The Chinese Communist Party (CCP) poses a significant danger to foreign companies operating in China, according to a congressional committee. The Select Committee on the Chinese Communist Party (CCP) held a hearing to discuss the risks faced by American companies in China. Representative Mike Gallagher stated that there is no such thing as a “private company” in China due to the CCP’s influence and control. He highlighted Chinese laws, including the anti-espionage and data security laws, which allow Beijing to access and seize data and assets as it wishes. Gallagher also mentioned the CCP’s practice of embedding party branches in various organizations to monitor operations and access confidential information.
The CCP’s Military-Civil Fusion policy further enhances its control over private companies, as it requires the private sector to support the People’s Liberation Army (PLA) in its technological advancements. This means that every foreign business operating in China essentially becomes a partner of the CCP. Recent events, such as Beijing’s pressure on auditing and consulting firms, including raids on American companies, demonstrate that the CCP considers accurate business information and sunlight to be threats to its rule.
Piper Lounsbury, the chief research and development officer at Strategy Risks, testified during the hearing, stating that the CCP has created a dangerous environment for US companies in China. She explained that the CCP’s goals are to replace American firms and businesses while coercing or subjugating them in the near term. Lounsbury shared specific instances of the CCP’s theft and coercion, where high-profile American CEOs were threatened with market access loss if they did not release intellectual property to their Chinese partners. She also mentioned the CCP’s blatant theft of IP in joint ventures, where they established state-funded competitor factories, preventing the American companies from operating in the market.
The issue of intellectual property theft also extends to individual data, with concerns that personal information and biometrics could fall into the hands of the CCP. Lounsbury recommended implementing better due diligence to ensure the secure storage of personal information. She highlighted that Chinese identity technology service providers often have ties with the CCP, and this raises significant concerns.
The hearing also discussed the risks associated with American investors buying Chinese stocks. Many Americans believe they own Chinese stocks in their retirement plans and pensions, but they actually hold claims on Variable Interest Entities (VIEs). These entities give investors no control over corporate governance or assets, making them essentially side bets in a CCP-run casino. The use of VIEs allows Chinese companies to bypass restrictions on foreign investments.
Furthermore, the reliability of China’s economic data was called into question. It was stated that China’s statistical authorities manipulate the data to create an illusion of strength. Wall Street’s reliance on China’s official economic data was criticized as it allows Beijing’s propaganda to influence the public narrative on China’s economy.
In conclusion, the hearing shed light on the significant risks faced by American companies operating in China due to the influence and control exerted by the Chinese Communist Party. The CCP’s actions, such as intellectual property theft and manipulation of economic data, pose threats to businesses and investors. It is crucial for American corporate executives and investors to understand these risks and take appropriate measures to protect their assets and interests.
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