[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]
COMBATING THE GENERATIONAL
CHALLENGE OF CCP AGGRESSION
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HEARING
BEFORE THE
COMMITTEE ON FOREIGN AFFAIRS
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTEENTH CONGRESS
FIRST SESSION
__________
FEBRUARY 28, 2023
__________
Serial No. 118-2
__________
Printed for the use of the Committee on Foreign Affairs
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available: http://www.foreignaffairs.house.gov/, http://
docs.house.gov,
or http://www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
51-256PDF WASHINGTON : 2023
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COMMITTEE ON FOREIGN AFFAIRS
MICHAEL T. MCCAUL, Texas, Chairman
CHRISTOPHER H. SMITH, New Jersey GREGORY MEEKS, New Yok, Ranking
JOE WILSON, South Carolina Member
SCOTT PERRY, Pennsylvania BRAD SHERMAN, California
DARRELL ISSA, California GERALD E. CONNOLLY, Virginia
ANN WAGNER, Missouri WILLIAM KEATING, Massachusetts
BRIAN MAST, Florida DAVID CICILLINE, Rhode Island
KEN BUCK, Colorado AMI BERA, California
TIM BURCHETT, Tennessee JOAQUIN CASTRO, Texas
MARK E. GREEN, Tennessee DINA TITUS, Nevada
ANDY BARR, Kentucky TED LIEU, California
RONNY JACKSON, Texas SUSAN WILD, Pennsylvania
YOUNG KIM, California DEAN PHILLIPS, Minnesota
MARIA ELVIRA SALAZAR, Florida COLIN ALLRED, Texas
BILL HUIZENGA, Michigan ANDY KIM, New Jersey
AMATA COLEMAN-RADEWAGEN, American SARA JACOBS, California
Samoa KATHY MANNING, North Carolina
FRENCH HILL, Arkansas SHEILA CHERFILUS-MCCORMICK,
WARREN DAVIDSON, Ohio Florida
JIM BAIRD, Indiana GREG STANTON, Arizona
MICHAEL WALTZ, Florida MADELEINE DEAN, Pennsylvania
TOM KEAN, JR., New Jersey JARED MOSKOWITZ, Florida
MIKE LAWLER, New York JONATHAN JACOBS, Illinois
CORY MILLS, Florida SYDNEY KAMLAGER-DOVE, California
RICH MCCORMICK, Georgia JIM COSTA, California
NATHANIEL MORAN, Texas JASON CROW, Colorado
JOHN JAMES, Michigan BRAD SCHNEIDER. Illinois
KEITH SELF, Texas
Brenden Shields, Staff Director
Sophia Lafargue, Staff Director
C O N T E N T S
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Page
WITNESSES
Kritenbrink, Daniel J., Assistant Secretary, Bureau of East Asian
and Pacific Affairs, U.S. Department of State.................. 8
Estevez, Alan F., Undersecretary of Commerce for Industry and
Security, U.S. Department of Commerce.......................... 14
Nathan, Scott, Chief Executive Officer, U.S. International
Development Finance Corporation................................ 27
Schiffer, Michael, Assistant Administrator, U.S. Agency for
International Development...................................... 34
APPENDIX
Hearing Notice................................................... 96
Hearing Minutes.................................................. 98
Hearing Attendance............................................... 99
STATEMENT SUBMITTED FOR THE RECORD FROM REPRESENTATIVE CONNOLLY
Statement submitted for the record from Representative Connolly.. 100
RESPONSES TO QUESTIONS SUBMITTED FOR THE RECORD
Responses to questions submitted for the record.................. 102
COMBATING THE GENERATIONAL CHALLENGE OF CCP AGGRESSION
Tuesday, February 28, 2023
House of Representatives,
Committee on Foreign Affairs,
Washington, DC.
The committee met, pursuant to notice, at 10:11 a.m., in
room 210, House Visitor Center, Hon. Michael McCaul (chairman
of the committee) presiding.
Chairman McCaul. The Committee on Foreign Affairs will come
to order. The purpose of this hearing is to identify gaps in
pursuing a more holistic approach to capturing the Chinese
Communist Party.
I now recognize myself for an opening statement.
I would like to first say that one of our colleagues,
Joaquin Castro, is at MD Anderson and got diagnosed with
cancer. And let's offer our thoughts and prayers to him for a
speedy recovery. And if you can reach out to him personally,
that would be awesome. And, anyway, our prayers are with him.
There is no doubt that the growing aggression of the
Chinese Community Party poses a generational threat to the
United States, from using a spy balloon to surveil some of
America's most sensitive military sites to their theft of
upwards of $600 billion of American IP every year, much of
which goes into their military, to their continued military
aggression and expansion in the Indo-Pacific.
And now CIA Director Burns has recently stated U.S.
intelligence has reason to believe China is considering sending
weapons, lethal weapons, to Russia, all this ahead of the
upcoming meeting between Chairman Xi and Putin next week where
they will surely strengthen their unholy alliance.
We are living through one of the most dangerous periods in
American foreign policy in a generation. It is a struggle for
the global balance of power. And the primary battleground is
technology leadership.
This is an issue Congress and this Administration cannot
ignore. I commended the Administration for their recent export
control rules on semiconductors and semiconductor equipment.
And I look forward to hearing the details about your work with
the Dutch and the Japanese to harmonize these controls.
But I am concerned the Administration's efforts aren't as
all-encompassing as they should be. Congress authorized the
Bureau of Industry and Security with expansive powers to stop
the transfer of dual-use technology that the CCP is using to
build their military. Yet overwhelmingly, BIS continues to
grant licenses that allow critical U.S. technology to be sold
to our adversaries even though it is designed, designated as
threats to national security.
In just one recent 6-month time period, BIS approved
licenses worth $60 billion to Huawei and $40 billion to SMIC,
their semiconductor company. Both of these companies are
military companies for the CCP. And both are listed on the
entities list.
If BIS continues to mindlessly green light sensitive
technology sales, the CCP has proven they will use our own
inventions against us. Look no further than the recent spy
balloon that the Administration allowed to fly across much of
the continental United States. It has been reported western-
made components were found in this balloon. That is on top of
the recent hypersonic missile test, which circled the globe and
landed with precision. This was only possible through U.S.
technology that was sold to them. This should be a wake-up call
to all Americans.
I stand ready to work with the Administration and with the
Democrats on this panel to strengthen our export control
systems where needed and why I launched a 90-day review of BIS.
We are also falling behind on the ideological battlefield.
Congress appropriated $325 million to the State Department to
counter CCP's maligned influence around the world. But instead,
that money was used to fund bakeries in Tunisia, electric
vehicle charging stations in Vietnam.
And at the same time, the CCP continues to invest large
amounts of money in developing countries, building bridges,
roads, ports, and energy infrastructure, all the while growing
their influence over the people in these developing nations.
Both the USAID and the Development Finance Corporation play
key roles in developing lasting partnerships and long-term
development in trade with other countries. Every day we should
make sure people around the world know that our aid is not the
debt-trap diplomacy that the CCP uses to exploit developing
countries.
But we are not succeeding. Of the 6.3 billion people living
in developing countries, about 70 percent have a positive view
of both China and Russia, 70 percent. All the while, the threat
against Taiwan grows everyday. Yet arms sales to Taiwan, those
that the ranking member and I signed off on nearly 4 years ago,
have yet to be delivered despite the Administration admitting
Taiwan is facing an imminent threat from the CCP. We must
strengthen Taiwan's defenses through weapons and training. We
will not tolerate any attempts to delay notification to
Congress of arms sales to Taiwan.
But it is not too late to reverse this trend. As the
chairman of the Foreign Affairs Committee, it is my priority to
make sure Congress and this Administration are working together
in a bipartisan fashion to confront this generational threat.
That starts with ensuring that we are using the tools we have
on the books like export controls to constrain the CCP's
military and surveillance systems.
And I stand ready to work with the Administration and those
on the other side of the aisle to strength our export control
systems where needed. We need tough diplomacy and real actions
to keep critical technologies and manufacturing capabilities
out of the grip of our adversaries.
So I look forward to hearing from each of you what you are
doing to address the China challenge and what steps you are
taking to dramatically shift your agency's priorities to meet
this challenge head on. From what I have seen over the last 2
years, much more is needed.
It is time we move beyond the false belief that the CCP
will ever deal in good faith. Time and again they do not stand
behind their commitments. The CCP is acting in their own
interest. And it is time that we start protecting ours.
And with that, the chair now recognizes the ranking member,
the gentleman from New York, Mr. Meeks, for any statements he
may have.
Mr. Meeks. Well, thank you, Mr. Chairman.
And while I do not--first, let me just say also in regards
to our colleague, Mr. Castro, who has all of our prayers, I
have talked to a number of members of his staff. And they have
told us that the surgery has been very successful, that Mr.
Castro is hoping to be back after the next recess that we have.
He will be home shortly recuperating. And so, to him, I want to
make sure that everyone knows that every member of this
committee, he is in our hearts, our thoughts, and our prayers
as he recovers.
First, the aggregate data regarding license approvals and
denials provides no information about the transactions that
took place. To use them to conclude that problematic
transactions are taking place is both wrong and I believe
disingenuous.
Second, our export Administration regulations are published
publicly and spell out exactly which items and technologies are
not allowed to be exported to specific entities on the entity
list. Companies generally do not apply for a license when they
know it would be denied. So it should be no surprise that we
see far more approvals than denials.
The current entity list and licensing process gives the
Administration tremendous visibility into what goods and
services are being legally exported. One would think we would
want that. And the agency review process consisting of BIS, the
State Department, Department of Defense, and the Department of
Energy reviews these licenses. The public debate on the issue
should be done with this important context in mind.
Now, the PRC and its policies clearly present the greatest
geopolitical challenge that the United States faces today. And
I want to thank Chairman McCaul for making this the very first
hearing on the 118th Congress. And I thank all the witnesses
here today for your service and for appearing before this
committee.
And since this is our very first hearing this Congress, I
want to remind everyone what this committee is all about. The
House Foreign Affairs Committee must be at the forefront of
positioning the United States for success in the strategic
competition with China, as this is the only committee that is
focused on diplomacy.
Other committees have jurisdiction over military, over our
domestic institutions, over financial systems, and so on. Our
job on this committee is to make sure that the State
Department, USAID, the Development Finance Corporation, the
Bureau of Industry and Security have the tools and resources
they require to effectively compete with the People's Republic
of China.
So what does effective competition look like? An effective
China strategy is one that invests in the leverages, and that
leverages our strengths and one which does not exaggerate the
threats we face. A smart strategy is not simply about
responding to Chinese actions or provocations. It is one where
the United States leads by representing a positive agenda and a
vision for the rest of the world. If we are simply in the
countering China business, we are not living up to our
responsibilities to the American people.
First and foremost, we must complete and compete
diplomatically. Our alliances and partnerships are our
superpower and something Beijing cannot replicate. Instead of
taking unilateral steps that will be less effective and
alienate us from our allies and partners, we must focus on
working collectively to isolate Beijing.
Our generals are constantly telling me that the State
Department helps make their jobs much easier. So I hope this
committee will pass a bipartisan State authorization bill and
work to ensure that we adequately staff and resource our Indo-
Pacific strategy.
Second, we must show up diplomatically and stand up
rigorously for our interests. We need to work with our allies
and partners and in multilateral institutions to advance U.S.
interests and uphold a rules-based order. Whether it is about
calling out Beijing's genocide in Xinjiang, its provocations of
the Taiwan Strait and the South China Sea, or its coercion of
sovereign States, the United States cannot be silent about the
PRC's problematic behavior.
The Biden Administration deserves credit on this front. It
has directly shared our disagreements with China while
strengthening our diplomatic partnerships, whether by elevating
the Quad, starting new initiatives like Aukus, or elevating our
relations with partners in ASEAN and the Pacific Islands
through high level summits and strategies.
Third, it is critical that the United States remain the
responsible player in this competition. We all know what the
PRC is going to do. But the world needs to know what the United
States will play by the rules, that we will remain open to
cooperation with Beijing on areas of shared interests and
global concern, and that we are trying to keep channels of
communications open to ensure that this competition does not
slide into conflict.
Fourth, we need to recognize that war with China would be a
policy failure of catastrophic proportions. It would cost
countless American lives and devaState our economy. We must
make clear that we do not seek war, and we will work to avoid
it. However, we will continue to stand up to the PRC's
aggression against our interests.
And finally, we must not engage in a race to the bottom
with the Chinese Community Party when it comes to our values. I
have been deeply troubled by the spike in anti-Asian violence
spurred by the political rhetoric around COVID-19. I was
similarly dismayed when one of our colleagues just last week
questioned the loyalty of Congresswoman Judy Chu. There is no
place for that in our democracy and in our debate. We should
celebrate our diversity and safeguard our freedoms to present
and clear contrast with the CCP.
And what our committee does, it matters. It matters because
both the country and the world are watching.
And with that, I look forward to today's testimony. And I
thank Chairman McCaul. And I yield back the balance of my time.
Chairman McCaul. I thank the ranking member.
I have a housekeeping measure. Based on our consultation,
for purposes of Section 4820(h)(2)(B) of Title 50 of the United
States Code, premised upon the national interest determination
described therein, I ask unanimous consent that the committee
authorize a disclosure of some non-business confidential
aggregate data derived from documents provided to the committee
by the Department of Commerce that summarizes export licensing
decisions concerning those on the entity list as reflected in
the BIS licensing data report breakdown document that has been
provided to members.
Such authorization does not include the disclosure of the
applicant names, trademark, or brand names, item descriptions,
or ECCN, or license numbers.
Without objection, so ordered.
Other members are reminded--the ranking member is
recognized.
Mr. Meeks. Yes. Thank you, Mr. Chairman.
Let me just say quickly that while I do not oppose the UC,
I do want to provide some context as to what the data is and
what it represents. And I have concerns about whether the
information being authorized for disclosure is of utility for
the public on its own. In fact, I am concerned that it can, in
fact, be misleading and politicized without the adequate
context.
So we have asked BIS to provide an explanatory document
that will accompany the data being disclosed on the record. And
it is important that the data be considered alongside the
context regarding BIS's regulatory and licensing process.
Chairman McCaul. I appreciate the ranking member's remarks.
And we just want to see the data. It has never--we got one
production of a 6-month window of time. And I look forward to
your compliance with this committee, sir, Secretary Estevez.
And we have had great conversations about this issue.
Other members of the committee are reminded that opening
statements may be submitted for the record.
And we are pleased to have a distinguished panel of
witnesses before us today on this important topic. First, Mr.
Daniel Kritenbrink is the Deputy Assistant Secretary for East
Asia and the Pacific at the Department of State. Mr. Alan
Estevez is Undersecretary of Commerce for Industry and
Security. Mr. Scott Nathan is the Chief Executive Officer of
the U.S. International Development Finance Corporation. And Mr.
Michael Schiffer is USAID Assistant Administrator of the Bureau
for Asia.
I want to thank all of you for being here today. Your full
statements will be made part of the record. And I will ask that
each of you keep your remarks to 5 minutes in order to allow
time for the members to ask questions.
I now recognize Mr. Kritenbrink for his opening statement.
STATEMENT OF THE DANIEL J. KRITENBRINK ASSISTANT SECRETARY,
BUREAU OF EAST ASIAN AND PACIFIC AFFAIRS, U.S. DEPARTMENT OF
STATE
Mr. Kritenbrink. Thank you, Mr. Chairman. Chairman McCaul,
Ranking Member Meeks, distinguished members of the House
Foreign Affairs Committee, thank you for this opportunity to
testify before you today. I am grateful for the bipartisan
approach of this committee regarding our competition with the
People's Republic of China.
The PRC represents our most consequential geopolitical
challenge, because it is the only competitor with both the
intent and increasingly the economic, diplomatic, military, and
technological capability to reshape the international order.
The scale and scope of the challenge posed by the PRC as it
becomes more repressive at home and more aggressive abroad will
test American diplomacy like few issues we have seen. We will
effectively compete with the PRC and are focused on managing
this relationship responsibly. In doing so, we have emphasized
the importance of open, sustained, and empowered channels of
communication.
To that end, Secretary Blinken met with Wang Yi, the
Director of the Chinese Community Party's Central Foreign
Affairs Office, on the margins of the Munich Secretary
Conference on February 18th. Their meeting was exceptionally
direct.
Regarding the unacceptable and irresponsible violation of
U.S. sovereignty and international law by the PRC high altitude
surveillance balloon, the secretary made clear that the United
States will not stand for any violation of our sovereignty and
that such an incursion must never happen again. We have also
exposed the breadth of the PRC's surveillance balloon program,
which has intruded into the airspace of more than 40 countries
across 5 continents.
The secretary condemned Russia's brutal war against
Ukraine. And he warned about the implications and consequences
if China provides material support to Russia or assistance with
systematic sanctions or export controls evasion.
The secretary also reaffirmed there has been no change to
our longstanding One China Policy, which is guided by the
Taiwan Relations Act, the Three Joint Communiques, and the Six
Assurances. He underscored our fundamental interest in
maintaining peace and stability across the Taiwan Strait.
The secretary reiterated President Biden's statements that
the United States will compete and unapologetically stand up
for our values and interests, but that we do not want conflict
with the PRC and we are not looking for a new cold war. At the
same time, the secretary reiterated our commitment to
maintaining open lines of communication at all times so as to
reduce the risk of miscalculation that could lead to conflict.
We are continuing to implement the core pillars of our PRC
strategy, invest, align, compete.
With your help, we are investing in the foundations of our
strength at home with bipartisan bills like the CHIPS and
Science Act, the Inflation Reduction Act, and the Bipartisan
Infrastructure Law.
We are aligning with allies and partners on our approach
abroad to build collective resilience, close off
vulnerabilities, bolster security ties, and advance a shared
affirmative vision.
By harnessing these key assets, we are competing with the
PRC to defend our interests and build our vision for the
future.
We will continue standing up to PRC threats and
provocations, whether in the South and East China Seas or
across the Taiwan Strait, to its economic coercion aimed at
partners in Asia, Oceania, Europe, and elsewhere, and to
China's attempts to undercut U.S. and allied technological
advantages, and exploit our cutting edge technologies to
advance the People's Liberation Army military modernization.
We will continue to support the people of Hong Kong as they
confront the steady of erosion of their rights and fundamental
freedoms. And we will continue to call out the egregious and
unacceptable human rights abuses across China, including in
Xinjiang and Tibet. And we will hold accountable those involved
in these practices.
Our Indo-Pacific strategy, by contrast, presents the
positive, affirmative vision we have for a region that is free
and open, connected, secure, prosperous, and resilient.
Through our Indo-Pacific strategy, we are building regional
capacity and resilience, including to the challenges posed by
the PRC, by defending democracy and the rule of law,
strengthening the collective capacity of allies, partners, and
friends, as well as the regional architecture, through
collaboration with the Quad, ASEAN, and Partners in the Blue
Pacific, driving shared prosperity through the Indo-Pacific
economic framework, bolstering regional security through
enhanced maritime domain awareness, and more.
These efforts support the ability of our allies and
partners to make sovereign decisions in line with their
interests and values, free from external pressure, while
meeting their economic and development needs.
With the resources and authorities provided by this
committee and the Congress, we will continue taking concrete
actions to meet this moment. Again, we recognize the scale and
scope of the PRC challenge will continue to grow.
We will compete vigorously with the PRC while managing that
competition responsibly. And we remain willing to explore
cooperation with Beijing where it is in our interest to do so.
In closing, let me reiterate our commitment to approaching
our PRC strategy in a way that is consistent with our values,
with bipartisan efforts at home, and in lockstep with our
allies and partners abroad.
There are few issues where bipartisan action is more
critical. In coordination with the U.S. Government departments
and agencies, this committee, and colleagues across Capitol
Hill, we are confident we can sustain the resources and
policies needed to prevail in our competition with the PRC.
Thank you very much.
[The prepared statement of Mr. Kritenbrink follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman McCaul. Thank you, Mr. Kritenbrink.
I now recognize Mr. Estevez for his opening.
STATEMENT OF ALAN F. ESTEVEZ, UNDERSECRETARY OF COMMERCE FOR
INDUSTRY AND SECURITY, U.S. DEPARTMENT OF COMMERCE
Mr. Estevez. Thank you, Chairman. Chairman McCaul, Ranking
Member Meeks, distinguished members of the committee, thank you
for inviting me to testify this morning. This is my second time
appearing before this committee as Undersecretary for Industry
and Security. It is an honor for me to lead the dedicated
personnel of the Bureau of Industry and Security in the
Department of Commerce as we take on the challenge of the
People's Republic of China.
As President Biden notes in the 2022 National Security
Strategy, the People's Republic of China harbors the intention
and increasingly the capacity to reshape the international
order in favor of one that tilts the global playing field to
its benefit, even as the United States remains committed to
managing the competition between our countries responsibly. The
NSS goes on to State that the PRC presents the most
consequential geopolitical challenge.
Given the PRC's capability and intentions, as I told this
committee in my July 2022 testimony, I have directed and am
currently overseeing a top to bottom review of our export
control policies related to the PRC.
While my formal written statement goes into more detail,
Commerce is using our regulatory and enforcement authorities to
confront the PRC's military-civil fusion program and related
efforts to obtain advanced technologies for military
modernization, human rights violations, and other activities
that threaten U.S. national security.
In October of last year, we announced significant, robust,
new controls related to advanced computing and semiconductor
manufacturing. We added new controls on certain high capability
chips, components going into PRC supercomputers, semiconductor
tools, and items going into the PRC's advanced fabrication
facilities, or FABs.
We also imposed restrictions on certain activities of U.S.
persons, which limits the ability of Americans to support the
maintenance and operation of these technically complex machines
at the PRC's advanced FABs.
The threats posed by the PRC's military-civil fusion
strategy and its stated intentions for global dominance in
artificial intelligence are real. Unfortunately, many of the
powerful computer chips that come in consumer goods can also be
the foundation of systems for mass surveillance in Xinjiang or
modeling and development of nuclear missiles and other weapons.
So let me be clear. These actions were taken to protect
national security and foreign policy interests of the United
States. We are not engaged in economic warfare as the PRC
government often claims.
Our export controls work best when applied on a
multilateral basis with allies and partners, as demonstrated by
our 38-member coalition's response to Russia's atrocious and
illegal war in Ukraine. Conversations about coordinating
substantially similar controls by critical allied countries are
confidential due to their sensitivity. I would be happy to
brief further on this in an appropriate setting with the
appropriately cleared staff.
I would also note that we have implemented multilateral
controls on certain items and electronic design software
necessary for the production of advanced semiconductors.
In addition to these consequential rules, we have been
vigorous in identifying and adding entities to the PRC to our
entity list, which imposes requirements that exporters obtain
licenses approved by BIS and our colleagues at the Department
of Defense, State, and Energy before exporting items subject to
our jurisdiction.
Since the beginning of the Biden Administration, we have
taken aggressive posture, adding 160 PRC parties to the entity
list. Approximately 25 percent of all PRC listed entities were
added during this Administration.
Finally, we have been vigorous in our enforcement efforts,
both through our own administrative and civil authorities in
imposing criminal penalties in partnership with the Justice
Department.
My north star at BIS as it relates to the PRC is to ensure
that we are doing everything within our power to prevent
sensitive U.S. technologies from getting into the hands of
malign actors. We will continue to review our export control
policies, assess the threat environment, and work across
Federal Government with allies and partners, and act to protect
U.S. national security.
I look forward to your questions.
[The prepared statement of Mr. Estevez follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman McCaul. Thank you, Mr. Estevez.
I now recognize Mr. Nathan for his opening statement.
STATEMENT OF SCOTT NATHAN, CHIEF EXECUTIVE OFFICER, U.S.
INTERNATIONAL DEVELOPMENT FINANCE CORPORATION
Mr. Nathan. Thank you, Mr. Chairman. Ranking Member Meeks,
and members of the committee, thank you for inviting me here
today. I appreciate this opportunity to testify about how the
Development Finance Corporation is meeting the challenge posed
by the People's Republic of China as it seeks to expand
influence in the developing world.
I would like to begin by thanking this committee for its
central role in creating the DFC through the passage of the
BUILD Act. DFC launched just over 3 years ago. And strong
bipartisan support since then has enabled DFC to build the
capacity to better pursue the dual mission Congress gave us, to
focus on making positive development impact in the poorest
countries of the world and at the same time advance the
strategic interests of the United States.
We meet this mission by financing private sector projects
across regions and sectors. I want to emphasize this point.
Unlike the development approach of the PRC, which often burdens
countries with unsustainable, sovereign-level debt, DFC's
efforts are directed toward supporting private entities,
mobilizing private capital, and through that activity, building
resilient market economies.
We are guided by the belief that developing a robust
private sector is the best way to alleviate poverty over the
long term and strengthen the economic and strategic positions
of our partners around the world. DFC's investments also carry
our values of openness, respect for local laws and conditions,
and high environmental, labor, and integrity standards.
That stands in sharp contrast to what the PRC offers. There
is no doubt that the PRC has put an immense amount of money
into projects around the world through its Belt and Road
Initiative. But they are using a different model. What they
offer frequently comes laden with burdens, not all of them
financial. When the PRC's State-controlled entities put money
into projects, they often bring their own workers rather than
create local jobs and show little respect for community,
environmental, or labor standards. When the workers go home,
the projects left behind are often inappropriate for local
conditions and are poor quality.
As I travel in our markets and meet with leaders from
developing nations, it is clear that many would prefer an
alternative to what the PRC offers them. The key is that we
need to show up and offer them that choice. That is why you
created DFC. And that is what we are striving to do every day.
And we have made significant progress in close partnership
with you. Last year DFC committed to financing 183 transactions
totaling over $7.4 billion, a record level of investment and
associated impact. This was across our product range, including
direct lending, loan guarantees, political risk insurance, and
importantly our new tools of technical assistance grants and
equity investments.
We are also working across sectors, from infrastructure and
energy to health care and support for small business, pursuing
private sector opportunities that improve people's lives and
strengthen the strategic position of our allies and partners.
In my written testimony, I describe many of DFC's recent
transactions of particular strategic importance. I would like
to now highlight just a few.
Strategic seaport investments are a high priority for us.
And DFC recently committed to lend $150 million to finance the
expansion and modernization of a container port in Ecuador. In
addition to ports, we are pursuing strategic and developmental
infrastructure investments around the world, including
airports, railways, and toll roads.
In the 21st century, we also need to think about
infrastructure more broadly, making investments to close the
digital divide in a secure and open manner. To that end, DFC is
supporting companies which have out-competed Chinese suppliers
for cell phone networks, data centers, and smart city systems.
For example, DFC recently worked with our Australian and
Japanese counterparts to enable Telstra to secure the digital
networks of six Pacific Island nations.
DFC financing is also promoting access to reliable energy
that is cleaner, more sustainable, and more secure. In the last
year, amongst other projects, we financed non-Russian gas
supplies for Moldova, enabled the construction of new solar
panel manufacturing plant in India, free from the problems of
the Chinese supply chain, and expanded our support for a gas-
fired power plant in electricity-starved Sierra Leone.
DFC is also actively pursuing new opportunities in nuclear
energy. And we are working to sustainably diversify the supply
and processing of critical minerals away from dependence on the
PRC.
We recently invested $30 million in the latest round of
equity financing for U.S.-aligned critical minerals platform,
TechMet Ltd., to support their investment in nickel and cobalt
production in Brazil.
So, to conclude, these are just some examples of the type
of transactions that offer an alternative to the activity of
the PRC in the developing world. I am proud of the work that
the fantastic team at DFC has done through these transactions
and many others. And although DFC is just 3 years old, we have
made great progress and are building on a record year of
impact. But I know we can and must do more.
I welcome the opportunity to keep the members of this
committee informed of our progress. Thank you. And I look
forward to your questions.
[The prepared statement of Mr. Nathan follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman McCaul. Thank you, Mr. Nathan.
I now recognize Mr. Schiffer for his opening statement.
STATEMENT OF MICHAEL SCHIFFER, ASSISTANT ADMINISTRATOR, U.S.
AGENCY FOR INTERNATIONAL DEVELOPMENT
Mr. Schiffer. Thank you, Mr. Chairman. Chairman McCaul,
Ranking Member Meeks, distinguished committee members, thank
you for inviting me here today to testify on USAID strategy for
engagement in the Indo-Pacific and for strategic competition
with the People's Republic of China.
As we enter the new year, there is no shortage of global
challenges, Russia's further invasion of Ukraine, which has
sparked a global food emergency, a climate crisis, which has
become a threat multiplier, and a global pandemic, from which
we are now emerging, but which for a moment allowed autocratics
to ride high and seek to control as the regular patterns of our
lives were upended.
Perhaps nowhere are these challenges more evident than with
the PRC under Xi Jinping's hyper-nationalist authoritarian
rule, intent to rewrite for its own narrow advantage the
existing global rules and norms.
In many significant respects, the challenge we face from
the PRC, geoeconomic as much as geopolitical or geostrategic,
is unlike any we have previously dealt with as a Nation.
For USAID, the response to this challenge does not begin
with the PRC however. It begins with our own nation's value
proposition, that democracy delivers, and a belief that
equipped with our ideas and our ideals and with congressional
support, the necessary resources, we can drive development
diplomacy that elevates democratic norms and supports a vision
for a rules-based international order congruent with our
Nation's interests and values.
And our results demonstrate our success. Eleven of our top
15 trading partners today benefited from U.S. and USAID's
foreign assistance as they developed. That I would offer is
what successful global leadership looks like.
Development outcomes in a very real sense are where
territorial integrity, sovereignty, and a free and open
architecture live. USAID does not weaponize development
assistance for our own benefit or in a transactional way to the
detriment of our partners, as the PRC often does. At the same
time, we are very clear-eyed about that what Beijing does
abroad can have a detrimental impact on our own affirmative
development agenda and the well-being of our partners.
In response, we are committed to work with our allies and
partners to shape the environment in which Beijing operates and
in so doing advance our vision for an open, transparent, and
rules-based world.
As we contemplate the challenges before us for the balance
of this century, there are four pillars to our approach.
First, USAID is prioritizing new development partnerships
to accelerate the flow of capital into the investments that are
critical for success in the 21st century. USAID's model enables
competition, fair and transparent dealmaking, free market, and
incentivizes investments and creates opportunities for American
workers. Through enterprise-driven development, USAID is
reducing dependency on PRC debt diplomacy, especially for
infrastructure.
Second, USAID is improving assistance outcomes through
digital technology and open and inclusive and secure digital
ecosystems. Our work enables U.S. firms to bring world leading
technologies to developing countries and to drive investment,
especially in key emerging markets.
Third, USAID is enabling partner countries and local
communities to become increasingly independent of and resilient
to authoritarian influence. We identify and address malign and
corrupting authoritarian narratives. And we amplify the
positive impacts of democratic governance.
And finally, we support vibrant civil societies. We support
anti-corruption efforts, human rights, and inclusive, locally
driven and locally owned development, including gender equality
and women's economic empowerment, all of which are vital
enablers for sustainable development.
In short, USAID is elevating our contributions, doubling
down on our commitment, and appealing to the best parts of our
rooted history in the countries where we work. That is how we
will continue to show our value, bolster American leadership
around the world, and outcompete the PRC in the years ahead.
Thank you for the opportunity to represent USAID and to
work with members of this committee in a bipartisan fashion to
advance our Nation's interests and values around the globe. I
look forward to answering any questions you may have.
[The prepared statement of Mr. Schiffer follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman McCaul. Thank you, Mr. Schiffer.
I now recognize myself for 5 minutes.
To Mr. Estevez and Kritenbrink, I just attended the Munich
Security Conference where we witnessed a showdown between the
Chinese Foreign Minister and the Secretary of State over the
recent spy balloon that happened across this country, spying on
this Nation, and then the advanced warnings their intelligence
has provided that China is now considering providing lethal
weapons to Russia.
Clearly China is supporting Russia in their war against
Ukraine currently by selling them satellite technology, micro
electronics, and buying Russian energy. I know that seven PRC
companies were put on the entities list because they were
contributing to Russia's military and defense industrial base.
I also commend the Secretary of State for saying, warning
China. But I hope that if that happens, that the information
will be declassified so the American people can see what is
really happening.
My question to both of you is, what is the precise nature
of the CCP support to Russia in this conflict, and what is
State and BIS doing about it? And second, what actions would
deter the PRC from providing these lethal weapons? Mr.
Kritenbrink.
Mr. Kritenbrink. Mr. Chairman, thank you for your
questions.
Mr. Chairman, as you indicated, the secretary made very
clear in Munich in his meeting with Director Wang Yi the
consequences and the implications if China were to provide
lethal support to the Russian military for use in its barbaric
invasion of Ukraine.
The secretary has also noted publicly that in many ways
China has been supporting Russia's war in Ukraine from the
beginning through its dissemination of Russian propaganda and
its own use of disinformation to support Russia's war there and
to blame inappropriately the war on the West, the United States
and NATO. We have seen China stepping up its economic
engagement in purchases from Russia.
And then also, Mr. Chairman, you recognized some of the
countries that we, or some of the entities rather, PRC entities
we put on the entities list for providing the assistance that
they did to Russia, including one firm, Spacety, that was
providing satellite imagery to the Wagner Group.
So we have made very clear that we will not hesitate to
take steps to hold to account PRC entities that assist Russia.
And we have made that very clear to the Chinese. The secretary
certainly did so in Munich. And, of course, the president and
the national security advisor have done so directly to the
Chinese on previous occasions.
Chairman McCaul. And I think we need to make it clear to
China this will not be tolerated, if in fact it is happening. I
know it is happening with respect to the seven entities,
companies listed on the entities list, but with respect to
lethal weapons, that it is not acceptable.
Mr. Estevez, do you have any comments on the seven
companies?
Mr. Estevez. Yes, it is actually 12 companies----
Chairman McCaul. Now it is 12.
Mr. Estevez. Yes, we had some back in December that we also
put on.
Chairman McCaul. OK.
Mr. Estevez. Plus one that was supplying parts to the
Iranian drone program, so 13 if you count that one.
And we have made clear, as my colleague just said, that we
will not hesitate to put companies on the entity list as soon
as we see factual data that they are supplying Russia. And we
are looking across all third parties, but especially China in
that regard.
Chairman McCaul. I am glad you mentioned the Iranian drones
that are in Crimea, that the Ukrainians, I just back from
theater, cannot attack the Iranian drones without the longer
range artillery.
But having said that, components were found in these
Iranian drones that were from the United States of America and
also the spy balloon and also the hypersonic built on the
backbone of American technology. We got to stop doing this.
They steal it. We do not have to sell it to them.
We got a snapshot of your, Mr. Estevez, from January 2022
to March 2022, BIS denied 8 percent of licenses applications
and approved more than $23 billion worth of license
applications to the PRC companies on the entities list.
How does this align with your statement that ``we are doing
everything within BIS's power to prevent sensitive U.S.
technologies from getting in the hands of PRC military,
intelligence services, or other parties' '?
Mr. Estevez. First, let me quickly address the Iranian
drone thing. As you know, we put companies in Iran on the
entity list, invoking the foreign direct product rule, so that
at ports that are American branded, not necessarily made in
America, also cannot go to that program.
For the point on licensing, which, of course, is an
interagency process that is done with my colleagues in Defense,
State, and Energy, we have specific licensing rules. The entity
list is not a blanket embargo. So going on the entity list may
have a particular rule.
And in the case of Huawei and SMIC, there were particular
rules. SMIC is now, of course, subject to the rule that we put
out in October on semiconductor manufacturing. The licensing
rule, the previous Administration that still stands for Huawei,
allows things below 5G, below cloud level to go. And, you know,
I will say that all those things are under assessment.
Chairman McCaul. OK. Thank you. I see my time has expired.
The chair recognizes the ranking member.
Mr. Meeks. Thank you, Mr. Chairman.
And I just want to say that, because I hear the chairman,
particularly with the work that BIS has. And one of the things
I think that is important, and maybe we can do this in a
bipartisan way, that, you know, for me, BIS may need additional
resources for all of the work that we are telling them that
they need to do, et cetera. So maybe we can talk about that at
some point and figure out how we can make sure that they have
more resources to do all the work that Congress is asking them
to do. So we will talk about that later.
But let me ask my question first to Mr. Kritenbrink, to the
secretary. I concur that I am very concerned about some of the
conversations that we have had with China contemplating giving
Russia weapons. And as indicated, you know, part of my
viewpoint is to make sure that is a line that cannot be
tolerated, if they are giving Russia the weapons to pursue
their illegal war.
Are we talking to and preparing our allies also so that it
is not, if there is a sanction, and that is what I hear, part
of it will take place as sanctions, so if there are sanctions
to be placed, if China does step over that line, so that it is
not just the United States, that if Russia, that China feels
the full force and power of us and our allies, similarly as
Russia is with NATO, EU, and our other allies in fighting the
war in Ukraine?
Mr. Kritenbrink. Yes, sir, Mr. Ranking Member. Thank you
for your question. And, again, when we look at our invest,
align, compete strategy vis-a-vis China, I think one of the
most important pillars and certainly a real focus in the State
Department is the align pillar. So we are incredibly aligned
with allies and partners and friends, including on the
situation of Russia's illegal war in Ukraine. And, Mr. Ranking
Member, it's been quite striking to me how many partners in
Europe and Asia increasingly recognize that a security matter
in Europe cannot be separated from the security situation in
Asia.
So, yes, we have been in touch with our key partners in
both Europe and Asia on this matter, and I think it's,
obviously, everything that happens in Ukraine and Russia's
illegal war there remains a matter of significant concern. And
we've shared with them our concerns regarding China's
consideration in providing this illegal assistance, and I think
I'm confident to say that many partners share our concerns.
Mr. Meeks. So the other issue that I'm really, you know,
when I'm watching what the PRC is doing, the economic coercion
that they're having with our allies, and I was proud, along
with Representative Ami Bera and Representative Tom Cole,
bipartisan way, to introduce the Countering Economic Coercion
Act of 2023 which provides the President with new tools to
provide rapid economic support to partners and allies facing
economic coercion from the PRC. So how are your agencies
preparing for the next time that we see the PRC economically
coerce other nations over, for example, Taiwan and what
counter-coercion policies, responses, and tools are at your
agency's disposal for when this happens again, as we saw that
took place with Lithuania, and are there additional authorities
you require from Congress that would give you more flexibility
to support our allies and partners who have been targeted by
Beijing's economic coercion?
Mr. Kritenbrink. Mr. Ranking Member, I'll respond first and
see if other colleagues want to chime in. Mr. Ranking Member, I
fully agree that this is a significant threat posed by the PRC.
Beijing's increasing willingness to weaponize many aspects of
its external engagement, including its economic engagement, is
of deep concern. We've seen a number of countries who have been
subject to economic coercion. Certainly, you've mentioned
Lithuania. That's the most recent example, but many other
partners around the world, including Australia, Japan, the
Philippines, and others have been subjected to this.
At the State Department, we're developing a range of tools
to help respond to this. I know in the Lithuania case it was
helpful that we were able to provide Eximbank credits to assist
Lithuania, and we were able to organize reverse trade missions
and the like to assist them, and we certainly look forward to
working closely with Members of Congress to further develop
those tools because this challenge will only grow, Mr. Ranking
Member.
Mr. Meeks. And, last, what is the Administration doing to
support the people of Hong Kong in the face of Beijing's
growing crackdown there?
Mr. Kritenbrink. Well, Mr. Ranking Member, we share your
concern at the erosion of rights that we've seen over the last
few years in Hong Kong, which is deeply concerning. We continue
to speak out to condemn those actions. We have held to account
officials who have implemented the new national security law
and other draconian measures by subjecting them to U.S.
sanctions. We'll continue to speak out, and we'll continue to
stand with the people of Hong Kong so that their rights are
observed.
Mr. Meeks. My time has expired. I yield back, Mr. Chairman.
Chairman McCaul. Thank you, Ranking Member. The Chair now
recognizes Mr. Smith.
Mr. Smith. Thank you very much, Mr. Chairman. Secretary
Kritenbrink, if I could ask you, we all know that China targets
certain industries. They've done it with the pharmaceuticals,
they've done it in a whole host of other products and issues
that they would like to control the flow of money and the flow
of research. They steal just about everything by violating
international property rights.
But let me ask you the question with regards to
pharmaceuticals. Where are we in standing up either in
countries that are friends or within a domestic capability
those important pharmaceuticals and those chemicals that are
all-important in the curative aspect of it, and I would include
antibiotics there, as well. We know some of it is transshipped
through other countries from China, but where are we on that?
Second, no where in Africa is the CCP's malign impact more
egregious than the DRC. I've been to the DRC. I've been to the
mines. I've been not to the cobalt mines but others previously.
And I chaired a hearing last Congress as part of the co-
chairman of the Tom Lantos Human Rights Commission on the issue
of cobalt, and the fact it's something on the order of 35,000
children, forced labor for children, many of whom get sick,
some die. They do not have any protective equipment. They
shouldn't be subjected to child labor anyway. And then the
adults, something on the order of 200,000, are mining cobalt,
all of which goes to China for refinement for batteries. You
know, no matter where anybody comes down on EVs, you know,
they're on the roads, they're everywhere, growing in number.
But the supply chain should in no way be linked to such
horrific practices as forcing children into those mines.
And I'm wondering, I know there's been a standup of some
kind of counselor or some organization. I do not believe
anything has been done or will be done until that supply chain
is attacked in a way that we find other sources or we make sure
that all of this exploitation ends. Unfortunately, in the D.R.
Congo, there's a great deal of buying of the government, and I
believe that to be true. And, you know, when money talks, we do
not have anything called the Foreign Corrupt Practices Act or
anything that even comes close to it, it's easy to buy off a
corrupt official.
And, finally, on the implementation of a Hong Kong Human
Rights and Democracy Act, are there gaps or are there things
that we need to be doing to advance further that law? I was the
House sponsor of it, and, when it passed, it took years to get
passed. Introduced in 2014, everybody told me it was a solution
in search of a problem. When we finally did, it was very many
days late and lots of dollars short, but it still is a useful
tool.
If you could speak to those three issues.
Mr. Kritenbrink. Thank you, Congressman. On
pharmaceuticals, I think the general point that I would make,
sir, and it gets at your question about the DRC, as well, is
that we have tried to make clear to countries around the world
that they need to have diverse supply chains. And so promoting
the diversity of supply chains gives countries options and
makes them less subject to coercion and undue influence. So
that is the general principle that animates much of our work.
Now, on the details of pharmaceuticals and of the
activities in the DRC, I am not an expert on either issue, but
I will just underscore our message to countries is you should
not be overly dependent on any one country or any one entity
for your supply chains because it makes you subject to undue
influence, No. 1. No. 2, whether it's countries in Africa,
Asia, or Latin America, we do encourage them to understand the
implications of their engagements with the PRC, PRC
investments, loans, and other activities that, again, could
make countries subject to undue leverage and influence, which I
think is the root of the problem of many of the issues you've
outlined there.
On the Hong Kong Human Rights Protection Act, thank you,
Congressman, for your work there. I hope, through my comments,
I've indicated how deeply concerned we are by the continued
erosion of rights in Hong Kong, the continued harassment and
arrest of individuals for simply speaking their mind and
standing up for their rights. We look forward to working with
you and other members to continue to implement the Act and to
stand up for the values that we hold dear.
Mr. Smith. In the final 10 seconds, there has been an
announcement that Ford will enter into a contract with China or
Chinese companies with regards to cobalt. How can we ensure
that none of that cobalt is coming on the backs of African
children?
Mr. Kritenbrink. Well, thank you, Congressman. Perhaps I
should take that issue back with me. I'm happy to look into it
and report back to you. Thank you, sir.
Chairman McCaul. The Chair now recognizes Mr. Sherman.
Mr. Sherman. Mr. Kritenbrink, China's hot. The Pacific
Islands rarely are in terms of the attention. As co-chair,
along with Mr. Bera, of the Pacific Islands Caucus, I'd like to
know, now that what lies between the United States and China is
the Pacific Islands and China is certainly making a play there
in several different respects, can you assure us that you're
giving a high priority to actually getting those compacts
completed and renewed? Hopefully, that's a yes answer.
Mr. Kritenbrink. Congressman, it's an emphatic yes. We
recognize the importance, obviously, of the Pacific Islands,
and we certainly recognize the importance of the freely
associated States. You may have seen, Congressman, that we have
concluded MOUs with all three of the freely associated States,
and we look forward to working with Congress to complete those
deals.
Mr. Sherman. It should be front burner.
Mr. Kritenbrink. Yes, sir. Yes.
Mr. Sherman. Mr. Chairman, I thank you for distributing a
sheet describing how China controls our corporations, but
there's much to be added. You point out that China forces a
change slightly in marketing of Top Gun as to how it's marketed
in China. Now and then, a movie is edited for presentation in
China, so we figure China is controlling what the people of
China see. No, China controls what Americans see and what the
world see by limiting American studios to 40 movies going into
China every year.
What that means, of course, is nobody is going to make a
movie, another movie about Tibet because it's not going to be
shown in China. No, it means no studio is going to make any
movie that offends China because none of their movies will then
be admitted to China. And so China, you think we have a First
Amendment in this country. In Beijing, they control our
studios. Make a movie they do not like, none of your movies get
in.
JPMorgan is told you better advise your clients to invest
in China 15 percent of their portfolios, or you won't be doing
business in China. And I know that Lithuania is a success, but
it's a small country, and we're talking about a very small
amount of money. There are hundreds of billions dollars lost by
American corporations who are treated unfairly in China or that
would be lost if those corporations did not change their
behavior unfairly in order to meet China's demands, and we need
a program to collect billions and tens of billions and hundreds
of billions from China so that we can make sure that every
American corporation that's unfairly treated either currently
or that dares to do something like maybe mention the Uyghurs is
compensated for that unfair treatment.
Mr. Kritenbrink, there's a considerable dispute as to
whether COVID came from a wet market or came from the lab. The
reason for that dispute is that China was absolutely opaque.
They failed to cooperate, they failed to come clean. Millions
of people died around the world, and a substantial percentage
of them died because of China's obfuscation at the beginning.
The State Department has done almost nothing to tell the world
how China's responsible, not maybe for the virus but certainly
for their obfuscation and failure to cooperate afterwards. Is
the State Department going to do a better job of informing the
world of the Chinese Communist Party's responsibility here?
Mr. Kritenbrink. Congressman, thank you. On the issue of
COVID, we have long stated that China needs to do a better job
of being transparent.
Mr. Sherman. But do people in India and Europe and South
America who have lost relatives know that those relatives might
be alive if China and its Communist Party had cooperated with
the world in the first few months? The answer to that, I'll
answer for you, is no because the State Department has done
very little to tell the world.
Third question, and that is Taiwan. Would the
Administration support an immediate declaration now that if
Taiwan is blockaded or invaded that that immediately ends MFN
for China? Don't American corporations deserve to know whether
that would be the case?
Mr. Kritenbrink. Congressman, on your last question, I'm
happy to talk about our approach to the Cross-Strait situation
in Taiwan. As I said in my remarks, we're committed to our One
China policy, our longstanding One China policy----
Mr. Sherman. I'm asking you whether you--people are trying
to run companies around--they deserve to know whether MFN for
China would be ended if China blockades or invades. Can you
give them that answer, or do they have to fly blind?
Mr. Kritenbrink. What I can say, Congressman, is we are
committed to maintaining peace and stability across the Taiwan
Strait and----
Mr. Sherman. I think they already knew the----
Mr. Kritenbrink [continuing]. Taking a range of steps to do
that.
Mr. Sherman. They had already heard that. Thank you.
Mr. Kritenbrink. Thank you.
Chairman McCaul. The Chair recognizes Mr. Wilson.
Mr. Wilson. Thank you, Chairman Mike McCaul, for your
leadership, and Ranking Member Greg Meeks for this bipartisan
hearing on something so important as we understand the
significance of the challenge of the Chinese Communist Party,
also the relationship, actually, to the war in Ukraine.
In fact, my appreciation of the people of China, my father
served in the Flying Tigers in World War II, and so it was
really, I grew up with such an appreciation of the Chinese
people. He served in Kunming, (inaudible). And growing up, I
just grew up with such, his affection for the people of China.
And so we want the best for the people of China, but that
obviously means we also want a free and independent Taiwan.
And I appreciate the recognition a few minutes ago about
Lithuania, how they've been taking a lead on providing to stop
Chinese Communist Party influence in Europe. And I was, just
last week, in Prague and the Czech Republic. They, too, are
working hard to promote the independence of the people of
Taiwan opposing the Chinese Communist Party influence.
With that in mind, I want to thank all of you for being
here today, but I believe the world is in a global competition
between democracies with rule of law opposed by authoritarians
with rule of gun. Today, the conflict is war criminal Putin's
mass murder in Ukraine. Ukraine must be victorious to deter the
Chinese Communist Party from attacking the 24 million people of
Taiwan, and Ukraine must be victorious to stop Iran from its
efforts to vaporize Israel as it develops intercontinental
ballistic missiles to devaState American families.
With that in mind, I would like to ask Secretary
Kritenbrink, the Chinese spy balloon endangered the security of
American families from Guam to my home community of South
Carolina. And, yet, the President said he advised not to shoot
down the balloon on January 28th when it was still over the
Alaskan Aleutian Islands and not until over the U.S. mainland.
What was the reason for such a delay?
Mr. Kritenbrink. Congressman, thank you. On the balloon,
I've been honored to brief the House before on this issue
together with a number of colleagues, and I'll reState here we
tracked, we detected, we surveilled, and then we took down the
Chinese high-altitude balloon when it was safe to do so. The
President made a decision on the advice and in consultation
with our military commanders. We took the steps to protect
ourselves, to mitigate against any threat posed by that balloon
and then made the decision, again, to take down that balloon
once it was safe to do so.
It's a massive structure, 200 feet tall. The payload
underneath it is the length of three buses. So the concern was,
in the modeling that was done, if you take that down over land,
the debris field could be quite significant and could pose a
real harm to Americans on the ground, and that's why the
President made the decision to take it down when he did.
But I can say, Congressman, we also learned a great deal by
us surveilling that balloon while it flew in our air space, and
we are learning more as we have collected the payload since we
took it down.
Mr. Wilson. Well, to me, it's very disappointing. It was a
threat to my constituents. I representative Fort Jackson, and I
represent Savannah River Nuclear Laboratory. To have a spy
balloon come over our State, it's just, it's inconceivable.
And, indeed, Governor Greg Gianforte, Senator Steve Daines,
Congressman Ryan Zinke have all said that they would have
welcomed to have the balloon shot down over Montana as being
only a threat to prairie dogs.
And so I just find that inconceivable, and I want to ask
you if you could provide, and I've asked and not been given the
information, what was the exact trajectory over South Carolina
and North Carolina? I would like to know what counties the
balloon traveled over; and, for some reason, that has been
called classified, which it's on opensecrets.com, but this
needs to be revealed to the American people and what a threat
this was. And I sincerely disagree with you that the thought of
shooting it down off of Surfside Beach South Carolina into the
ocean, it should have been recovered in some way so that we
could find out what type of threat there is from the Chinese
Communist Party.
With that, I yield back.
Mr. Kritenbrink. Congressman, thank you. Again, I do want
to underscore, as I did in my opening statement, that China's
introduction of this high-altitude surveillance balloon into
U.S. sovereign territorial air space was irresponsible and
unacceptable, full stop. But as I indicated, we tracked it from
the beginning. We made an assessment of how to mitigate the
risk and the determination the President and our military
commanders was that it was not safe to take it down until it
was off the waters of South Carolina. When we did, and in the
water, we were able to recover the payload, and I'm confident
we'll learn more from that.
Chairman McCaul. The Chair recognizes Mr. Bera.
Mr. Bera. Thank you, Mr. Chairman. Yes, I've said this a
number of times in my capacity as the chair, now ranking
member, on the Subcommittee on Asian Pacific, you know, if we
think about the geopolitical order in 75 years post-World War
II, you know, it really was U.S.-led but peace, prosperity,
lifting, you know, millions out of poverty, and creating
stability. And, you know, prosperity for China, as well, in
that. But there's no--Mr. Chairman, thank you for having this
hearing because there is no questioning, you know, where a
decade ago we may have hoped as China developed a broader
middle class, an entrepreneurial class, they would go in a
direction of more freedom and openness and open markets. Xi
Jinping's policies have taken Beijing in a very different
direction, and we do not have to guess that direction, and it
really does set up for, and competition is fine, but the hope
is to avoid confrontation. And much of this is led by, you
know, the Chinese may say, well, the United States is changing
this. It isn't. It is China changing the calculus here. The
aggression in the South China Sea has changed the calculus in
the South China Sea, aggression across the Taiwan Straits,
human rights violations in Xinjiang, you know, what they've
done in Hong Kong.
The Ranking Member touched on economic coercion and how
they use those tools of coercion. It really does mean a whole-
of-government approach, not just here in the United States but,
you know, I applaud the Administration for the alliances and
renewal of, you know, the elevation of Quad coalition to the
leaders' level is certainly incredibly important. You know,
partnership around AUKUS, incredibly important for maritime
security.
You know, I was just in Japan last week, and Prime Minister
Kishida's Administration efforts to get to 2-percent of GDP to
increase their self defense capabilities. Again, the hope is to
avoid confrontation, but, given the realities that we see in
the Indo-Pacific, hugely important.
Secretary Kritenbrink, I applaud and hope we get the
compacts done as quickly as possible and the renewed interest
and focus on the Pacific Islands. Let me touch on the economic
coercion component of it and, you know, the Ranking Member
touched on the bill that we introduced last week in a
bipartisan way with Congressman Cole, that builds on a bill
that we introduced last Congress, the Countering China Economic
Coercion Act that I introduced with Representative Wagner that
was signed into law by President Biden. That particular bill
looks at how we can engage with the private sector on issues
related to PRC economic coercion and how we can bridge that gap
between the public and private sector. You know, Congressman
Sherman touched on some of the coercive tactics that were used
against our film industry, you know, used against the NBA
players and the NBA, as well.
I'd just be curious, and maybe this is a question for
Commerce or State, you know, how should we think about the
partnership across government and the private sector to make
sure we've got tools and resiliency to counter some of these
coercive behaviors? Maybe, Secretary Estevez, if you want to
touch on that or----
Mr. Estevez. Thank you, Congressman. While not in the area
of export controls in general, you know, first of all, to go
back to the point of what do we tell companies. When companies
come to see me, I point out the dangers of reliance on single-
source supply chains and the need to diversify, to point out
what happened to companies that were operating in Russia when
Russia invaded Ukraine and how they had to pull out. And so
companies need to take stock of their own risk calculus, and I
believe they are all doing that, which will help all of us,
quite frankly, as they diversify.
The other thing we need to look at is things like chips,
which, you know, my boss is rolling out today. Very important
for bringing technology and important advanced technologies
back to other United States. We're working with our friends, as
well, so that we are not reliant on China for such things.
Mr. Kritenbrink. Well, Mr. Ranking Member, thank you for
your comments again, and I'll reiterate we're committed to
continue to step up our engagement across the Pacific Islands,
including the compacts, and I know the special envoy,
Presidential Envoy for Compact Negotiation. Joe Yun is working
on that as we speak.
On economic coercion, I do agree that we do need to work in
partnership with the American private sector. I know, as a
diplomat overseas, I'm incredibly proud to represent the
world's finest private sector. When you look at the Indo-
Pacific, $2 trillion in trade between the United States and the
Indo-Pacific, a trillion dollars in U.S. investment, and almost
a trillion dollars in investment from the region in the United
States. This is a vitally important economic trading and
investment relationship, and we look forward to working closely
with our private sector to make sure that we stand up for our
values and for American workers but also to protect critical
technologies, as well.
Chairman McCaul. The Chair recognizes Mr. Perry.
Mr. Perry. Thank you, Mr. Chairman. Secretary Kritenbrink,
I want to take you down a stroll down memory lane here to fall
of 2019 when China realized their first case of the Wuhan
virus. Now, it wasn't until January of the next year until they
reported it some weeks or months later, and then in February
their top bioweapons expert took control of the lab.
Now, the mantra from the press and from the party in the
current Administration was is that it occurred naturally. And,
of course, people like me, and speaking on behalf of myself but
the millions of Americans who saw all the evidence in front of
them that pointed to the lab as opposed to it occurring
naturally, those people were vilified in the public, and the
new Administration used the information to frighten Americans
and confuse them and to distort the facts.
Based on that, I'm just wondering did you, does the State
Department have any irrefutable evidence that the Wuhan virus
came from the wet market in China? Irrefutable evidence. Do you
have any?
Mr. Kritenbrink. Congressman, I would point to comments
that National Security Advisor Sullivan made on Sunday. He
stated that there are a variety of views in the intelligence--
--
Mr. Perry. I know there are a variety of views, but the
American people have been taken for a ride for 2 years, more
than 2 years over this, and I want to know what evidence the
State Department or you have that is used to debunk people's
opinions based on what they see and what they know and what is
reported as fact. What evidence--do you have a bat from the wet
market? Does the State Department have one of these bats?
Mr. Kritenbrink. Congressman, I'll State again there is not
a definitive answer that has emerged from the U.S. intelligence
community on this question.
Mr. Perry. I'm not asking----
Mr. Kritenbrink. Some elements of the IC----
Mr. Perry. Sir, sir, I'm not asking----
Mr. Kritenbrink. I'm sorry.
Mr. Perry [continuing]. About differences of opinion. You
work for the State Department. You're the undersecretary,
right? You're almost in charge over there, and the State
Department speaks for the United States of America, and
Americans across the country were ridiculed and vilified for
having a difference of opinion.
So with all due respect, sir, what facts do you have? Do
you have the pangolin where the virus jumped from the pangolin
to a human? Do you have it? What facts do you have? Do you have
any facts whatsoever to support your claim that the virus
occurred in the wet market, as opposed to the Wuhan lab?
Mr. Kritenbrink. Well, Congressman, again, I'll State, if
you look at what elements of the U.S. intelligence community
have said, some have pointed to say they come down on the
question that it looks like it was naturally occurring, some
have come down on the other side of that. Some have said we do
not have enough evidence to judge.
Again, I will say, in conclusion, the intelligence
community does not have a definitive answer on the COVID origin
question. President Biden has directed from the beginning of
his Administration to take all necessary steps, including all
elements of our intelligence community, to get to the bottom of
it. But the----
Mr. Perry. OK. Fair enough. If there are difference of
opinions, then what authority does the State Department or this
government have to refute the opinions based on facts that we
do know? Because there are no facts at all that it occurred in
a wet market, a wet market outside of Wuhan, right. There are
zero. We all know that, right. But there's plenty of
circumstantial evidence, if not more, because a bunch of it was
destroyed. We know they destroyed the samples in the lab,
right, so that nobody could see them. But if that's the case,
will the State Department at least acknowledge, acknowledge
that they were wrong and apologize to the millions upon
millions of Americans that they disparaged for their opinions
based on what they know happened in 2019 in the Wuhan Institute
of Virology? Will the State Department acknowledge it and
apologize? Will they ever do it?
Mr. Kritenbrink. Congressman, what I will acknowledge and
commit to is to doing what the President has said: that we will
use all elements, including in the IC, to get to the bottom of
this. But as we stand right now----
Mr. Perry. And when they get to the bottom of it----
Mr. Kritenbrink [continuing]. There is not a definitive
answer that has emerged from----
Mr. Perry. Mr. Secretary, when they finally do get to the
bottom of it, if they ever do get to the bottom of it, knowing
that the communist Chinese destroyed a bunch of the evidence,
knowing that, if they do get to the bottom of it and they do
determine that it is the Wuhan Institute of Virology, will they
apologize? Will the State Department apologize to the American
people it disparaged?
Mr. Kritenbrink. Congressman, the President has directed
his team that we will share with Congress and the American
people what we learn. I'll just reiterate there's not a
definitive answer that has emerged from the intelligence
community on this question.
Mr. Perry. Thank you, Mr. Chairman. I yield.
Chairman McCaul. Let me just say, when we were in the
minority, we published a report finding by a preponderance of
the evidence it did originate from the Wuhan lab. I feel the
latest intelligence has confirmed our opinion, and that can be
found on the House Foreign Affairs website.
With that, the Chair now recognizes Mr. Cicilline.
Mr. Cicilline. Thank you. I want to begin by thanking you,
Chairman McCaul and Ranking Member Meeks, for giving us the
opportunity to explore this important issue, and I really want
to thank the four witnesses both for their service to our
Nation but also for helping to inform today's discussion, for
being with us.
From the genocide against the Uyghur population in Xinjiang
to the 2021 crackdown on democracy and the rule of law in Hong
Kong, we've seen a glimpse at the values the People's Republic
of China is trying to impress upon the world: a rejection of
human rights, a commitment to authoritarianism, a silenced
press, and the abandonment of the rule of law. Those values are
antithetical to our own and must be confronted globally by
American leadership, diplomacy, and investment.
And in taking up this important work in today's hearing and
those in the future while working on these issues, it's my hope
that we can do so in a way that does not promote or advance
xenophobic anti-China rhetoric, which we've seen lead to an
alarming increase in hate crimes against Asian Americans across
the country. We simply cannot allow this committee or others to
give that rhetoric any oxygen because the consequences are too
dangerous and too serious.
I want to begin with, Mr. Schiffer. The PRC's repression of
Uyghurs and other ethnic minorities is global in nature, and
we've seen the PRC pressure governments in the Middle East and
in South and Central Asia to cooperate with or overlook its
campaign to intimidate, harass, detain, and deport Uyghur
refugees and the diaspora members around the world. And there
was a recent Wilson Center report that documented over 5,000
cases of Uyghur intimidation and worse.
So I'd like you to speak to what USAID and the State
Department are doing to urge nations to prevent the harassment
and detention and deportation of Uyghurs and other ethnic
minorities on their soil in the face of this kind of tremendous
PRC pressure and really demands that they're making and what
role we can play in Congress in supporting the work that you
are doing.
Mr. Schiffer. Thank you very much for that question. We
have, at USAID, working with our colleagues at the Department
of State, just launched a new international religious freedom
and human rights assistance activity to work with members of
the Uyghur community outside of the PRC and to try to provide
them with the support that they need navigating this very, very
oppressive environment that the People's Republic of China is
trying to create for them both inside the PRC but also, as you
so rightly pointed out, all around the world.
We regularly engage with our partners and allies in
conversations about what their governments can do, as well, as
we look to align, as Secretary Kritenbrink offered, to make
sure that the international community is fully engaged on this
issue to speak out on the PRC's genocidal actions in Xinjiang
and to support the Uyghur community wherever they may be.
Mr. Cicilline. And is there anything that we should be
doing additionally to support that work?
Mr. Schiffer. Well, I certainly think the congressional
leadership over the past several years, including legislation
that the House has moved forward, has been an important part of
creating the momentum that we need to be able to continue to
press back against the PRC. So I would certainly look forward
to working with you and your colleagues to continue to raise
voices on this issue.
Mr. Cicilline. Thank you.
Mr. Kritenbrink. Congressman, would it be OK if I addressed
that question, as well? I just want to underscore that, in
response to the genocidal actions in Xinjiang, the United
States has designated 12 persons under Global Magnitsky
sanctions. We've imposed visa restrictions on another 7. We've
coordinated with the EU, UK, and Canada on the imposition of
sanctions, as well. That would be the first point, Congressman.
The second point, any time we learn of Uyghurs who have
been detained or harassed abroad and are threatened with
forceful involuntarily return to China, we've engaged with
those governments to try to stop that action. We will continue
to do so. Thanks.
Mr. Cicilline. Thank you. Mr. Nathan, just quickly, I know
there's a lot of evidence that the Belt and Road Initiative is
sort of running out of steam and financing for projects is
becoming more difficult and many countries are now struggling
to repay loans. Would you just speak to what the Development
Finance Corporation is doing to finance projects that are in
this position so that countries have an understanding that
there are other options out there to deal with their needs?
Mr. Nathan. Thank you for the question. For sure, when I
travel and meet with leaders in the developing world, they are
actively looking for an alternative and we need to be there to
present it, whether that's in the Indo-Pacific, Africa, Latin
America. Countries are actively seeking alternatives that are
high standard that reflect values of the private sector and do
not burden them with debt. I think they found out that, often,
projects that are funded by the Belt and Road Initiative or by
the PRC State-controlled entities turn out to be inappropriate
for their local conditions and frequently not of high quality
and leave them with burdensome debt loads.
Mr. Cicilline. Thank you. Thank you, Mr. Chairman. I yield
back.
Chairman McCaul. The Chair recognizes Mr. Mast.
Mr. Mast. Thank you, Chairman. I want to talk diplomacy
because that's what we do here in this committee. And, hands
down, one of the biggest things asked, I think, probably to all
of us, either side of the aisle, is what are you doing. We see
China visits Russia, Russia pulls out of New START. We see
balloons flying over America. We see China testing hypersonics.
And the question constantly is what are you doing.
And one of those forms of diplomacy that we have to deal
with this is the entity list, correct? I mean, that's one of
the ways that we help deal with this to say, listen, you cannot
get the nut, the screw, the bolt, the epoxy, the semiconductor,
the pencil to draw it up if that's what we decide, you cannot
get what you need, China, Chinese, you know, Communist Party
company, you cannot get what you need to make those things that
threaten America or our allies because we are going to put you
on a list, correct? Correct understanding, Mr. Estevez?
Mr. Estevez. I wouldn't call it a tool of diplomacy, but
correct understanding.
Mr. Mast. You wouldn't say, I mean, I look at diplomacy in
this way, and I always ask this question is does our support
equal our policy goals? So if we're allowing somebody to get
something, that's a form of support. If we're stopping them
from getting something, those are diplomatic efforts, right?
Mr. Estevez. Close.
Mr. Mast. All right. Well, I'll take that. You said close.
We'll say it's close. So, sir, Mr. Estevez, looking at those
entity lists, I'll call it a form of diplomacy. Whether we're
going to let Chinese Communist Party entities get the supplies
that they need to build things that are a threat to America,
America's allies, and Americans, in order to do that, this
list, how many have you published in the last year? How many
have you recommended to go up to the Federal Register? I know
you've talked about 12 recently.
Mr. Estevez. We put 160 entities on the entity list since
the beginning of this Administration. That's about a quarter of
the entities in the PRC, and the entity list goes back to the
90's.
Mr. Mast. Very good. So when we look at this, and I want to
bring Wendy Sherman into the conversation and say, you know,
it's been the conversation, I believe, from Wendy Sherman that
State agrees with the action of you guys having the end user
review for that, but there's really somebody higher than you
all, and that's whether it's Mr. Kritenbrink or Wendy Sherman
or Blinken. They might ultimately decide if those end user
reviews are going to be put into the Federal Register, correct?
Mr. Estevez. There's an interagency process. We never go up
that high, to tell you the truth. Only 1.1 percent of
discussions over licenses or entity lists even go up to the
assistant secretary for adjudication because usually there's
pretty good consensus on what goes on the list based on the
evidence that we have.
Mr. Mast. There's a process. But even if you all recommend
that that review goes forward and put it on the Register, if
Secretary Blinken or Mr. Kritenbrink or Wendy Sherman decide
they do not want that on there, that's not going on there, is
it?
Mr. Estevez. The process actually flows a little
differently than that.
Mr. Mast. Mr. Kritenbrink, would you like to----
Mr. Estevez. We have a vote. We put people on the list.
Mr. Kritenbrink. Congressman, yes. Thank you. I think we
collaborate exceptionally well with our colleagues at Commerce
and not just Commerce but Energy and DoD, as well, who are also
part of this process. And our goal is to do exactly what you've
outlined. The entities list is designed to prevent China or
other actors from acquiring U.S. technology inappropriately or
to use for their military modernization in ways that would
threaten our interests. So we're very supportive of that
effort----
Mr. Mast. So let's ask a specific question on that then.
Mr. Kritenbrink. Yes, sir.
Mr. Mast. I'm glad we have both of you sitting here. So how
many PRC entities have passed that end user review, the
committee, that have not been published yet?
Mr. Estevez. I'm not aware of any.
Mr. Mast. None?
Mr. Estevez. None.
Mr. Mast. Very good. That would be great to hear. Do you
want to consult with your staff and make sure that that's the
case? Anybody behind you?
Mr. Estevez. I do not have to do that.
Mr. Mast. Mr. Kritenbrink, are you familiar with any that
Ms. Sherman might think that she agrees with the action but
does not agree with the timing because it might piss off China?
Mr. Kritenbrink. Congressman, I would say that, once a
proposed entity listing is approved by these four agencies,
this regulatory action in ERC, it goes on the entity list. That
is the process.
Mr. Mast. It does not just go there. You all have the
opportunity to pull that back as higher leadership in the State
Department.
Mr. Kritenbrink. I think what I would say, Congressman, is
that we feel like our job, the reason why we have this
consultative body is to sit down these four agencies and to
think through all of the implications. Is this proposed action
going to achieve our goals? Is it potentially going to
inadvertently harm our own interests or the interests of allies
and partners? We have to think through all of those things,
but, once we reach consensus and we vote, those actions go
forward and are published on the entities list.
Mr. Mast. Thank you for your time, Mr. Chairman.
Mr. Kritenbrink. Thank you.
Chairman McCaul. The Chair recognizes Mr. Kim.
Mr. Kim of New Jersey. Thank you, Mr. Chairman. Thank you
to our panelists for coming today. Mr. Kritenbrink, I wanted to
start with you. I guess I just want to ask you how central to
the work that we're trying to do in the Indo-Pacific,
especially vis-a-vis China, how important is coalition building
to our strategy and our efforts there?
Mr. Kritenbrink. Well, Congressman, I would say it is
absolutely vital. It is central to what we do. As the Assistant
Secretary of State for East Asia and Pacific, I spend the vast
majority of my time and my bureau's time on building the
coalitions that you're talking about and what we refer to as
building the collective capacity of our allies and partners and
friends to work together with us to support the rules-based
international order and to counter all challenges, including
those posed by the PRC. It is absolutely central, and I would
argue it is the most important thing that we do.
Mr. Kim of New Jersey. I very much agree with you that it
is so central and, to your point, you said perhaps the most
important thing that we are trying to do. And I think this
committee, we have talked a lot about, in the context of
Ukraine, just how central that coalition was for our efforts
over there. But what we've also recognized is that, in many
ways, our coalition in the Indo-Pacific, it is much more
fragmented and segmented in some ways than it is over in the
Transatlantic.
So I guess I want to ask you what does this kind of
coalition building 2.0 look like? What is this next level that
we can do to try to take that and add some greater gravity to
it and pull it together?
Mr. Kritenbrink. Well, thank you, Congressman. Again, we
talk about building a latticework of an interlocking web of
relationships. We start with our treaty allies, our five treaty
allies in Asia: Japan, Korea, Australia, the Philippines, and
Thailand. I would argue that our alliance relationships are
stronger than they have ever been before, and we are working
together not just in bilateral ways to improve our security but
increasingly in trilateral and multilateral ways to advance our
shared interests, not just in the security realm but in
economics in terms of promoting our values.
And then, beyond that, I am sure you've seen, Congressman,
the President hosted an unprecedented summit with the leaders
of ASEAN last year. He hosted another unprecedented summit with
the leaders of the Pacific Island countries. We formed new
informal mechanisms, such as the Quad, the Partners of the Blue
Pacific, again forming these interlocking webs of relationships
that we think are absolutely vital.
Mr. Kim of New Jersey. And trying to build that trust there
and that partnership there, it is so important----
Mr. Kritenbrink. Absolutely. And, sir, I feel like my No. 1
duty every day and the duty of my colleagues is to demonstrate
the credibility of our commitment to the region and to our
partners to let them know that they can count on us and let
them know that we will all be better off, more prosperous, more
secure, if we work together, including in countering threats
from the PRC.
Mr. Kim of New Jersey. There is a little bit of a debate
here about how best to build this coalition. I want your
thoughts on it. I have had a number of people come to me and
say we should be applying greater pressure to some of these
partners that we are working with in the Indo-Pacific, pushing
them to more definitively choose between the United States and
China. And I guess I wanted your thoughts on whether or not
that would help or hurt your ability to build the coalition you
need.
Mr. Kritenbrink. Well, Congressman, I would say, generally
speaking, we do not try to force countries to choose. They tell
us that they do not want to choose. Most countries in the Indo-
Pacific do not need an education on the threat posed by the
PRC. What they want to know is how can they work together with
the United States and increasingly together in these
interlocking webs of relationships to advance our shared
interests.
The way we look at it is we are not asking countries to
choose. We are working to make sure countries have choices and
to make sure they can make their own sovereign decisions free
from coercion. And if we do that, I am confident that we will
prevail in this competition and we will continue to preserve
the free and open region toward which we are working.
Mr. Kim of New Jersey. One thing that I have heard when I
was out there in the region talking to some of our vital
partners there is they do have concern about some of how we are
approaching vis-a-vis China, our rhetoric, our posture. And I
guess some of their concern was saying that they really want to
work with us and to be a partner, but that may be more
difficult for them if they feel like or see or is perceived
like the United States is the instigator for aggression or
provocation in that relationship between the U.S. and China.
Do you hear the same from partners that you are talking to?
Mr. Kritenbrink. I do, Congressman. Look, I think it is
important that we always demonstrate that the United States is
a responsible actor, that we are committed to the rule of law,
to peaceful resolution of disputes, committed to the rules-
based regional order. And when we do that and when we work
together with our partners, I think that is when we are most
effective. And I think it is quite clear across the range of
issues we have discussed today, I think it is quite clear which
party is taking steps to undermine the rules-based----
Mr. Kim of New Jersey. And I think that is something we can
highlight while underscore that we are that responsible actor.
Thank you. I yield back.
Chairman McCaul. The Chair recognizes Mr. Barr.
Mr. Barr. Thank you, Mr. Chairman. And thank you for you
and the Ranking Member holding this very important bipartisan
hearing related to the threat from the Chinese Communist Party.
Secretary Estevez, in your testimony, you State that in
Fiscal Year 2, BIS and its interagency partners approved
approximately 69.9 percent of license applications involving
the PRC and denied or returned without action approximately 30
percent of such license applications. How many of those BIS
licenses were approved for companies on either DoD's 1260H list
of Chinese military companies or Treasury's Chinese military
industrial complex companies list?
Mr. Estevez. Unfortunately, Congressman Barr, I would have
to get you that information, which I will be happy to----
Mr. Barr. Does BIS have that information at your
fingertips?
Mr. Estevez. When we vote through the interagency,
obviously, Defense can bring, first of all Defense can propose
anything they want and Defense can raise the concern over any
license based on their list.
Mr. Barr. Well, here is the concern I have. And you and I
have had a good conversation about this: the lack of
coordination and the lack of visibility across agencies, big
problem, big problem. How important is it that Commerce entity
list designations be coordinated or be cross-referenced by OFAC
or Treasury or DoD for purposes of sanctions to prevent
American investors from financing entities tied to the CCP or
these Chinese military industrial complex firms that are still
included in emerging growth index funds either on U.S.
exchanges or foreign stock exchanges or even through private
equity or credit investments?
Mr. Estevez. So what was locked on back there, obviously,
investors should be looking at all those lists. As far as
coordination between myself, the Treasury Department, and the
Department of Defense, we actually have pretty excellent
coordination going on right now, certainly with regard to what
we're doing----
Mr. Barr. Well, I am not sure we do. Sorry. Reclaiming my
time. I am not sure we do because the OFAC list that is subject
to the EOs, they are not aligned, frankly, with your entity
list and certainly not with some of these other lists, the
military end user list, the unverified list even.
And here is what I would just say editorially, and we are
going to be looking at this in the Select Committee on China
and in this committee and in the Financial Services Committee
on which I serve. Restrictions on capital flows to China should
be aligned with our export controls regime and limited to
capturing outbound investments that circumvent the spirit of
existing export control rules. In other words, why should
restrictions or notification regime on outbound American
investments in China not also be applicable to what is on an
export control list?
Mr. Estevez. And, of course, we are working on an outbound
investment program, and I know that the Congress is looking at
that, as well.
Mr. Barr. Do you have visibility into PRC entity list
companies that remain in index funds listed on U.S. or other
exchanges?
Mr. Estevez. I do not.
Mr. Barr. That is what we need. That is what we need. That
is what we do not have right now. So we need list coordination
because if we are worried about export controls, if we are
worried about companies that are on this entity list, but
American investors are financing, unwittingly financing these
same companies, that is a problem. That is a gap that we have
that we need to fix, and I appreciate your attention to that.
Mr. Nathan, and also, believe me, we are going to be
talking to Treasury about that problem because you are doing a
good job, you have got a good entity list, but we need
coordination so that we are not unwittingly financing these
technologies even if we have export controls.
DFC, Mr. Nathan, we have talked about this, DFC must
prioritize a lower middle income economies defined by the World
Bank, but there are some higher-income economies where Belt and
Road is alive and well. Would you like to have the capability
of going into some of those higher-income countries that are
strategic, like Panama, where China is all over the Canal?
Mr. Nathan. Thank you for the question, and I appreciate
our previous discussions, Congressman. Congress has provided us
the opportunity specifically for Energy to operate in high-
income countries in Europe through the European Energies
Security and Diversification Act. If Congress moved forward
other legislation, we would obviously work together to make
sure that that was aligned with our objectives and our mission
under the BUILD Act. As you and I have discussed previously,
some of the World Bank income classifications are a little bit
clumsy in terms of the countries where we can operate.
Mr. Barr. And last question to you. Due to budgetary
treatment of DFC equity investment, DFC has not been able to
fully unlock this tool. How can we help you with that?
Mr. Nathan. Excellent question, and thank you for asking
it. Equity is a very important tool for us to be forward
leaning on risk to be able to fund infrastructure projects,
companies, and other projects that meet the needs of the
countries where we are operating and give them the choice that
they are looking for as an alternative to the State-directed
investment from the PRC. The current budgetary treatment does
not allow us to fully realize the promise of the tool and I
believe what the intention of the BUILD Act was. We are looking
for a way to fix that so that we can have more certainty and a
larger amount of equity to deploy to fulfill our mission. An
equity fix would be very useful.
Mr. Barr. Thank you. My time is expired, Mr. Chairman, but
I look forward to working with you, Mr. Chairman, on this issue
that companies on the BIS entity list need to be included on
Treasury's CMIC sanctions list. And I yield.
Chairman McCaul. And I agree with the gentleman, and I will
be working very diligently on that. And I also agree with the
equity issue. We need to fully fund the equity. Otherwise, you
cannot fulfill what Congress intended.
So with that, the Chair now recognizes Ms. Jacobs.
Ms. Jacobs. Thank you, Mr. Chairman, and thank you to our
witnesses. Assistant Secretary Kritenbrink, I want to start
with you and zoom out a little bit. I think we spent a lot of
time talking about strategic competition, and I think the
Administration has rightly identified the PRC as a challenge
and taken several actions engaged in strategic competition. But
I would like to hear from you what are we competing for, and
what is the Administration's end goal with China so that we're
not just talking about competition as an end in and of itself?
Mr. Kritenbrink. Yes, ma'am. Thank you very much for the
broad strategic question. We are competing for and fighting for
the kind of region that we want to live in. We talk about a
free and open region where countries can freely pursue their
interests and where people in those countries can enjoy
freedom. We are talking about an interconnected region where we
work closely with our allies, partners, and friends. We are
talking about a prosperous region, right, where everyone
benefits from free and unfettered trade. We are talking about a
secure region where disputes are resolved peacefully and we
counter threats to security. And we are talking about a
resilient region that has the capacity to respond to
transnational threats, like climate change and pandemic
disease. We are fighting for freedom and democracy, as well.
That is what we stand for. It is an affirmative vision. That is
where I start and end my day everyday. What are we doing
everyday to advance those affirmative goals.
As far as our end goal with China, we talked about the
means that we use in our competition, but we also are
interested in exploring cooperation where it is in our
interests to do so. And at a minimum, whatever we do, we want
to keep channels of communication open so that we do not have
some kind of a miscalculation that could veer into unintended
conflict.
Ms. Jacobs. Thank you.
And I just think it is really important that we stay
focused on those end goals because China is not going anywhere,
and we do not want to feed into the CCP's talking points around
us just being out to weaken China for the sake of weakening
them indefinitely, and figuring out what kind of world we
actually want to try to get to.
On the question of keeping lines of communication open,
quickly, I know that Secretary Blinken told Wang Yi that we do
want diplomatic engagement and open lines of communication and
he would be prepared to visit Beijing as soon as the conditions
allow. When exactly will conditions allow for the visit to be
rescheduled? And what conditions are you looking to?
Mr. Kritenbrink. Congresswoman, thank you for your
question.
Yes, the Secretary did make the decision, following the
irresponsible, non-acceptable intrusion into our airspace of
the Chinese high-altitude balloon, that he simply could not
travel to China at that time and be able to conduct any of the
business across the broad-ranging agenda that he had intended
to. We did say that he would look to travel when conditions
allow. We will determine what those conditions are and when.
Ms. Jacobs. Thank you.
Well, I think many of us on the committee would encourage
keeping lines of communication as open as possible, recognizing
that it takes two to be able to do that.
Mr. Kritenbrink. Yes, ma'am. I would say, unfortunately,
sometimes our Chinese friends have used those channels of
communication as a source of leverage, and that is unfortunate.
Ms. Jacobs. Yes.
Assistant Administrator Schiffer, I want to go to you. You
know, we have had a lot of talk about the Belt and Road
Initiative and what China has been doing in that regard. I
think we sometimes have a temptation to play Whac-A-Mole with
our investments and just feel like we need to show up wherever
China is showing up, even if it is not necessarily in our
strategic interest.
So, I just wanted to hear how USAID is viewing this part of
their work and how you are thinking about prioritizing
strategic investments where we have a comparative advantage,
instead of just this sort of trying to match one-to-one.
Mr. Schiffer. Thank you for that question.
You know, it is absolutely critical, if we are going to be
successful in creating a sort of world that we seek to create,
as Secretary Kritenbrink laid out, that we are disciplined and
strategic in our approach. And I would offer that I think we
have been, as we look to work with countries that are on the
front line of visioning this course of economic practices and
countries and partners that are critical for our own security,
and for being able to build the free and open architecture that
we seek, whether it is in the Indo-Pacific or around the world.
The challenge that we have is that, while Beijing's model
for development assistance isn't actually about development
assistance--it is about geostrategic advantage--our model is
premised on being able to create bankable propositions that can
attract capital and that can have market access for success.
And that is a much trickier proposition.
But we are seeking to fully align our work with the
strategic priorities of the Administration, including in the
Indo-Pacific. We are looking to expand our presence there
significantly over the course of this year.
Ms. Jacobs. Thank you, and I would just note we are already
seeing many countries where the Belt and Road Initiative has
backfired and where countries are starting to sour on Beijing
as a result. So, I appreciate your strategic approach.
And, Mr. Chairman, I yield back.
Chairman McCaul. The chair recognizes now the chair of the
Indo-Pacific Subcommittee, Mrs. Kim.
Mrs. Kim of California. Thank you, Chairman McCaul and
Ranking Member Meeks, for holding today's hearing on the
generational challenge posed by the PRC.
I want to ask the first question to Mr. Estevez. When you
came before the committee more than 6 months ago, you stressed
your desire to harmonize the various U.S. Government lists
related to PRC companies. And I think most of us agree that is
a common-sense policy that needs to be implemented.
So, for example, CRRC, a giant, well-known PLA supplier, is
not on the Commerce Entity List, but it is on the DOD military
list, right? That seems like a glaring omission. So, what
specific steps have you taken to work with DOD to harmonize
these lists, and when can we expect this process to be
implemented?
Mr. Estevez. So, a couple of things about the lists, and I
understand the confusion over different lists. Different lists
have different authorities around them. So, the DOD list, which
is required by the 1999 NDAA, I believe, has no consequence for
the companies that are listed. Whereas, the Entities List,
which requires factual and articulable information in order to
put somebody on the Entity List, has consequences for the
company. So, I need data in order to put someone on the Entity
List, as opposed to research. Also, I really want to see if
there are exports to that company, because, otherwise, it is a
useless enterprise. But we do put people on the Entity List
with very few exports.
DOD, which sits on the committees that authorize licenses
and put people on the Entity List, can always propose someone
to go onto the Entity List, and then, we will take that up and
we will look at the facts and the data around that. So, from
the standpoint of whether DOD can put someone on the list, the
absolute answer is yes, through the process.
Mrs. Kim of California. So, you are referring to legal risk
associated with harmonizing DOD lists with the Entity List. Let
me tell you, our committee has consulted many lawyers and legal
experts about this issue, but they have been told that BIS
faces minimal legal risks.
So, for instance, Congress expressly precludes BIS from the
Administrative Procedures Act and sets a very low bar to clear
for entity listings; that an entity be, or have the potential
to be, a threat to U.S. national security and foreign policy
interests. So, we have found only two recent cases in which PRC
companies took BIS to court over an entity listing, and BIS
prevailed both times.
So, can you please explain the legal foundation for your
assessment?
Mr. Estevez. Representative Kim, I am not a lawyer. So, I
am not going to give you the legal foundation that my lawyers
happily articulate to me all the time, when I am saying, Why
cannot we put this person on the list? Because we do need to
have fact-based. We are not the PRC. We do not make it up. We
actually follow a process and we live by the rule of law.
Mrs. Kim of California. It sounds like, to me, it is more
like a political concern than a legal one.
Mr. Estevez. Zero political concern, ma'am.
Mrs. Kim of California. Well, let me go on. How do you
explain the declining rate of BIS entity listings? Because, by
our count, there were 114 in 2019, 147 in 2020, 85 in 2021, and
68 in 2022. So, can you explain that?
Mr. Estevez. I would have to go back to look at that, but I
do not see us having a declining rate. I actually----
Mrs. Kim of California. All right.
Mr. Estevez [continuing]. See us as having an expedited
rate on----
Mrs. Kim of California. All right. I will move on then.
You know, I would like to ask a question to Mr.
Kritenbrink. I am going to ask you about the backlog of $21
billion in sales to Taiwan. Last Congress, as you know, I
introduced the Arms Exports Delivery Solutions Act, and that
requires DOS and DOD to report to Congress on reasons for
backlogged sales to Taiwan and the Indo-Pacific allies. And it
provides the authority that Congress could use to expedite
these deliveries.
So, the legislation was already signed into law through
NDAA. So, can you provide me with an update on the
implementation of that law and what steps that the State
Department is taking to expedite the delivery of arms to Indo-
Pacific partners and allies, especially our allies who are
facing threats from the PRC and North Korea?
Mr. Kritenbrink. Madam Chairwoman, thank you for your
question on this, the specific question about a backlog in arms
sales to Taiwan.
I can assure you that the U.S. Government, and certainly
the State Department, we are committed to meeting our
obligations under the Taiwan Relations Act to assist Taiwan in
maintaining a sufficient self-defense capability.
Just last year, we notified 13 different sales to Taiwan,
which is the largest single number of notifications for Taiwan
in the last 20 years. I would say, ma'am, there are production
and delivery delays worldwide, not just for Taiwan, but for
other partners. We are working expeditiously to get through
those.
But I would also say, sometimes I think that the notion
that there is a long backlog, some of that can also be
misleading. Because when we notify the Congress of the intent
to have a sale, it does take some time for the companies to,
then, negotiate those contracts and implement them.
But I can assure you we are doing everything that we can.
The Biden-Harris Administration has notified more than $5
billion in foreign military sales to Taiwan, $37 billion since
2010 and $21 billion since 2019. We are committed, not just to
arms sales to help Taiwan grow its deterrent capability, but
also diplomatically with allies, partners, and friends to
support the peace and stability within international----
Mrs. Kim of California. Would you be able to tell us
quickly the percentage of those sales that were signed off
since President Biden has been in office?
Mr. Kritenbrink. I would have to do the math, but the
figure, as we stand today, is $5 billion thus far. But I would
also say, beyond just comparing the numbers, it is important to
look at the kinds of systems. And again, in consultation with
our partners in Taiwan, we are focusing on building Taiwan's
asymmetrical defense capabilities, which we think--we both
think is most effective in maintaining a deterrent capability,
so as to maintain peace and stability.
Mrs. Kim of California. Thank you. My time is up. So, I
yield back. Thank you.
Chairman McCaul. The chair recognizes Ms. Manning.
Ms. Manning. Thank you, Mr. Chairman.
And thank you to all of our witnesses for your service to
our country.
Assistant Secretary Kritenbrink, I have just returned from
a congressional trip to Japan, where we met with the Prime
Minister and a host of lawmakers who talked extensively about
their concerns about Chinese aggression and their decision to
double their military spending--really an unprecedented
decision--but also about their deep economic relationship with
China.
How can our relationship with Japan enhance our position
with regard to China, and what additional steps can we be
taking?
Mr. Kritenbrink. Ma'am, thank you very much for your
question.
There is certainly no more important ally than Japan. And I
think that our alliance has never been stronger, and our
cooperation, both in a bilateral alliance sense, but,
increasingly, globally, has really never been stronger. Japan
is chair of the G7 this year, and we are working really
diligently together with them, under their leadership, to make
sure we take steps around the globe to promote peace and
prosperity vis-a-vis the war in Ukraine, but also encountering
Chinese economic coercion as well. Certainly, from an alliance
perspective, we very much welcome the historic steps that Japan
has taken under Prime Minister Kishida.
The decision, as you noted, to increase their defense
spending to 2 percent of GDP, their unprecedented national
security strategy, which is almost completely aligned with the
same vision that we have outlined, and that other partners
across Asia and Europe have outlined, for their vision of the
kind of world that we want to live in--I think our alliance
collaboration and coordination is closer than ever before. We
have collaborated as well in ways that the U.S. military will
be adjusting its force posture in Japan, which also we believe
will further contribute to regional stability.
And increasingly, ma'am, maybe the thing I am most excited
about is that Japan has become our partner across the region
and across the world, in Southeast Asia, certainly in the
Pacific Islands, and on the Ukraine war as well. Japan has
played an absolutely leading role, and we are very grateful for
that. And again, I think our alliance is stronger than ever,
and we both benefited from the agreement.
Ms. Manning. Thank you.
Under Secretary Estevez, can you share with us details
about the recent deals the U.S. has reached with Japan and with
the Netherlands on export controls that are important to our
efforts to deal with China's aggressive behavior?
Mr. Estevez. What I can say, Congresswoman, is that, first,
multilateral controls are critically important when we do these
types of things. We are always in deep discussion with our
allies around that. And further than that, I would have to say
we need to talk in a closed hearing.
Ms. Manning. OK. Thank you.
So, Assistant Secretary Kritenbrink, I am going to go back
to you. One of the other things that we learned from our
friends in Japan is that fewer Japanese students are coming to
the U.S. to study, as opposed to a large number of Chinese
students who are now studying in the U.S. Is this an issue of
concern, and if so, how can we increase the number of Japanese
students to strengthen that relationship among different
generations? And also, how can we harness the talent of the
Chinese students who are studying here to help our country?
Mr. Kritenbrink. Yes, Congresswoman. Thank you. Vitally
important questions.
I continue to believe that people-to-people ties are an
absolute essential element of many of our partnerships around
the world. Certainly, that is the case with Japan. And I can
speak from personal experience, having been an exchange student
as an undergrad in Japan for a year, which was a really
wonderful and life-altering experience.
We have been concerned to see the decrease in the number of
Japanese students studying in the United States. And my team,
together with colleagues across the State Department, across
the interagency, and our fantastic embassy in Tokyo, are taking
steps to further highlight the benefits of studying in the
United States and the benefits of growing those people-to-
people ties, which remain, obviously, very deep between the
United States and Japan.
But, ma'am, I would say as well, you could say the same for
the importance, continued importance, of people-to-people ties
between the United States and China. There are some 290,000
Chinese students in the United States right now. I think, as
one of the Members of Congress made clear earlier, we should
always distinguish between the Chinese Communist Party and the
Chinese people.
I am confident that the study that is carried out, the
legitimate study carried out by Chinese students in the United
States benefits them, benefits the United States as well. And I
know a large number of those very talented students end up
staying in the United States and contribute to our society and
our economy here as well.
And the final point, ma'am, that I'll make, that a Member
made earlier as well, I hope that we are also very careful, as
we focus on legitimate concerns about the Chinese Communist
Party, as we focus on some of the concerns about how some of
these exchange programs were in some instances not used for
legitimate purposes, we do have to make sure, again, we are
distinguishing between the Chinese people and the Chinese
Communist Party. And we also have to make sure that none of our
actions contribute to a disturbing rise in discrimination and
hate directed at Asian Americans.
Thank you.
Ms. Manning. Thank you. My time has expired. I yield back.
Chairman McCaul. The chair now recognizes the chair of the
Western Hemisphere Subcommittee, Ms. Salazar.
Microphone?
Ms. Salazar. Yes, thank you, Chairman, for holding this
very critical hearing.
And as we have spoken, the penetration of China in Latin
America is real and terrifying. It has reached a level where
our national security is in danger. Almost 30 percent of
China's global lending goes to Latin America. That is almost
$140 billion. China has a physical presence in 25 out of the 31
Latin American countries and is the second largest user of the
Panama Canal.
But we know that the Chinese are not here for trade; they
are here for war. And why do I say that? Because 10 years ago,
China sold Hugo Chavez/Venezuela VN1 tanks and advanced radar
systems. Bolivia, via Evo Morales, is using right now Karakorum
fighter jet planes, one of China's most advanced fighter jets.
And now, Argentina--that is very concerning--is considering
opening Chinese fighter jet factories. Chairman Xi Jinping has
been to Latin America more times than Presidents Obama, Trump,
and Biden combined in the last 10 years. And I will explain to
you what bothers me the most at this moment, and it should
scare all of us.
Assistant Secretary, Mr. Kritenbrink, thank you for being
here and for wanting to answer our questions.
Ten years ago,
[inaudible], who is today Argentina's Vice President,
Cristina Fernandez, who has been accused of corruption and who
stole millions of dollars from the Argentinians, now she has
sold her soul to the Chinese by allowing them to have this, a
deep space station the size of 400 football fields in the
middle of the Patagonia desert--400 football fields. I am sure
the Chinese are very interested in studying the stars and every
constellation, but from the Argentina skies. But the problem is
that Argentina has no idea what is going on there because the
Chinese do not let them in. They do not let them in on
Argentinian soil.
So, my question to you is, how dangerous is this station
for our national security, sir? I am asking you, Assistant
Secretary, are you as concerned as we are, yes or no?
Mr. Kritenbrink. I will say two things, ma'am. One, we are
concerned with China's efforts around the world to increase its
military presence, No. 1. And we----
Ms. Salazar. But I am talking about this space station, in
particular.
Mr. Kritenbrink. No. 2, I would have to consult with my
colleagues across the interagency and get back to you. And
perhaps it would be more appropriate----
Ms. Salazar. You do not know anything about this?
Mr. Kritenbrink. Perhaps it would be more appropriate in a
classified session.
Ms. Salazar. But I am asking you, do you know about this
deep space station in Patagonia?
Mr. Kritenbrink. I am not an expert on this situation.
Ms. Salazar. You are not? So, you did not know this
happened?
Mr. Kritenbrink. I am not an expert on the issue that you
raise----
Ms. Salazar. Four hundred football fields in the middle of
Patagonia. I mean, isn't that concerning? Does this have
anything to do with the Chinese balloon that was flying over
our territory?
Mr. Kritenbrink. Again, I'll say, ma'am, that we are aware
of a number of steps that China has taken around the world to
increase its military presence----
Ms. Salazar. I'm talking about Latin America and I'm
talking about this----
Mr. Kritenbrink. Understood.
Ms. Salazar. You do not? You do not know about this?
Interesting. OK. So, who does?
Mr. Kritenbrink. Ma'am, as I said, I would be delighted to
consult with my colleagues in the interagency and get back to
you. And perhaps it would be most appropriate to do so in a
classified session. But I would be happy to do that.
Ms. Salazar. OK. So, interesting. Right.
So now, let me ask you something else. Do you also know
that Cristina Fernandez, the actual Vice President, wants to
buy 18 Chinese JF-17 fighter jets? They want to buy them from
the Chinese. Are you aware of that? And then, not only that, to
build a fighter jet factory in Buenos Aires and sell those
fighter jets to other neighbors, meaning Paraguay, Uruguay,
Chile, Bolivia. Are you aware of that?
Mr. Kritenbrink. Ma'am, again, I'm not an expert on either
of those questions, and I would be happy to take that back and
come back to you.
Ms. Salazar. OK. So, we certainly hope that either you or
one of your colleagues can come back to this forum and explain
to us----
Mr. Kritenbrink. We look forward to that. Thank you.
Ms. Salazar. I would imagine that it is pretty concerning.
So, since we cannot get any answers from you, then, I was
going to use this forum to send a message to the Argentinians,
specifically to the Vice President. And I'm going to do it in
Spanish, because maybe they are not hearing from you, but maybe
they will hear it from me. And I'm going to forewarn them that,
if they decide to build a fighter jet factory of Chinese
fighter jets, it is a very bad idea for them, and moving
forward, and everything that has to do with the relationship
with the United States. So, that is why I am going to say it in
Spanish, and I beg your pardon, if you do not understand.
[Ms. Salazar speaks in Spanish.]
Thank you, Mr. Chairman. I yield back.
Chairman McCaul. Thank you, Ms. Salazar.
And I will be requesting a classified briefing on this very
issue.
Ms. Salazar. Thank you.
Chairman McCaul. The chair now recognizes Mr. Dean.
Ms. Dean. Well, it is Madeleine.
Chairman McCaul. I'm sorry, Madeleine Dean. What am I
saying? Excuse me. Apologies.
Ms. Dean. Thank you. Thank you, Mr. Chairman McCaul,
Ranking Member Meeks, and to all of our witnesses for
testifying.
I hope you know that some of our absences in this room
reflects not at all on the subject matter and your work, but on
a markup in another committee at the same time.
So, with the limited time that I have, I would like to
examine and understand China's role in illicit fentanyl and
what the United States is doing about it. We all know that
fentanyl is wreaking havoc on our Nation, on our communities.
In the year ending September 2022, CDC estimates that
synthetic opioids, mainly fentanyl, were responsible for about
73,000 overdose deaths, 70 percent of all drug overdose deaths,
which topped 108,000 in a single year. Those numbers are
staggering. That is 300 people a day dying of overdose.
Some of you may know this is an issue personal for me. I
have a son in recovery, long-term recovery, from opioid
addiction, now for over a decade. By the grace of God, he is in
that space. But we know too many of our children and adults are
not, and we are losing them.
China was the primary source of illegal fentanyl entering
the United States until the PRC imposed controls in 2019.
Today, Mexican drug cartels rely on PRC-sourced precursor
chemicals to produce fentanyl. While cooperation between the
United States and PRC has yielded some success in curbing
illegal fentanyl, recent tensions have hindered that progress.
Under Secretary Estevez, Assistant Secretary Kritenbrink,
how is the Biden Administration working to pressure the PRC to
improve further controls on fentanyl precursors? And what is
the Administration doing, what progress is being made, to
pressure the PRC to come back, financial flows, from illicit
fentanyl? Under Secretary Estevez or--either one, yes.
Mr. Kritenbrink. Ma'am, thank you very much for your
question.
Certainly, we recognize the tragedy and the travesty caused
by these opioids, synthetic opioids, and certainly fentanyl. I
think you have described it very well, ma'am. China did take
steps in 2019 to control fentanyl, which brought direct
shipments of fentanyl down to almost zero. Now, the problem,
ma'am, has transformed into precursor chemicals that are coming
out of China are being diverted elsewhere, and then,
manufactured into fentanyl, synthetic opioids, and brought into
the United States.
I would say we have done two things. One, in our
engagement, direct engagement, with the PRC, we have made
cracking down on this precursor fentanyl problem one of our
absolute highest priorities. We have told the Chinese they need
to take a number of steps to make sure that they and their
entities know to whom they are selling these precursors, to try
to prevent their diversion, to make sure that they are properly
labeled, and the like. And I will say, candidly speaking,
ma'am, our conversations have not been very satisfactory on
that for a variety of issues, partly related to the broader
bilateral relationship, partly related to some of the concerns
that the Chinese have, which we think are unfounded. But I can
assure you this is an absolute top priority in our engagement
with China.
The second major thing that we are trying to do is work
with other countries in the world to together put pressure on
China to take the right steps. We are not the only country that
suffers from this scourge. Certainly, in North America, others
do, but this has increasingly been becoming a global problem.
Thank you.
Mr. Estevez. And if I could?
Ms. Dean. Yes, please.
Mr. Estevez. Unfortunately, there is no exports going to
the fentanyl or precursor manufacturer in China. However, we
are working with DEA right now to assess whether we can put
restrictions on machinery or lab equipment that they use for
that. So, we are doing that kind of assessment, working both
with law enforcement and my Export Administration side to see
what we can do to crack down on that.
Ms. Dean. And if I could followup, Mr. Kritenbrink, you
said that direct engagement is not going very well. So, what do
we do in the face of that?
Mr. Kritenbrink. I would say two things. One, we haven't
given up in our direct engagement with the Chinese and using
all tools and all leverage at our disposal to try to make
progress directly with the Chinese.
But I think, as I hope I have made clear here today, I
think equally important in our diplomacy writ large with China,
and on the fentanyl issue as well, is to work together with our
partners and friends who are also suffering from the diversion
of these precursor chemicals, and together, to engage the
Chinese and put pressure on the Chinese to do the right thing,
to control these chemicals in a way that prevents their
diversion in illegal manufacturing of fentanyl.
Ms. Dean. Well, I hope you will call upon me and call upon
all of us to be partners with you in making sure that we do
everything possible--and we have to think outside the box--
everything possible to reduce the trafficking, the manufacture
of fentanyl, the trafficking of fentanyl.
We now know that it is being laced into almost anything and
you do not have to be an addict to die of this. We heard
testimony from a father whose 15-year-old son Noah recently
died of fentanyl poisoning, thought he had purchased a Percocet
pill. So, you do not have to be an addict. It is not one thing
or another.
This is extraordinarily deadly in our communities. So,
anything we can do to partner with you, Congress can partner
with you, please call upon us.
Mr. Kritenbrink. Yes, ma'am, and thank you for your
leadership on this issue. Thank you.
Chairman McCaul. And thank you, Ms. Dean, and I look
forward to working with you and the ranking member on this very
important issue. This is, obviously, a very bipartisan issue,
and we would like to get something done. And it touches
thousands of lives, and I think 100,000 young people died just
this last year. So, thank you for bringing that up.
The chair now recognizes Mrs. Radewagen.
Mrs. Radewagen. Talofa
[speaking Samoan]. Good morning.
Thank you, Chairman McCaul, Ranking Member Meeks.
And thank you all for testifying today.
Secretary Estevez, my questions are for you. Why is it
appropriate for BIS to let U.S. technologies be exported to
SMIC to advance the CCP's military modernization efforts?
Mr. Estevez. Thank you for that question.
SMIC is on the Entity List. It is on the Entity List with
not a complete stop. It is we prevent the most advanced
capabilities for making semiconductors from going to SMIC. So,
they cannot make semiconductors below 14 nanometers.
Mrs. Radewagen. Thank you.
Following up on that, does BIS think it has visibility into
where the chips produced by a CCP military company are going?
Mr. Estevez. Most chips actually made in China are consumed
in China. However, we are watching to see if they are moving
chips to Russia in violation of our sanctions.
Mrs. Radewagen. Is increased dependency on the PRC for
these types of chips a national security issue? And how many
PRC chips are you comfortable in having in DOD systems and U.S.
critical infrastructure?
Mr. Estevez. So, my export controls do part of the job
here. The other part of the job is what we call in Commerce
``playing defense''; the other part plays offense.
I want to thank Congressman McCaul for his support of the
CHIPS Act, being rolled out as we speak.
Developing capability in the United States for the most
advanced chips is critical. And for me personally, no chip in a
DOD system should come from anywhere else but the United
States.
Mrs. Radewagen. If these are risks, why is BIS failing to
act and mitigate this threat, when it can easily use existing
authorities?
Mr. Estevez. I'm sorry, ma'am, I believe that we are
stopping the most advanced chips from being made in China.
Chips are a ubiquitous commodity at the legacy level.
Mrs. Radewagen. Thank you, Mr. Chairman. I yield back.
Chairman McCaul. The chair now recognizes Mr. Crow.
Mr. Crow. Thank you, Mr. Chairman.
And thank you, all of you, for your testimony today.
My first question is about Afghanistan and China's efforts
to capitalize on some of the mining opportunities there. In
2008, under the Karzai Administration, the Afghans signed a 30-
year contract with a Chinese joint venture company to extract
high-grade copper from Mes Aynak. Can one of you give me an
update on Chinese involvement with regard to that contract and
their operations to try to get copper out of Afghanistan?
Mr. Kritenbrink. Representative Crow, thank you for your
question. I would have to take that back and get back to you.
I'm not familiar with the details of that deal. I know of it in
general terms, but not in any detailed way. But I would be
happy to bring that back.
Mr. Crow. Yes, that would be great for the record. Thank
you.
Then, the second is a broader question about Chinese
infrastructure generally. I mean, we I think sometimes view the
Chinese as 10-feet tall, but they, obviously, have problems
upon problems of their own, one of which is pretty substantial
blowback in certain areas on One Belt, One Road Initiative
efforts.
I have spoken with a number of Ambassadors and heads of
State in Africa, and they have relayed to me not only the
predatory economics and high debt financing terms of a lot of
these investments, but the infrastructure itself is not great
and it is failing; plus, a lot of it is built with Chinese
labor, which is causing domestic turmoil within a lot of
African countries, as they see Chinese workers come in to build
projects, while their unemployment rate remains very, very
high.
Can you talk to me about some of the blowback that you are
seeing with regard to their practices, particularly in Africa?
Mr. Kritenbrink. Why do not I take an initial stab,
Congressman? I think you have outlined the problem well. We
hear the same complaints from partners around the world.
And what we have done is, one, to caution countries to be
well aware of what they are getting into when they sign into
one of these deals, whether it is the predatory finance that
you mentioned; the fact that the quality of the infrastructure
can be in question, and then, through the use of PRC labor,
oftentimes, the economic benefits do not redound to that
country--not to mention whether the product will be--or the
project will be sustainable, including in environmental terms.
But the other thing we try to do is offer alternatives. And
I wonder if my colleagues would like to speak to that.
Mr. Nathan. Thank you, Secretary.
I completely agree with what you said, Congressman. I mean,
our experience is that, not only do projects by the PRC not
often accrue to the economic benefit of the countries, then
they do burden countries with debt. But they also frequently
involve environmental hazards, labor violations, poor quality,
inappropriateness for local laws and conditions.
But this is why we have experienced strong demand for our
product. Countries are looking for choice, and particularly,
the choice that we and our allies offer, which is high
standard, which respects local laws and conditions, just
transparent, which is funding at the private level. This is the
value proposition that the Development Finance Corporation is
presenting around the world.
Mr. Crow. And with regard to the Development Finance
Corporation, which I think is a phenomenal program, what
barriers are you seeing in really scaling that and expediting
it? And what would you need from Congress to, frankly, double
down on that effort?
Mr. Nathan. Thanks for that question.
You know, the DFC is just over 3 years old, and I think we
have made extraordinary progress in that time. But the BUILD
Act contemplated a new tool set for DFC, importantly, one that
includes the ability to make equity investments. Equity
investments would allow us to take more risk, to be forward-
leaning on the type of opportunities that we pursue in
infrastructure and other companies around the world.
We have made progress, but we have limitation from a
budgetary treatment of equity, limitation in our ability to
realize the full promise of the equity tool. We look forward to
working with this committee and others to remove those barriers
and realize the full potential BUILD Act contemplated for DFC.
Mr. Crow. Thank you.
And I just wanted to finish on this topic of China having
their own problems and just being very clear to China and to
everyone listening that there has been a lot of talk about
Ukraine emboldening China and strengthening China and weakening
the West, given the attrition and the amount of weapons and
equipment we are pouring into Ukraine.
I actually think it is the opposite. I think the United
States, NATO, and the West are greatly formalizing and
increasing the intelligence-sharing and our analysis. We are
strengthening our Defense Industrial Base by, essentially,
doing a real-time audit of some of our weaknesses and
shortfalls, but we are fixing it and moving fast to fix it. We
are increasing our partner training. We are learning about
weapon systems and how ours perform vis-a-vis old Soviet
systems, or strengthening NATO and increasing investments and
modernizing the NATO alliance. So, this is, I think, an
opportunity for us to show the strength of the West and how
China is on the wrong side of history.
Thank you. I yield back, Chairman.
Chairman McCaul. Thank you.
The chair now recognizes Mr. Huizenga.
Mr. Huizenga. Thank you, Mr. Chairman, and I appreciate the
opportunity to be here.
For those of you that we are questioning today, this is my
first term and first time being here at the Foreign Affairs
Committee. I sit on the Financial Services Committee. And the
reason why I mention that is because, in one of my past jobs,
it was chairing what at the time was called the Monetary Policy
and Trade Subcommittee, where I had the opportunity to look at
our review process here in the United States when it came to
sensitive technology.
And I am going to briefly touch on something here regarding
a battery company, A123, that we reviewed at the time. But,
obviously, COVID exposed a real issue with our supply chains
and our dependence, whether it is chips, but certainly
batteries. And coming from Michigan, I do not have any of the
direct manufacturers, but I have all the suppliers, all the
Tier 1, Tier 2, Tier 3 automotive suppliers that are in my
district, both past district and current district, including
battery companies.
But the A123 battery deal at the time was somewhat
controversial. And I know I was in on some classified briefings
on that. And yet, that seemingly went through the process
pretty quickly, and I felt like I was arguing against our own
government, frankly, at times about why this would be, could be
problematic.
And I'm curious, Under Secretary Estevez, do you mind, just
very quickly, is dependence on China for batteries a national
security issue?
Mr. Estevez. First of all, I want to note that the 123 deal
went through CFIUS and----
Mr. Huizenga. Yes. Yes. Yes, I'm aware. I am aware.
Mr. Estevez. It is probably not the best decision that
CFIUS made, but that is----
Mr. Huizenga. Well, we are finding consensus there then.
Mr. Estevez. Yes, look, there is a whole bunch of
technologies that we need to start doing investment on in the
United States. We should not be reliant on China for batteries,
for chips, for pharmaceutical precursors, for rare earths. And
we need to--and my colleagues to my left are more in the
engagement with allies----
Mr. Huizenga. Yes.
Mr. Estevez [continuing]. To buildup those capabilities. I
mean, the stopping from the Chinese to get stuff.
Mr. Huizenga. Yes.
Mr. Estevez. But we certainly need to look at our supply
chains better.
Mr. Huizenga. Sure. And we had a review of the CFIUS
process, and Representative Barr, who is also on this
committee, who followed me as the chair of MPT, was a crucial
part of that.
I do want to move on here in my last 2 minutes. For Mr.
Kritenbrink, has the State Department refused to approve or
requested the delay of sanctions to hold the PRC accountable
for human rights violations against the Uyghurs?
Mr. Kritenbrink. Congressman, what I would say is, as I
indicated earlier, human rights remains central to our foreign
policy.
Mr. Huizenga. I understand that.
Mr. Kritenbrink. We have taken a range of----
Mr. Huizenga. But has there been a request for a delay?
Mr. Kritenbrink. We have taken a range of steps to impose
costs on those who are carrying out genocide in Xinjiang,
including sanctioning, under Global Magnitsky, 12 officials
and----
Mr. Huizenga. OK.
Mr. Kritenbrink [continuing]. And another seven who have
been placed under restrictions.
Mr. Huizenga. All right. I have got a minute and a half
here. Let's get very specific. Has Deputy Secretary Sherman
refused to approve or requested any delay in implementation of
congressionally mandated the Uyghur Human Rights Policy, or
UHRPA, sanctions?
Mr. Kritenbrink. What I would say, sir, is we continue to
take a number of steps, and we will take a number of steps, to
hold accountable those in China who are----
Mr. Huizenga. That is--that's a yes-or-no kind of question,
though.
Mr. Kritenbrink. Congressman, I will--I will just reiterate
what I have said. We are committed to----
Mr. Huizenga. Well, either you know or you do not know.
Mr. Kritenbrink. Congressman, we are committed to taking
steps. I'm happy to take that back and come back to you.
Mr. Huizenga. Please do. Yes, that is the purpose of this.
And have you personally supported any delay in UHRPA?
Mr. Kritenbrink. I support making sure that we take steps
to ensure that we hold to account those in China who are
carrying out----
Mr. Huizenga. I understand that, but, respectfully, that's
not my question. Both for Ms. Sherman or for yourself, have you
felt it was in the best interest for a delay?
Mr. Kritenbrink. I think it is in America's national
interest to continue to carry out our steps to hold account
those people who are doing that----
Mr. Huizenga. And are you doing everything that you can do
to push forward on those steps and implementing those steps, as
has been congressionally mandated? In a bipartisan manner, I
might add.
Mr. Kritenbrink. Yes, sir, I'm confident that all of my
colleagues and all of my leadership are committed to making
sure that we hold to account those in China who----
Mr. Huizenga. And moving ahead in a timely fashion?
Mr. Kritenbrink. Yes, sir.
Mr. Huizenga. OK. We are going to hold you to that.
Mr. Kritenbrink. We are committed, again, to holding to
account those who are carrying out genocide in Xinjiang, in
China.
Mr. Huizenga. OK. We expect that action to continue.
And with that, Mr. Chairman, my time has expired. I yield
back.
Chairman McCaul. Thank you.
The chair recognizes Mr. Stanton. Mr. Stanton is
recognized.
Mr. Stanton. Thank you very much, Mr. Chairman, for holding
this important hearing. This is my first hearing as a member of
this committee, and I am honored to be here.
Last year, Republicans and Democrats came together to pass
the CHIPS and Science Act, an historic investment in American
ingenuity and advanced technology. Few States stand to benefit
more than my home State of Arizona, as we welcome $40 billion
in investment from TSMC in north Phoenix, expand Intel's
footprint in my district in the East Valley, and support
innovation from dozens from other companies.
That is why I am gravely concerned about the theft of
American intellectual property by the PRC. Last fall, FBI
Director Wray warned that, not only does Chinese IP theft
threaten these companies' bottom lines, but it jeopardizes our
economic competitiveness and our national security.
Mr. Estevez, last October, the Biden Administration imposed
controls designed to limit the development of production in
China of advanced node semiconductors, semiconductor production
equipment, advanced computing items, and supercomputers. That
was a very important step. What other steps is the Department
of Commerce taking to combat IP theft, particularly for
semiconductor technology?
Mr. Estevez. So, let me start off by saying thank you for
the notice on chips, very important.
We put those sanctions on, export controls on semiconductor
equipment and related technologies for national security
reasons, not necessarily for IP theft. However, when we find
companies that it is provable that they have stolen IP, we will
take action against those companies. Full stop.
Mr. Stanton. What additional tools do you need from
Congress to better protect American enterprise from IP theft?
Mr. Estevez. From the export control perspective, I think I
have the authorities that I need. From a greater perspective of
cyber theft, you know, companies need to invest in their cyber
protection and they need to notify when such breaches happen.
Mr. Stanton. Thank you.
I want to piggyback on questions from my colleague,
Madeleine Dean earlier. More than five Arizonians die every day
from opioid overdoses, nearly half of which involve fentanyl.
Unfortunately, the PRC continues to play a deadly role by
allowing export of precursor chemicals, the core ingredients
that some bad actors, like the Mexican drug cartels, can use to
make fentanyl. The PRC seems to have backed off cooperating
with the United States on stopping the flow of fentanyl
substances. They attribute that to U.S. entity listings and
export controls, including on institutions implicated in human
rights violations.
Mr. Estevez, this question is for you as well. What is your
analysis? What is really going on here? Has the PRC stopped
cooperating out of retaliation or have some of our controls
truly complicated their ability to cooperate?
Mr. Estevez. That is really a better question for my State
colleague. But from a national security perspective, it is
important that we exercise our authorities with export
controls.
Mr. Stanton. Mr. Kritenbrink, please.
Mr. Kritenbrink. Congressman, thank you very much for your
question. Again, this is vital national security issue
important to the lives and the health and safety of American
citizens. We have made it one of our absolutely top priorities
in engaging with the Chinese. Unfortunately, they have put up
various roadblocks to cooperation lately. They have complained
about regulatory steps that we have taken that allegedly impede
that cooperation. We do not agree with that view, and we do not
believe that there are any steps that the United States has
taken from a regulatory perspective that ought to impede
cooperation. We believe that China has a responsibility to take
steps to impede the flow of these precursor chemicals.
As I indicated earlier, in 2019, they did take steps to
schedule fentanyl, which stopped the shipment of fentanyl to
almost zero. Now, the problem is these precursor chemicals
which are diverted, and then, illegally manufactured into
fentanyl. We have made clear in our bilateral engagement that
China needs to do better and needs to take steps to make sure
that their companies know to whom they are selling; that these
chemicals are appropriately labeled, and the like.
And then, Congressman, I would hasten to add, we are also
working with other international partners to put pressure on
the Chinese to do the same.
Mr. Stanton. OK. I have time for one rather quick question.
On export control, obviously, we have shown real leadership on
that issue, the Biden Administration, but, obviously, we need
our partners around the world to do the same thing. We cannot
act in a unilateral way. What steps--what other countries are
we engaging with to impose multilateral export controls? And
that is for any of our witnesses.
Mr. Estevez. Yes. So, for any control we put on, we
generally engage multilaterally, unless we, the United States,
are the only country that makes a piece of equipment. I cannot
talk in specifics around the semiconductor export controls, but
we have engaged multilaterally on that. And I would be happy to
talk in a classified setting about what we have done there.
And just look what we have done on Russia: 38 nations put
on like controls to what we put on. That eventually will stifle
the Russian industrial base, so they cannot reconstitute their
military.
Mr. Stanton. Thank you very much. I yield back, Mr.
Chairman.
Chairman McCaul. The chair recognizes Mr. Davidson.
Mr. Davidson. Thank you, Chairman.
Despite the World Trade Organization membership China
enjoys, China is neither a market economy nor a developing
nation. As a condition of membership, China committed to be a
market economy. They are also allowed to pretend that they are
still a developing economy. Claiming this special status allows
the People's Republic of China to exploit the developed nations
like ours through various perks, such as restricting imports to
protect certain industries and complying with fewer WTO
obligations.
The failure of our country and others to enforce the
obligations of World Trade Organization membership on China has
been disastrous for America's economy, our manufacturing
sector, in particular, and our middle class. The consequences
are especially harmful in my home State of Ohio.
Are any of you aware that the Chinese Communist Party
military intelligence units have conducted cyberattacks on U.S.
businesses resulting in intellectual property theft of dual-use
technology?
Mr. Kritenbrink. Congressman, thank you for your question.
The cyber threat posed by China is vast, highly
significant. We are taking a number of steps to counter it.
But, certainly, the cyber-enabled theft of intellectual
property rights and trade secrets remains a top concern.
Mr. Davidson. Are whole-of-government uses of intelligence
units to steal intellectual properties characteristics of
market economies?
Mr. Kritenbrink. Congressman, I would say that it is
unacceptable for any country, regardless of status, to use
cyber-enabled means to steal intellectual property and trade
secrets.
Mr. Davidson. I agree with your statement there, and thank
you for that.
Is China unique in its use, as a World Trade Organization
member, of its intelligence units to steal intellectual
property of American companies on behalf of the companies that
they are trying to benefit inside China?
Mr. Kritenbrink. I can speak with confidence to the
challenge posed by China. I would have to take back your
question as to whether there are others that pose a similar
threat.
Mr. Davidson. Thank you. And that is concerning.
But, you know, Mr. Estevez, in 2020, BIS published a report
which revealed some concerning information regarding AK Steel,
which is now owned by Cleveland Cliffs. It stated, quote, ``If
AK Steel's Grain-Oriented Electrical Steel, GOES, operation
were to close, the United States would lack the ability to
produce transformers of any power-handling capacity without
relying on foreign sources.'' Does this assessment sound
accurate?
Mr. Estevez. I would have to go back and look at that, but
I would be happy to get a detailed discussion on GOES with you,
if you would----
Mr. Davidson. Yes. So, you know, your organization
publishes a lot of these reports. So, I wouldn't expect you
know all of them, but this is work that BIS did do, and it
highlights how important it is to understand the particular
sectors that are vulnerable. And China, when they use these
powers and exploit their membership status in WTO, they are
shaping market access, and they are targeting specific
companies and specific intellectual property.
This Grain-Oriented Steel produced by AK Steel, or
Cleveland Cliffs now, is the only U.S. source for this. And as
we look at the sensitivity of our electrical grid and
vulnerabilities there, this is just one of the core issues.
And as I have just a little bit of time, Mr. Kritenbrink, I
just want to highlight, with the abuses in fentanyl and tools
there, would it help if we designated cartels, in particular,
which are moving this product, as enemies of our country, and
made people that support those cartels by supplying precursor
chemicals, for example, or moving money and cash back and forth
eligible for sanctions and intelligence collection? Would that
be helpful?
Mr. Kritenbrink. Well, Congressman, I think, as a matter of
general principle, we would be supportive of looking at any
step we can to get at this scourge. But I would need to take
your question back to the experts, both in our Department and
across the interagency, and come back to you with a more formal
answer.
Mr. Davidson. Thank you. I hope to do just that, because it
highlights the important relationship between the Financial
Services Committee, which I also serve on, and this committee.
Because when you look at the sanctions regime and OFAC, it
is an important tool, the financial intelligence that we look
at. The cartels are in this business for money, and I think we
have to get at all of the corrupt influence the People's
Republic of China is doing. And the Chinese Communist Party
does not allow these things to go on unchecked. We have to
believe they have the power to change course. And I hope that
we will use all the tools in the kit bag to check the abusive
influence of the Chinese Communist Party and the negative
impact on our country, our economy, and our culture.
I yield back.
Chairman McCaul. Thank you, Mr. Davidson. You raise a great
point. Why is China still under a developing nation
designation, which entitles them to interest-free loans by the
World Bank or very low interest rate loans? And then, it allows
them, then, to use that for their Belt and Road Initiative with
usurious interest rates. And then, they rape the rare earth
minerals. They bring in their own workers; take over a port or
base. And then, when they fail, then the IMF goes in to bail
them out.
I think they are extraordinary, and I give them an A+ for
being very clever the way they can manipulate the global
institutions and take advantage of them. I am sure all of you
agree with that, but I won't ask you for a comment on that.
But I thank the gentleman for raising the point. I think we
should be taking a hard look at that.
The chair recognizes Mr. Phillips.
Mr. Phillips. Thank you, Mr. Chairman.
I think it is fair to say that Russia's invasion of Ukraine
has forced Central Asian countries to reassess their
relationship with Moscow. So, I am curious, Mr. Kritenbrink,
based on your assessment, how has China's approach to the
region changed, and how receptive are the member countries in
Central Asia to their overtures?
Mr. Kritenbrink. Thank you, Congressman, for your question.
I would note Central Asia is outside of my area of
responsibility. So, I will quickly outstrip the level of my
expertise.
But I would say, certainly, China has stepped up, yes, its
engagement in the region, but so has the United States. And I
think you can see that including through our senior-level
travel.
But I would have to take back any detailed questions on
Central Asia.
Mr. Phillips. Can you speak about--you just mentioned our
approach, though. How has our approach changed?
Mr. Kritenbrink. I think it would be safer if I would take
that back to my----
Mr. Phillips. OK.
Mr. Kritenbrink [continuing]. Assistant Secretary colleague
to answer in an expert way.
Mr. Phillips. OK.
Let me ask, also, about Iran. I know President Raisi
visited President Xi in China recently. Your assessment of that
visit?
Mr. Kritenbrink. Well, I can, again, speak in general
terms, and beyond that, I would have to take your question
back.
We are concerned about the deepening ties between Iran and
the PRC, make no mistake about it. And it concerns us in a
number of ways, both the oil purchases for sure, but also other
concerning areas of cooperation that I think pose a national
security threat to the United States and the international
community.
Mr. Phillips. OK. Let me turn to Mr. Schiffer and Mr.
Nathan, if I might.
How successful has China been in the Middle East and
Central Asia with their Belt and Road Initiative? If you can
speak to either, starting with you, Mr. Nathan?
Mr. Nathan. It is hard for me to say how successful it is.
They definitely spend a lot of money. I think that is the
overall issue with the Belt and Road Initiative, is that they
have exerted influence, spent money, burdened countries with
debt, left projects behind that are poor quality, often
inappropriate, and then, use that as a way to extract other
concessions.
When we make investments, it is based on our values, our
standards, the private sector, and we are not attaching strings
to them in some way.
Mr. Phillips. So, let me ask--I'm glad you mentioned that,
Mr. Nathan, because we quantify their influence by dollar
amounts.
Mr. Nathan. Right.
Mr. Phillips. Is it fair to say in some cases it actually
might be backfiring, as they layer on burdens,
responsibilities, commitments that cannot be fulfilled on
countries that have been beneficiaries? Are there any examples
of that that you might share?
Mr. Nathan. Well, I do not have at my fingertips any
examples, but I think it is absolutely the case that it
backfires. When I travel and talk to leaders, they are very
interested in our projects, in our funding, that comes with
high standards. It is free from the kind of integrity and
corruption problems, environmental and labor standards, that
BRI projects often entail.
Mr. Phillips. And Mr. Schiffer?
Mr. Schiffer. Yes, it is a very, very important set of
questions that you are asking. And I can certainly offer one
example in our wheelhouse.
You know, we have had the opportunity to engage with the
Kyrgyz Republic over the past year, because they have become
increasingly concerned about the amount of debt that they owe
to China's Exim Bank. And so, they have worked with us to
support efforts to provide better analysis of their debt burden
and to build better capital controls into their system to
manage that debt relationship with the PRC going forward.
So, we do see opportunities like that----
Mr. Phillips. OK.
Mr. Schiffer [continuing]. In Central Asia where we are
looking to find opportunities for AID, our colleagues at DFC,
and across the interagency, to be able to play smarter and
better in that region.
Mr. Phillips. So, on that subject, Mr. Schiffer, you know,
I am getting personally a little bit tired and concerned of us
completely or spending most of our time pointing out how we are
failing in our competition with China. How can we do better
vis-a-vis your perspectives, especially you, Mr. Nathan and Mr.
Schiffer, in competing with them? What can our Congress do to
support your efforts?
Mr. Schiffer. Well, look, we certainly welcome any
opportunity to work with Congress to be able to shine more of a
light on the efforts that we are undertaking, whether it is in
Central Asia, across the Indo-Pacific, or around the world,
that demonstrates the value proposition that we bring to the
game and the importance of American leadership.
Mr. Phillips. We just have a few seconds left, but, Mr.
Nathan?
Mr. Nathan. Yes, I would say one of the missions that we
were given by the BUILD Act explicitly was to offer an
alternative to authoritarian government, State-controlled
investments in the developing world. Part of the commitment of
the BUILD Act to give us that tool was the equity investment
authority that we were given. And finding a budgetary treatment
that allows that tool to fully realize its potential I think
would be critical.
Mr. Phillips. Indeed. Thank you.
Thank you all for your time today.
I yield back.
Chairman McCaul. Thank you, Mr. Phillips.
Mr. Nathan, I understand that you have a hard stop at
12:50, and clearly we are now exceeding that, so I would
request that if members have questions for you that you would
be able to respond in writing, if that is OK.
Mr. Nathan. That's absolutely OK. I really appreciate it.
Thank you very much.
Chairman McCaul. Thank you.
With that, I will recognize Mr. Kean.
Mr. Kean. Thank you, Mr. Chairman.
Thank you for your testimony here today.
And, Mr. Nathan, thank you. You can leave while I speak.
Don't worry about that. I will be directing some of my
conversations to your right. Thank you.
Assistant Secretary Kritenbrink, my district in New Jersey,
7th congressional District, just like many districts around the
country, has been impacted by fentanyl. We see time and time
again intercepts in human--and that impacting all of a--all
Americans.
In a January 30, 2003 State Department press release
announcing sanctions against U.S. fentanyl traffickers, you--
department *125221 any mention of fentanyl--of China or that
the designees of relationship to OFAC designate Chinese
chemical transportation company Shanghai Fast Fine Chemicals, a
stark contrast from Treasury's press release. Why is that?
Mr. Kritenbrink. I'm sorry, Congressman. I do want to make
sure I understand your question, that there was a sanctions
announcement on January 30 that did not include Chinese
entities. Is that right, sir?
Mr. Kean. Yes, whereas Treasury's press release did and the
Department's--and your State Department did not. Why is that?
Mr. Kritenbrink. Congressman, I'll--I'll have to take that
back. I--I'm--I'm not sure what the--the precise answer to that
question is, but I'm happy to take that back--go back, too. And
I will, as I mentioned earlier, certainly stopping the flow of
fentanyl precurses from China is an absolutely top priority and
happy to talk about what we're doing on that. But I'll have to
take your question back, sir.
Mr. Kean. Thank you. Also to you, can you--I know that
Chairman McCaul also mentioned the impact on--in Ukraine and
China and the Russia partnership therein. Can you speak to how
China is helping Russia evade sanctions that have been put in
place due to Putin's invasion of Ukraine?
Mr. Kritenbrink. Well, Congressman, this is what I can say:
We've made very clear including most recently when Secretary
Blinken was in Munich and met with Director Wang Yi what the
implications and consequences could be for China if it engaged
in providing material assistance to the Russian military in
Ukraine or assisted China--assisted Russia in systematic
sanctions evasion.
I think what I could say, sir, is we do have a concern for
some of the steps that China has taken to support Russia's war
in Ukraine: its--its--its spreading of disinformation about the
cause of the war and about Russian activities there, its
shielding of Russia in the U.N. and--and--and other areas, some
of its economic activities. We have sanctioned certain Chinese
entities who--who have provided assistance to Russia. Perhaps
my colleague would want to respond to that in more detail.
Mr. Estevez. That's correct, Congressman. First of all, I
want to recognize that my sister lives in your district.
Mr. Kean. OK.
Mr. Estevez. In Mendham. We have put 12----
Mr. Kean. Great community.
Mr. Estevez. Yes, it is. We've put 12 Chinese entities on
the entity list, meaning that cannot get exports from the
United States, under a licensing regime that we put on because
they were backfilling Russia, providing dual-use technology to
Russia. We also put one Chinese entity on the entity list for
providing parts that go into Iranian drones.
Mr. Kean. Yes.
Mr. Estevez. So we constantly work this with our colleagues
at State Defense and Energy and with the intelligence community
to assess trade flows and identify companies that may be
violating our sanctions. And if they are, we'll take care of
them.
Mr. Kean. And sanctions are obviously part of these
conversations. Why have they potentially not been enacted
sooner?
Mr. Estevez. For an entity listing we need specific data
about a--a specific entity, so specific and articulable facts
that when we see something going on that we can legally put
them on the list.
Mr. Kean. Thank you.
Yield back my time. Thank you.
Chairman McCaul. Thank you.
With that, I will go ahead and recognize Mr. Allred.
Mr. Allred. Well, thank you, Mr. Chairman.
And thank you all for being here. I know it has probably
been a long day. I hope we can have a bipartisan response to
our concern with Beijing's actions, but I want to be clear: We
have so many strengths that the CCP could only dream of
bringing to the table.
And as I have had a chance to see firsthand in my travels
as a member of this committee around the world, from Africa to
the Indo-Pacific with our allies there to even former Soviet
States and Central Asia, everyone would prefer to trade with
us, to attract our investment, and even to have us as their
preferred security partner. And we need to keep in mind that as
this President has made a central focus of his foreign policy
that we are in a global competition but that we should be
confident in our abilities. And I sometimes worry that some of
the discussions here make us sound like we are afraid. And I
think we have nothing to be afraid of. As I said, I think we
have real strengths.
But I am concerned in particular with the Chinese expansion
of their influences in the global south and wanted to, if I can
find the question, ask about our USAID process and timelines.
Just give me 1 second. This is the problem when you have too
many questions and you go to this stage of the hearing.
So how do our USAId project timelines--so 5-year projects,
1-year budget planning compare to the types of investments and
projects that are funded by the PRC and how do those timelines,
if they do or at all, inhibit longer-term consistent U.S.
engagement in partnerships around the world, particularly in
the global south?
Mr. Schiffer. You know, in--in--in some significant
respects it--it does place us at a disadvantage in the sense
that our--our friends in--in--in Beijing can, as you pointed
out, operate with a--a long timeline and without the sort of
economic and--and market logic that constrain--constrain our
activities. And--and the reality of the congressional
authorization and appropriation cycle and how we work--work
through that system to be able to--to obligate for--for
projects can--can create a certain tension in--in the process,
if I can put it that way.
Mr. Kean. Well, this is your opportunity to let us know how
Congress can provide USAID with additional tools, or resources,
or authorities to allow you to better compete, because I think
it is an important component of our competition. We talk a lot
about our defense deterrence. We are going to talk a lot about
our controls. But this is one of our most important tools and
everywhere I go, especially in the global south, I hear that we
are not doing enough.
Mr. Schiffer. I mean, at--at the liberty of suggesting that
you have a--a--a conversation with your friends on the
Appropriations Committee, if it were possible to have multiyear
appropriations, that would go a very, very long way toward
allowing us to do the sort of longer-term planning that--that
would allow us to be more competitive.
Mr. Kean. Well, I just want to say to my colleagues this is
the damage that is done when we do not make long-term
investments. If you want to talk about competing with China, it
is in having a strategic vision that you can carry out also
with our soft power, and I think we should keep that in mind.
So I do want to ask about--Secretary Kritenbrink and Under
Secretary Estevez, we are seeing further integration of China's
civilian and military industries as their policy of civil-
military fusion continues. And as more and more dual-use
technologies come on the market how do we effectively control
exports of these products and technologies to China?
Mr. Estevez. Yes, let me start off with--with that.
Obviously we look at this all the time. You know, as I talked
about earlier, in the advanced fabrication semiconductor area
we just cut them off from the most advanced semiconductors
because I cannot tell whether it's being used for a benign
activity, you know, a gaming system or for artificial--
artificial intelligence for military applications. So we just
stop it.
And then after that it becomes a little bit of like
assessing company by company whether we see them facilitating
Chinese military use. We'll stop that. Specific technology
areas usually in the advanced technology area, we'll stop that.
Things around quantum computing, for example. So it's--it's--we
have to assess the technology, assess what they're doing with
it. And if we're likely using it for those type of
applications, we want to ensure that they're not.
Mr. Kean. Yes. Tough to know the difference.
Do you have anything to add, sir?
Mr. Kritenbrink. Well, Congressman, I'd just say thank you
for the question. Very important. Agree that it's the civ-mil
fusion that--that poses the real threat here. It's why the U.S.
Government, including my colleagues in Commerce and elsewhere,
have taken these targeted steps to prevent China from getting
its hands on these technologies that assist its military
modernization and which threaten our national interest.
Mr. Kean. Thank you. I yield back.
Chairman McCaul. Thank you, Mr. Allred.
With that, I will recognize Mr. McCormick.
Mr. McCormick. Thank you, Chairman.
It is know that China obviously has a lot more debt that we
do, up to $20 trillion more debt, yet they have a smaller GDP.
My question is how are they allowed to use this money that
they basically fabricate by manipulating their monetary policy
without a true central banking system like we have that when we
call the Federal Reserve--the Federal Reserve, most people
understand, it is neither Federal nor the reserve--but yet
China gets away with having a fake monetary policy and spending
trillions of dollars per year more than we do around the world
expanding their global presence in the Western Hemisphere,
expanding their military, expanding their technologies on this
while simultaneously investing near a trillion dollars in our
national debt, which we pay interest to their economy with? Why
do we allow that to happen and can Congress do something about
that?
Mr. Kritenbrink. Congressman, thank you very much. I'll--
I'll have to take that back because matters of currency and the
global economy. I think it would be best if I take that back to
colleagues at the Treasury and elsewhere to come back to you.
But apart from the monetary questions that you asked,
obviously the whole focus of our conversation here today has
been trying to counter the malign influence that we have seen
posed by the PRC in a--in a range of areas. And we try to
address that. But I--I think it's safer, sir, that I take your
monetary question and currency question back.
Mr. McCormick. Here is what is upsetting me, because I have
been asking this for about 2 months to multiple government
agencies, multiple Congressman about something that is as
central to the future of America and the global security as
anything, which is money. Money is power. Money is what
develops technologies. Money is what buys military power. Money
is what buys strategic influence on foreign national
governments. And they have literally been cheating for at least
a decade and they have run up $20 trillion more debt than us; I
am going to emphasize that, with a smaller GDP and that the
world does not see this as a house of cards that needs to
crumble.
They do not have the inflation that they should have with
that. They do not have a normal monetary policy. And for a
decade nobody has asked that question? How do we not know the
answer this far into it? Fifty trillion dollars into a
question, we do not have an answer, and this hasn't been--this
is not a new question. I do not understand why we have to go
back to staff to ask a question that is very fundamental to the
existence of our influence strategically to the rest of the
world versus a rising power that is cheating.
Mr. Kritenbrink. I appreciate your question, Congressman,
but I--I'm--I'm confident in my areas of expertise and areas
that are outside of my area of expertise. I'm going to take
that back. I commit--I commit to you we will get you and
answer.
Mr. McCormick. I get it. It is frustrating because it seems
like everybody I ask has the same answer and I am not really
sure who to ask anymore.
But with that I will yield since nobody has those answers.
Mr. Kritenbrink. Understood, sir.
Chairman McCaul. Thank you, Mr. McCormick.
With that, I will recognize Mr. Moran.
Mr. Moran. Thank you, Mr. Chairman.
Secretary Kritenbrink, I want to start with you. I am going
to move down the line. You mentioned in your testimony about
the three core pillars of the U.S. strategy: invest, align, and
compete. Seems to me however that frankly our efforts have been
meager compared to the Chinese efforts when we look at what
they are doing to invest, align, and effectively dominate
economically in the world.
Mr. Nathan noted in his testimony some examples about U.S.
investment globally and he noted two specific examples: $150
million loaned to Ecuador to expand and modernize a container
port; $48.4 million to the country of Georgia to expand and
modernize a port there. But when I look at some of the
transactions that China is doing across the world: $1.4 billion
in loans to Djibouti; $6.7 billion in loans to Pakistan; $1
billion of loans to Montenegro for a highway project; $3.1
billion in Chinese investments to the Dominican Republic, which
effectively cut ties with Taiwan over that.
Would you agree that China is flexing more economic muscle
around the world and as a result is influencing the foreign
policies of many countries in a manner inconsistent with the
foreign policy and national security goals of the United
States?
Mr. Kritenbrink. Congressman, what I would say is that
we're very confident in the capabilities and the tools that we
bring to the table. We--we have different capabilities and we
play a--a very different, quote/unquote, ``game.'' China is in
the--in the game of--of State-backed loans and--and State-
directed enterprises. What we stand for is catalyzing primarily
U.S. private sector investment, which is unrivaled across the
world, just in my region of the world and in the Pacific a
trillion dollars in American investment across the--the Indo-
Pacific, larger than--than--than any other country. So that
would be point one.
And point two, sir, I--I would say that we've also tried to
demonstrate to countries the--the downside oftentimes of
signing up to those loans and those projects by the Chinese,
because you have to be careful about the debt trap you might
find yourself in, again concerns raised by another member on
the quality of the infrastructure and also the labor used in
them.
And then third and finally--my colleague Mr. Nathan isn't
here anymore, but we do obviously strive to offer alternatives.
But I'll go back to point one. Oftentimes we try to catalyze
U.S. private sector investment rather than State-led.
Mr. Moran. And I certainly understand that. The $7.4
billion from Fiscal Year 2022 that Mr. Nathan references in his
testimony does seem meager compared to what the Chinese are
doing across the globe and is having an effect no doubt on the
foreign policies of these other nations.
I want to go back to what you mentioned though about
private sector investments. What are we doing to--if anything,
to incentivize private sector companies to effectively unwind
with their economic ties to China?
Mr. Kritenbrink. I would say what--what we're doing, sir,
is we're taking a number of steps to try to make sure that
through our economic engagement with China that our national
security is not undermined. And so we're looking at ways in
careful select narrowly defined ways to achieve those goals.
But we are not pursuing decoupling.
We have a $750 billion trading relationship with China, but
I think the point that we're making here today, both--
particularly my--my colleague from Commerce in talking about
entity list decisions and other regulatory tools, is we're
trying to take narrow targeted steps that prevent China from
using those interactions in particular to increase the
capabilities of the PLA that would endanger American national
security.
Mr. Moran. Secretary Estevez, I want to pose a question to
you as it relates to targeted aspects of how we deal with China
economically. In my district I hear all the time that as it
relates to the entity list and export controls against Chinese
companies that companies in my district tell--are telling me
that China easily escapes this by--escapes these restrictions
by setting up dummy companies in other nations and running
through--their exports through them. They are also telling me
that when they get caught there is really not much teeth to
this and these individuals behind these attempts simply go set
up additional dummy companies and continue on with getting
around U.S. law.
Do you agree that additional enforcement and prevention
measures are needed to stop Chinese violations in this regard
to undercut American companies and American law?
Mr. Estevez. Thank you for that question. We have a fairly
robust enforcement capability in the Department of Commerce.
You know, just the other day, I think yesterday we fined a
company $2.8 billion, revoked their export privileges for
violating export controls related to China.
Mr. Moran. But did you get to the individual behind those
companies so they couldn't move on to set up new companies?
Mr. Estevez. This was a U.S. company that violated export
control law.
Mr. Moran. Same question: Did you get to the individual
behind the company?
Mr. Estevez. Absolutely. Absolutely in this case.
Now there is a bit of whack-a-mole out there. Companies put
up a facade. We go after that. And we'll put that company on
the entity list as well. I cannot stop people from being--you
know, doing illicit things, but we're going to after them. And
we do take action.
Mr. Moran. Yes, I would suggest that we can and we should
take additional hard actions against the individuals behind
those actions.
Thank you. I yield back.
Chairman McCaul. Thank you, Mr. Moran.
With that, I will turn it over to Mr. Issa.
Mr. Issa. Thank you. I am going to follow right back up on
that question. That $2.8 billion fine, did they successfully
export sensitive data?
Mr. Estevez. They exported data that was in violation of
our export controls.
Mr. Issa. So they succeeded and you are now fining them?
Mr. Estevez. That's correct.
Mr. Issa. So in the game of whack-a-mole what you are
saying is after they have succeeded and they try--well, in the
case of software, we know they try millions of times a day, but
they certainly try in the case of hardware hundreds or
thousands of times every day. And they succeed sometimes and
you succeed in fining those who do it sometimes. Is that a fair
assessment without adding too much either way?
Mr. Estevez. I also stop shipments from going.
Mr. Issa. Sometimes you catch them in advance?
Mr. Estevez. That's correct.
Mr. Issa. Those are the successes, the best part of whack-
a-mole, but often it is reactive, not proactive, correct?
Mr. Estevez. We try to be as proactive as possible.
Obviously when someone breaks the law and I catch them doing
it, we take action. And it's unfortunately after-the-fact.
Mr. Issa. And currently you punish U.S. companies
effectively because by definition you cannot punish the Chinese
company who lives to fight another day and try to circumvent
the law another day.
Mr. Estevez. Well, I would certainly entity list the
Chinese company.
Mr. Issa. OK. Let me ask you a question: What do you think
the most important transnational challenges are facing the
United States in its China relationship?
Mr. Estevez. Well, you know, from a--from the Commerce--
from the export control universe it is their chase after dual-
use technology for military modernization through their civil-
military fusion strategy.
Mr. Issa. And does that and should that define the U.S.-
China relationship in a major way?
Mr. Estevez. That--that is part of the China relationship.
And again, I'm going to turn it over to Assistant Secretary
Kritenbrink to answer----
Mr. Issa. Yes, briefly answer in another direction them,
Mr. Secretary, how would you--would you say there is something
different than that answer that is equally important?
Mr. Kritenbrink. Yes. Yes, sir, Congressman. If I
understand your question correctly about transnational
challenges, I--I would--I would list several. Certainly climate
change would be one. Certainly food security would be one.
Pandemic disease would be another. Proliferation would be
another.
Mr. Issa. So you would list those that I have got on the--
--
Mr. Kritenbrink. I would--yes, I would
[inaudible].
Mr. Issa. Well, that's 90 minutes--for 90 minutes when the
President met with President Xi that is all he talked about. He
did not talk about the export relationship. He did not talk
about the stealing of intellectual property. In other words, to
China this is what the President thinks, not your partner
there's recognition of a constant pervasive attempt and success
in stealing from America.
Mr. Kritenbrink. Congressman, I would say that the
meeting--the most recent meeting between President Xi and
President Biden in Bali was wide-ranging and exceptionally
candid and covered a--a much broader agenda than just the
transnational challenges that you've listed there, sir.
Mr. Issa. OK. In the remaining time that I have I am going
to back to the BIS for a second. Secretary Ashew worked very
hard for his nearly 4 years to limit what China got. You are
doing the same thing. Both of you have successes that you can
point to and both of you have those failures where you get a
fine, but money does not make up for the fact that China has
succeeded.
Let me ask you a larger question for a moment: It is
outside your jurisdiction, but it is not outside your mandate.
Every day in America thousands of Chinese nationals come here
supposedly for an education. I just left the Science Committee;
several hours there on the same subject. China is constantly
sending over spies, either official spies or would-be spies in
the form of students.
You have no authority over limiting them within your
jurisdiction, but according to the dollar figure, over half a
trillion dollars a year, isn't that probably the greatest
leakage of sensitive futuristic data, not what you are dealing
with on a daily basis, which is important, but in fact the
technology that they are stealing as a matter of policy
particularly using the people they imbed in our universities?
Mr. Estevez. Thank you for that question. First, I do not
want to leave the idea that all Chinese students are Chinese
spies.
Mr. Issa. But all Chinese students are--have family back in
China and potentially are raked for their knowledge in the
future. That is well established.
Mr. Estevez. Basically, sir, it's not subject to our export
controls, however certain technical data is subject to our
export controls. We have a university outreach program. I wrote
letters to every university that does--big research
universities and offered expertise from our export control
officers to come in and talk to them. We go out regularly. I
was just out at universities talking to them about how they can
protect the technical data that is subject to export controls.
Mr. Issa. And for the record would you followup with an
answer to the question of should you in fact have some form of
jurisdiction over universities and that--should that be added
to your portfolio? If you would opine on that.
Mr. Estevez. I will followup.
Mr. Issa. Thank you.
Thank you, Mr. Chairman.
Chairman McCaul. Thank you, Mr. Issa.
With that, I will recognize the gentleman from Texas, Mr.
Self.
Mr. Self. Thank you, Mr. Chairman.
I want to congratulate everyone that is still here. We will
call ourselves the survivors.
We do have votes in just a few minutes, so I will make this
quick. I just returned with the chairman from Germany, Poland,
and Ukraine. There is a lot of media attention on the funds
that we are providing to Ukraine. Are they being properly--do
we have proper oversight over them? And I think we ought to ask
the same question to some of the funds that we provided to the
State Department here. You may have heard that the chairman
indicated that part of the Countering Chinese Influence Fund
was used to fund a bakery, and other examples like that.
We also have the CHIPS Act where--so we have committed to
something like a billion-and-a-half dollars over the last--the
next 5 years for the Countering Chinese Influence Fund and we
have also committed to $500 million. So that is well over $2
billion.
My concern here is measurable objective standards for the
use of those funds. Now I have heard a lot of--I have heard the
phrase ``take steps'' often in this hearing this morning, but I
am interested in the measurable objective standards that you
use, because obviously we have mounting debt and deficit in the
Congress. It will be one of our primary objectives to get a
handle on that.
So can you share with us the measurable objective standards
that you use for the use of the U.S. taxpayer dollars?
Mr. Kritenbrink. Congressman, thank you for your question.
I first want to thank Congress for providing these funds. We
think the Countering PRC Influence Fund is a very powerful
tool. It's something that is used to counter Chinese influence
globally. There have been more than 100 projects approved over
just the last 2 years. I'd have to come back to you,
Congressman, if--if you're looking for more details and--and
more instances of success, but I do know that--that through
these programs we've been able to influence countries to resist
Chinese attempts to get them to sign onto 5--their 5G, for
example. It's also been used to make sure to highlight the
issues involved in--in forced labor, products produced using
forced labor coming out of Xinjiang.
But I--I'd be happy to take that back, but we think it's a
powerful tool. It's one that we take very seriously and that we
use we think very judiciously and effectively. But I'd be happy
to take your question back to come back in more detail,
Congressman.
Mr. Self. Thank you. I am not looking for success stories.
I am looking for the measurable objective standards that you
use as the guidelines, the guide rails for the use of these
funds.
And since I do have some time remaining, something that we
have not addressed today that I am very surprised has not been
addressed is what are the diplomatic actions that you are
taking against the Chinese basically annexing waters well
beyond their international waters in the South China Sea,
because that is in my mind a dangerous precedent that we are
allowing to happen? So what diplomatic actions are you taking
against that?
Mr. Kritenbrink. Thank you, Congressman. Another very
important question. We are deeply concerned about Chinese
activities in the South China Sea. Many of their activities and
many of their positions have no basis in international law. I
would say we're doing three primary things, both on the
diplomatic and the military front.
First, diplomatically we're engaging with partners across
the region to make sure that we all stand up for defending
international law. We stand up for freedom of navigation,
freedom of overflight. We ensure that when countries make their
claims that those claims are based in international law. And
it's through that diplomacy we also point out many of the de-
stabilizing actions the Chinese have taken including harassment
of other countries, of their boats, of their fishermen, and--
and the illegal reclamation that they've carried out in the
South China Sea.
Second, both the State Department and the DoD have very
significant programs to build the maritime capacity of our
partners in the South China Sea, building their maritime domain
awareness, building their security capabilities so they can
understand what is happening in their own waters, better deter
threats posed by China, and also ensure that they have access
to the minerals in their waters to which they're rightfully
entitled.
And then third and finally, we support the operations of
our colleagues at DoD who regularly exercise both presence
operations and freedom of navigation operations to make sure we
demonstrate that the United States of America will fly, sail,
and operate everywhere that international law allows and that
other countries should enjoy those same rights. Those are the--
the--the top three activities, sir, that we're carrying out in
the South China Sea.
Mr. Self. Thank you. I yield back.
Chairman McCaul. Thank you, Mr. Self.
Gentlemen, again I really appreciate your time and coming
today.
I had noted in your, Assistant Secretary's statement that
you said to reiterate we seek competition, not conflict. Can
you define conflict for me?
Mr. Kritenbrink. Well, yes, sir. What--what we're referring
to there is we welcome competition. We think that's healthy.
This--this is what we do as Americans. What we do not want to
see is some kind of a miscalculation that veers into conflict,
potentially military conflict. That--that is what we are
seeking to avoid and we're trying to make clear. Competition
does not equal conflict in our mind.
Chairman McCaul. No, understood. So your definition of
conflict though is from the kinetic element. It is not
discussing the economic, resource, cyber, and other types of
malign activities that the PRC and the CCP are engaged in
currently.
As we know that China is continuing their Road and Belt
Initiative, they have a geopolitical alignment between China,
Russia, Iran, and North Korea whereby they are already seeking
to utilize Ukraine as Eurasian expansion. They are taking over
Mariupol and the waterways, Africa, Oceania, recreating the
maritime Silk Route in an attempt to try and cutoff Western
Hemisphere supply chain while simultaneously controlling the
ports as we talked about and the waterways as Ms. Salazar
discussed in Panama, which would essentially cutoff all of our
supply chain.
Now in addition to this, we also know that they are
continuing to buy in the billions farmlands and other areas
around our military bases and we continue to see where they are
utilizing billions of dollars of intellectual property theft
from American businesses. They are continuing to try and
utilize surveillance and espionage techniques.
So do you not determine that that is in fact conflict?
Mr. Kritenbrink. Congressman, I would say that we share
your concerns over many of the activities that you outlined.
Chairman McCaul. But the question is do you consider that
conflict?
Mr. Kritenbrink. The--the way that we have used conflict in
a way that I
[inaudible] moment ago is--is--is kinetic.
Chairman McCaul. [Inaudible] or do you consider that to be
in any way a conflict from them to us?
Mr. Kritenbrink. What I consider that to be are
unacceptable steps that pose a threat to our national security
and other interests to which we are responding proactively on a
daily basis.
Chairman McCaul. Understood. And just to stay on the topic
of unacceptable, you did talk about the egregious and
unacceptable human rights abuses that are across China. We know
exactly what they are doing with the human rights abuses
against the Uyghur. We know that they are illegally doing organ
harvesting, that they have denied Hong Kong of the one country,
two system framework, that they are in conjunction with Iran
and Russia from an economic support perspective.
Why is it that you do not view decoupling an adversarial
nation that is out to try to eliminate the U.S. dollar from the
global currency and remove us from being a superpower? Why
would you not advise that that is good to decouple?
Mr. Kritenbrink. Well, Congressman, again as I hope we've
made clear here today, we have deep concerns across a whole
range of activities including several of which that you have
outlined and we are responding to them forcefully. But our
policy is not to pursue decoupling. Our policy is to respond to
those and counter those behaviors in a way that we think best
serves the American national interest.
Chairman McCaul. Do we as America determine that Iran--we
labeled them as a State sponsor of terrorism, is that correct?
Mr. Kritenbrink. That is my understanding.
Chairman McCaul. So what would you call then the Nation who
actually helps to support and fund in a proxy utilization--what
would that country then be? Would that not also be a State
sponsor of terrorism?
Mr. Kritenbrink. Again, Congressman, I've tried to outline
here that where we have concerns with Chinese behavior and
actions we've taken resolute steps to respond to them.
Chairman McCaul. Sir, I am just asking a simple question,
which is that we already have defined that Iran is a State
sponsor of terror. If another nation is in conjunction
supporting that State sponsor of terror, does that not then
also lean to them doing the same?
Mr. Kritenbrink. I'll just say, Congressman, we'll--we'll
respond to the actions of--of China that are of concern to us
and we'll do it in a way that supports our national interest.
Chairman McCaul. No, that is understood. And again, our
national interest seems to be on the ideas of what is
economically beneficial.
Can I ask a question to you, Mr. Schiffer? How much money
does USAID invest in China?
Mr. Schiffer. We do not invest any money in China.
Chairman McCaul. No programs? No projects that are being
done in China at a taxpayers' expense?
Mr. Schiffer. There are programs that we undertake to
support Tibetans and others who are victims of China's
oppression and human rights violations.
Chairman McCaul. So we will allocate and spend money to
help the people in China who China will not help, but in return
we will also continue to give hundreds of billions of dollars
in trade to China while they sponsor countries like Iran, who
we have noted as a State sponsor of terror, or Russia, who is
engaged in war in Ukraine. But yet we still won't determine
that they are a nation in which we are in conflict with. We
won't decouple. We won't stop and actually hold them
accountable noting that they are an adversary. Is that my
understanding of everyone's testimony right now?
Mr. Schiffer. Well, in terms of the programs that--that--
that we support; and be happy to talk to you more about them in
a--in--in a different setting, we believe that it's important
for the United States to stand up to oppressed people who are
victims of human rights violation, cultural genocide, and--and
more.
Chairman McCaul. And I completely agree with that. I think
we should always be trying to help those who are engaged in
human right abuses or denials.
One question: Do you believe that TikTok is a threat or a
national security issue? And this is for everyone on the panel.
Mr. Kritenbrink. Congressman, on--on your--your previous
question I would just say obviously we're taking a range of
resolute steps that we've outlined here today to advance our
national interest and push back on concerning China's behavior.
On--on--on TikTok I think you're aware that we have banned
the use of TikTok on all U.S. Government devices. My
understanding is CFIUS is looking at a number of--of steps
related to--to TikTok. But I think it would be safer to refer
questions to Treasury and the CFIUS process regarding those
details.
Mr. Estevez. I would also say TikTok is a threat. And like
Secretary Kritenbrink just said, CFIUS is adjudicating that
process right now.
Chairman McCaul. Thank you so much, gentlemen.
With that, I will recognize Mr. Burshett.
Mr. Burchett. Thank you, Mr. Chairman. It is Burchett, but
close. I appreciate it.
Chairman McCaul. Hey, it is close enough, right?
Mr. Burchett. Yes, it is close enough.
I fear that the U.S. Government has been compromised by the
Communist Chinese. Our own President when this surveillance
balloon, or whatever you want to call it, flew over our
country, the President called, from what I--the earlier reports
were that he called for it to be shot down. And then our own--
from what I understand General Milley said no, it should not.
And then it was allowed to transverse the entire
Continental United States of America. Came over my area, Oak
Ridge National Laboratory. I believe Y-12 in that mix.
And he was the same general under President Trump at the
end of his presidency that actually spoke with the Chinese,
apparently unbeknownst to the White House. And this is the same
man who is telling our President not to shoot this thing down.
And Leon Panetta, former CIA Director, former Chief of Staff
under Obama, he--I saw him in an interview and he said he would
have shot it down over Alaska.
I say that just as a preempt. Doesn't have anything to do
with my questions, but it is something I think that needs to be
said.
But, Secretary Estevez, I am concerned about the
possibility research conducted at ORNL, Oak Ridge National
Laboratory, which may result in matters of national security
could fall into the Chinese Communist Party's hands. And I know
Oak Ridge is part of the Department of Energy, but does the
Department of Commerce have export controls in place to stop
this from happening?
And I believe they are calling for votes. Is that correct?
Yes, I am good.
OK. Go ahead, brother.
Mr. Estevez. That's a--it is a better question for the
Department of Energy. I doubt that Oak Ridge is exporting
anything to China, but we certainly have controls around
nuclear--nuclear goods, nuclear-related items going to China,
full stop.
Mr. Burchett. OK. Secretary Kritenback--brink--how do--is--
did I say your name right, Kritenbrink?
Mr. Kritenbrink. Yes, sir.
Mr. Burchett. OK. I got it right.
Mr. Kritenbrink. Thank you.
Mr. Burchett. They cannot get Burchett right, but we get
Kritenbrink right. I know you all woke up this morning and
thought, gosh, we are getting to go to testify before Congress.
This is going to be great.
There are many researchers at Oak Ridge National Laboratory
with ties back in China, and these people are very loyal folks.
They are good folks. But what is being done to protect these
researchers and their families from Chinese Communist Party
influence? From what I understand that they--people will get
approached, not necessarily at Oak Ridge, but they could be
get--approached and they will say, hey, you got family back
here. Basically they imply they are going to disappear, which
is greatly within the possibility of Communist China. Is there
something that could done about that? Is there something we can
do about that?
Mr. Kritenbrink. Congressman, thank you for your question.
I--I will have to take that back because I do not know the
details of that program. But I'm happy to take that back and
provide----
Mr. Burchett. Would you please do, not just do the--not use
the usual----
Mr. Kritenbrink. Yes, sir.
Mr. Burchett. I realize it as the 435th most powerful
Member of Congress I am not at the top of your list, but
[inaudible].
Mr. Kritenbrink. No. No, sir. I'm happy to. Could I respond
very briefly on the balloon as well----
Mr. Burchett. Yes.
Mr. Kritenbrink [continuing]. And I had the opportunity to
mention earlier, Congressman, we--we detected, we tracked the
balloon. President ordered that it be taken down. And that was
done as soon as it was determined it could be done safe--safely
and not in a way that rained debris down potentially on top of
the heads of American citizens that could have injured or
killed them.
I would also say that at the President's direction we took
a number of steps to shield ourselves from any vulnerability
from that balloon. We learned a--a lot from that balloon by
tracking it and we're going to learn even more now that we have
taken it down and recovered the debris.
Mr. Burchett. Yes, sir. I fear that with it dropping in
salt water the electronics will be fried. And also since it--it
could have been dropped in Montana. The Democrat U.S. senator
from there even said it should have been dropped there.
I said this jokingly, but it is the truth: You dropped it
off the coast of Myrtle Beach. You are more likely to hit some
guy with a mullet and a tie-dyed t-shirt riding in a shrimp
boat that you were to hit somebody in Montana.
I mean, you have got all these computer models and you can
tell us where stuff drops. To me that is just very hard to--I
am not calling you a liar, but I am calling somebody a liar
because they are not telling us the truth about this thing. And
it is the type of thing we will never hear about or if we do it
will be in some expose later and then--and nobody will bat an
eye.
Mr. Kritenbrink. Well, Congressman, again I'll just say
that when--when the U.S. military and others did this modeling,
that was the precise concern. You have a balloon that's 200
feet high and the--the payload, the--the collection apparatus
is the length of three buses----
Mr. Burchett. I realize that, but----
Mr. Kritenbrink [continuing]. You shoot that down from that
height, debris scatters over a very wide field.
Mr. Burchett [continuing]. We have models that can----
Mr. Kritenbrink. Yes, sir.
Mr. Burchett [continuing]. That can read the data off a
dime on the pitcher's mound at Yankee Stadium.
Real quickly, is China--I know China is involved in the
fentanyl crisis. Is the State Department doing anything to
combat that? And I am out of time, I realize, but if you can
just answer that?
Mr. Kritenbrink. Yes, sir.
Mr. Burchett. Maybe have somebody come to the office and
get to me.
Mr. Kritenbrink. We will. Fentanyl is an absolute scourge.
We're engaging the Chinese aggressively. And perhaps most
importantly we're engaging our partners to collectively put
pressure on China to take their right steps that they should.
We'd be happy to brief you, sir.
Mr. Burchett. I wish you would. I hope you all just lock
them down because I do not believe they have anybody's best
interest--and I worry about the good folks in Tennessee that
have family back in China. Thank you, brother.
Chairman McCaul. Thank you, Mr. Burshett.
With that, I will recognize----
Mr. Burchett. Burchett. Birch like the tree and ett like I
just ett dinner. Ett. Burchett.
Chairman McCaul. Yes, but if I say it correctly, you won't
correct me.
Mr. Burchett. Burshett? What is that? Come on.
Chairman McCaul. I am giving you the French version.
Mr. Lawler?
Mr. Lawler. Thank you for correctly pronouncing my name.
Secretary Estevez, earlier this month Chairman McCaul and I
sent you a letter requesting information on the Department of
Commerce's implementation of U.S. export control laws regarding
Chinese exports to State sponsors of terrorism. I ask unanimous
consent that a copy of the letter be entered into the hearing
record.
Chairman McCaul. Without objection.
[The information referred to follows:]
*********COMMITTEE INSERT**********
Mr. Lawler. Between 2010 and 2016 Chinese company ZTE
illegally exported tens of millions of dollars worth of U.S.-
origin equipment to Iran, clearly violating U.S. sanctions and
export control laws. And I am sure this is not the only case of
illicit activity.
What has BIS done to enforce compliance with enhanced
controls on State sponsors of terrorism?
Mr. Estevez. Thank you for that question. On ZTE, of course
ZTE is under criminal penalty regarding their violation of--of
law there.
Tracking trade from China to other benign--or--or malicious
actors in the world, you know, we can track the trade. What
that is and whether there is American content in those items is
harder to discern. So we have a 10 percent de minimis rule for
stuff going to a State sponsor of terrorism. So we're doing
assessment of what we can do there. That's the most I can say
at this point. And obviously we're going to respond to your
letter.
Mr. Lawler. Thank you. Is BIS able to conduct end-use
checks in China for diversions of two State sponsors of
terrorism like Iran?
Mr. Estevez. We are able to use--to do end-use checks on
our goods that go to China and how they're being used to ensure
they're not being diverted from China. China exports going out
are not subject to our end-use checks. However, we can ensure
that, you know, if--if they're exporting stuff from the United
States, we can start to, you know, do an assessment of how much
content there is.
Mr. Lawler. Do you believe there are certain technologies
that we should not be exporting to China?
Mr. Estevez. If there's technologies that we're--should not
be exporting to China, my job is stopping those. So my view is
no, but as technology advances, we're always taking action
appropriately.
Mr. Lawler. OK. Thank you.
Secretary Kritenbrink, I am deeply concerned with recent
reports that China may be sending ammunition and other military
equipment to Russia in support of its war against Ukraine. How
is the Administration working to prevent this arms transfer and
how would the Administration respond if a deal goes through?
Mr. Kritenbrink. Congressman, yes, you're right, we are
deeply concerned that--our understanding is China is
considering taking steps to provide lethal assistance to the
Russian military in Ukraine. We have not seen them take that
step yet. We've tried to signal very clearly, both in private
in Munich and then publicly, our concerns. We've talked about
the implications and the consequences if they were to do so.
And we also know that many of our like-minded partners share
those--those concerns. So I think we've--I think we've made
that very clear.
Mr. Estevez. And if I could, Congressman?
Mr. Lawler. Yes, please.
Mr. Estevez. For dual-use items that are part of our
sanctions package, our export control package that we and 38
other nations have put on regarding support to Russia, we have
put 12 Chinese entities on the entity list for providing
support to Russia.
Mr. Lawler. Thank you. As we all know, the CCP has been
conducting vast espionage operations in our country for years,
long before this most recent episode with the Chinese spy
balloon. What specific steps are the--is the Administration
taking to counter China's espionage efforts over the past 2
years?
Mr. Kritenbrink. Congressman, I think it would be safer if
I take that back and have colleagues in the intelligence
community brief you in--in a classified setting.
Mr. Lawler. That would be great.
Mr. Kritenbrink. Thank you, sir.
Mr. Lawler. Last, how is the Administration working with
the ASEAN countries to push back on China's militarization of
the South China Sea?
Mr. Kritenbrink. Yes, sir. Well, I'd say a--a--a couple of
things: First of all, our engagement with ASEAN, the 10
countries of ASEAN, soon to be 11, is really vitally important
to the United States. Collectively these--these countries form
the world's fourth largest economy and with 650 million people
are--or collective 1 billion people I think have a bright
future together.
But specifically with countries in ASEAN and especially the
subset of ASEAN States who are South China Sea claimants we do
several things: We're engaged with them diplomatically to make
sure that they and all countries promote the peaceful
resolution of disputes, the respect for international law
including international maritime law, and that we work
diplomatically to preserve the freedom of navigation and
freedom of overflight.
Second, we are providing, both the State Department and
DoD, a--a--a great deal of assistance to build these partners'
maritime capacity including their maritime domain awareness
capacity and defense capacity so they better understand what's
happening in their waters, they can better deter China and
others from violating their rights and they can better secure
the minerals in their waters to which they're entitled.
And then third and finally, we work very closely with our
partners at DoD who on a daily basis are, through their
presence operations and freedom of navigation operations,
demonstrating that we'll fly, sail and operate anywhere
international law allows. And every other country should be
entitled to the same right.
Mr. Lawler. Great. Thank you. I yield back.
Chairman McCaul. Gentlemen, thank you so much. I want to
thank the witnesses for their valuable testimony as well as the
members for their questions. The member of the committees may
have some additional questions for the witnesses, and we would
ask that you respond to these in writing.
Pursuant to committee rules all members may have 5 days to
submit statements, questions, and extraneous material for the
record subject to the length limitations.
Without objection, the committee stands adjourned.
[Whereupon, at 1:41 p.m, the committee was adjourned.]
APPENDIX
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STATEMENT FOR THE RECORD FROM REPRESENTATIVE CONNOLLY
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RESPONSES TO QUESTIONS SUBMITTED FOR THE RECORD
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