kirin 9000s CPU designed by HiSilicon that supports 5G. (Alex Plavevski/EPA-EFE/Shutterstock)
As Commerce Secretary Gina Raimondo was visiting China earlier this week, a sea-green Chinese smartphone was quietly launched online.
It was no normal gadget. And its launch has sparked hushed concern in Washington that U.S. sanctions have failed to prevent China from making a key technological advance. Such a development would seem to fulfill warnings from U.S. chipmakers that sanctions wouldn’t stop China, but would spur it to redouble efforts to build alternatives to U.S. technology.
Huawei Technologies Co.’s new smartphone, the Mate 60 Pro, represents a new high-water mark in China’s technological capabilities, with an advanced chip inside that was both designed and manufactured in China despite onerous U.S. export controls intended to prevent China from making this technical jump. Those sanctions were first imposed by the Trump administration and continued under President Biden.
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The timing of the phone announcement on Monday, while Raimondo was in Beijing, appeared to be a show of defiance. Chinese state media declared it showed the U.S. that trade war was a “failure.”
Paul Triolo, the technology policy lead at the Washington-based business consulting firm Albright Stonebridge Group, called the new phone “a major blow to all of Huawei’s former technology suppliers, mostly U.S. companies.”
“The major geopolitical significance,” he said, “has been to show that it is possible to completely design [without] U.S. technology and still produce a product that may not be quite as good as cutting edge Western models, but is still quite capable.”
Biden administration officials declined to comment.
U.S. Commerce Secretary Gina Raimondo, center, leaves after a news conference at the Boeing Shanghai Aviation Service Co., in Shanghai on Aug. 30. (Andy Wong/AFP/Getty Images)
How powerful the new chip design is remains an open question. Unusually, Huawei revealed little about key aspects of the phone in its announcement, such as whether it was 5G-enabled or what process was used to produce it. In a statement, Huawei simply touted the phone as making breakthroughs in “satellite communications.”
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China’s official broadcaster, CGTN, in a post on X, formerly known as Twitter, called the phone Huawei’s “first higher-end processor” since U.S. sanctions were imposed and said the chip it contains was made by Semiconductor Manufacturing International Corp., a company partially owned by the Chinese government.
One person told The Washington Post that the Mate 60 Pro has a 5G chip. Speed tests posted by early buyers of the phone online suggest its performance is similar to top-of-the-line 5G phones. In July, Reuters reported Huawei’s imminent return to the 5G phone market, citing three technology research firms speaking on the condition of anonymity.
Nikkei Asia has reported, citing sources, that SMIC would be using what’s known as the “7-nanometer process” to make the chips for Huawei, the most advanced level in China. This would be on par with the process used for the chips inside Apple’s iPhones launched in 2018. Apple’s latest iPhone chips were made by the Taiwan Semiconductor Manufacturing Company, using what is known as the four-nanometer process. A nanometer is a measure of chip size, with the fewer nanometers in the process, the better. A piece of paper is about 100,000 nanometers thick.
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U.S. sanctions were intended to slow China’s progress in emerging fields like artificial intelligence and big data by cutting off its ability to buy or build advanced semiconductors, which are the brains of these systems. The unveiling of a domestically produced seven-nanometer chip suggests that has not happened.
Industry experts cautioned that it’s still too early to tell how competitive China’s chipmaking operations will become. But what is clear is that China is still in the game.
“This shows that Chinese companies like Huawei still have plenty of capability to innovate,” said Chris Miller, a professor at Tufts University and author of the book “Chip War.” “I think it will also probably intensify debate in Washington on whether restrictions are to be tightened.”
A Huawei Technologies Co. Mate 60 Pro smartphone. Chinese state media jumped aboard a groundswell of national pride surrounding Huawei’s latest smartphone, portraying the gadget as a technological marvel that delivered a much-needed victory over U.S. sanctions. (Justin Chin/Bloomberg News)
Few stakeholders have yet to voice opinions publicly, as industry groups seek to confirm more details and evaluate their stances. But there is no doubt the new Huawei phone has sparked discussions of what comes next. “There is a lot of activity,” said Craig Allen, president of the U.S.-China Business Council, a nonprofit group that promotes trade between the United States and China.
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Opinions differ as to how the U.S. government should react.
“This development will almost certainly prompt much stronger calls for further tightening of export control licensing for U.S. suppliers of Huawei, who continue to be able to ship commodity semiconductors that are not used for 5G applications,” Triolo said.
On the other hand, he added, “U.S. semiconductor companies would prefer to be able to continue to ship commodity semiconductors to Huawei and other Chinese end users, to maintain market share and stave off the designing [without] U.S. technology from Chinese supply chains more broadly.”
Washington faced a similar quandary of how to hobble the Soviet Union’s technological development during the Cold War. Willy Shih, an economist at Harvard Business School, said Huawei’s breakthrough was evocative of what happened with Global Positioning System technology, now commonly known as GPS. The U.S. Defense Department developed the technology and restricted its export, wary of it in the hands of rivals. But the export restrictions pushed Moscow and other governments to develop their own versions, Shih said.
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“So it went from a situation where the U.S. really dominated that technology and everyone would come to the U.S. to buy it, to now there are all these different alternatives,” he said. “And you have to wonder if the same thing is happening now with Huawei.”
China’s race to build an advanced homegrown chip began in May 2019, when, amid the Trump administration’s trade war with China, the Commerce Department put Huawei on its “Entity List,” prohibiting U.S. companies from doing business with it. Some wondered if it was a “death penalty” for Huawei, with the company choked from obtaining key components.
Huawei had long been in the crosshairs of Washington as the sharpest tip of China’s tech industry. Since 2012, Huawei has been the world’s largest supplier of the equipment needed to operate the global internet, a position it has maintained despite U.S. sanctions. Huawei files more patent applications than any other company in China, and a constellation of Chinese start-ups rely on Huawei’s AI algorithms to build their own applications for face and voice recognition, pattern identification and other purposes.
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Huawei’s business lines include geopolitically sensitive products including mobile base stations that provide nations with cell coverage, video-surveillance gear for police and submarine cable systems, which all require chips as their brains.
In the wake of the sanctions, Ren Zhengfei, Huawei’s charismatic founder who got his start in China’s army engineering corps, rallied Huawei’s staff for an all-out fight for the survival of their company. They stockpiled chips from overseas suppliers, predicting that Washington might close loopholes in the sanctions. This indeed came to pass. Washington plugged the loopholes one by one, including sanctioning SMIC, the only factory in China potentially capable of manufacturing advanced chips for Huawei — and pushing for suppliers of specialized chipmaking gear to halt sales to China more broadly.
A Huawei store in Shanghai (Alex Plavevski/EPA-EFE/Shutterstock)
Since then, Huawei has hunkered down into survival mode, drawing on its stockpiled chips as it raced to secure a domestic chipmaking solution.
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SMIC has striven to make cutting-edge chips since its founding in 2000, but the dream had long seemed pie-in-the-sky. Each generation of chips reflects a new frontier in just how microscopically small humans can draw precise designs into a sheet of silicon. By the time SMIC caught up to one generation, industry leaders had raced further ahead based on new breakthroughs by the world’s brightest physicists and technicians.
“It’s hard to catch up because chips are the most complex manufactured good humans have ever produced,” Miller said. “There’s nothing more complicated that humans make … this is really hard stuff.”
Miller says a considerable gap remains between SMIC’s capabilities and those of TSMC, the industry leader that produces the newest chips for companies like Apple. It also remains unclear if SMIC can produce advanced chips at a scale and cost that will make its products globally competitive.
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Shih said that regardless of if SMIC can reach the cutting edge, the foundry will certainly be able to produce older-generation chips at scale, possibly pushing down prices of chips worldwide. “We will see price pressure and commoditization pressure,” he said.
U.S. companies like Intel and Qualcomm have already lost significant sales in China, the world’s second-largest economy, due to the U.S. sanctions, crimping their research and development budgets. U.S. executives fear this could weigh on their long-term strength, in an industry where only a few of the strongest, fastest companies tend to survive.
“It starts a downward spiral in ability, to not be competitive with the rest of the world,” said an industry executive, who spoke on the condition of anonymity because of the sensitivity of the subject.
Since the U.S. chip sanctions began, Beijing has flexed what muscles it can to prevent more of the global chip industry from falling under Washington’s sway. For instance, Intel recently announced it will have to pay $353 million in termination fees to Israel’s Tower Semiconductor after failing to acquire Chinese regulatory approval for the acquisition.
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US lawmaker calls for ending Huawei, SMIC exports after chip breakthrough
The U.S. Commerce Department should end all technology exports to Huawei and China's top semiconductor firm following the discovery of new chips in Huawei phones that may violate trade restrictions, the chair of the House of Representatives' committee on China said on Wednesday.
www.reuters.com
US to check on chips used in Huawei’s ‘Made in China’ smartphone | Financial Times
Mate 60 Pro sells out in China as public celebrate reports of domestic chip breakthrough despite years of sanctions
www.ft.com
China is pushing ahead with dedollarization, hoarding gold for a 10th straight month after slashing Treasury holdings to a 14-year low
China's gold stockpiling comes amid the country's bid to erode the dollar's global dominance, as well as growing economic uncertainty within the Asian state.
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US lawmaker calls for ending Huawei, SMIC exports after chip breakthrough
The U.S. Commerce Department should end all technology exports to Huawei and China's top semiconductor firm following the discovery of new chips in Huawei phones that may violate trade restrictions, the chair of the House of Representatives' committee on China said on Wednesday.
www.reuters.com
Yeah this shyt is getting real. US Business Execs are about to get read in.
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US House panel plans Taiwan war game with Wall Street executives
Committee was formed to focus on potential threats from the Chinese Communist party
4 hours ago
House China committee chair Mike Gallagher leans over a tabletop war game exercise
House China committee chair Mike Gallagher, centre, has stepped up scrutiny of US investors’ connections with China © Ellen Knickmeyer/AP
The US House of Representatives China committee plans to hold a Taiwan war game with financial and business executives in New York on Monday, in an effort to raise awareness about the risks attached to Americans investing in China.
Mike Gallagher, the Republican head of the panel, and Raja Krishnamoorthi, its top Democrat, will lead the delegation, according to a person close to the committee.
The war-game participants include representatives from investment banks, in addition to current and former executives from pharmaceutical companies and retired four-star US military officers. The committee declined to name the financial executives who will participate.
The bipartisan delegation will also meet other financial executives in New York, as the committee steps up its scrutiny of how American investment in China could undermine US national security. On Tuesday they have scheduled a hearing that will include testimony from former chair of the Securities and Exchange Commission Jay Clayton and Jim Chanos, the hedge fund short seller.
The person familiar with the situation said the lawmakers wanted to hear from Wall Street executives about “the systemic risks that come with American capital flowing to China and how banks and other financial institutions think about their investments in China and exposure to the Chinese economy in the event of a political crisis”.
Krishnamoorthi told the Financial Times that it was “important that our committee hear from the financial industry about how CCP [Chinese Communist party] policies are affecting Americans’ savings and investments and what Congress needs to do to help protect American investors and our national security”.
The war game would consider the economic implications of a conflict between the US and China over Taiwan. In April, the lawmakers took part in a Taiwan war game on Capitol Hill that raised questions about whether the US and its allies were doing enough to prepare for sanctions on China and an economic war with Beijing in the event of a Chinese attack on Taiwan.
Following meetings with Apple chief executive Tim Cook and Disney boss Bob Iger earlier this year, Gallagher told the FT that Hollywood and Silicon Valley executives were underestimating the odds that China would attack Taiwan.
The US state department last year shared research with European countries that warned that a conflict over Taiwan would trigger an economic shock causing annual losses of as much as $2.5tn.
The House China committee, which was created in January to focus on potential threats from the Chinese Communist party, has held hearings on topics ranging from Beijing’s economic aggression to human rights abuses. But in recent months it has probed commercial links between US companies and China.
In August, for example, the panel accused BlackRock and MSCI of “unwittingly funding” groups that develop weapons for China’s People’s Liberation Army, compromising US national security.
Roger Robinson, former chair of the Congressional US-China Economic and Security Review Commission, said the China committee should build on its “visionary investigation” of BlackRock and MSCI.
“As the committee has learned, when you scrutinise and follow the billions of US investor dollars flowing to CCP-controlled Chinese enterprises, courtesy of reckless Wall Street firms, it leads to nowhere good in many instances,” he said.
The rising congressional scrutiny comes as the White House tries to cut the flow of US money to Chinese groups in technology with military applications. President Joe Biden last month signed an order limiting US investment into China’s quantum computing, advanced chips and artificial intelligence sectors.
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US House panel plans Taiwan war game with Wall Street executives
Committee was formed to focus on potential threats from the Chinese Communist party
www.ft.com
US House panel plans Taiwan war game with Wall Street executives
Committee was formed to focus on potential threats from the Chinese Communist party
4 hours ago
House China committee chair Mike Gallagher leans over a tabletop war game exercise
House China committee chair Mike Gallagher, centre, has stepped up scrutiny of US investors’ connections with China © Ellen Knickmeyer/AP
The US House of Representatives China committee plans to hold a Taiwan war game with financial and business executives in New York on Monday, in an effort to raise awareness about the risks attached to Americans investing in China.
Mike Gallagher, the Republican head of the panel, and Raja Krishnamoorthi, its top Democrat, will lead the delegation, according to a person close to the committee.
The war-game participants include representatives from investment banks, in addition to current and former executives from pharmaceutical companies and retired four-star US military officers. The committee declined to name the financial executives who will participate.
The bipartisan delegation will also meet other financial executives in New York, as the committee steps up its scrutiny of how American investment in China could undermine US national security. On Tuesday they have scheduled a hearing that will include testimony from former chair of the Securities and Exchange Commission Jay Clayton and Jim Chanos, the hedge fund short seller.
The person familiar with the situation said the lawmakers wanted to hear from Wall Street executives about “the systemic risks that come with American capital flowing to China and how banks and other financial institutions think about their investments in China and exposure to the Chinese economy in the event of a political crisis”.
Krishnamoorthi told the Financial Times that it was “important that our committee hear from the financial industry about how CCP [Chinese Communist party] policies are affecting Americans’ savings and investments and what Congress needs to do to help protect American investors and our national security”.
The war game would consider the economic implications of a conflict between the US and China over Taiwan. In April, the lawmakers took part in a Taiwan war game on Capitol Hill that raised questions about whether the US and its allies were doing enough to prepare for sanctions on China and an economic war with Beijing in the event of a Chinese attack on Taiwan.
Following meetings with Apple chief executive Tim Cook and Disney boss Bob Iger earlier this year, Gallagher told the FT that Hollywood and Silicon Valley executives were underestimating the odds that China would attack Taiwan.
The US state department last year shared research with European countries that warned that a conflict over Taiwan would trigger an economic shock causing annual losses of as much as $2.5tn.
The House China committee, which was created in January to focus on potential threats from the Chinese Communist party, has held hearings on topics ranging from Beijing’s economic aggression to human rights abuses. But in recent months it has probed commercial links between US companies and China.
In August, for example, the panel accused BlackRock and MSCI of “unwittingly funding” groups that develop weapons for China’s People’s Liberation Army, compromising US national security.
Roger Robinson, former chair of the Congressional US-China Economic and Security Review Commission, said the China committee should build on its “visionary investigation” of BlackRock and MSCI.
“As the committee has learned, when you scrutinise and follow the billions of US investor dollars flowing to CCP-controlled Chinese enterprises, courtesy of reckless Wall Street firms, it leads to nowhere good in many instances,” he said.
The rising congressional scrutiny comes as the White House tries to cut the flow of US money to Chinese groups in technology with military applications. President Joe Biden last month signed an order limiting US investment into China’s quantum computing, advanced chips and artificial intelligence sectors.
@88m3 @ADevilYouKhow @wire28 @dtownreppin214 @Leasy @Neo The Resurrected ONE
@dza @wire28 @BigMoneyGrip @Dameon Farrow @re'up @Blackfyre @NY's #1 Draft Pick @Skyfall @2Quik4UHoes