US Lawmakers Say China Using Coercive Business Practices for Economic Advantage

U.S. lawmakers Thursday charged the Chinese Communist Party is using coercive economic practices to achieve worldwide dominance over the United States.

The accusations came at a hearing of the House Select Committee on Strategic Competition Between the United States and the Chinese Communist Party days after U.S. Treasury Secretary Janet Yellen met with Chinese officials in Beijing to discuss the nations’ economic relationship.

Yellen said that while the United States was taking targeted national security actions, “a decoupling of the world’s two largest economies would be disastrous for interests for both countries and destabilizing for the world, and it would be virtually impossible to undertake. We want a dynamic and healthy global economy that is open, free and fair.”

Diplomatic relations between the two countries have been tense since the U.S. downed a Chinese spy balloon earlier this year. Witnesses told the House panel Thursday U.S. companies are facing increasing threats operating inside China.

“There’s no such thing as a private company in China, a raft of legislation like the updated counterespionage law, the data security law, the anti-foreign sanctions law has codified what was always true. China reserves the right to swipe any data, to seize any assets and take IP that it wishes,” committee Chairman Mike Gallagher said.

According to committee members, China’s restrictive environment is resulting in a so-called “brain-drain” of its own business people, turning China into the top country in the world for the departure of wealthy individuals, fleeing what they fear is the Communist Party’s ability to arbitrarily seize assets.

Witnesses testified the environment in China is becoming increasingly restrictive for American companies and individuals.

“In the last few months, PRC authorities are now charging any domestic or foreign businessperson with espionage simply for providing any services using PRC information to grant or give to third-country-based customers,” Piper Lounsbury, chief research and development officer at Strategy Risks, a risk management firm for companies doing business in China, said.

European companies have also complained about a worsening climate for business. In June, a survey by the European Union Chamber of Commerce in China reported a record-high 64% of surveyed China-based European companies reported that doing business in China became more difficult in 2022.

“The crackdown on consulting businesses, the enhanced data, secrecy laws and the flow of PRC information just highlight the negative symmetry that we have with China. This means that even companies now can’t even do due diligence in advance of any sort of business transaction,” Lounsbury, said.

The Chinese Foreign Affairs Ministry pushed back against criticism of its business practices Monday in response to a U.S. State Department travel advisory issued this month warning Americans citizens of the “risk of wrongful detention.”

“China is a country under the rule of law. The decision of relevant departments to carry out security review of foreign companies according to law is based on laws and facts. China welcomes citizens and enterprises from all over the world to visit China and do business in China, and protects their safety and legitimate rights and interests in China, including freedom of exit and entry,” said Mao Ning, a spokesperson for the ministry.

China’s constitution explicitly makes individual rights subordinate to the interests of the ruling Communist Party, which directly controls both the legislative process and the courts. Congressman Raja Krishnamoorthi, a Democrat from Illinois, told VOA Mandarin that Washington is focusing on trying to convince Beijing to change policies, not to hold the country’s economy back.

“Our quarrel isn’t with the Chinese people. We want them to realize their legitimate economic aspirations, but the CCP needs to change its behavior. I mean, you can’t have a system without a rule of law, and that’s what a lot of people are observing right now in China,” Krishnamoorthi said.

Witnesses told the committee that American businesses face a restrictive environment led from the top down by President Xi Jinping, potential intellectual property theft and the constant threat of seized assets.

“The issue is how much do I need to lose to have access to the market, so it’s a balancing act,” said Desmond Shum, a businessman whose ex-wife, Whitney Duan, was arrested by the Chinese. Shum, the author of Red Roulette: An Insider’s Story of Wealth, Power, Corruption and Vengeance in Today’s China, told U.S. news program 60 Minutes that he and his then-wife participated in corrupt business practices in China.

In its latest report to Congress in 2022, the U.S.-China Economic and Security Review Commission, set up by Congress in 2000 to monitor and report on the national security implications of the U.S.-China economic relationship, as well as make recommendations, said U.S. businesses and investors are reevaluating their reengagement in China.

“China has subverted the global trade system and moved further from the spirit and letter of its obligations under its WTO accession protocol,” the report said. “China’s subsidies, overcapacity, intellectual property theft, and protectionist nonmarket policies exacerbate distortions to the global economy. These practices have harmed workers, producers, and innovators in the United States and other market-based countries.”

The commission went on to say the United States’ ability to overcome harmful trade practices was undermined by the lack of a coherent strategy.

VOA Mandarin reporter Yi-hua Lee also contributed to this report.

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