UNITED NATIONS – Chinese investments in the U.S. pose a risk to U.S. economic and national security.
That's the conclusion of a new report by the U.S.-China Economic and Security Review Commission.
Congress created the commission in 2000 when it voted to admit China into the World Trade Organization, and charged it with issuing annual reports. Anyone who's bothered to read the reports would have trouble sleeping at night, and the latest report is particularly disturbing.
It finds Beijing has been buying up American assets at an increasing rate as China's own economy has grown into the world's largest manufacturing economy.
While many see this as a gift gilt with dollar signs, it's a Trojan horse, with the Chinese Communist Party and its state-owned enterprises behind the investments.
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As the commission report puts it, "China is different than most other large investors in the U.S."
China "has a vastly different economic system with heavy state intervention, it has a non-democratic political system without rule of law, and it is emerging as a geopolitical competitor of the United States," the report says, stating the obvious.
China's government-owned enterprises don't need to make a profit. They receive subsidies and other incentives from the government and are more about achieving Beijing's long-term strategic goals than upholding free-market principles.
And those goals are pushing Chinese investments increasingly into American technology, advanced manufacturing and research-and-development firms.
This places our economic future as well as our national security at risk.
Two of the commission's members wrote in the Wall Street Journal, "The national-security threat posed by China's state-led policies in high-tech sectors cannot be overstated. This year there has been an unprecedented rise in Chinese attempts to acquire U.S. firms with sensitive technologies, with more than 20 bids in the semiconductor industry alone."
For example, a buyout firm with ties to China's State Council and space program recently bid $1.3 billion for a U.S. producer of military-grade semiconductors.
This would benefit China's military with advanced technology and also provide insight into similar technologies used by our military.
The Committee on Foreign Investment in the U.S. (CFIUS) can block such acquisitions, but its budget is not keeping pace with the increased number of transactions that need review.
Chinese companies and individuals already in the U.S. that have R&D cooperation agreements, early stage technology financing or licensing agreements with local firms pose another national security challenge.
The danger of these investments on the economic front is also clear: American companies are at a distinct disadvantage competing with companies funded by the Chinese government's deep pockets that don't have to turn a profit.
Amazingly, while Washington contemplates who uses what bathrooms, it doesn't even know the extent of Chinese investment in the U.S. The U.S. Bureau of Economic Analysis says $21 billion; China's Ministry of Commerce says $47 billion; while private research says $64 billion.
Whatever the number, there's a simple straightforward solution to both the economic and national security risks, and it's consistent with conservative free-market principles: bar Chinese state-owned enterprises from investing in the U.S.
As the report's authors put it, "After all, if we don't want the U.S. government owning critical parts of the U.S. economy, why would we allow the Chinese Communist government to do so?"
Media wishing to interview Curtis Ellis, please contact [email protected].
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