Financial Services Republicans, Experts Tout Merits of Sanctions & Entity-Based Approach to Restricting U.S. Investment in the CCP’s Military-Industrial Complex
Washington,
January 31, 2024 -
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This week, the House Financial Services Subcommittee on National Security, Illicit Finance, and International Financial Institutions, led by Chairman Blaine Luetkemeyer (MO-03), held a hearing entitled “Better Investment Barriers: Strengthening CCP Sanctions and Exploring Alternatives to Bureaucratic Regimes.” At the hearing lawmakers and expert witnesses agreed: sanctions and entity-based approaches—like Congressman Andy Barr’s (KY-06) Chinese Military and Surveillance Company Sanctions Act—are more effective, immediate, multilateral, and stronger than bureaucratic and slow sector-based approaches at cutting off western financing for the CCP’s military-industrial complex.
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See what lawmakers and expert witnesses had to say about Committee Republicans’ approach below:
In his opening remarks, Chairman Patrick McHenry (NC-10) addressed the ongoing debate between lawmakers regarding U.S. investment in China.
“We agree that we must cut off revenue for the CCP’s military-industrial complex and other bad actors… Independent of hawks and doves—and that debate—I think it comes down to whether or not you understand the issue,” said Chairman McHenry.
Watch Chairman McHenry’s opening remarks here.
Under questioning from Subcommittee Chairman Luetkemeyer, expert witness Thomas Feddo, a former Assistant Secretary of the Treasury for Investment Security, highlighted the effectiveness of a sanctions-based approach to countering China’s economic aggression.
“Fundamentally, it’s about modifying the conduct of U.S. persons… it’s not about the fungible money, it’s about what comes with it… the services, essentially, all the experience and the like that comes with those funds,” said Mr. Feddo.
Watch Subcommittee Chairman Luetkemeyer’s line of questioning here.
In response to a question from Financial Institutions and Monetary Policy Subcommittee Chairman Andy Barr (KY-06), Mr. Feddo indicated that the Chinese Military and Surveillance Company Sanctions Act is the strongest approach being considered by Congress.
Rep. Barr: “On the three major legislative proposals before us in the Congress… Mr. Feddo, which of these three approaches would hit the Chinese military and intelligence companies, or CMIC entities, harder?
Mr. Feddo: “In my view, it’s clearly your bill, Mr. Barr, because it immediately identifies those entities of concern… immediately making them blocked persons… virtually any dealing with that person is prohibited.”
Watch Subcommittee Chairman Barr’s line of questioning here.
In an exchange with Rep. Barry Loudermilk (GA-11), expert witness Richard Ashooh, a former Assistant Secretary of Commerce for Export Administration, explained the strategic benefits of Americans serving on foreign boards.
Rep. Loudermilk: “Does having American executives serving on foreign boards have a strategic benefit for the U.S.?”
Mr. Ashooh: “It does… one possible strategic goal of the United States should be creating a dependency, or leverage, over China… having an understanding of the development of Chinese technology is key to exceeding it.”
Watch Rep. Loudermilk’s exchange with Mr. Ashooh here.
In response to a question from Rep. Dan Meuser (PA-09), Mr. Feddo warned against the perils of attempting to reinvent the wheel by creating a new bureaucratic regime to screen outbound investment.
“In creating yet another regulatory regime, instead of relying on existing regimes, existing definitions, existing infrastructure, a huge wealth of institutional knowledge and experience at OFAC and other parts of the U.S. government that have been implementing and administering sanctions for a very long time… drafting new regulations, redefining terms… it will take more resources and more time than I think the Administration or the Congress expects,” said Mr. Feddo.
Watch Rep. Meuser’s line of questioning here.
Under questioning from Rep. Young Kim (CA-40), Mr. Ashooh highlighted the multilateral impact of using the existing sanctions framework under the Treasury Department’s Office of Foreign Asset Control (OFAC), rather than creating a new, clunky bureaucracy.
Rep. Kim: “We all believe a key to ensuring emerging technologies do not fall into the hands of our adversaries, like China, is to get our allies and partners on board with similar protective measures. … Are sanctions a time-tested and effective national security tool?”
Mr. Ashooh: “The number one problem with a new regime is that it would automatically start by not being multilateral because we’d be the only ones doing it. … The SDN list, while it’s not necessarily the product of a multilateral approach, it is well known and well regarded by our allies and friends—and that gives it strength. We cannot go it alone on this.”
Watch Rep. Kim’s exchange with Mr. Ashooh here.
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