Hearing Entitled: Examining Policies to Counter China

Chairman French Hill (R-AR)SPEAKER_26

Committee will come to order. Without objection, the chair is authorized to declare a recess of the committee at any time. This hearing is entitled Examining Policies to Counter China. Without objection, all members will have five legislative days within which to submit extraneous materials to the chair for inclusion in the record. I now recognize myself for 4 minutes for an opening statement. I want to welcome our members to this hearing on China, and I look forward to our testimony. From the very first Trump administration, many will recall a key China policy issue as the global race to 5G. We urged caution to our foreign partners by both the executive and the legislative branch and our friends around the world about telecom infrastructure. We said there's a right way and there's a Huawei. And yet other technologies before 5G showed that a country that launches an innovation first isn't always the one that wins. Rather, it's the economy that's got the economic system to transform those technological advances into winning new products and services resulting in economic and productivity gains. I open with this example of 5G because in a broader context of our economic and geopolitical rival with China, it's often neglected. Instead, narrow questions end up taking an existential importance. One day it's the race to 5G, the next day it's concern over a trendy Chinese app like TikTok, or today it's DeepSeek's ability to answer a question in more or less time than a U.S. competitor. Of course, these things merit our close attention, but if these are the trees, then Congress really must still see the forest. For example, if we edge out China in artificial intelligence, but Washington prevents our companies from commercializing it, what happens? If we secure a 1-year lead in hypersonics, but a defense procurement obstacle course makes its deployment a pipe dream? What if we attract to our shores the greatest technical minds in the world, but our tangle of red tape regulations mean that their startups being taken public is out of the question? In short, winning a race is no substitute for choosing a better way of life with a better political and economic system. At our hearing today, we'll examine tools to counter China. But make no mistake, those tools are embedded in an American system, and it's the health of our thriving system that ultimately decides who will prevail. We will use sanctions, for example, but sanctions did not build a $30 trillion economy. We can use export controls, but it wasn't export controls that created eight American exceptional technology companies, each worth more than $1 trillion. We can use the Committee on Foreign Investment in the U.S., but CFIUS didn't make the dollar the world's premier reserve currency. Today's hearing is based on the idea that beating China means doubling down on American strengths. First, we must ensure that our federal budget our fiscal house is in order and on a sustainable path. Next, we must lead a global financial system where like-minded economies reject nontransparent, predatory lending and mercantilism while crafting and enforcing rules that safeguard economic growth and stability. Second, our investors, our markets, our institutions, both large and small, must be able to nurture cutting-edge ideas and help take them from friends-and-family-backed startups to an initial public offering. Third, we must ensure that access to capital is coupled with access to energy. That means the U.S. must champion an all-of-the-above energy strategy, offering real alternatives to failed Chinese lending and white elephants. And last but not least, our strength depends on prioritizing Americans' health and safety of our hometowns and our cities, which have been so devastated by an opioid surge that China has helped unleash. Each of these elements is key to any real China strategy, and it's critical that they're all addressed today. And I yield back, and the chair now recognizes the ranking member of the committee, the gentlewoman from California, for a 4-minute opening statement.

Ranking Member Maxine Waters (D-CA)SPEAKER_12

Thank you, Mr. Chairman, for this hearing. This is very important. Good morning, everyone. I and committee Democrats have long recognized the national security concerns and threats of our— to our economy from the Chinese Communist Party. We're very supportive of efforts to prevent Wall Street from investing Americans' hard-earned savings in the Chinese military. I've also pressed for the United States to use its influence at the IMF—that's the International Monetary Fund—the World Bank, and other multilateral institutions to stop the worst lending, contracting, and other industrial practices of China. But Mr. Chair, while I would love to work with you in a bipartisan way to advance efforts to stop China's aggression, I'm concerned that our efforts would be meaningless as President Trump and his unelected billionaire co-president, Elon Musk, destroy the United States government and our alliances. In just the past month, Trump has imposed import taxes on our closest allies, frozen aid for impoverished nations, illegally shuttered USAID and CFPB, and threatened to illegally seize Greenland, Canada, and the Panama Canal. Inexplicably, he has also sided with Russia's President Putin over allies in Ukraine and Europe, withholding military assistance and blaming Russia's murderous invasion on the victims of its war. As Trump tears up treaties and alliances, embraces dictators, and abandons America's global leadership role, he is giving China a free pass to fill the void left by his retreat. We're here to talk about China and discuss bills about countering Chinese government aggression, all while Trump, Musk, and congressional—some congressional Republicans give China the green light to seize other of our allies, such as Taiwan. Trump and Musk have so eagerly sold out America's values and workers to China because they are singularly focused on billionaire tax cuts and amassing more personal wealth. As it stands, Elon Musk makes billions in China, where more than half of Tesla vehicles are produced. Nearly 40% of Tesla's battery supply relies on Chinese companies, and Chinese buyers represent Elon Musk's largest market. While Tesla sales continued to collapse in the United States last year, there was a 90% increase in China. And Trump is ready to forcibly remove Gazans to build golf courses for Trump and his billionaire friends and investors, just as the CCP—that is the Chinese Communist Party—forced removal of Uyghurs from their land. Racist nationalism, anti-democratic activity, and even genocide and war are not a concern if it means power and wealth for them and their billionaire class. While this is to be expected from people like Musk and Trump, I'm deeply disappointed that my Republican colleagues, many of whom have previously been outspoken about the important role the U.S. plays as a beacon of freedom and defender of democracies around the globe—Republicans did not even speak up when the Trump Pentagon refused to allow one of its trafficking experts to join us today to speak about Chinese fentanyl precursors and Chinese money laundering. Committee Democrats believe that together, we can solve the world's greatest problems. To counter China, we must stand with our allies and fight for a vibrant, effective democracy, with respect, civil servants who carry out our foreign policy. Democrats will not rest until we stop the unlawful effort to dismantle our government here and overseas. Hopefully, our Republican colleagues will come to their senses and join us in this effort. And thank you for the additional time, Mr. Chair.

Chairman French Hill (R-AR)SPEAKER_26

The gentlewoman yields back. Today we welcome the testimony of John Miller, Senior Vice President of Policy, Trust, Data, and Technology and General Counsel at the Information Technology Industry Council; Nicholas McMurray, the Managing Director of International and Nuclear Policy at ClearPath; John Cassara, a retired special agent formerly with the United States Treasury Department; Martin Mühleisen, a nonresident senior fellow at the GeoEconomics Center at the Atlantic Council; and Dr. Rush Doshi, the C.V. Starr Senior Fellow for Asian Studies and Director of the China Strategy Initiative at the Council on Foreign Relations, and an assistant professor at Georgetown University. We thank each of you for taking time to be with us today. Each of you will be recognized for 5 minutes to give an oral presentation of your testimony. Without objection, your written statements will all be made of the record. Mr. Miller, you're now recognized for 5 minutes.

Mr. John MillerSPEAKER_09

Chairman Hill, Ranking Member Waters, and distinguished members of the committee, on behalf of the Information Technology Industry Council, or ITI, thank you for the opportunity to testify today on examining U.S. policies to counter China. This is a timely topic, and I commend the committee for its thoughtful and sustained engagement in this area. ITI is a global policy and advocacy organization representing 80 of the world's leading tech companies, and I lead ITI's Trust, Data, and Technology Policy team, including our work on security, artificial intelligence, and data policy in the United States and globally. ITI's members represent every vertical of the tech ecosystem, from cloud and AI to consumer electronics, from semiconductors and data centers to cybersecurity. Our membership represents around 10% of the U.S. GDP, directly employs 9 million Americans, and accounts for roughly 32% of the market capitalization of the S&P 500. As of 2024, there were seven companies that had reached or exceeded global market cap of $1 trillion. Six of those seven are U.S. tech companies who are ITI members. Policymakers should recognize the preeminence of these companies and the innovation economy they anchor as an asset and the envy of other nations. Indeed, the strength of the innovation economy bolsters the broader U.S. economy and drives the U.S. competitive advantage in tools and capabilities that underpin U.S. national security, such as semiconductors, AI, quantum, and advanced manufacturing. Do not take for granted the current U.S. technology lead over China. China's longstanding disregard for international norms governing free trade and market access and its theft of IP has been well established and must be addressed. However, regardless of whether China plays by the rules, we should be clear-eyed that over the past two decades, China has improved in technological development, innovation, and growth, and that these gains have not been achieved simply by virtue of stealing U.S. technology. Make no mistake, ITI and the companies we represent take seriously the U.S. government's obligation to protect national security. Successful policies to counter China's technological rise must enable companies to better compete globally, not wall the United States off from competing with China or inadvertently erect hurdles to U.S. tech innovation and investment. U.S. investment, supply chain, tax, and trade policies and regulations must be crafted to maintain the current asymmetric advantage as a key driver of U.S. economic security. We believe the government and industry must work together to achieve these objectives in a way that supports the innovation, investment, and economic growth that are foundational elements of economic security. This morning, ITI released a paper offering our members' consensus policy recommendations for U.S. economic security. Our paper defines economic security as encompassing elements of the economy that affect the stability, technological competitiveness, and resilience that enable the government to better protect national security. The ideal policy environment to foster U.S. economic security is one in which the global success of American and multinational companies operating in the U.S. supports technological leadership and innovation, and the government and private sector work side by side to safeguard critical technologies. Our paper, which is incorporated as part of my written statement, offers 10 recommendations, three of which I will highlight now. First, in the area of financial policy, investment and transaction reviews should strengthen economic ties with allies by establishing clear and targeted national security criteria for what is reviewable. Capital investments, both inbound and outbound, are foundational and help companies in the United States diversify the supply chain, engage the research and development ecosystem, gain access to global talent, and gather global market intelligence. Overly broad investment restrictions, whether through CFIUS or the Outbound Investment Security Program, will impede domestic and overseas investment in and by U.S. companies and consequently decrease economic security. Second, reinvigorate U.S. trade leadership and open new markets to optimize for both trade and economic security. ITI encourages the U.S. government to negotiate robust, binding commitments that facilitate trade through new strategic and targeted bilateral and multilateral market access agreements to enable U.S. companies to compete on an even playing field. Third, continue to incentivize innovation and investment in foundational and emerging technology. One near-term priority should be restoring the immediate tax deduction of R&D expenses to drive innovation and create high-wage jobs in the United States. Another should be maintaining and improving the CHIPS program by pursuing meaningful permitting reform and streamlined reporting requirements. Doing so will help promote these multibillion-dollar investments in semiconductors, the building blocks of the modern digital economy, as a strategic economic security asset. Thank you again for the opportunity to testify today. I look forward to your questions.

Chairman French Hill (R-AR)SPEAKER_26

Thank you, Mr. Miller. Mr. McMurray, you're now recognized for 5 minutes.

Mr. Nicholas McMurraySPEAKER_08

Good morning, Chairman Hill, Ranking Member Waters, members of the committee. Thank you for the invitation to testify today. My name is Nico McMurray, and I'm the managing director of international and nuclear policy at ClearPath. At ClearPath, we believe in markets over mandates and innovation over regulation. When it comes to energy, we want to make it here, sell it globally, and compete with China. The global energy landscape is rapidly evolving. Demand growth is skyrocketing

Chairman French Hill (R-AR)SPEAKER_26

Could you pull your mic a little closer, please?

Mr. Nicholas McMurraySPEAKER_08

Yes Supply chains are shifting, and we are in a global competition. Countries want more reliable, affordable, and cleaner energy to fuel their economies. This is a major opportunity for U.S. companies to lead. Strategic financing tools can help the U.S. strengthen its energy leadership, open new markets, and counter China. Let me put this into context. China currently has 57 operating nuclear reactors and 28 reactors under construction, while the U.S. has 94 operating reactors. It currently has no commercial reactors under construction, but several demonstrations are close. The world's electricity consumption is at an all-time high. The International Energy Agency says global electricity demand could increase up to 76%, and we could see a double in U.S. electricity demand by 2050. American private sector innovation is the key and extends beyond domestic borders. Take advancements in LNG, for example. In 2023, the U.S. surged its LNG exports. As a result, Russia's market share in the EU was reduced from 40% in 2021 to 8% in 2023. There is also a huge economic opportunity for American companies in other technologies. If the U.S. doesn't act now, the world will choose cheap options from China. China is already taking an all-of-the-above energy approach. For example, last year, China started construction on about 94 gigawatts of coal capacity and also invested $940 billion in clean energy. Without a focused effort to expand domestic energy production, U.S. companies risk being sidelined in global markets. To level the playing field, the U.S. must strengthen its trade and development finance toolkit. Export and development financing plays a pivotal role in advancing America's strategy for global energy dominance. EXIM and DFC can strengthen U.S. leadership in global energy markets. America must take a more agile approach, using financing tools to de-risk projects and attract private capital. Export and development finance prioritizes investments in infrastructure, manufacturing, energy security, and economic partnerships. EXIM and DFC provide loans and guarantees that must be repaid, ensuring taxpayer dollars are used efficiently while expanding opportunities for U.S. businesses. This approach creates American jobs, strengthens economic ties, and positions the U.S. as the global energy partner. Both the EXIM Bank and DFC are due for reauthorization this Congress, creating a prime opportunity to refine America's foreign policy toolkit. While EXIM is one of the best tools for increasing export competitiveness, its current capabilities limit the bank from achieving energy dominance. The following five recommendations could bolster U.S. energy leadership, enhance energy security, and create domestic jobs: First, create a national interest account to consider the geostrategic value of investments. Second, expand the China and Transformational Exports Program to include broader technologies. Third, increase the default cap rate for nuclear projects. Fourth, reinforce the U.S. jobs mandate. Fifth, bolster domestic manufacturing and overall modernize the bank's mission. I would be remiss if I didn't mention DFD DFC's reauthorization this year. Created during the first Trump administration to counter China's Belt and Road Initiative, DFC has established itself as an effective tool in countering China. For example, it now supports nuclear projects after removing its nuclear moratorium in 2020. The World Bank also plays a critical role, but its outdated policies have left a gap that China has eagerly exploited, particularly its self-imposed restrictions on financing nuclear power. In order to achieve energy dominance, the government must provide a predictable environment for developers to attract private investment. The work of this committee will be critical to providing stability for companies seeking to raise capital and compete globally. In conclusion, the U.S. must build domestically and sell globally to compete with China. Meeting growing energy demand and strengthening global energy leadership requires bold action. And finally, Congress has a unique opportunity to strengthen American solutions by modernizing export and development financing to support nuclear, LNG, geothermal, and other technologies. I look forward to today's discussion. Thank you.

Chairman French Hill (R-AR)SPEAKER_26

Gentleman yields back. Mr. Cassara, you're recognized for 5 minutes.

Mr. John CassaraSPEAKER_21

Good morning, Chairman Hill, Ranking Member Waters, and distinguished members of the Financial Services Committee. It's an honor for me to testify. Communist China is an ideological, military, economic, commercial, high-tech, intelligence, and diplomatic rival of the United States and the West. The People's Republic of China has a growing exploitative presence in the developing world. While these threats are known, the Chinese Communist Party's involvement in transnational crime and money laundering is generally not recognized, understood, or investigated. My most recent book is China: Specified Unlawful Activities; CCP Inc., Transnational Crime and Money Laundering. I found in writing that book that criminal activity has seemingly become part of the CCP's overall strategy to grow its power. Regarding fentanyl, the Mexican cartels are still dependent on Chinese precursor chemicals and manufacturing expertise. Fentanyl and fentanyl-laced products are smuggled into the United States. In calendar year 2023 alone, the DEA seized more than 77 million fentanyl pills and nearly 12,000 pounds of fentanyl powder. This is the most fentanyl the DEA has ever seized in a single year and more than enough to kill every single American. As it is, in 2023, more than 107,000 Americans lost their lives to drug overdose, with 70% of those deaths attributed to opioids such as fentanyl. Each death is a tragedy. Each individual that died has a story. Families and communities are devastated. The scourge affects every one of the members' districts and our country as a whole. But, of course, it all comes back to the money. Fentanyl production generates enormous proceeds, and Chinese are becoming the money launderers of choice for the cartels. They leverage an underground banking system that has large— long served China's immigrant diaspora. They have developed other Chinese-centric money laundering methodologies that enable the laundering of their illicit proceeds not only in the United States, but around the world. In my written statement, I give an overview of some of the most pernicious enablers as they relate to fentanyl trafficking, such as trade-based money laundering, black market exchanges, underground financial systems like feiqian, or flying money, and mirror swaps that are facilitated by Chinese mobile phone apps. While my testimony focuses on U.S. efforts to counter illicit fentanyl trafficking and money laundering, I urge that we do not look at the fentanyl issue in a vacuum or as an isolated concern. The CCP's business model that fuels the fentanyl crisis is also active in many other sectors of crime, including counterfeit goods, intellectual property theft, human trafficking, illicit tobacco, and trade fraud. In fact, data indicates that China leads the world in 11 of the 12 largest categories of transnational crime. Each of these categories are also specified unlawful activities or predicate offenses to charge money laundering. CCP Inc.'s involvement in these crimes is approximately $2 trillion a year. To put that in perspective, $2 trillion is very roughly half the estimated $4 trillion that is laundered annually around the world. I call corruption the great enabler for money laundering. CCP Inc. has taken their domestic corruption and exported it overseas. They excel in so-called influence operations, which is probably a major reason for the lack of focus on CCP Inc.'s criminality and money laundering. Once again, these specified unlawful activities, methodologies, and enablers cannot be viewed in isolation. Rather, they are intertwined and must be addressed collectively. CCP international lawbreaking makes them exposed. It makes them vulnerable. I conclude my written testimony with recommendations that emphasize law enforcement and more effectively following the money and value trails. Thank you very much.

Chairman French Hill (R-AR)SPEAKER_26

Gentleman yields back. Mr. Mühleisen, you're recognized for 5 minutes.

Mr. Martin MühleisenSPEAKER_06

Thank you, Mr. Chairman. Ranking Member Waters, members of the committee, thank you for inviting me today. My name is Martin Mühleisen. Before joining the Atlantic Council's GeoEconomics Center, I retired from the International Monetary Fund in 2021, having served as chief of staff and director for strategy, policy, and review, among others. The following are my personal views, not those of the Atlantic Council or any other organization. On the topic of multilateral institutions, I would like to focus on three recommendations. First, China should be held responsible for its bad lending decisions. Chinese loans have contributed to rising debt vulnerabilities in low-income countries. In several cases, their unsustainable debt put a hold on new loans by multilateral lenders. The speed of debt workouts has picked up in recent years, but China remains unwilling to provide haircuts to restore solvency when needed. The united States should encourage the IMF to make full use of its debt policies when countries need deeper debt restructuring. For example, under certain conditions, the IMF's Lending into Official Arrears policy allows programs to proceed even if a country is in default to another IMF member. A more robust application of this policy could strengthen the negotiation position of debtor countries, eliciting more ambitious debt relief from China. Second, focus on quality, not quantity, of multilateral programs. The World Bank and other development banks have been leveraging their capital base to increase lending to low-income countries, who also benefited from a $650 billion issue of IMF Special Drawing Rights. These efforts are intended to meet large financing needs of poorer countries, often with relatively little conditionality. Higher debt to multilateral institutions, however, can drive out private lenders, resulting, in the end, in higher dependence on China. To attract private capital, the institutions' main focus should therefore be on raising countries' long-term growth prospects, including through loan conditionality. But stepped-up lending by multilateral organizations alone will not win the struggle for hearts and minds in the Global South. The United States should work with multilateral lenders to incentivize needed reforms. If multilateral programs were flanked by co-financing, investment funds, specific trade preferences, or private capital, they would have a larger chance of succeeding. Especially in Africa and Southeast Asia with their growing populations, this could unlock important markets for US exports in the future. Third, protect the dominant role of the dollar. Large emerging markets have exhibited a remarkable degree of economic stability in recent years. Countries among this group are still vulnerable to external shocks. However, in case of a severe crisis, some may need access to US dollar sources to avoid sharp devaluations, and their financing needs could be large. In this case, the IMF could deploy its lending capacity, its full lending capacity, of around $1 trillion to avoid contagion and preserve global financial stability. This amount leverages the United States' contribution to the IMF by a factor of more than 5 to 1. In the absence of this safety net, countries would either have to acquire additional foreign exchange reserves, putting upward pressure on the US dollar, or they would need to seek help from China, which could become a factor in undermining US dollar dominance over the long term. It would therefore be in the U.S. interest if Congress ratified the increase in IMF quotas agreed last year, which would provide a stronger capital cushion and make loans available at short notice if needed. Thank you, Mr. Chairman.

Chairman French Hill (R-AR)SPEAKER_26

Gentleman yields back. Mr. Doshi, you are recognized for 5 minutes.

Dr. Rush DoshiSPEAKER_07

Chairman Hill, Ranking Member Waters, distinguished members of the committee, thank you very much for the opportunity to testify at today's hearing. I'll focus my remarks on four questions related to China. First, what are Beijing's economic and technology ambitions? Second, what is its strategy to achieve them? Third, how is its strategy working? And finally, what should we do about it? So first, what are Beijing's ambitions? The PRC has a grand strategy to displace US-led order. It seeks to catch up and surpass the US technologically, to reduce dependence on others while increasing their dependence on China economically, and to acquire the capability to defeat US forces militarily. Beijing believes economic and technology competition is about power, not prosperity. It believes there have been four industrial revolutions that determined the fate of nations. The first was steam power, which led to British dominance. The second and third were electrification and mass manufacturing, which led to American dominance. And now we're in the fourth: AI, quantum computing, smart manufacturing, biotechnology, which China aims to win. Second, what is Beijing's economic and technology strategy? There are three parts. First, Beijing acquires technology. It buys foreign companies to get it, or it forces them to transfer it at exchange— in exchange for market access, or it steals it outright through human intelligence and cyber espionage. Second, Beijing protects its companies. It uses tariffs, non-tariff barriers, and exchange rate manipulation to keep out foreign competition. Third, Beijing wields industrial policy. It uses massive industry support—subsidies, tax breaks, R&D support, cheap credit, state investment—so that its companies can undercut rivals on price. Taken together, PRC companies will lose money in their home market, they'll lose money in foreign markets, but they'll use that to win both their home and foreign markets. And eventually, they know they can stay solvent longer than foreign rivals that don't have similar state backing. Dominance in one sector then helps them climb the ladder to the next rung. The scale of China's industrial policy efforts is breathtaking. Beijing likely stole more than a trillion dollars' worth of US intellectual property. Its industrial support is about 2% of the PRC economy every year—that's a conservative estimate, but it's more than any other country around the world. It's twice as much as US support. It's probably about $400 billion a year. And that's more in comparison to the CHIPS and Science Act, which is about $50 billion over multiple years. So third, is this strategy working? In short, yes. In the last two decades after China joined the WTO, the US share of global manufacturing fell by half, from 30% to 15%. That so-called "China shock" cost millions of jobs and shuttered thousands of factories. Meanwhile, in the exact same period, China's share of global manufacturing quintupled, from 6% to 30%. China is a manufacturing superpower. Its capacity exceeds that of the next nine countries combined. And it can leverage that manufacturing dominance to innovate and to gain military advantage. Take innovation. China is at the leading edge of fields like robotics, AI, and quantum computing. It leads the US in high-impact patents and scientific papers. It accounts for half of all industrial robot installations worldwide, 60% of all global electric vehicle production, 75% of global battery production, and over 90% of solar panel, rare earth, and antibiotic production. Then take the military competition. The PRC has 200 times the shipbuilding capacity of the United States and is leading in new technologies like hypersonics. Now, Beijing's economy has problems. It's slowing, its population is aging, but we shouldn't feel confident. Beijing is pouring money into industry and exports to find growth, and that strategy is causing a second China shock that's deindustrializing economies around the world, including our own. So fourth and finally, what do we do about it? Well, first, we can't go it alone. China surpasses the US on some industrial metrics, but the US, combined with its allies and partners, has three times China's GDP, half of all global manufacturing, more than twice China's likely military spending, twice China's patents and top-cited publications, and massive market power. If we pool our markets, protect our technology, coordinate our research, and create defensive barriers to PRC excess capacity, we can handily weather the second China shock and reindustrialize and lead in technology. Second, we need new institutions. The US could benefit from a federal industrial investment bank that can make long-term loans, take equity in strategic industries, and most importantly, coordinate with private capital. That could allow us to also fund reshoring from China to the US or to allied countries. Third, we need to change incentives. China can play the long game while our companies focus on quarterly earnings cycles. We can consider tax policies to change that. We also need to invest more in basic science research, where China outspends the United States now. And finally, we have to play defense. That involves calibrated tariffs to protect our industry from excess capacity from China. It requires stronger export controls, research protection, and regulation of inbound and outbound investment to maintain our lead. The uS has never faced an adversary quite as formidable technologically and industrially as China. But we have everything that we need to succeed. We just have to make different choices in some cases. I want to thank you for your time, and I look forward to your questions.

Chairman French Hill (R-AR)SPEAKER_26

Thank you, sir. Gentleman yields back. The chair recognizes Mrs. Beatty, the ranking member of the National Security, Illicit Finance, and International Financial Institutions Subcommittee, for one minute.

Rep. Joyce Beatty (D-OH)SPEAKER_01

Thank you, Mr. Chairman. First, let me say I'd like to echo Ranking Member Waters comments and note the incredible irony of us holding this hearing while Team Trump-Musk are presiding, and they are demolishing the United States' leadership on the international stage. The White House and DOGE are illegally deleting entire agencies in violation of the Constitution, siding with adversaries, calling our allies dictators, and abruptly and ruthlessly rescinding U.S. aid that fosters global goodwill and advance our national security goals, all which unquestionably allows China to fill the void and hands them the prize of global leadership on a silver platter, all while colleagues across the aisle who have a long record in Congress of loudly supporting soft power initiatives like USAID and assistance for Ukraine are stunningly silent now. This is unthinkable, and I yield back.

Chairman French Hill (R-AR)SPEAKER_26

Gentlewoman yields back. Chair recognizes himself for 5 minutes of questions. Mr. Mühleisen, the IMF's last major report on China comes from 2024 on their economy, and it reads like it's a parallel universe to me. The report says, quote, "Directors"—meaning IMF directors—"positively noted that China is a key player in addressing global challenges and welcomed its constructive role in supporting sovereign debt restructuring in low-income and vulnerable countries and tackling the global climate crisis." That's a quote from the report. They also emphasized China's important role in strengthening multilateral trading system in close cooperation with international partners. That sounds preposterous to me. Mr. Mühleisen, what what's your view on that?

Mr. Martin MühleisenSPEAKER_06

Thank you, Mr. Chairman. I think—and I'm not speaking for my colleagues, I want to just emphasize that, for my former colleagues—I think that the staff report wanted to point out that China did make some progress on the debt restructuring issue. There has been improvements, as I mentioned earlier, because China is participating under the G20 Common Framework for Debt Restructuring, and some country cases have been resolved.

Chairman French Hill (R-AR)SPEAKER_26

But you wouldn't argue that the Common Framework has been successful, would you?

Mr. Martin MühleisenSPEAKER_06

It has been a difficult effort to get China to contribute. It is not like the Paris Club, but it has some of the same principles.

Chairman French Hill (R-AR)SPEAKER_26

Shouldn't China belong to the Paris Club? Shouldn't they participate in the Paris Club?

Mr. Martin MühleisenSPEAKER_06

I would, I would welcome if they did.

Chairman French Hill (R-AR)SPEAKER_26

Wouldn't that make all this a lot easier, and we wouldn't have to have a made-up framework like the Common Framework from the G20?

Mr. Martin MühleisenSPEAKER_06

I think I pointed out in my statement that I think there are still shortcomings in the way China does handle its loans to troubled countries, and I would agree that having them in the Paris Club would make them play with the rules that are well established and functioning. But obviously, this is China's own decision. I think at some point they considered it, but it was then rejected within China.

Chairman French Hill (R-AR)SPEAKER_26

Yeah, I agree with you. I think it was a mistake, and I think the IMF and the IMF members should put more pressure on China to participate through the Paris Club. What should the IMF be doing now as it relates to this past four years of effort that really hasn't been very successful?

Mr. Martin MühleisenSPEAKER_06

As I mentioned, I think the only real tool that the IMF has is the lending into official arrears policy.

Chairman French Hill (R-AR)SPEAKER_26

Do they have the right information from the countries they're trying to lend to if the terms that China has are not transparent and are not disclosed?

Mr. Martin MühleisenSPEAKER_06

There has been some improvement in disclosure, but again, I don't want to put my hand in the fire and say that everybody knows exactly what China is doing in member countries. That improvement has helped especially bring private creditors on board because now there's more of a level playing field. People understand more what the mass of loans is and how to negotiate that restructuring. But there's still a lot— a long way to go.

Chairman French Hill (R-AR)SPEAKER_26

Thank you. Mr. McMurray, I was pleased to be sponsoring in this Congress a bipartisan bill with Mr. Torres of New York that would support nuclear energy financing through the World Bank and the European Bank for Reconstruction and Development. This legislation would not only help lift the World Bank's prohibition on sane financing, but it would kickstart a trust fund to add in the assistance that you referenced in your good testimony, I'd like to insert into the record two articles I've written on the importance on nuclear financing: Build Back Nuclear from 2021 and Our Energy Future from January 2025. Without objection, they'll be added to the record. Mr. McMurray, can you help us understand why funding for nuclear and other energy projects is so critical in countering China's influence in the world?

Mr. Nicholas McMurraySPEAKER_08

Yeah, thank you, Chairman, and thank you for your leadership on this issue. China is actively building almost 30 nuclear reactors today, poising them to prepare to export and build their technologies elsewhere. The World Bank has a really important role to fund large global infrastructure projects. So by them not supporting nuclear, that limits the effectiveness of the World Bank and cedes that leadership to China. As you mentioned, the trust fund is actually an excellent tool for the World Bank to do two things: one, build that internal expertise so it can start educating its own staff as well as its members, and then two, lay out some of those early-stage projects so ultimately entities like the Ex-Im Bank can start funding and support additional projects globally.

Chairman French Hill (R-AR)SPEAKER_26

Thank you very much. My time's expired. I now yield to the ranking member of the full committee for 5 minutes.

Ranking Member Maxine Waters (D-CA)SPEAKER_12

Thank you very much, Mr. Chairman. Mr. Doshi, in the Caribbean, nations increasingly disillusioned by the United States' unpredictability are turning to what is known as BRICS. That's Brazil, Russia, India, China, South Africa, including, of course, both in a very, very real way, China and Russia, for investment and financial support. China's Belt and Road Initiative have brought investments to the region from ports and energy resources to hotels and highways, although often with predatory loan arrangements. In light of these developments, what strategic actions should the United States take to counterbalance China's growing influence and provide a more reliable, attractive alternative for Caribbean nations and other regions? I just want you to know that when any of us participate in activities with our Caribbean countries, that's all we hear. What are you guys doing? Can't you help us to avoid what China is doing in the Caribbean? What do you know about this?

Dr. Rush DoshiSPEAKER_07

Well, thank you very much, Ranking Member Waters. Let me just say this is a very important issue. Every great power adversary the U.S. has ever faced has wanted a role in the Caribbean, whether that was Germany in even the First World War, but especially the Second, or the Soviet Union in the Cold War. And China's no different. They also want a role in the Caribbean because they know it's a weak spot for us, potentially. They know about our reliance on the Panama Canal. So the history here shows that China will want to be involved, and if you look at their own statements, you know it. I would add a few things. China's involvement picked up really in the early 2000s. They've accelerated their involvement in recent years. And as you correctly noted, they are focused on a whole-of-government approach in the Caribbean. That means military assistance, in some cases, to Caribbean countries. That means law enforcement and military assistance. It also means investment, significant investment in Jamaica, investment in port infrastructure, including the operation of ports in the Caribbean. And so they're there, they're present, and in many ways, their economic relationship is growing rapidly. Tourism is another component. What do we do about it? There are a few things. First, a little bit of support from us goes a long way. These are not large economies. Taken together, the entire GDP of the region is about the GDP of Kansas, maybe a little bit less. So we can do more by being present and by increasing our aid activity. Second, Caribbean countries, as you know well, want commercial engagement with the United States. We should find ways to make it easier, whether that's through EXIM, DFC, or other institutions, for our businesses to be involved in the Caribbean. But finally, we should remember that we have an asymmetric advantage. Those countries, as you noted, they want to be with us, not with China. And they're not happy about the corruption that China sometimes brings to their economies. So transparency and sunlight is the best disinfectant. We should fight in the information space so people know that we stand for anti-corruption and that the Chinese stand for corruption. Finally, we have to worry about the military role that China is building there, and we should make sure that our Department of Defense is doing everything it can to strengthen military diplomacy with our Caribbean friends.

Ranking Member Maxine Waters (D-CA)SPEAKER_12

Thank you very much. Um, in speaking about what more we can do, some of our Caribbean island states, um, do not receive foreign aid, uh, because they say they don't— they're a little bit— they make a little bit too much money. But you know, they're hit with storms and they're in great debt as they try to, um, reconstruct and renovate and all of that. Is this an area that we could help them in because of the debt that is incurred with all of these Mother Nature events?

Dr. Rush DoshiSPEAKER_07

Well, thank you very, very much, Ranking Member Waters. You brought an important point up, which is debt. Many of these countries are heavily indebted to China, increasingly indebted. Jamaica is another good example of that. In many cases— Suriname is another recent example. In many cases, they can't pay back the debt. So that's a problem. And it speaks to the previous discussion earlier about China's nonparticipation in the Paris Club. But I would just add that, yes, storm relief, we can do more there. And finally, very quickly, we might want to consider changing the thresholds for aid for some of these countries so that we can make sure we can be more useful to them.

Ranking Member Maxine Waters (D-CA)SPEAKER_12

Thank you very much. And quickly, do we have a security problem with China getting so much influence in the Caribbean and being so close to us? Should we be concerned about that?

Dr. Rush DoshiSPEAKER_07

We should, in my opinion. It's somewhat compromised some of the activities that we undertake in the Caribbean. We have SOUTHCOM operations and others that are worried about this, but in particular, I'd note just two things: first, that the PRC operates out of Cuba a number of sensitive sites, and we should worry about those and their ability to collect on our operations in the Caribbean; and second, I would also add to that that the PRC's ownership of port infrastructure in the region, including around the Panama Canal, can pose security threats, as the Trump administration and the Biden administration have identified.

Ranking Member Maxine Waters (D-CA)SPEAKER_12

Thank you, and I yield back.

Chairman French Hill (R-AR)SPEAKER_26

The gentleman yields back. The gentleman from Michigan, the vice chairman of the full committee, Mr. Huizenga, is recognized for 5 minutes.

Rep. Bill Huizenga (R-MI)SPEAKER_20

Hey, everybody. I want to get to IMF reform and some things, but Mr. Doshi, I want to very, very quickly hit on this, because I learned a new phrase recently, which is the lie-flat generation in China. And my question is, can China survive economically from the downturn that they are seeing? And it seems to me, as a child of the Cold War and that era, the difference between our Space Race and the Cold War race that we had with Russia is they had a much smaller economy. So, I'm very curious, very quickly, your view on China with that.

Dr. Rush DoshiSPEAKER_07

Thank you, Congressman. It's a very important question. And very quickly, I would say that yes, they can survive. We have generally underestimated China's ability to compete. But very importantly, China has scale. And every rising power that has scale tends to do pretty well. The Soviets did not have the scale China does. I'm happy to go into more detail.

Rep. Bill Huizenga (R-MI)SPEAKER_20

Okay. All right. Mr. Mühleisen, I want to turn to you about your work at IMF and your views from the IMF, not necessarily your particular work there. But according to the Wilson Center, 80% of China's government-supported loans are to countries that are in some sort of debt stress. The IMF has failed to convince China to work on restricting this debt, which some estimate in excess of a trillion dollars. To me, having worked with IMF and World Bank and others over the years, I would argue it seems to be a strategy, not a coincidence, that oftentimes they are lending into these countries that have a debt strain, and then they are then utilizing the loan documents and the profile of that to then flip that into an asset that they either control or own. So, my question is, is what role should these IFIs play here? Should they simply just back away from countries where debt sustainability is unclear?

Mr. Martin MühleisenSPEAKER_06

Thank you, Congressman. I would put it this way. I don't see China engaging in some kind of debt trap, if that's what you meant, where they entrap countries so that they

Rep. Bill Huizenga (R-MI)SPEAKER_20

I think a clear-eyed look at what's happening in Africa and the rest of Asia would contradict

Mr. Martin MühleisenSPEAKER_06

that. What I would rather look— how I would rather look at it is that they're getting a lot of benefits out of that engagement, because what they do is, of course, they have these trade relations also with countries. So

Rep. Bill Huizenga (R-MI)SPEAKER_20

are you saying that they're just— they have a higher risk profile than the rest of the world does?

Mr. Martin MühleisenSPEAKER_06

To some extent, I think China was not even aware of the risks they got into, and I could speak to that in a second. But what I meant is the strategic advantages they're getting—access to ports, access to other facilities,

Rep. Bill Huizenga (R-MI)SPEAKER_20

including in Latin America and other places.

Mr. Martin MühleisenSPEAKER_06

exactly, Caribbean. That is, I think, the main benefit. It's not like they would kind of own then a port that a country has to hand over because they can't pay their

Rep. Bill Huizenga (R-MI)SPEAKER_20

debt. Staying with you, in your testimony you mentioned that the United States should insist on improved transparency at the IMF. And I'm also curious, what can the US Treasury do to encourage the IMF to adopt a more forceful approach, including that transparency?

Mr. Martin MühleisenSPEAKER_06

So I didn't mean to say that the U.S. should push the IMF to make— to be more transparent. It's actually the debt transparency of China that needs—

Rep. Bill Huizenga (R-MI)SPEAKER_20

Yes, I understand that, but the IMF is the tool for that, correct?

Mr. Martin MühleisenSPEAKER_06

Yeah. So I myself—

Rep. Bill Huizenga (R-MI)SPEAKER_20

So is the IMF doing enough to push that transparency and to push a country like China to give that transparency?

Mr. Martin MühleisenSPEAKER_06

I've myself worked with Chinese officials in my former capacity to help them understand how much actually countries owe to China, because within China, their facilities as lenders of all these different institutions that are lending are kind of not as far developed as we in the West would have it. They are not kind of set up to do that. They're only slowly getting into the business of lending.

Rep. Bill Huizenga (R-MI)SPEAKER_20

I've got 45 seconds. I think the Chinese are far better business people than what you seem to be implying. But the latest shareholder review at the IMF did not increase China's voting power. They were pushing to do so. What conditions should the IMF insist on in the future if China lobbies for more shares would be a question. But I'm going to actually get that in writing because I do have to hit this, Mr. Chairman. I previously introduced a bill, the IMF Reform and Integrity Act, that would prevent any shareholder increase at the IMF for a country, such as the PRC, that does not meet basic obligations codified in the organization's Articles of Agreement. So, I believe—and this goes back to my time working with Madame Lagarde when she was there—the IMF needs to get tougher and tighter about enforcing its own rules. So I'd like to include submit a copy of my bill to the

Chairman French Hill (R-AR)SPEAKER_26

without objection,

Rep. Bill Huizenga (R-MI)SPEAKER_20

Chairman. Thank you. I yield back.

Chairman French Hill (R-AR)SPEAKER_26

The gentleman yields back. The chair recognizes the gentlewoman from New York, the ranking member on the Small Business Committee, Ms. Velazquez, for 5 minutes.

Rep. Nydia Velazquez (D-NY)SPEAKER_23

Thank you, Mr. Chairman. Let me start off by saying that I am glad we're having this hearing discussing the rising threat of China, but holding this hearing is not enough. If we want to talk about countering China, then we need to be discussing how President Trump and his unelected president, Elon Musk, are the biggest threat to the United States in countering China. President Trump has abandoned our closest allies in favor of cozying up to dictators, illegally closed down USAID and cutting off aid for needy nations, destroyed our national security apparatus, and installed conspiracy theorists like Kash Patel at the top levels of our government. Dismantling these institutions that have helped keep our nation and the world safe since World War II opened the door for China. Countries across Africa and Latin America are turning to China for financing and leadership, a geopolitical move China is facilitating and exploiting. Mr. Cassara, by hollowing out the government through illegal firings and layoffs, Elon Musk and DOGE are making Americans less safe from financial scams coming from China and encouraging corruption both home and abroad. An article printed in The Wall Street Journal, not exactly a bastion of liberal media, last week describes how illegal proceeds from fentanyl sales are being laundered through China for reinvestment in real estate and other vehicles here in the United States. The proceeds and flow of illegal fentanyl from China is an issue members on both sides of the aisle care about. How can Congress bolster current BSA/AML statutes to reduce the reinvestment of illegal fentanyl proceeds here in the U.S.?

Mr. John CassaraSPEAKER_21

Thank you for the question. Regarding BSA, Bank Secrecy Act, financial intelligence reporting requirements, I think one of the best things that could happen to counteract some of the issues that you're developing is for real estate agents, for example, to no longer be exempted from KYC, know your customer, reporting requirements and to file suspicious activity reports. I think something else needs to be done, that is more efficient utilization of suspicious activity reports in general, which is going to require additional personnel, it's going to require technology, and most importantly, it's going to require additional resources on the ground for agents to work cases.

Rep. Nydia Velazquez (D-NY)SPEAKER_23

And wouldn't you agree that to reduce the laundering of money from Chinese fentanyl sales, we are going to need to continue to crack down on anonymous shell companies here in the U.S.?

Mr. John CassaraSPEAKER_21

Absolutely. In money laundering, there are three stages of money laundering: placement, layering, and integration. Shell companies, LLCs, Delaware corporations, whatever you want to call them, are one of the premier tools of choice by money launderers in the layering stage of money laundering. It makes it very, very difficult for criminal investigators to follow the money trail. Same thing within the integration stage. Once that money is layered and integrated into the economy, we don't know who owns that shopping center, who owns that yacht, who owns that property. We need beneficial ownership information.

Rep. Nydia Velazquez (D-NY)SPEAKER_23

Thank you for that answer. Dr. Doshi, how important is it for both the U.S. and allied nations to adopt and enforce transparency measures, like beneficial ownership registries and anti-corruption laws, to prevent bad actors from abusing our financial system?

Dr. Rush DoshiSPEAKER_07

Well, thank you, Congresswoman. I think it's incredibly important. Every step that we want to take, whether on law enforcement with anti-money laundering, or with export controls, or with investment restrictions, all of those steps are going to require knowing essentially the beneficial owner. If we don't have that, then the PRC can always set up shell companies and get around our restrictions, and they've been doing that. So I think it's indispensable to our competitiveness agenda.

Rep. Nydia Velazquez (D-NY)SPEAKER_23

Thank you. I yield back.

Chairman French Hill (R-AR)SPEAKER_26

Gentlewoman yields back. The gentleman from Oklahoma, Mr. Lucas, the chair of the Task Force on Monetary Policy, is recognized for 5 minutes.

Rep. Frank Lucas (R-OK)SPEAKER_24

Thank you for holding this hearing, Mr. Chairman, and thank you to our witnesses for testifying today. As the former chairman of the Science Committee and representing an energy-dominant state, I'm particularly sensitive to how China weaponizes energy as a geopolitical tool. The united States must continue to prioritize targeted investments in clean, reliable, and affordable nuclear energy, which will contribute to an enhanced energy security, geopolitical stability, and emissions reductions. Mr. McMurray, can you touch on why maintaining U.S. leadership in energy production is so critical to countering China in energy security national issues?

Mr. Nicholas McMurraySPEAKER_08

Yeah, thank you, Congressman, and thank you for your leadership on clean energy innovation, especially as chair—former chair of SST. China is actively building projects, and right now countries around the world want and need more energy for either energy access or as they're just having more manufacturing or as they're growing. And so they're going to look at whatever options are cheap and available, and right now, in many cases, that is China. And so the US has to look at how does the government support private companies which are developing all sorts of innovative technologies, such as nuclear energy, to be able to make it easier to compete on an unlevel playing field? Some of the best tools are Ex-Im and DFC to kind of help with that financing piece, but ultimately, we have to be able to make these technologies here and build them here, and that requires support from the Department of Energy and the national labs so we can demonstrate these technologies, so we can ultimately sell them.

Rep. Frank Lucas (R-OK)SPEAKER_24

Thank you. Authorities at the Oklahoma Bureau of Narcotics have identified transnational criminals that are moving illicit drugs on the black market and laundering money in China. Mr. Cassara, how can Congress address the financial streams that are the foundation of this illegal activity so we can cut off this very sophisticated criminal enterprises? And I know it's

Mr. John CassaraSPEAKER_21

a complex question, but I, I think to get to the heart of the matter, I think we've made a mistake over the last so many years. Our enforcement agencies have been putting emphasis on what I call the product for example, illegal drugs, and the people, meaning like drug kingpins and those involved with it. I think what we've been missing is to really, truly, finally go after the money, because all of these organizations are motivated by greed, avarice, and the way to hurt these individuals and these organizations better than anything is to identify their assets and take them away. The reason we haven't been doing this is because going after the money is hard. Enforcement agencies are statistic-driven, metric-driven. They want measurements of success. Instead of going after meaningful, long-term, complex money laundering investigations that may take 2 years or more, they are content to go after these quickie little buy-bus cases that really don't make any difference. We have to change the incentives for law enforcement.

Rep. Frank Lucas (R-OK)SPEAKER_24

Play chess, not checkers.

Mr. John CassaraSPEAKER_21

Yes.

Rep. Frank Lucas (R-OK)SPEAKER_24

Turning back to the EXIM Bank for a moment, Mr. McMurray, in the most recent reauthorization of EXIM, Congress built the China and Transformational Exports Program, or CTEP. That program reserves at least 20% of EXIM's authority to neutralize China's export subsidiaries subsidies. How can we improve on that program and scale it up to match their actions?

Mr. Nicholas McMurraySPEAKER_08

Thank you, Congressman. CTEP has been an excellent tool to compete with the very competitive financing that China is able to offer. Right now, CTEP focuses on only a certain subset of technologies. One of the best ways to increase the competitiveness of U.S. companies is to expand that, for example, including nuclear energy as part of CTEP's mandate. I would also want to just mention DFC was also created under the first Trump administration directly as a counter to China's Belt and Road, and there is an opportunity as well to strengthen DFC to make U.S. companies, again, more competitive.

Rep. Frank Lucas (R-OK)SPEAKER_24

I just want to simply note in my closing comments, we cannot afford to get caught flat-footed on the issues we're discussing today, and outcompeting China in export markets, financing energy investments must be a top priority. And I'm thankful to the chairman for focusing on this in our hearing today. And I yield back, Mr. Chairman.

Chairman French Hill (R-AR)SPEAKER_26

Lucas yields back. The gentleman from California, Mr. Sherman, the ranking member on our Capital Markets Subcommittee, is recognized for 5 minutes.

Rep. Brad Sherman (D-CA)SPEAKER_29

Thank you, Mr. Chairman. Some of our witnesses seem to be here advocating what they'd advocate in any other committee that wasn't even talking about China. If you're paid to convince Congress to let you drill for oil in Yellowstone National Park, you can then come to a hearing on China and say, Well, that's the way to take care of China. Mr. Chairman, thank you for focusing on the importance of the U.S. as a world reserve currency. And we should remember that the announced purpose of crypto is to partially displace the U.S. dollar, and there is a bill in the Senate to make crypto the reserve currency of the dollar. And I think you understand how important it is that nothing displace the dollar as the world's reserve currency. Likewise, I think it was Mr. Cassara who focused on money laundering. Crypto is advocated by its own supporters as a way to do massive transactions or large transactions out of the view of the U.S. government. And that's perhaps why 100% of the ransomware attacks in recent years have demanded payment in crypto. Crypto Mr. Mühleisen, I'd like I hear what you say about China debt. Too many small countries are being told, Well, you borrowed China's money, so you have to give us your port. What we need to do is say to every lender and every credit rating agency that when China makes an unfair loan and you don't repay, that can't be used against the country's credit rating, so that countries who are facing this circumstance will, instead of giving China their port, they can give China their middle finger and still borrow from American corporations, banks, and international lending institutions. We've made some unforced errors. One of those, as The Wall Street Journal points out, is we should be focused on China, and instead we go to economic war with Canada and Mexico. Second, we have cut aid to tiny countries in the Pacific, to the Cook Islands, to Solomon Islands, to Tonga, where we just have million-dollar programs. These are the islands where my father's friends gave their blood in the last war in the Pacific. And now we're turning over control of those islands to China for a few million to save a few million dollars. The original sin was giving China most favored nation status. Before then, their economy was tiny. The majority, the vast majority of Democrats voted against that, and we stood up to our own president. And I turn to my Republican colleagues and say, perhaps your proudest moment this year will be when you stand up to one of— to a Republican president. In capital flows, it's nice to say, Well, we shouldn't send any capital to China. Keep in mind, because of that huge trade deficit, which I might add was much bigger under Trump than it was under Biden and was big, even bigger still in the pre-COVID years of Trump. So Trump gave us the worst trade deficit in history vis-à-vis China. But we are dependent for over $1.5 trillion of investment in our debt instruments on China. But we've got to look at equity flows. So believe it or not, uh Right now, we subsidize Americans who invest in Chinese stocks. We do so through our tax system and the capital gains allowance. I'm going to ask all witnesses here, please raise your hand if you believe that we should provide subsidies to Americans who choose to invest in Chinese stocks. Let the record show no hand went up. And yet, I have great difficulty. I've only gotten one Republican cosponsor for the bill that I'm going to reintroduce. I hope all of you join me in cosponsoring this: to say no capital gains allowance for investment in Chinese stocks. Now, I know that offends the billionaire class, but you cannot go Uh, you cannot stand up to China if you're unwilling to offend the billionaire class. Mr. Doshi, I'm I'm not able to read your sign so well, so I may have mispronounced your name. Are there unique risks for Americans when they invest in Chinese stocks, such as expropriation, that should be part of the disclosures they get from the SEC?

Dr. Rush DoshiSPEAKER_07

Thank you, Congressman. I think that there are significant risks. I'm not sure that we have— I mean, that, that market itself is highly volatile, unpredictable. There's no adequate auditing of these companies. Our due diligence

Rep. Brad Sherman (D-CA)SPEAKER_29

firms—the auditing Senator Kennedy and I did something about. But yes, there's everything

Rep. Pete Sessions (R-TX)SPEAKER_30

else.

Dr. Rush DoshiSPEAKER_07

And the

Chairman French Hill (R-AR)SPEAKER_26

Gentleman's time has expired. Gentleman from Texas, Mr. Sessions, recognized for 5 minutes.

Rep. Pete Sessions (R-TX)SPEAKER_30

Mr. Chairman, thank you very much. Delighted we're having this hearing today. I think that the panel is well-positioned to provide a lot of information to us. Mr. McMurray, I want to go directly to your testimony, and we're talking about China. China currently has 57 nuclear reactors in operation and 28 reactors under construction. United States has 94 reactors, none currently, evidently, on the books to replace them. What is the major reason why we cannot build of economic the funding that's necessary for these? Is the market not robust? Is there not an understanding? What is the reason why America would not be building at least one or two?

Mr. Nicholas McMurraySPEAKER_08

Yeah, thank you, Congressman. Um, China over the last several years has made a concentrated, you know, focus on building new nuclear, and that has played out in the number of reactors under construction. I would say the U.S. has also done that. There has been significant bipartisan policy for the past several years focused along every step to build new nuclear, whether it's demonstrating early technologies, developing the fuel supply chain, providing tax credits, improving the regulatory framework. Congress has really focused on this for the last several years,

Rep. Pete Sessions (R-TX)SPEAKER_30

but the market has not gathered itself together to take advantage of this.

Mr. Nicholas McMurraySPEAKER_08

So, today there are several projects that are very close to breaking ground. There are two research reactors that are under construction. There are several reactors through the Department of Energy's Advanced Reactor Demonstration Program that are also nearing construction, as well as several private companies that are also looking to build. So the US

Rep. Pete Sessions (R-TX)SPEAKER_30

trying to go to next-gen, they're waiting for the newest research and development.

Mr. Nicholas McMurraySPEAKER_08

There is an interest in all sorts of technologies. After the Vogtle plants came online in Georgia, pairing that with the projected demand increases for electricity in the U.S., there's also a renewed interest in large reactors as well. And so it's important for policy in the market to kind of recognize all of these different technologies have a role to play domestically because there is also an interest in all of these technologies internationally.

Rep. Pete Sessions (R-TX)SPEAKER_30

Yeah. Well, in Texas, we have a lot of land, but a lot of that land is being grabbed up 30,000 and 40,000 acres at a time for solar panels, taking then agricultural ability off that land. And we know, as you alluded to, we're going to double the amount of electricity that's necessary. Did this— do you tell me about the proposed Trump tax cuts? Will that provide more capital available for these kinds of projects to where they don't have to come to the federal government?

Mr. Nicholas McMurraySPEAKER_08

So, focus on Texas for a moment. There's been a lot of great work out of the state to build new nuclear, including through the governor directing the Public Utility Utilities Commission to figure out what state policies would help attract new nuclear. I think on the federal level, we've seen significant support going back to nuclear-specific tax credits that have supported the Vogtle plants, as well as existing policies that support the new technologies today. And so I think Congress has the opportunity to continue that support and continue that focus so it can provide certainty and predictability for the companies looking to build.

Rep. Pete Sessions (R-TX)SPEAKER_30

Great. Well, we need them because we cannot continue to grab 30,000, 40,000, 50,000 acres to meet the needs of not just the electrical, uh, system, electrical grid system, but we need it because we're going to grow exponentially and we've got that, that, uh, issue. Well, I want to thank you. I, I think that the, you know, if we're going to be a capitalist nation and want to grow and meet the demand for all this, we need to move towards, uh, what I would call all of the above. And that has to be a better reliance upon what we're doing with nuclear. I want to thank you very much for being here today. Mr. Chairman, I yield back my time.

Chairman French Hill (R-AR)SPEAKER_26

Gentleman yields back. The gentleman from New York, Mr. Meeks, the ranking member on the House Foreign Affairs Committee, is recognized for 5 minutes.

Rep. Gregory Meeks (D-NY)SPEAKER_34

Thank you, Mr. Chairman. And as the chairman has just indicated, I now serve as the ranking member of the and am the former chairman of the House Foreign Affairs Committee. And so when we are discussing the topic at hand, I have to say I come here gravely concerned about our great country. China and Russia, both nuclear-armed permanent members of the UN Security Council, have a vastly different vision of the world than we do. At least that used to be the case. The first month of the Trump administration, however, has confirmed my worst fears, that it has severely undermined American global leadership, not just for the next 4 years, but for decades to come. Just yesterday, the United States, along with a few other tin-pot dictators, Russia and Russian satellite states, voted at the UN not to condemn Russia's aggressive, unprovoked, and unjustifiable invasion into Ukraine. Mr. Doshi, just give me a yes or no: Do you believe it's in our interest to stand with Russia over Ukraine?

Dr. Rush DoshiSPEAKER_07

to stand with Ukraine.

Rep. Gregory Meeks (D-NY)SPEAKER_34

And I would also ask, just yesterday, I dropped a resolution. I would ask my colleagues on the other side of the aisle to join us on this resolution that this just basically says we are—because this is the third year of Russia's invasion into Ukraine. Join our resolution. All it says is that we condemn Russia's invasion of Ukraine, of which the UN tried to pass and we voted, or the administration voted against. Mr. Doshi, let me ask you another question, this time as you are an expert on China. Do you believe that China will read into our failure to stand up to Ukraine as it thinks about aggressive action against Taiwan or in the South China Sea?

Dr. Rush DoshiSPEAKER_07

I'm always reluctant to say that credibility transfers like that. In this case, however, everything I've ever learned about the Chinese Communist Party tells me two things. First, they're disproportionately focused on the US use of power. That is, if they think we're weakening, they're more bold. And number two, if they think domestically we can't rise to the occasion against Russia, they'll think we won't rise in defense of Taiwan. So if we don't stand for Ukraine, they will be emboldened in Taiwan, in the Taiwan Strait, in the South China Sea. That is a strong belief that I have based on everything I've ever studied. Thank

Rep. Gregory Meeks (D-NY)SPEAKER_34

you for that. And so, what we have to do is let's review the record of our president and his positions on China. Back in 2017, he signed a deal to let ZTE Corporation off the hook despite their record of violating U.S. sanctions, which to this very day undermines telecommunications security around the globe. In 2020, he repeatedly praised Xi for the job he did regarding COVID-19 instead of criticizing China's secretive response and failure to allow an impartial investigation into the origins of the coronavirus. And since returning to office, President Trump allowed TikTok to continue to operate in the United States despite clear congressional intent to the opposite effect. Second, he has severely undermined economic trust in the United States among allies worldwide by aggressively threatening tariffs on our allies. This includes tariff threats on semiconductors from our close Taiwanese partners. He has allowed Elon Musk to decimate USAID, which is the tip of the spear of American soft power and goodwill around the globe. So, Mr. Doshi, do you think it is in the United States' interest to compete with China for commercial and soft power projects around the globe?

Mr. John MillerSPEAKER_09

Yes, I do.

Rep. Gregory Meeks (D-NY)SPEAKER_34

I do, too. Mr. Miller, do you agree?

Mr. John MillerSPEAKER_09

Yes, absolutely. It's in our interest to compete.

Rep. Gregory Meeks (D-NY)SPEAKER_34

Mr. McMurray, do you agree?

Mr. Nicholas McMurraySPEAKER_08

Yes, we need to make sure we can compete.

Rep. Gregory Meeks (D-NY)SPEAKER_34

And so now I'm hearing that the president wants to sign a big deal with China to get them to buy more of our commodities while allowing the PRC to build up its military and undercut our workers. All of this is encouraged by Elon Musk and others who have enormous business interests there. So let me be clear, I think we need to continue to trade with China, and I'm not supportive of the trend of stoking xenophobia or undermining our economy just to spite the PRC. But the Chamberlain policy of appeasement coming out of the White House is about self-enrichment, affinity for dictators, not America's economic growth or national security. And we should be competing with the PRC across the globe, not shutting down agencies. We should be cracking down on the China-Russia no-limits partnership, not trying to join it. And I yield back.

Chairman French Hill (R-AR)SPEAKER_26

The gentleman's time has expired. The gentlewoman from Missouri, Ms. Wagner, the chair of the Subcommittee on Capital Markets, is recognized for 5 minutes.

Rep. Ann Wagner (R-MO)SPEAKER_40

I thank you, Mr. Chairman, for holding this vitally important hearing. And I want to thank our witnesses certainly for being here today. Back in my home state of Missouri, it is estimated that three people lose their lives every single day from an overdose. I've heard from countless constituents who tell me about a neighbor, a friend, or family member who's lost their life due to an accidental overdose of fentanyl. Transnational criminal organizations, many of them based in China, make millions of dollars off the illegal production and trafficking of this deadly narcotic. The CCP knows this and is allowing it to continue. There are many different ways in which federal policy needs to be strengthened to combat this crisis. But to quote the testimony of one of our previous witnesses, financing serves as the oxygen for criminal networks. We must coordinate our government response to identify, isolate, and interdict the financing, manufacturing, and trafficking apparatus of fentanyl and its precursors from China through Mexico and into our neighborhoods. We must cut off the oxygen to these criminal networks. Mr. Cassara, can you describe how Chinese entities exploit both the Chinese and American financial systems to launder illicit funds gained through fentanyl trafficking? Being mindful of my time.

Mr. John CassaraSPEAKER_21

Thank you for the question. I think one of the primary ways they undermine the integrity of our financial system is because they use a lot of methodologies and enablers that are Chinese-centric, and many of these are designed to bypass our financial transparency reporting requirements, meaning they use things like trade-based money laundering, underground financial systems, value transfers, mobile phone apps, these types of things that we are not set up to capture from our primarily money laundering countermeasures, financial intelligence.

Rep. Ann Wagner (R-MO)SPEAKER_40

And in what ways is the Chinese government complicit in this illicit financing?

Mr. John CassaraSPEAKER_21

Well, as you said yourself, China, the CCP, is— it's a command state. They are aware of what they're doing. They are aware of criminal triads and criminal organizations committing crime and laundering money. If they wanted to shut a lot of this stuff down, they could. Nothing happens in China, or for that matter with their diaspora, without their permission.

Rep. Ann Wagner (R-MO)SPEAKER_40

And how does the United States government need to change or alter its current oversight or enforcement to ensure Chinese entities are not laundering funds in these illicit ways, as you've outlined, through American companies?

Mr. John CassaraSPEAKER_21

Well, there's a number of things that I put in my written statement as far as recommendations, but if you're talking about, for example, underground financial systems, illegal or unregistered money remitter services, for example, we need to do a much better job of enforcing the fact that these companies need to be registered with FinCEN and I think licensed in 49 of the 50 states. We're not ensuring that that's done.

Rep. Ann Wagner (R-MO)SPEAKER_40

On his first day in office, President Trump issued an executive order to designate drug cartels as foreign terrorist organizations. Mr. Cassara, how will terrorist designations affect the flow of funds between China and drug cartels in Mexico?

Mr. John CassaraSPEAKER_21

I think we have to wait a little bit to see how this plays out, but I think it will give the administration and the executive branch, including law enforcement and intel and even, even our diplomatic corps, more tools to, to go after these organizations.

Rep. Ann Wagner (R-MO)SPEAKER_40

And clearly that's the intention. Does this designation impact any potential US intermediaries that the drug cartels use to launder funds?

Mr. John CassaraSPEAKER_21

I think it depends on the specifics, but I think this is focused on those cartel organizations. If they use third parties or, or, or whatever.

Rep. Ann Wagner (R-MO)SPEAKER_40

Are there stronger steps, sir, that Congress can take to disrupt these financial networks?

Mr. John CassaraSPEAKER_21

I would go back to, again, some of the recommendations I put in my statement, but I think we need to enhance and prioritize law enforcement. This is where they're most vulnerable, but we're not making cases. And there's a lot— there's a number of reasons for this. Some of it, we're just not aware of it. We don't have the tools. Most importantly, law enforcement doesn't have the resources.

Rep. Ann Wagner (R-MO)SPEAKER_40

I thank you. And hopefully we're going to be getting them the resources here soon. To dig even deeper now that we've designated them as terrorist organizations. My time's expired, Mr. Chairman, and I yield back.

Chairman French Hill (R-AR)SPEAKER_26

gentlewoman yields back. The gentleman from Georgia, Mr. Scott, is recognized for 5 minutes.

Rep. David Scott (D-GA)SPEAKER_37

Ladies and gentlemen, China is taking advantage of us. They are looking at the United States now as weaker than ever. Reports now indicate an increase in efforts by Chinese hackers to infiltrate U.S. government networks and classified systems with backing directly from the Chinese government. Need I look at fentanyl that's destroying the very fabric of our nation, our young people in record numbers? It's almost like China has declared war on the United States, and damn it, we need to declare war back. I hope this hearing will go far and loud. We are tired of China taking advantage of the United States. Our young people are too precious. And as you know, CFIUS recently experienced a CCP-backed cyber breach meant to undermine the committee's integrity. This is too significant a threat to our national security and economic security to ignore. Some of y'all may remember, I said right here in this committee, when we let the damn balloon go over there after China had taken all their data from our farmland, our food, and from our sensitive areas, our military bases, and waited till it got over there off of Myrtle Beach in the Atlantic Ocean, then we shoot it down. They take these things as a sign of weakness. Mr. Miller, let me get to my question here. How effective has CFIUS been at reviewing—listen to me carefully—Chinese companies' attempts to invest in U.S. businesses, particularly involving critical infrastructure, large amounts of personal data, or sensitive technology?

Mr. John MillerSPEAKER_09

Thank you for the question, Congressman. You know I think that the CFIUS investment review regime has been effective, particularly in recent years at making those types of reviews, and particularly after CFIUS was revised via the FIRRMA bill.

Rep. David Scott (D-GA)SPEAKER_37

Let me just interrupt you just briefly on that. I've got to get to this other question. I might have took too long on the first. But earlier this month, Congressman Frank Lucas and I sent a letter to Treasury Secretary Scott Bessent signed by both Democrats and Republicans on this very committee urging him to take a stronger, more proactive approach toward battling future cyber breaches. And I would like to insert the letter for the record, Mr. Chairman.

Chairman French Hill (R-AR)SPEAKER_26

Without objection.

Rep. David Scott (D-GA)SPEAKER_37

Now, our letter asks the secretary to give a firm commitment to CFIUS, would continue to move forward with longer review processes and detailed investigations of Chinese government-linked investments. So how can Treasury improve the parameters and oversight necessary in its service providers and refocus training to better identify potential Chinese cyber threats, particularly those targeting

Mr. John MillerSPEAKER_09

Thank you for that, as well. We need to take all cyber threats very seriously, and that means starting with getting full visibility of the networks, including the networks at Treasury, monitoring systems. As always, using a risk-based approach is really important. And also just using the tools that we have, the basic risk management tools such as end-to-end encryption, multifactor authentication, and logging. It sounds like a broken record because we say this all the time, but we

Rep. David Scott (D-GA)SPEAKER_37

need— Chairman's

Chairman French Hill (R-AR)SPEAKER_26

time expired.

Rep. David Scott (D-GA)SPEAKER_37

I just want to end with this. It's very important that we understand China is targeting our food supply system.

Chairman French Hill (R-AR)SPEAKER_26

gentleman's time has expired, and,

Rep. David Scott (D-GA)SPEAKER_37

and our national—

Chairman French Hill (R-AR)SPEAKER_26

closing remarks are so noted. Thank you. The gentleman from Kentucky, Mr. Barr, the chair of the Subcommittee on Financial Institutions, is recognized for 5 minutes.

Rep. Andy Barr (R-KY)SPEAKER_32

Thank you, Mr. Chairman. So, last Friday, Mr. Miller, President Donald Trump issued an executive order titled "America First Investment Policy." He also issued a national security policy memorandum in which he stated that we will adopt new rules to stop U.S. companies from pouring investments into China, stop China from buying up America, and allowing, at the same time, all of those investments that serve American interests. Seems to me this is exactly the right policy. This is the America First policy. It's the policy that says that investments that help advance our national and economic security should go forward, green light, and investments that undermine our national security should not go forward, red light; a red-light, green-light system. And I appreciate that because it's common sense, and this Congress has been focused on an outbound screening tool and legislation over the past several years. I introduced the Chinese Military Surveillance Company Sanctions Act, which was a sanctions entity-based approach. And then we also introduced the COINS Act at the end of the last Congress, working with the Speaker's office. It was a bipartisan effort and a bicameral effort, and we added an additional focus on specifically defined technologies. Now, what I have always said on this committee and on the Select Committee on the Strategic Competition with the Chinese Communist Party is that our advantage is that we're capitalists and we allocate capital effectively and efficiently. Their disadvantage is that they're communists and they misallocate capital. And this is perhaps why Chairman Xi's crackdown has actually backfired on the Chinese economy and why U.S. venture capital deals have fallen in China by 87%, and by 2023, net foreign investment into China turned negative for the first time on record. But it's also true that U.S. investments made in China still are valued at about $127 billion. So, I want you to to address specifically this this first comment you make in your in your written testimony, Mr. Miller, that overly broad investment restrictions could actually decrease economic security and that policymakers should be mindful of the economic security value of outbound investments. Explain that a little bit.

Mr. John MillerSPEAKER_09

Thank you for the question, Congressman Barr. Yes, if I think that, in my experience anyway, companies absolutely want to and make their best efforts to comply with these regimes, but if the scope is overly broad or it's not clear uh, it's not clear and and defined as to what exactly the companies are supposed to be doing, it really does create some headwinds there in terms of compliance. I think specifically with respect to the outbound regime that you're talking about, it's

Rep. Andy Barr (R-KY)SPEAKER_32

Well, I think one thing that you said that I agree with is that some outbound investment could provide insights into competitor activities, and so not all outbound investment is bad. I think clarity is very, very important. That's why I talk about why the president's approach, green light, red light, is the right approach. And that's what we tried to do in our sanctions bill. Sanctions do provide clarity. Companies know how to comply with it, and if properly defined in terms of these technologies, we can also provide private investors with with clarity. There's also advantages of multilateralism with with a sanctions approach. But here's here's the next question. In a post-Chevron world, and this is for anyone, what is the benefit of having a statute that guides this policy consistent with executive order as opposed to just relying on the Biden executive order or the Trump executive order? Any one of you.

Mr. John MillerSPEAKER_09

I mean, I'll, I'll, I'll, I'll I'll take that. Yeah, you're right. In a post-Chevron world under Loper Bright, the onus really is on Congress to write these rules as clearly as possible so that there, there, there, there really is not it's not left to executive agency discretion, which might be overturned by the courts.

Rep. Andy Barr (R-KY)SPEAKER_32

Well, I think here's the bottom line in my remaining 30 30 seconds is the president's approach in his national security memorandum and executive order is exactly right. It's America first. It recognizes that some outbound investment actually is in the interest of our country, some foreign direct investment is in the interest of our country, but not all of it. And so we need to provide clarity and we need to do it through a statute consistent with the Treasury Department's guidance here. That's what we're going to be working on, and we invite the expertise of the panel to work with us on that. And we look forward to getting this policy exactly right. With that, I yield.

Chairman French Hill (R-AR)SPEAKER_26

Gentleman's time has expired. The gentleman from Massachusetts, Mr. Lynch, the ranking member of the Subcommittee on Digital Assets, Financial Technology and Artificial Intelligence, recognized for 5 minutes.

Rep. Stephen Lynch (D-MA)SPEAKER_22

By the time you announce me, I won't have time to speak. That's a pretty long title. Thank you, Mr. Chairman, and I want to thank the ranking member. This is a great hearing and one that is both timely and incredibly important. I want to thank the witnesses for your very thoughtful testimony, not always in agreement, but always thoughtful. So, China has developed extensive cyber capabilities offensively over the past 10 years or so, and now, I think, is admittedly a world leader in vulnerability exploitation, either directly or through proxies. The Chinese government's targets in the U.S. have included infrastructure, our government agencies, companies, private organizations, and individuals as well. They use tools and methods that breach international law. These malicious acts can be aimed at control or just simply disruption and exposing vulnerabilities in our electrical grid and critical infrastructure. It also involves economic espionage and intellectual property theft. Those are among the most concerning intrusions. But most recently, China had a state-backed Chinese malicious cyber group. They hacked the U.S. Treasury Department, and they gained access to hundreds of workstations and sensitive but unclassified documents from the Committee on Foreign Investment in the United States, CFIUS, and the Office of Foreign Assets Control. So, with that backdrop, we have right now Elon Musk, who's got massive, massive investments in China. He's got this Gigafactory that produces two of his most popular cars there. He's got billions and billions of dollars in investment in China. He's got employees there. He is now inside Treasury and has had, at least for a while before the judge stopped him, had access to United States Treasury payment systems. And it really worries me that he's got young kids in there who I got a letter here from five Treasury secretaries that are expressing concern that these individuals with no training and no ethics requirements and no security requirements are all inside Treasury. Meanwhile, they work for a guy that has billions of dollars of investments in China. It just looks like a bad, bad situation. Dr. Doshi, as Elon Musk and DOGE continue to have access to personal and payments data inside Treasury along with sensitive information about what we are doing with defense contractors and other initiatives with sanctions, could they potentially open up holes in our security system and make Americans' financial information vulnerable to attacks from China?

Dr. Rush DoshiSPEAKER_07

Thank you, Congressman. China is the most capable cyber actor the US faces, and I think that there's a risk that efforts to kind of take data off government systems and put them perhaps even on private systems so they can be run through artificial intelligence will create additional vulnerabilities that China will be very happy to exploit.

Rep. Stephen Lynch (D-MA)SPEAKER_22

What, what are the, what are the strongest measures we can take in terms of, you know, requiring the people who have access to that system maintain the integrity of the financial system itself?

Dr. Rush DoshiSPEAKER_07

Thank you, Congressman. I think that there's a number of technical steps that have to be taken on the end-to-end encryption side, on securitization of security, essentially for that equipment technology, the data. But there's also a human element as well. And I worry about mass firings leading to insider threats, particularly of people with clearances.

Rep. Stephen Lynch (D-MA)SPEAKER_22

Should those individuals, if they have access to any of that, all go through a lengthy and robust security clearance process?

Dr. Rush DoshiSPEAKER_07

My personal view, based on my time working in the NSC, is that more and more of U.S. government work in these sensitive areas should be moved to classified systems. That doesn't mean it can't be democratically accountable, but the unclassified systems are compromised, whether at the State Department, Treasury, or the U.S. Trade Rep, which gives China insight into what we're doing and advantage in negotiation. We should move that into a more secure system.

Rep. Stephen Lynch (D-MA)SPEAKER_22

All right, uh, Mr. Chairman, that just about wraps up my time. Thank you. I yield back.

Chairman French Hill (R-AR)SPEAKER_26

Gentleman yields back. The gentleman from Texas, Mr. Williams, chairman of the House Small Business Committee, recognized for 5 minutes.

Rep. Roger Williams (R-TX)SPEAKER_15

Thank you, Mr. Chairman, and thank all of you for being here today. I appreciate it. The lack of transparency into the Chinese economy is a large concern of mine, and one of the world's largest creditors, this lack of insight presents extreme risk to the United States economy and our national security. This is why I introduced the China Financial Threat Mitigation Act, which my colleague Representative Gottheimer and I have joined together. And this is a bipartisan legislation that would require a study on the exposure of the U.S. financial sector to risk from China. Reliable data is crucial for the United States government to accurately assess our financial exposure to the Chinese, and through this, we will be able to better protect the United States' financial interests and our own national security. So, Mr. Mühleisen, how can the United States best hold China accountable for the lack of transparency in their financial system?

Mr. Martin MühleisenSPEAKER_06

The IMF has certain tools, like, for example, the Financial Sector Assessment Programs and the like, that look at whether member countries live up to standards by the Basel Committee, for example, among others. But of course, as a multilateral organization, it has limits as far as it can go because it needs to look at these standards and can only assess those that exist. So, the IMF as such has no direct tools to increase transparency, but it can publish them—their findings. It can rely on peer pressure and shareholders in the IMF to then exert pressure on China to improve its policies.

Rep. Roger Williams (R-TX)SPEAKER_15

Thank you. China has continuously exploited global supply chains to advance their strategic ambitions, using economic coercion, forced labor, and predatory trade practices to dominate key industries. And this has created vulnerabilities for the United States and puts American businesses and consumers at the mercy of Chinese Communist Party policies. In addition to their use of global supply chains, the CCP's OPEC opaque lending practices and state-subsidized competition have undercut American manufacturers, making it increasingly difficult for them to compete on a level playing field. So, Mr. Miller, what specific policies should Congress pursue to counteract China's stranglehold on critical goods and manufacturing? And additionally, how can we create a stronger incentive for American companies to diversify their supply chains and reduce dependence on China?

Mr. John MillerSPEAKER_09

Thanks very much for the question, Congressman. You know, it's absolutely critical that we focus on supply chain resiliency and security. You know, and I think companies certainly in the technology sector for some time have been working to increase supply chain diversity. You know, it's— we have to be realistic that we have complex global supply chains, right? Right now, and it will not be an overnight process. But, you know, moving certain parts of manufacturing and, and supply to, uh, you know, friends and allies as well as the United States is something that is already underway.

Rep. Roger Williams (R-TX)SPEAKER_15

In the short time I have left, throughout your career, Mr. Cassara, you have investigated international money laundering networks and underground financial systems that enable transitional crime, transnational crime. So today we see Chinese financial networks playing a key role in laundering fentanyl profits for Mexican cartels, using trade-based money laundering and underground banking to move illicit funds while evading U.S. authorities. So given China's history of shielding these operations from scrutiny, what steps should the U.S. take to disrupt these financial channels? And what is China's endgame, do you believe, in weaponizing fentanyl in the U.S.?

Mr. John CassaraSPEAKER_21

Thank you for the question. Regarding fentanyl, I believe it is a form of asymmetric warfare that the Chinese are are employing against the United States. Maybe some of this goes back to the Opium Wars of a century or so ago. I think it's, in effect, it's retribution. To answer your question about what can we do for underground financial systems, we could talk for a great length of time about this, but I think one of the most important initiatives that we came up with a number of years ago are trade transparency units. Basically, having customs information exchanged back and forth, just like the Egmont Group of financial intelligence units where we exchange financial intelligence, exchange customs-related information, imports and exports, to help look for anomalies in specific trade transactions—over- and under-invoicing, for example. This initiative has been stalled. In my opinion, one of the reasons it's been stalled is because legacy Customs has been shortchanged through an emphasis on immigration enforcement under Immigration and Customs Enforcement.

Rep. Roger Williams (R-TX)SPEAKER_15

My time is up. Thank you for your testimony. The

Chairman French Hill (R-AR)SPEAKER_26

gentleman's time has expired. The gentleman from Missouri, Mr. Cleaver, ranking member on the Housing and Insurance Subcommittee, is recognized for 5 minutes.

Rep. Emanuel Cleaver (D-MO)SPEAKER_00

Thank you, Mr chairman. Um, a couple of years ago, I was in Addis, in Ethiopia, Addis Ababa. And as I moved around the city, I was walking by a building, a large, majestic building, and the Ethiopian friends who were carrying me around said, Do you want to go in? And I said, Sure. We went in. It was the African Union building. And as you walk into the building, there's a sign about the gift of this building to Ethiopia by the Chinese. When I went on down south to Tanzania, where I have about 50, 75 family members—actually, our ranking member has met some of my family members from Tanzania—all they could talk about was the money China was spending in Tanzania. The ambassador appointed by Bill Clinton, Charles Stith, Dr. Charles Stith, had really revved up everything that he could in Tanzania to attract the attention of the United States because China was steadily investing in Tanzania. And unfortunately, as China was investing, we were decelerating. And if you go all the way through the continent, you'll see that China has created quite a relationship with the entire continent. Dr. Stith wrote a book called "For Such a Time as This," and I think that that book would be contrary to what we've just seen with USAID. So we can't take advantage of anything now. China has had some failures. They did establish 25 economic zones on the continent and in 16 different countries, by the way. And when the USAID shutdown, let me find out from those of you—you move on down—how many of you think that it was a mistake, or it is a mistake for us to cancel out all of the work that people have been trying to do, like Dr. Stith, in Africa, and all of a sudden we make a statement that we're first, we don't we're not that interested in helping anybody except ourselves? How do you think that's coming across, and does it impact the economy of the continent when obviously China is trying to take over? Anybody? Did we make a mistake? Is there a mistake with USAID? Please.

Dr. Rush DoshiSPEAKER_07

Yes, Congressman, I think it's a mistake to cut USAID in this fashion. It needs reform, but this is not the way.

Mr. Martin MühleisenSPEAKER_06

I think it will hurt unless it is replaced by something else relatively quickly.

Mr. Nicholas McMurraySPEAKER_08

think you need to take all the available tools to compete with China.

Mr. John MillerSPEAKER_09

I agree. We need to compete with China everywhere we can using all tools that we have.

Rep. Emanuel Cleaver (D-MO)SPEAKER_00

We had a good chance if we if we would work. Most people probably don't even know, one of the one of the members of of of Congress during the 1990s, Mickey Leland, had become so familiar with Africa, he and Donald Payne Sr., that they were invited to everything that went on in the continent. In fact, Mickey Leland's plane went down just outside of Addis Ababa, and there's a statue of him built in downtown Addis Ababa. We were moving through Africa and and making friends, and all of a sudden, that has just been blown to pieces. And I know, you know, I'm not trying to get any of you in politics. I don't like politics. But I do think that this is more than political. I think it's it's a futuristic look of where we need to go back. Thank you, Mr. Chairman.

Rep. Frank Lucas (R-OK)SPEAKER_24

Gentleman's time has expired. The chair now recognizes the gentleman from Ohio, Mr. Davidson, chairman of the Subcommittee on National Security, for 5 minutes.

Rep. Warren Davidson (R-OH)SPEAKER_17

I thank the chairman. I really appreciate our witnesses, and confronting China is certainly one of the essential things for American foreign policy and frankly, for governments around the world. They're confronting the same kinds of practices by China when they were admitted into the World Trade Organization as a, quote, "developing country." They promised to become a market economy, and clearly they're not a market economy. In fact, they use the same kinds of practices everywhere to block market access, to use a whole-of-government approach using their intelligence services and everything else to steal intellectual property, and then to subsidize and dump to take over market share strategically. So confronting outbound investment is one of the most important things that this committee and frankly this Congress is going to deal with, and it comes in the context of a whole host of other policies. But I want to go back to the Dodd-Frank Act. And when I was in manufacturing, prior to coming to Congress, I owned a group of small manufacturing companies in Ohio. And early on, after one acquisition, someone came to me with a form and said, You need to sign this form saying that none of the steel that we buy contains, quote, 'conflict minerals.' Now, at that time we had under 50 employees and they're coming to me and I'm like, "I'm buying steel from U.S. Steel, and you're asking me, a small manufacturing guy in western Ohio, where the tin that coats the steel comes from? Might it come from this place in Central Africa? How am I supposed to know that? Why aren't you—if the government cares to know that, why isn't the government doing that?" Well, this is the fallacy behind one of the approaches to our Outbound Investment Act. This is the Cornyn approach in the Senate. This has been one of the approaches presented through the Foreign Affairs Committee. But thankfully in this committee, this Financial Services Committee, where we follow the money, we know that really doesn't work. It just shifts the burden to the private sector. And the reality is the private sector doesn't even have the resources to know the answer to some of these things. We don't do that when it comes to sanctions. We use an aggressive licensing approach that targets specific actors. It does take a lot of work, and the sanctions regime itself is stressed. It goes back to 1975. But I'm going to butcher your name, but Mr. Mühleisen,

SPEAKER_UNKNOWN

uh,

Rep. Warren Davidson (R-OH)SPEAKER_17

I, I can't, I can't find the note here and I can't see without reading glasses. So, uh, can you, can you highlight like the problem with this approach where you put the burden on the companies?

Mr. Martin MühleisenSPEAKER_06

Uh, thank you, Congressman. Um, I'm not really an expert on regulation of American companies, but I do think that light regulation in general and something that is in the power of companies to live up to and fulfill is the right way to go.

Rep. Warren Davidson (R-OH)SPEAKER_17

Well, thank you. One of the other challenges that we confront as we deal with outbound investment is our international institutions. And we've, since the end of World War II, structured things like the International Monetary Fund, the World Bank. We've got Inter-American Development Banks. We've got the Asian Development Bank. And the idea that we're subsidizing China with this makes makes little sense to me. From 1981 to 2001, the World Bank lent China over $40 billion for 280 projects. Since 1986, almost 40 years now, the Asia Development Bank has committed 1,218 public sector grants totaling $44.3 billion. And right now, the current portfolio, as of right now, 77 loans worth $12.55 billion. We've got the Chinese Currency Accountability Act, where the IMF wants to grow the influence. So, I guess, Mr. Mühleisen, why would that make sense?

Mr. Martin MühleisenSPEAKER_06

Personally, I don't wish for China to gain a bigger share in these institutions at the moment, in part for the reasons you mentioned, also in part because of the strategic competition that the United States and other countries are engaged with against China. The IMF and and other institutions are, I think, really important assets for the United States, where a lot of capital and human capital is invested in. And it would be, I think, not right to allow China to interfere with the work of these institutions if they wanted, if they would get a bigger voting share.

Rep. Warren Davidson (R-OH)SPEAKER_17

Yeah, thank you for that. And Mr. Miller, unfortunately I missed the question to you, but on the outbound investment, if you could respond, we'll send a note following the hearing. My time sadly is

Rep. Frank Lucas (R-OK)SPEAKER_24

The gentleman's time has expired. The chair now recognizes the gentleman from Illinois, Mr. Foster, ranking member on the Subcommittee on Financial Institutions and an old colleague of mine from the Science Committee. You're recognized for 5 minutes, sir.

Rep. Bill Foster (D-IL)SPEAKER_28

Thank you, and I'd like to focus on artificial intelligence and anti-corruption efforts. Mr. Miller and Mr. Doshi probably are the right ones for this, but artificial intelligence is coming at us and we're not ready for it. It is probably the most important area of competition between China and the United States. The first country that gets what amounts to an AGI, this is an ability to simply an artificial intelligence agent that can outperform humans in most things. I think in computer coding, it's arguably already here. And just in the last few days, there was an announcement from Google about a co-scientist device that actually outperformed a small scientific group who worked for 4 years at a problem that it solved in 48 hours. So we're almost there. And whichever country gets that capability first will have effectively an infinite army of highly skilled technical workers that will make all of our efforts at workforce education irrelevant. And so this is the battle we cannot lose. Now, the free world is in a very fortunate position that the production of the GPUs, the key core elements of these, is almost entirely in the free world. We rely on the Dutch systems, the German optics, Tokyo Electron, and a number of companies in the US, and final production of many of these chips in Korea and Taiwan. And so we have, by luck maybe, or maybe by not luck, we have all of the choke points to control that technology and potentially keep it out of Chinese hands. However, we've tried to do that with normal export controls and found that people are simply smuggling those devices out. You saw Deepfake is widely believed—Deepfake, sorry, DeepSeek is widely believed to have trained their cutting-edge model using systems smuggled out of the United States because our export controls exist but are not enforceable. So what are the things that we can do that will actually get enforceable controls on these, assuming that we get the entire free world to buy into the need to keep these out of Chinese hands? Mr. Doshi, you and I have been on a panel discussing this recently, and so I'll start with you.

Dr. Rush DoshiSPEAKER_07

Well, thank you, Congressman, and I appreciate your leadership on this issue. As you know, I'm partial to a solution that's technical that would make it difficult for GPUs to be operated in jurisdictions where there's hardware built into it preventing the operation unless, again, it's in the correct jurisdiction. So

Rep. Bill Foster (D-IL)SPEAKER_28

If they were smuggled into China, they would simply stop working, or smuggled outside of their licensed area, they would simply stop working.

Dr. Rush DoshiSPEAKER_07

So in addition to enforcement mechanisms, which we need to strengthen, in addition to better controls, which we haven't really tried, we should also look at these hardware-based solutions. Solutions to keep our choke points strong.

Rep. Bill Foster (D-IL)SPEAKER_28

Yeah, and there was a very impressive hardware demonstration over near the Executive Office Building with one of these systems that showed this can be done if we choose to do it. Mr. Miller, any comments on—

Mr. John MillerSPEAKER_09

Yeah, thank you for the question, Congressman. Just to go back to your lead-up to the question, talking about the fact that we are working with allies in Taiwan and Germany and the Netherlands, etc., I think it underscores the fact that for any export control to really be effective, it should be, of course, targeted at the bad actors and the national security risks that we're trying to control, but it really needs to be multilateral, and we need to get buy-in from all of our partners and allies on a unified approach if we're really going to be successful.

Rep. Bill Foster (D-IL)SPEAKER_28

Yeah, and that's why things like voting along with all the rogue states in the United Nations is not a good step forward. And the way this administration is frankly destroying the confidence in our allies is not going to make those necessary negotiations work easier. I'd like Mr. Mühleisen, one of the best areas that IMF has been involved in is anti-corruption. You correctly point out in your testimony that the Chinese Belt and Road loans should be treated very skeptically by the international community because they're frequently created through corrupt payments, and that result in white elephants built by Chinese contractors and unpayable loans behind them. And so traditionally, the U.S. has been at the forefront of anti-corruption efforts. So can you just say quickly how the U.S. benefits from leadership in anti-corruption efforts as opposed to what we've seen with the administration announcing recently they are no longer going to enforce the Foreign Corrupt Practices Act because apparently the president believes that it has blocked some deals that he wanted to do?

Mr. Martin MühleisenSPEAKER_06

I

Rep. Bill Foster (D-IL)SPEAKER_28

think it's— You've got a few seconds here.

Mr. Martin MühleisenSPEAKER_06

Yeah, I think it's important to pursue the avenue that bad loans start from corrupt practices, and China has demonstrated that. And while there is a need to respond and to expand U.S. loans and projects, one has to very carefully weigh the pros and cons of what has just been proposed.

Rep. Frank Lucas (R-OK)SPEAKER_24

The gentleman's time has expired. The chair now recognizes the gentleman from Tennessee, Mr. Rose, for five minutes.

Rep. John Rose (R-TN)SPEAKER_16

Thank you, Chairman, and thanks to Chairman Hill and Ranking Member Waters for holding this hearing, and thank you to our witnesses for taking time to be with us. Last Congress, Ari Rubenstein testified that we should be more concerned about how prepared American capital markets are for a Chinese invasion of Taiwan. Mr. Doshi, I know that you believe the Chinese market is highly volatile. As we look to prepare our markets for geopolitical instability, would it not be beneficial to have better market data regarding our systematic and material risk exposure to China?

Dr. Rush DoshiSPEAKER_07

Congressman, I think you are exactly right. We need better information about our vulnerabilities across a variety of sectors— in the financial sector, supply chains. And in addition, this is harder to do because our due diligence firms in China were— are being shut down.

Rep. John Rose (R-TN)SPEAKER_16

I think we are woefully underprepared in the event of a Chinese invasion of Taiwan, and I know that my colleagues plan to introduce widely supported legislation that would provide us with key data on exposure risk. I believe that coupled with a heavy-handed tariff strategy will incentivize American industry to return home and protect our markets. And just just a further comment, I am just always kind of struck by the difficulty in getting visibility for the exposure to China. I sit on the board of a nonprofit with investments across a range of assets, and I have been asking this question now for a number of years and have yet to get a really clear dial-in on exactly what our exposure is. I think if there was a terrible event vis-à-vis Taiwan, we would find out real quickly exactly what that exposure looks like, and that— but that would be too late, of course. Shifting gears now, in Tennessee, we are proud to be a leader in nuclear energy innovation through the Oak Ridge National Laboratory and the efforts at the Tennessee Valley Authority. However, we are not innovating fast enough in my view. China is building dozens of nuclear reactors. You have testified to that today, witnesses have, and looking to finance— China is looking to finance even more abroad. We are learning now that China is expanding its nuclear influence internationally by funding projects in Pakistan and Argentina. Mr. McMurray, how does China incentivize foreign nations to accept their funding for these international nuclear projects?

Mr. Nicholas McMurraySPEAKER_08

Yeah, thank you, Congressman. China is able to offer very competitive financing packages, and they've done that, for example, in Pakistan to some loans, 2% interest, for example. That's very hard for private US companies to compete with. That said, there is a real opportunity then to leverage other financial institutions such as EXIM and DFC. Two really recent examples are in Romania, where the Department of Energy and the EXIM Bank worked together to essentially finish a project in Romania where China was also competing. And the US ultimately won that project, issued a loan for some preconstruction work that directly benefited US jobs, then also signed a letter of interest for a multi-billion-dollar loan there as well. And so we've seen examples where, when US companies are on a more level playing field, they are able to compete in other countries.

Rep. John Rose (R-TN)SPEAKER_16

Do you think that our, our technology and our focus on maintaining American superiority in terms of just the technology available, is that a, is that an issue? Number one, and number two, our own failure to move forward with projects here domestically. How big of an impact does that have on our ability to provide or to win projects overseas?

Mr. Nicholas McMurraySPEAKER_08

Yeah. So the private companies developing new technologies are one of the U.S.'s greatest assets, and that gives us the ability to compete globally because countries want to work with the U.S. and build these technologies. The challenge is if we're not at the table by either building them or developing them, they're going to turn to other options. Recently that's been Russia, and China is well-poised to take that if the U.S. doesn't make sure we have the tools to be able to compete.

Rep. John Rose (R-TN)SPEAKER_16

As we've been discussing, part of what has made Oak Ridge National Lab in Tennessee so successful is how it leverages public-private partnerships to resolve technical hurdles and develop industry-leading technology. Mr. McMurray, using Oak Ridge National Lab as an example, how can the government improve American private corporations' abilities to compete with China?

Mr. Nicholas McMurraySPEAKER_08

Yeah, the Department of Energy and the national lab system are an incredible resource for private companies. The public-private partnerships to develop technologies allows these early ideas to really get to market. A great example recently out of Oak Ridge is the development of TRISO fuel, which is a type of fuel for a lot of new reactors. There's going to be a fuel facility being built near Oak Ridge, Tennessee, and this technology is going to be built here in the U.S. as well. And so taking those ideas from market or from the lab to the domestic market and then to the global market really should be the goal for a lot of these public-private partnerships.

Rep. John Rose (R-TN)SPEAKER_16

Thank you. My time has expired. I yield back, Mr. Chairman.

Rep. Frank Lucas (R-OK)SPEAKER_24

Gentleman yields back. The chair now recognizes the gentlelady from Ohio, Mrs. Beatty, ranking member of the Subcommittee on National Security, for 5 minutes.

Rep. Joyce Beatty (D-OH)SPEAKER_01

Thank you, Mr. Chairman. My first question here goes to you, Mr. Cassara. As a member of this committee, I'm proud to have supported legislation that would protect Ohioans from dirty money and harmful effects that it has on our communities. For example, the Corporate Transparency Act, passed by Congress with bipartisan support and signed into law by President Trump, will help us understand who really owns anonymous shell companies and will give our law enforcement more tools to keep our communities safe. For example, in my home state of Ohio, which has suffered the brunt of the nation's lethal opioid epidemic, the threat of anonymous shell companies is very, very real. In just one instance, a Chinese synthetic opioid trafficker manufactured and shipped deadly fentanyl analogues to 37 United States using shell companies formed in Massachusetts to run their operation, and this scheme led, as you can imagine, to multiple fatal overdoses in Ohio. Now, I agree that we must work with small business to help them comply with reporting requirements, but cannot abandon these landmark anti-money laundering policies altogether, because the human cost is just unacceptable. So, here's my question. Mr. Cassara, you have worked to counter illicit finance for decades. Can you please address why understanding the true owners behind U.S. anonymous companies would be important for countering China's role in the fentanyl trade?

Mr. John CassaraSPEAKER_21

Thank you for the question. I have looked at anti-money laundering, counter-terrorism finance for over 30 years, and in my opinion, lack of beneficial ownership information surrounding anonymous shell companies is kind of like the last hurdle. I remember back in the day when we started passing a series of laws, rules, and regulations, but kind of in my estimation, this is the last major hurdle that we have to overcome. The current legislation, in my opinion, again, it's not perfect, but it is something. It is something that we can we can work with going forward. The reason it's so important is, again, following the money and the value trails, and finding out who is actually behind all this. Myself, my colleagues, constantly, they get to a certain stage in investigation and they back— they bump into one of these anonymous companies, and we can't go any further. And as I explained earlier in testimony, it's they're very active in the layering stage of money laundering, they're very active in the integration stage of money laundering. We need something, some tools to avail ourselves. The other thing is very, very quickly, we are being criticized around the world for lack of beneficial ownership information. We failed the most recent mutual evaluation from Financial Action Task Force, not having this type of information available. And personally, when I've been overseas mentoring, teaching our colleagues overseas, talking about the importance of transparency, they could come back to me and say, Well, Mr. John, we're doing an investigation into your company in your country, and it goes to these anonymous shell companies. Can you help us? There's nothing I can do.

Rep. Joyce Beatty (D-OH)SPEAKER_01

Thank you. I have got time maybe for one more question. Let me go to you, Mr. Mühleisen. In your testimony, you outlined that China has become the largest sovereign lender to emerging and developing countries over the past two decades. Now, we all know that Project 2025's agenda, which President Trump denies ownership of, despite executing it provision by provision by provision by provision, proposed that the United States withdraw from the IMF and the World Bank. Can you discuss how the United States withdrawing from these IFIs would affect our ability to preserve dominance of the US dollar and compete with China on the global stage?

Mr. Martin MühleisenSPEAKER_06

Well, first of all, I mentioned earlier that the institutions really leverage US contributions by a large amount. Second, if the US were to exit from the institutions, they would still exist. I mean, the headquarters would move to the largest second shareholder, but probably they would not be able to access the easily the dollar anymore, and therefore they would have to loan in other currencies. And that would be, for example, one way that other currencies would gain in stature. And of course, the, the effect of the fall in U.S. leadership would contribute also to that. So

Rep. Joyce Beatty (D-OH)SPEAKER_01

it would affect it? Can you give me a yes or no on that? Okay, thank you. My time is up.

Rep. Frank Lucas (R-OK)SPEAKER_24

Gentlelady's time has expired. The chair now recognizes the gentleman from South Carolina, Mr. Timmons, for 5 minutes.

Rep. William Timmons (R-SC)SPEAKER_03

Thank you, Mr. Chairman, and I want to thank the witnesses for being here today. China poses the most significant risk to both global financial markets and our country's economic future. With its growing influence over the global economy, technology, and key industries, China has the potential to disrupt financial systems worldwide. Institutions like the IMF and World Bank help maintain stability, but China's increasing role within these organization— organizations raises concerns about the direction of the global economy. That said, we shouldn't be anti-China. Instead, we need to hold China accountable for issues like currency manipulation, unfair trade practices, and the rising debt they impose on other countries. And this is important: the United States cannot do all of this alone. We must work with our allies to protect the global economy without creating unnecessary conflict by pushing for greater transparency and fairness in international financial institutions. Institutions Mr. Miller, could you please explain the role China's Belt and Road Initiative has played in exporting emerging Chinese technologies to developing nations worldwide, and how significant is the cybersecurity risk these technologies pose within the economic frameworks of these countries?

Mr. John MillerSPEAKER_09

Thank you for the question. Yes, I mean, China's Belt and Road Initiative is has definitely increased the availability of Chinese technologies around the world. When it comes to cybersecurity, I think the first principles are always that we need to mitigate risks and be as targeted as possible in doing so. As we saw during the 5G debates here, when it was determined that there were risks involved in certain of those Chinese technologies, steps were taken to both mitigate the cyber risks, and happy to get in more details on that, but also to exclude equipment when there's been a judgment made that it is causing those types of issues.

Rep. William Timmons (R-SC)SPEAKER_03

Thank you for that. You know, we're talking about Huawei, a global player in 5G technology, and the risks posed by the Chinese Communist Party. In 2019, the US government led the effort alongside allies like the UK and Australia to restrict Huawei's access to global supply chains, citing national security concerns over the potential for espionage through 5G networks. And despite this, many developing countries continue to adopt Huawei's technology, drawn in by the lower costs, because the Chinese government subsidizes the entire thing, and the company's alleged commitment to investing in local infrastructure, when they just want a backdoor into their system. But Huawei's growing presence in the global infrastructure, particularly in developing nations, has caught the attention of the IMF. The IMF highlights the complex relationship between economic development and geopolitical risks. For many of these countries, Huawei's affordable and advanced 5G technology is vital for building telecommunications networks, which are crucial for economic growth and modernization. At the same time, the US has urged nations to reconsider their reliance on Huawei, citing concerns over espionage and Chinese influence on communication systems. This has created a challenge for the IMF because it has to balance the need for financing and long-term stability with the political and security risks that could impede development. In 2020, I introduced the Promoting Secure 5G Act to counter China's efforts to expand its telecom influence in countries receiving aid from international financial institutions, particularly the IMF and the IFC. I was pleased to see that bill was passed into law as a part of the 2022 NDAA. Mr. Mühleisen, how has the IMF approached the challenge of balancing its mission to support global development with concerns raised by Western nations about potential security risks linked to Huawei and other innovative Chinese companies that have close ties to the CCP?

Mr. Martin MühleisenSPEAKER_06

I think the IMF as a multilateral institution cannot really assess the technological risks. The money that is being provided is for balance of payments support, and of course it is up to the countries how to spend it and use it. And the IMF as a macroeconomic organization cannot go into the details of how it is used.

Rep. William Timmons (R-SC)SPEAKER_03

Thank you for that. I think the Huawei example is a perfect way to chart a path forward to hold China accountable. Obviously, Huawei was engaging in untoward behavior, and the exposing the cybersecurity risks associated with them essentially giving away 5G to developing countries, and getting our allies to get on board to essentially force Huawei to become an arms-length transaction in the future, I think it's a perfect example of how we can band together with our allies to hold China accountable. Thank you, Mr. Chairman. I yield back.

Rep. Frank Lucas (R-OK)SPEAKER_24

Gentleman yields back. The chair now recognizes the gentleman from Illinois, Mr. Casten, for five minutes.

Rep. Sean Casten (D-IL)SPEAKER_27

Thank you, Mr. Lucas. So, thank you all for coming here today. I really appreciate the Chair bringing up this important hearing. I want to focus—there's a lot about sort of theoretical future risks. I want to talk about real-time, ongoing risks, and things that, six months ago, were very bipartisan. I hope they're still bipartisan. We had, as part of the continuing resolution, an agreement to block outbound investment in China. I think Mr. Davidson and Mr. Barr have alluded to pieces of that. I suspect, from their comments, they may not have agreed with all of it, but it was a very bipartisan agreement that had been developed. That package was removed under pressure from Elon Musk right at the end of the last term. And so, now we don't have an outbound investment screen that we would have had but for that pressure. Are any of you familiar enough with the terms of that proposal for me to just ask you a couple follow-up questions? Oh, you're all stanced. Well, let me just share with a concern and what's going on there. That provision would have required restricted or required notification of U.S. investments in Chinese companies that were involved in semiconductors, microelectronics, quantum information technologies, and AI. If that's the only thing you know—I see, Mr. Doshi, I see you nodding your head, so I'm going to pick on you here. Let's say that you owned a U.S. automobile-based company that got its start in an infusion from capital from a Department of Energy loan from the Loan Programs Office. You wanted to build factories in China to bring self-driving cars from China. Does that sound like something that might be restricted or retained under that program?

Dr. Rush DoshiSPEAKER_07

I think it's possible under that program that could be restricted.

Rep. Sean Casten (D-IL)SPEAKER_27

Okay. And you'd also like to build an AI data center in China to train the algorithm that's needed for your autonomous vehicles. That sure sounds like something that would also probably be restricted given the data collections.

Dr. Rush DoshiSPEAKER_07

Yes, Congressman, I think a sectoral approach does make sense.

Rep. Sean Casten (D-IL)SPEAKER_27

Okay, so that of course is Elon Musk I'm talking about. And it makes perfect sense, if he is only looking out for his self-interest, that he might have pressured Speaker Johnson or others to pull that from the floor. I'm speculating, but why else would he, right? Now, we also six months ago had a very bipartisan agreement to force the sale of TikTok from a CCP-controlled company. We had lots of hearings, lots of scary information about the way that the CCP was taking data, the way they were weaponizing that data in places like Taiwan, and could potentially weaponize it in the United States. All of a sudden, Trump comes into office and that deal is indefinitely postponed. Not legally, because the law is very clear, the sale should have happened. Again, one questions the motives. We've had Elon Musk, who has said—this is a direct quote from him—he said that Taiwan is an integral part of China. From a diplomatic perspective, that sounds an awful lot like Donald Trump saying Zelenskyy is a dictator. Mr. Doshi, any comments on what that might do to Chinese aggression in the region if they if they hear the United States, the leader of the United States, suggesting that Taiwan is integral and Russia can take land by force?

Dr. Rush DoshiSPEAKER_07

Congressman, I think that the PRC looks very carefully at our statements and actions on Taiwan and in Ukraine. They think that if we, for example, abandon Ukraine in a fit of dysfunction, then that means that we're not going to come to Taiwan's defense. It will embolden them, as will statements that suggest that Taiwan should pay us for defense.

Rep. Sean Casten (D-IL)SPEAKER_27

I share the concern. Last thing that happened, Trump gets into office, issues a meme coin. The meme coin, as all meme coins do, surges in value and then collapses because it's a piece of garbage. But along the way, there are $120 million worth of trades made by Chinese investors. The the Trump family and entities owned by the controlled by the Trump family made over $100 million in brokerage fees. So, even though they didn't get the value of the coin, because there is no value of the coin, they've made $100 million in deal fees. The World Liberty Financial, Trump's entity, which was about to hit a liquidity crisis, all of a sudden got a $30 million infusion of capital from Justin Sun, whose TRON blockchain is used by drug traffickers and terrorist groups, that all of a sudden gave Donald Trump access to the cash flows from that company under their terms of the agreement. My question for you all, and I say this is an immediate concern, is there a national security concern if entities affiliated with the Chinese Communist Party have direct economic involvement with the President of the United States and Elon Musk? If you're hesitating on that question, let me put it another way. Should we care about national security only when it is bipartisan, or should we care even more when the call is coming from inside the damn building? Yield back.

Rep. Frank Lucas (R-OK)SPEAKER_24

Gentleman yields back. The chair recognizes the gentleman from Pennsylvania, Mr. Meuser, chairman of the Oversight and Investigations Subcommittee. Thank

Rep. Daniel Meuser (R-PA)SPEAKER_31

you, Mr. Chairman. Thank you to our witnesses. So China is outpacing us, leveraging trade practices, currency manipulation, aggressive state-backed investment to dominate critical industries. The Biden administration did absolutely nothing to change that. Under President Trump, we are seeing a different approach, one that puts America first by attracting over $1 trillion in foreign and domestic investment from the likes of Saudi Arabia, Taiwan, Oracle, Apple, Nippon Steel, securing critical industries and leveraging tariffs to create a more competitive playing field. Mr. McMurray, AI data centers demand significant power, as we all know, and we, including nuclear, including nuclear to power the investments President Trump recently secured. I do have a nuclear plant in my district working to power an AI data center. How critical would you put it that strong energy infrastructure in attracting AI investment and keeping the U.S. ahead? How important is—

Mr. Nicholas McMurraySPEAKER_08

Yeah. Thank you, Congressman, for your question. Access to electricity and power is going to be incredibly important for technologies like AI. And so domestically, we have to make it easier to build the different generation sources to provide that power, nuclear being one of the many technologies to do that. And so looking at the broader permitting system and making, making it easier to build new generation, to build new transmission lines, All needs to happen so the US can continue to lead on AI.

Rep. Daniel Meuser (R-PA)SPEAKER_31

Because nuclear will play a big role in this.

Mr. Nicholas McMurraySPEAKER_08

I hope so.

Rep. Daniel Meuser (R-PA)SPEAKER_31

Okay, great. Mr. Mühleisen, my bill recently passed the House, the China Exchange Rate Transparency Act, directing the US representative of the IMF to hold China accountable for currency manipulation, with China's unreliable economic data and opaque exchange rate practices. First off, do you agree with that, and how can the IMF be effective in stopping such currency manipulation by China?

Mr. Martin MühleisenSPEAKER_06

The IMF assesses the exchange rate policies of its members annually in the External Sector Report. It has not found evidence of strong misalignment. There are issues with some of the data that go into that assessment. There's a very interesting debate about the discrepancy between China's current account and trade account, and that's an ongoing discussion. But purely in terms of macroeconomic variables, imbalances have come down, and there's no evidence of currency manipulation, which I think has also been found— Excuse

Rep. Daniel Meuser (R-PA)SPEAKER_31

to me, that's like saying there's no gambling at Rick's. That's just not correct, sir. Mr. Miller, I'm going to move on to you. CFIUS focused more on scrutinizing allies than stopping China from bypassing investment restrictions. President Trump's national security memorandum correcting this by expediting allied investments over $1 billion, while tightening controls on Chinese investments in critical sectors like AI and healthcare, does this— think you— do you think this addresses flaws in CFIUS?

Mr. John MillerSPEAKER_09

Congressman, thank you for the question. I absolutely agree that we should be incentivizing investments with U.S. allies. The NSPM that you mentioned, I think it's commendable in that it seems to address a risk-based approach. Allied investments would seem to present a very low risk, so why wouldn't we want to fast-track those types of investments? So I do think that there are improvements there for the overall CFIUS process.

Rep. Daniel Meuser (R-PA)SPEAKER_31

Okay. And Mr. Mühleisen, I know I cut you off fast. I'll send you the facts and evidence that that I have, which shows that it does happen in a in a very slick manner, but it is a is a regular activity that takes place. Mr. Miller, President Trump's approach to outbound investment focused specifically on ensuring U.S. dollars don't fund the CCP's military buildup. How does this targeted approach better protect national security and economic interests compared to a broad, one-size-fits-all investment ban?

Mr. John MillerSPEAKER_09

Well, you're absolutely right that a one-size-fits-all approach is not the right approach on outbound investment, and I would suggest not the right approach on really any economic security issues. We really need to target these policies to clearly identifiable risks so that we don't accidentally undermine the US investment and competitiveness that we know is so key. I do think that the implementation details will matter, as we see more details regarding the NSPM, but and also enforcement resources, right? Because if we don't have the resources to enforce these policies, then it's also going to be very difficult.

Rep. Daniel Meuser (R-PA)SPEAKER_31

Thank you. I'm out of time, Mr. Chairman. I yield back.

Rep. Frank Lucas (R-OK)SPEAKER_24

Gentleman's time expired. The Chair now recognizes the gentlewoman from Michigan, Ms. Tlaib, for 5 minutes.

Rep. Rashida Tlaib (D-MI)SPEAKER_39

Thank you, Mr. Chair. I just came from my office and meeting some of my constituents, and I can tell you overwhelmingly right now this week, I'm not getting calls about this particular issue. I wish we were using this the power to convene and discuss the issues that matter to many of our families in our district more directly. And right now, they're very worried about the budget proposal. They're very worried about families being impacted by the illegal firings. And I mean, it's just important to say for them, the biggest threat right now is, again, uncheck balances. And you have court decisions after court decisions saying that there's unconstitutional moves in regards to this administration. And so I really stress to my colleagues if anything we can do to be more transparent with our residents about what's going on specifically right now with our federal government. Instead of right now, sometimes I feel like we're scapegoating foreigners and we continually target people that are sometimes even the most vulnerable among us. But again, I think the real threat right now in our country is what is going on with this administration and the lack of accountability on the part of Congress to hold them in check. But I do want to ask Mr.—is it Mühleisen? Am I saying it right? Thank you. One of the things that I think that is critically important, as you know, about U.S. and China and how we can tackle global challenges, as you know, from the climate crisis to public health crises that we continue to see, the unequal growth require multilateral collaboration and so forth, and we've got to create some sort of opportunities to have some sort of dialogue to, again, address some of these concerns. So for instance, take the global overcapacity. Many U.S. critics demand that China end its industrial policies to reduce excess production. Instead of making this a zero-sum problem where one country must produce less, we could work together so that all countries can that all can consume more. That means focusing on development, higher wages, and more global public goods. So how can you see the U.S. working more closely with China and other countries to reduce global overcapacity by expanding global consumer demand?

Mr. Martin MühleisenSPEAKER_06

Expanding global consumer demand in the current situation could be potentially inflationary, but having said that, of course there is a need to ensure that China does not unfairly subsidize its manufacturing exports. I think the multilateral approach would of course be through the World Trade Organization, but I think in the forthcoming trade negotiations between the United States and China, this should be a key focus. Given the current situation, multilateral institutions can only be of limited help in kind of contributing to a bilateral trade dispute, although I personally, of course, very much support the objectives of getting China to play fair and by the rules.

Rep. Rashida Tlaib (D-MI)SPEAKER_39

Dr. Doshi, in The Long Game, you state that countries could engage in coinvestment with China on Belt and Road Initiative projects in exchange for improved standards. Do you see an opportunity for coinvestment by US to improve standards, including labor standards?

Dr. Rush DoshiSPEAKER_07

Thank you very much, Congresswoman. I think it's possible. When I wrote that four or five years ago, it seemed like it was more plausible than it is today, given the competitive dynamics between the US and China. But I do think that if there were some projects where the US came in and said, We'll come in, but it has to be done in X, Y, and Z way, with perhaps certain US companies, with certain US labor standards, the Chinese would be interested, because for them, it would help legitimize some of the projects. But that being said, I think this is a very hard thing to do because they're not necessarily as inclined to work with us in some of these places, because they're using their infrastructure loans to get ports and other things for their own strategic benefit.

Rep. Rashida Tlaib (D-MI)SPEAKER_39

Yeah, I've seen that. So let's talk a little bit, Dr. Doshi, about nuclear de-escalation. Of course, you know, there's issues. Do you see any openings for us in regards to arms control talks with China?

Dr. Rush DoshiSPEAKER_07

Well, when I worked for President Biden and we were thinking about stuff like this, we were unable to really get the Chinese to engage. And when they did engage, they did it for one simple reason: they wanted to whitewash their massive nuclear buildup and make it look like they were being responsible. That being said, there's a lot we have to do, and I was grateful to work on the the ability for the U.S. to basically come with China and say nuclear weapons should not be connected to artificial intelligence. So there's things we can do like that that we should keep working on, and I think the Trump administration will build on that foundation.

Rep. Rashida Tlaib (D-MI)SPEAKER_39

Yeah. And I'll just leave with folks, as we talk about these issues, and they're real issues, I just hope we don't racialize it. And one of the things, you know, just as a Muslim American in the United States, I know, for instance, when many countries are doing, you know, bad things, or it's not reflective on a whole people. And so I just I say that because there's so many folks I think directly impacted sometimes in how we approach accountability with China. Thank you.

Rep. Frank Lucas (R-OK)SPEAKER_24

gentlelady yields back. The chair now recognizes the gentleman from New York, Mr. Garbarino, vice chairman of the Subcommittee on Capital Markets, for 5 minutes.

Rep. Andrew Garbarino (R-NY)SPEAKER_19

Thank you, Mr. Chairman. For years, we have heard warnings from the intelligence community on the threat of state-sponsored cyber actors conducting malicious activity on our nation's critical infrastructure. These warnings have now become a reality. CISA, NSA, and the FBI and other governmental agencies confirmed the People's Republic of China has successfully infiltrated the networks of U.S. critical infrastructure. PRC-sponsored Volt Typhoon hackers are prepositioning themselves on IT networks to enable lateral movement to OT assets to disrupt functions within our water, energy, and communication sectors. Then you have Flax Typhoon hackers who take directions from the Ministry of State Security and have unleashed a large-scale botnet targeting American and Taiwanese computer networks. As a result of these discoveries, Treasury issued a series of sanctions aimed at combating increasingly aggressive cyber activity by PRC-sponsored actors. We must do everything in our power to hold nation-states like the PRC accountable. Recent events prove that cyber risk is an evolving and persistent problem that is not isolated to one sector nor one threat actor. Mr. Miller, what should the U.S. do to best mitigate the impact of PRC cyber incursions now that we've acknowledged so publicly that they are currently in our networks?

Mr. John MillerSPEAKER_09

Thank you for the question, Congressman Garbarino. Yes, as you know well, and as you mentioned, state-sponsored cyberattacks from China and elsewhere have been a problem for quite a while. In terms of mitigating these risks, I would say we really do need to go back to some cyber-first principles, right? There are once they've breached the networks, which they obviously have in this case, organizations need to, frankly, follow the advice of CISA and others, and do things like using end-to-end encryption is something that's been flagged a number of different times, multifactor authentication, logging so that you can really figure it out. And then maybe even more fundamentally, it's so important to get visibility into what visibility into your network and your assets to really understand the scope of the breach. So those are some of the very basic cyber things that we all need to be doing and doubling down on.

Rep. Andrew Garbarino (R-NY)SPEAKER_19

Yeah, absolutely. Cyber hygiene, I've always pushed, is something that everybody needs to do, better cyber hygiene. But FBI disrupted Flax Typhoon's grasp on these compromised devices, and

SPEAKER_UNKNOWN

uh,

Rep. Andrew Garbarino (R-NY)SPEAKER_19

they were being run by a company called Integrity Technology Group, which was sanctioned by the Treasury office. This is the— I think now the second major Chinese hacking group that has been disrupted and sanctioned. So I'm wondering, do you think sanctions, more sanctions, could deter China from future attacks? Do you think that's worth it? Or is there something that we can do for deterring Chinese actors?

Mr. John MillerSPEAKER_09

Well, I think particularly when we have been able to verify or more specifically, when national security and law enforcement agencies are able to verify, you know, the attribution of an attack, you know, absolutely, you know, sanctions targeted at those bad actors is a way to not only hold them accountable, but to deter other actors. You know, I don't think we should look at sanctions as a silver bullet solution here. You know, something that we all know is that this is a continuous process. When it's coming, when we're dealing with cybersecurity. And I don't think we're ever going to eliminate all risks. So we're always going to have to be managing these risks. And there probably are always going to be new actors, too. But the more we can do to hold them accountable, the better.

Rep. Andrew Garbarino (R-NY)SPEAKER_19

Absolutely, I appreciate that answer. Thank you very much. I wish there was a silver bullet. Nuclear energy is one of our largest sources of clean power, and advanced nuclear energy shows a lot of promise. The International Atomic Energy Agency says that nearly 30 countries are looking to build nuclear power. However, over the last several years, the export markets for this energy has been dominated by Russia and China. We must do more to make sure that we have a robust supply chain to build new nuclear reactors domestically so that we can become leaders in the international marketplace. Mr. McMurray, how does innovation at home translate to our ability to export these technologies internationally?

Mr. Nicholas McMurraySPEAKER_08

Thank you, Congressman. Ultimately, we need to make it easier for private U.S. companies to compete globally. I think, especially for countries that are interested in building nuclear power for the first time, the U.S. can offer a lot of other things, whether it's the Department of Energy and the national labs and the technical expertise there, the regulatory expertise from the Nuclear Regulatory Commission, and just the operations expertise that we have from our existing fleet. And so when we look to compete, we have to think broader than just competing financially, although EXIM and DFC can help play a role in that, but really try to focus on the broader suite of offerings and technologies that we have.

Rep. Andrew Garbarino (R-NY)SPEAKER_19

I appreciate that. I'm out of time. Uh, thank you very much for your answers, and thank you, Mr. Chairman. I yield back.

Rep. Frank Lucas (R-OK)SPEAKER_24

Gentleman's time has expired. The chair now recognizes the gentleman from California, Mr. Liccardo, for 5 minutes.

Rep. Sam Liccardo (D-CA)SPEAKER_14

Thank you very much, Mr. Chair. Mr. Miller, I very much appreciate your testimony as someone who lives in Silicon Valley and represents Silicon Valley, particularly your emphasis on ensuring U.S. competitiveness through better tax policy, financial policy, and in particular, the deductibility of research and development expenditures, which I know is of great interest to many entrepreneurs and small companies in my district. As I recall, those expenditures— I'm sorry. The expensing, or the deductibility, of those expenditures was phased out in 2022. Is that right?

Mr. John MillerSPEAKER_09

I'm not 100% sure on the year, but I, but I believe that that did happen. Yes.

Rep. Sam Liccardo (D-CA)SPEAKER_14

And it happened as a result of the passage of the Trump tax law in 2017.

Mr. John MillerSPEAKER_09

I believe so.

Rep. Sam Liccardo (D-CA)SPEAKER_14

And in fact, we are now faced with proposals to extend those tax cuts for the next decade or so at a cost of $4.6 trillion or so. And in fact, the expensing deductibility of research and development expenditures, that was largely sacrificed as a way to pay for those very expensive tax cuts in 2017, was not

Mr. John MillerSPEAKER_09

I'm, I'm not certain that that, that, that, you know, is the exact exchange there. But I mean, both of those things did happen. Yeah.

Rep. Sam Liccardo (D-CA)SPEAKER_14

And they happened to happen in the same tax law. That is, we gave very large tax cuts in other areas and we got rid of this critical provision that has been part of the US tax code for more than half a century. To provide entrepreneurs and small companies the ability to expense current-year research and development expenditures.

Mr. John MillerSPEAKER_09

We released a paper on economic security today, and one of our recommendations is that we should absolutely reinstate that ability to expense in the year that the— and to not amortize over 15 years.

Rep. Sam Liccardo (D-CA)SPEAKER_14

I very much share your perspective on that, so I appreciate your point. And as we think about competitiveness with China, certainly, those kinds of tax provisions are very important. How important is it that we would exempt the first $13 million of someone's estate from an estate tax toward competitiveness with China?

Mr. John MillerSPEAKER_09

I am not a tax expert, I'll be honest with you, but I'm happy to I'm happy to take some of these tax questions back and get you an answer for sure.

Rep. Sam Liccardo (D-CA)SPEAKER_14

Okay. Thank you, sir. I very much appreciate your advocacy, and I hope, I hope that all of us will come to the same conclusion that we need sensible tax policy that makes us more competitive and not tax giveaways that simply amount to handouts for very, very wealthy individuals. Mr. Doshi, I appreciate that you've certainly been studying and working in this space for many, many years, and you undoubtedly remember the situation more than a decade and a half ago, I think, with Huawei and several other Chinese companies that were essentially caught in trade secret theft. And as we think about our IP, many of those companies are still operating in the United States, are they not?

Dr. Rush DoshiSPEAKER_07

They are, sir.

Rep. Sam Liccardo (D-CA)SPEAKER_14

And so they'd be subject to U.S. laws and to federal investigation?

Dr. Rush DoshiSPEAKER_07

They should be, Congressman.

Rep. Sam Liccardo (D-CA)SPEAKER_14

And if we have a challenge being able to find FBI agents or assistant U.S. attorneys to be able to investigate and prosecute those cases, that would not help in our efforts to crack down on trade secret theft and IP theft.

Dr. Rush DoshiSPEAKER_07

Congressman, yes, and the FBI has indicated it needs more resources for the China challenge for across administrations.

Rep. Sam Liccardo (D-CA)SPEAKER_14

And the current administration's position so far has been to essentially fire thousands of FBI agents and federal prosecutors. Is that right?

Dr. Rush DoshiSPEAKER_07

Yes, Congressman, and to reprioritize the FBI for other missions.

Rep. Sam Liccardo (D-CA)SPEAKER_14

Is that going to make us better or worse at halting trade secret theft in this country?

Dr. Rush DoshiSPEAKER_07

I think it's important to invest in enforcement. The Chinese Communist Party is one of the most formidable challengers for IP theft that the country has ever faced. And so more enforcement on this issue is always better.

Rep. Sam Liccardo (D-CA)SPEAKER_14

Thank you. I, uh, thank you very much, Mr. Chairman.

Rep. Frank Lucas (R-OK)SPEAKER_24

The gentleman yields back. The chair now recognizes the gentlewoman from California, Mrs. Kim, for five minutes.

Rep. Young Kim (R-CA)SPEAKER_36

Thank you, Chairman. And I want to thank our witnesses for joining us today to talk about some of the ways that we can compete against China. And Dr. Doshi, good to see you again. Mr. Miller, I know I read your testimony, and I agree with you about not taking our current U.S. technology edge over China and other competitors for granted. We all saw how China shocked the world and global markets when it unveiled DeepSeek as a competitor to many of our domestic AI companies. So, can you elaborate on what policies should the U.S. implement and/or expand on to better compete against China? And why do you believe DeepSeek has found success competing against our more established AI companies?

Mr. John MillerSPEAKER_09

Thank you for the question, Congresswoman. Well, in terms of the policies that that we should be pursuing, as I mentioned to your colleague just a moment ago, ITI released a paper just today with 10 different recommendations to promote economic security and innovation, including in a on a number of different areas. And many of those relate specifically to competition in emerging technologies and promoting competition in emerging technologies such as AI. And in the economic security context, what we really want to do is calibrate our policies so that we are, whether it's investment restrictions or export controls, targeting national security risks, but not doing anything to undermine the U.S. ability to to compete. We have the leading innovation companies in the world, and that is a source of strength not only for the economy, but for

Rep. Young Kim (R-CA)SPEAKER_36

Miller, I'll be reintroducing the legislation that I co-led with Congresswoman Beatty on the other side of the aisle. This is a bipartisan bill, the Strengthening Exports Against China Act. This is to give the EXIM, EXIM Bank, the tools to better support exports of American emerging technologies like AI, 5G, and advanced semiconductors. So do you believe this type of legislation will be helpful to implement or complement our competition against China?

Mr. John MillerSPEAKER_09

Yes. I mean, we obviously— exports are a key part of what— of that U.S. economic strength in technology. So we want to really promote all tools that we can to really help facilitate companies of all sizes in making those exports abroad.

Rep. Young Kim (R-CA)SPEAKER_36

Thank you. Since 2015, the Chinese Communist Party has been the largest creditor to low-income countries. And according to the World Bank's figures, the total external government debt of low- and middle-income countries increased from $1.7 trillion in 2011 to $3.5 trillion in 2021. A large part of that is a huge increase that can be directly attributed to the CCP's irresponsible and opaque lending programs like the BRI, Belt and Road Initiative. I want to ask this question to Mr. Mühleisen, right there, okay. In your testimony, you mentioned that since China joined the G20 Common Framework for Debt Restructuring in 2020, the speed of debt workouts had picked up somewhat. So, why are debt workouts have not picked up at full speed? Can you start that?

Mr. Martin MühleisenSPEAKER_06

It would be ideal if China would be part of the Paris Club that has long experience and procedures for how to restructure debt. The Common Framework is kind of a, I would say, a follow-up attempt to bring China into some process, but it's not as elaborate as the Paris Club. China is finding its way how to contribute to it. It is very reluctant for deep discounts, which makes it difficult to get countries to a sustainable debt level. So there's a lot of progress still needed. That improvement is noteworthy. It's been for a few countries, but it needs to be sustained and it needs to be accompanied by deeper willingness to do debt restructuring.

Rep. Young Kim (R-CA)SPEAKER_36

Can you tell us, what are some of the hurdles, the biggest hurdles to ensure that the CCP agrees to collective debt restructuring, and if you can tell us how debtor countries are affected when the CCP delays debt restructuring through their bilateral actions?

Mr. Martin MühleisenSPEAKER_06

My understanding is that Chinese officials that work for various state banks and other entities don't want to take a loss, a nominal loss on their loans. They're totally reluctant to do that, so they're trying to do all sorts of other things that are not as beneficial for the creditor— for the debtor countries to restructure their debt. It is really an internal Chinese issue that needs to be overcome.

Rep. Young Kim (R-CA)SPEAKER_36

Thank you. My time's up.

Rep. Frank Lucas (R-OK)SPEAKER_24

Gentlelady's time has expired. The chair now recognizes the gentlewoman from Massachusetts, Mrs. Pressley, for 5 minutes.

Rep. Ayanna Pressley (D-MA)SPEAKER_05

Thank you, Mr. Chair, and thank you to the witnesses for being here today sharing your expertise on information technology, trade policy, international relations, and more. The threat the Chinese Communist Party pose to the United States is one that my colleagues and I take seriously, from egregious violations of human rights, manipulation of our global economy, to supporting drug trafficking and stealing intellectual property. The United States must take action to confront these issues. While many of these problems have been around for years or even decades, there is a new threat emerging, deeply intertwined with the Chinese government, that deserves our full attention, and that threat is Elon Musk. Chair, I ask unanimous consent to enter into the record the following articles: Elon Musk's China Threat, China May Welcome Elon Musk's Cuts, How Elon Musk's Deep Ties to and Admiration for China Could Complicate Trump's Beijing Policy—pardon me—Elon Musk, a Chinese Puppet, and Elon Musk, a National Security Threat.

Rep. Frank Lucas (R-OK)SPEAKER_24

Seeing no objections, ordered.

Rep. Ayanna Pressley (D-MA)SPEAKER_05

Witnesses, I'm going to ask you to answer the following questions to the best of your ability. Please do not feel like you have to pretend that you know the answer, but also do not pretend that you do not know the answer. You've taken an oath to be honest, and the American public is watching. Dr. Doshi, who is the CEO of Tesla and makes the majority of its profits through manufacturing in China?

Dr. Rush DoshiSPEAKER_07

That would be Elon Musk, Congresswoman.

Rep. Ayanna Pressley (D-MA)SPEAKER_05

Elon Musk. And not just the vehicles. 40% of his battery supply chain is with Chinese companies. Mr. Miller, Mr. Miller, who worked with the Chinese Communist Party to receive $1.4 billion in loans to support his Tesla business? Mr. Miller?

Mr. John MillerSPEAKER_09

I mean, I, I'm not— I don't have the information.

Rep. Ayanna Pressley (D-MA)SPEAKER_05

Reclaiming my time. Elon Musk. Okay. Ms. Rayaluga, who did Republican Senator Tom Cotton accuse of chasing Chinese dollars to help his businesses Tesla and SpaceX? Oh, okay. Well, it is Elon Musk. In our global economy, it is not uncommon that a rich CEO would do business in China, but in this case, it is a five-alarm fire when that rich CEO doing business with China is also running the United States States federal government. Mr. Mühleisen, do you know what billionaire had a private meeting with China's vice president literally the day before Trump's inauguration?

Mr. Martin MühleisenSPEAKER_06

I don't know.

Rep. Ayanna Pressley (D-MA)SPEAKER_05

Elon Musk. And then on Inauguration Day, who became the head of DOGE, a federal agency created by Trump? Elon Musk. Mr. Miller, as head of DOGE, who has accessed private sensitive government data, including US Treasury payment systems? Reclaiming my time, Elon Musk. Dr. Doshi, given all this information, who do you think should undergo a rigorous investigation

Dr. Rush DoshiSPEAKER_07

Well, I think anybody with conflicts potentially in China should be investigated if they're having a position of influence in government. So, I would say the CEO of Tesla, Elon Musk.

Rep. Ayanna Pressley (D-MA)SPEAKER_05

Elon Musk. Unfortunately, Elon Musk has not even gone through a simple federal background check. He is a citizen of three countries, has business dealings with adversarial governments, and is leading an assault on our federal government workers. The Financial Services Committee is one of the most powerful committees in Congress. There should be an investigation into Elon Musk's conflicts of interest with China, or at least, how about a federal background check? This should not be a partisan issue. No billionaire, Republican or Democrat, should get a free pass. If Republicans are serious about countering China's threat to the United States, you all will support this investigation of Elon Musk. Elon Musk has already bought the presidency, and we should all be concerned he will sell out that presidency and our nation to China. I yield back.

Rep. Frank Lucas (R-OK)SPEAKER_24

Gentlelady yields back. The chair now recognizes the gentleman from Wisconsin, Mr. Fitzgerald, for 5 minutes.

Rep. Scott Fitzgerald (R-WI)SPEAKER_10

Thank you, Mr. Chairman. Thank you, gentlemen, for being here. I know it's a long day. U.S. Secret Service investigates a variety of cyber-related criminal activities, including the illicit use of digital assets, through its global network of 44 cyber fraud task forces. Significant aspects of this illicit activity involve unlicensed money transmitting businesses, the illicit structuring of transactions, and other criminal activity against organizations that are not federally insured financial institutions, but are financial institutions as defined under the Bank Secrecy Act. To address this problem, I was pleased to work last Congress and this Congress with colleagues to advance Combating Money Laundering and Cybercrime Act out of both Financial Services and Judiciary Committee, of which I'm a member of both. This bill, it could harmonize kind of the criminal activity and the banking statutes to clarify kind of specifically where Secret Service has the ability to investigate authority over crimes related to illicit digital asset transactions. Mr. Cassara, could you just briefly touch on important role that the Secret Service plays in fighting these illicit transactions?

Mr. John CassaraSPEAKER_21

Congressman Fitzgerald, thank you for the question. I actually started my career in Treasury as a special agent for the US Secret Service back in the 1980s, mid-1980s. I'm very, very aware of the dual missions of the of the Secret Service, basically enforcement and investigations. A lot of people don't recognize how important financial crimes investigations are to the US Secret Service, got its start right after the Civil War investigating counterfeit, and that's progressed over the years. The Secret Service has got involved with the forgery of US Treasury checks, credit card fraud, computer fraud, identity fraud. And then more recently, I think it was started about 2004, 2005, they initiated the Cyber Investigative Section, one of the first US law enforcement units dedicated to strategically tackling significant cybercrime actors and groups. This type of threat is becoming more and more important. Cyber cybercurrencies, for example, definitely involved with things like ransomware, right? All these types of payments.

Rep. Scott Fitzgerald (R-WI)SPEAKER_10

Does the Department of Justice and law enforcement prioritize kind of the financing side of the relationship, which we're exploring right now related to the fentanyl crisis, or is the emphasis right now placed on kind of the interdiction of drugs themselves? There's kind of this discussion that's been going on in Congress for the last couple of Congresses on that.

Mr. John CassaraSPEAKER_21

Yeah, this is an issue that's been discussed within law enforcement for many times. In— per a kind of a previous answer of mine, law enforcement has been emphasizing the product, for example drugs, and people. Instead of following the money trail. There's lots of different reasons for that. In my opinion, one of the, one of the primary reasons is because investigating the product interdiction, for example, is much easier than going after the money trails. These are long-term, complex investigations. Sometimes they don't bear any results. It takes an extreme, uh, commitment to put the manpower and the resources into these investigations, but these are the investigations that actually pay dividends over time, taking the, the motivation away from the criminals.

Rep. Scott Fitzgerald (R-WI)SPEAKER_10

So, there's a lot of discussion obviously about the border, but specifically, the most alarming thing that a lot of the border agents, when I've been there and other members of Congress have been down there, one of the most alarming is the Chinese nationals that were being caught on a regular basis. So, the fentanyl crisis is obviously something that we're all aware of, but it's really Beijing and the flow of dollars that are coming across with the drug trade that I think, to my—in my estimation, has really underscored the whole idea that this is in fact happening in a larger and larger kind of magnified area specific to the San Diego sector, which we see a lot of that happening right now. Any thoughts on that piece?

Mr. John CassaraSPEAKER_21

I think I'd just like to pick up on one of your comments as far as the Chinese nationals of military age, males primarily,

Rep. Scott Fitzgerald (R-WI)SPEAKER_10

right,

Mr. John CassaraSPEAKER_21

are the largest ethnic group, if you will, we'll use lack of a better term, other than Latinos that are coming across our southern border. And once again, it frightens me because the CCP, China, Communist China, is skilled with asymmetric warfare. We don't know who these people are. We don't know where they are. We don't know what they're doing. And any Chinese that come to this country basically come with permission of the Chinese government. And once they're here, they are obligated by Chinese intelligence law to answer to and take orders from Chinese intelligence services.

Rep. Scott Fitzgerald (R-WI)SPEAKER_10

Very good. Thank you. I'll yield back, Chairman. Thank you.

Rep. Frank Lucas (R-OK)SPEAKER_24

The chair now recognizes the gentlewoman from Texas, Mrs. Garcia, for 5 minutes.

Rep. Sylvia Garcia (D-TX)SPEAKER_04

Thank you, Mr. Chairman, and thank you to the witnesses. One of the things that I'm most concerned about and I've watched over the years, when it comes to China and frankly, even other—even Russia, is the rise of its influence in Latin America. By 2021, China has become the second largest trading partner for the entire region, just behind the United States, by $150 million in imports and $399 billion in exports. China is also making foreign investments in Latin America within the infrastructure, energy, and military sectors. Clearly, China's Belt and Road Initiative is working. China is slowly but surely expanding its influence throughout Latin America. It is only a matter of time before China surpasses the United States as the top trade partner in Latin America. And in my view, tariffs on Mexico doesn't help one bit. We must reprioritize investing with and recommit to our partners in Latin America to stop China's growing influence. Mr. Doshi, what can we do to better counter growing Chinese investments and influence in Latin America?

Dr. Rush DoshiSPEAKER_07

Well, thank you very much for the question, Congresswoman. I'll note a few things. First, a significant amount of Chinese investment in Africa—sorry, in Latin America—involves a degree of corruption. Not all of it, but a lot of it. If you look at, for example, a significant dam project in Ecuador, the dam didn't work, there were a lot of cracks, and there was also direct evidence of corruption. So one thing that we can do is bring some sunlight as a disinfectant. The more people know about what's happening in their backyard, the more that they see that there's sort of corruption behind some of this investment, the easier it is to push back. But the second thing we have to do is we can't fight something with nothing. It's important for us to reauthorize the DFC and other institutions as well, EXIM, to be players in this space, help our companies compete commercially, and make sure we're providing aid where it's necessary.

Rep. Sylvia Garcia (D-TX)SPEAKER_04

But do you think we can do it?

Dr. Rush DoshiSPEAKER_07

I think that the United States can certainly outcompete the PRC for influence in Latin America. We are still the preferred partner of choice. But I'll note that in addition to the problems that we have with the development financing that we need to offer, or on the commercial side, China is a major goods exporter to Latin America. The fact that China is the world's biggest manufacturing superpower with a $1 trillion global goods surplus gives them a lot that they can send to Latin America. We have to figure out how we're going to deal with their manufacturing heft if we want to retain our influence in that region.

Rep. Sylvia Garcia (D-TX)SPEAKER_04

Right. Of course, we've we've had a lot talked a lot about this morning about fentanyl, and we know that the drug trade is global. Money laundering is a global issue. Despite the global reach that illicit finance has, our financial institutions have their hands tied and cannot share information or seamlessly track concerning actors. The existing guidance from the Financial Crimes Enforcement Network and other federal regulators prohibits U.S. financial institutions from sharing the SARs, the suspicious activity reports, with foreign branches, subsidiaries, and affiliates. It's a slow and hard process to counter illicit finance. Mr. Cassara, where are you? There you are. Wouldn't it be useful to let financial institutions share information on a case-by-case basis via a pilot program established through the Anti-Money Laundering Act?

Mr. John CassaraSPEAKER_21

Yes, Congressman— Congresswoman, excuse me. I believe it would be very, very useful to share information on that pilot program, taking into consideration issues like privacy, third party, and this type of thing. But yes, I think it would be very useful to make SARs more more effective for, for law enforcement.

Rep. Sylvia Garcia (D-TX)SPEAKER_04

More beneficial and helpful to law

Mr. John CassaraSPEAKER_21

enforcement. More beneficial and yes.

Rep. Sylvia Garcia (D-TX)SPEAKER_04

All right, so wouldn't you agree that this is a potential solution to helping financial institutions better detect intentionally opaque connections to foreign terrorist organizations?

Mr. John CassaraSPEAKER_21

I

Rep. Sylvia Garcia (D-TX)SPEAKER_04

think— and other illicit actors across national borders?

Mr. John CassaraSPEAKER_21

I think it could certainly help, yes.

Rep. Sylvia Garcia (D-TX)SPEAKER_04

Well, Mr. Chairman, that's why I'm excited to reintroduce my bill, the Foreign Affiliates Pilot Sharing Program Extension Act, very soon. The bill extends a pilot program that allows financial institutions to share information about suspicious activity reports with their foreign affiliates to combat illicit financial activity. The pilot program, which was authorized through the Anti-Money Laundering Act but was never executed, would only allow financial institutions to share that there is a concern about an illicit actor, but not what the concern is. So I look forward to working with you, Mr. Chairman. This bill was passed under suspension last Congress, so I look forward to working with you and the ranking member to pass it again this Congress. With that, I yield back.

Rep. Daniel Meuser (R-PA)SPEAKER_31

gentlelady yields. The gentlewoman from Michigan, Mrs. McClain, conference chair, is now recognized for 5 minutes.

Rep. Lisa McClain (R-MI)SPEAKER_35

Thank you, Mr. Chair. I think we all know China is a threat to our country and every other country educationally, militarily, and economically. Yet we enable China by letting them benefit from these very institutions. For example, Xi Jinping's daughter went to Harvard. Countless other children of the of their elite seek education in this country. And high-ranking officials in the CCP have burrowed themselves into our financial institutions. While they brainwash their poverty-stricken citizens about the evils of the West, they themselves benefit from our institutions. And if they move against our democratic ally Taiwan, their free ride, I believe, should come to an end. Mr. Mühleisen, I hope I'm saying that correctly. In your opinion, how would cutting off high-ranking CCP officials from our financial sector affect their behavior, both individually and overreaching government policies?

Mr. Martin MühleisenSPEAKER_06

Congresswoman, this is an answer I cannot respond to it. This is really not in my expertise.

Rep. Lisa McClain (R-MI)SPEAKER_35

So, so you don't have an opinion on how we should deal with high-ranking officials?

Mr. Martin MühleisenSPEAKER_06

To the extent that they're pursuing illegal or corrupt practices, I'm sure the United States has enough tools to go against them. My expertise is in multilateral institutions, not so much in financial institutions. That's why I'm not really in a position to answer your question.

Rep. Lisa McClain (R-MI)SPEAKER_35

And do you have an opinion on that?

Mr. Martin MühleisenSPEAKER_06

I think it is, from a moral perspective, it is, I think, if Chinese ordinary citizens would hear about that, they would certainly question what is going on. And so in that sense, it is something that conflict between what you do and what you say, and I found that— find that, of course, morally reprehensible.

Rep. Lisa McClain (R-MI)SPEAKER_35

Is it safe to say, and I don't want to put words in your mouth, that actions should have consequences?

Mr. Martin MühleisenSPEAKER_06

Certainly Chinese citizens should see whether they could

Rep. Lisa McClain (R-MI)SPEAKER_35

not— What about the high-ranking officials?

Mr. Martin MühleisenSPEAKER_06

That's what I mean. Okay, the consequences should be in China because that's in a way where the disadvantages are for their citizens.

Rep. Lisa McClain (R-MI)SPEAKER_35

I'm looking as well to protect our citizens, our financial institutions, and really try to deter the Chinese and disincentivize them for taking advantage of our institutions, whether it be educationally or our financial institutions, and try to hold them accountable. We know they're bad actors, so how do we hold them accountable? And what incentives or disincentives do we put in place for the CCP to get them to be good actors, which they have proven time and time again that they're not good actors? What I've tried to do and what I am doing is I'm proud to lead the Taiwan Conflict Deterrence Act along with my colleague Sherman in this Congress. I think it's very important. In the event that China moves against Taiwan, this bill would take effect and publish the financial institutions providing services to senior Chinese government officials. I mean, we're all about transparency, right? And it would prevent them from being able to live here in the U.S. I mean, I'll show— it'll, it It'll show the Chinese citizens, who live under the repression and suffer daily, that their hypocritical, tyrannical leaders live lavishly by gifting and grifting off of their United States colleagues. This bill has an exemption carve-out for those who cooperate, being the operative word, with the United States. And I would love to see which members of the elite have more loyalty to the US dollar than they do to Chairman Xi Jinping. I mean, I think that would be kind of interesting. Is there more, in your opinion, that Congress or other countries can do to use financial tools to sway or incentivize or disincentivize the CCP?

SPEAKER_UNKNOWN

Mr.—

Mr. Martin MühleisenSPEAKER_06

I can't really answer your question, Congresswoman.

Rep. Lisa McClain (R-MI)SPEAKER_35

Wonderful. Thank you. I'm out of time. I yield.

Rep. Daniel Meuser (R-PA)SPEAKER_31

gentlelady yields. The gentlewoman from Georgia, Mrs. Williams, is now recognized for 5 minutes.

Rep. Nikema Williams (D-GA)SPEAKER_38

Thank you. So, with today's hearing, my Republican colleagues are trying to find the most inflammatory way to say something that we all should agree on. Y'all, the United States' competitiveness in a global economy is a shared goal amongst Democrats and Republicans, independents, people who don't even care about politics. So why do we get partisan hearing titles like Examining Policies to Counter China? My Republican colleagues would rather demonize an entire country for the fact that the United States is lagging behind in global competitive- competitiveness than talk about the real problem. And the real problem, you might ask, is that my colleagues in the Republican Party have refused to invest in America for decades. When Congress made historic investments in roads, bridges, ports, rail, y'all, we were on the right track, but just catching up. But, unfortunately, President Trump and his co-president, Elon Musk, refused to build on that progress. Instead, they're gearing up today for a budget resolution that would roll back Congress's historic investments over the last 4 years. And that's not to mention that they're crippling the very agencies that are making these investments by firing as many federal employees as possible. So let's really ask ourselves, how do we make America competitive in a global economy? So, let's start by fixing this hearing title. There: Examining Policies to Counter Elon Musk. Because that's was what really needs to happen, and if we don't want our government and economy to become the laughingstock that Twitter became when Elon Musk took over, it's time for us to take back our power as Congress, Article I, Section 1 of the U.S. Constitution. Elon Musk doesn't want a serious discussion in this hearing because, y'all, he makes money when his Tesla stocks do well in China. So let's stop pretending that the whole country of China is the problem when Elon Musk is right here in our country and is a huge problem. So let's talk about policies to counter Musk and his agenda of destroying investments in America. And y'all, the way that I was raised, you take care of home first. So let's talk about a few policies that hit right at the heart of what Musk is doing to my Fighting 5th District in Atlanta. Atlanta is home to the Centers for Disease Control and Prevention, and every dollar that we invest in public health, it yields up to $88 that benefit our society. Congress has been investing nearly $10 billion per year in the CDC. So we're talking about a potential value of $880 billion. Dr. Doshi, what do you think? If we stop making those investments, who's going to step up and get access to that $880 billion in investments? The research that we're doing, how does that help our competitiveness with China? Does that benefit the U.S. or China?

Dr. Rush DoshiSPEAKER_07

Thank you for the question, Congresswoman. I think over the last 8 to 10 years, there's been a growing bipartisan consensus on the need to invest in American competitiveness, not just to focus on China, although that's a principal challenge for us, but also to make ourselves more prosperous, more secure, and, quite frankly, more advanced when it comes to technology. And so I think it's important for us to think about the CHIPS and Science Act as a critical way of strengthening American investment in the future of technology, elements of the Inflation Reduction Act, which make the US more competitive in everything from batteries to EVs. But batteries are relevant also for military advantage. And also infrastructure, basic infrastructure. China invests enormous sums in infrastructure; we don't invest very much. That's why right now, Congressman, Congresswoman, our percentage share of manufacturing has fallen from 30% to 15% in 2 decades, while China's has gone from 6% to 30%. So I think more investment across the board is a priority and maybe something that's got bipartisan support.

Rep. Nikema Williams (D-GA)SPEAKER_38

and it absolutely should be bipartisan. And I look forward to working with my Republican colleagues on these very policies. Also, Atlanta is home to the world's busiest and most efficient airport, providing countless contributions to the United States' position in the global economy. Dr. Doshi, if we don't have the air traffic controllers and the TSA agents that we need to keep travelers safe and coming into America, are people going to want to keep coming to the United States for global commerce, or could that competitive edge also be taken by another country, like China?

Dr. Rush DoshiSPEAKER_07

Thank you for the question, Congresswoman. I think American state capacity is one of those things that needs to be improved, and some significant cuts to it without thinking about how to retain capacity in areas we already have can cause competitive disadvantage across the board, including in the sector that you identified.

Rep. Nikema Williams (D-GA)SPEAKER_38

So I have many more questions because I also went into the grocery store this weekend and there's no eggs on the shelf. So my 9-year-old was quite upset when he couldn't get his cheese eggs for breakfast on Sunday morning. But we have a lot of issues.

Rep. Daniel Meuser (R-PA)SPEAKER_31

Time has expired.

Rep. Nikema Williams (D-GA)SPEAKER_38

My time has expired and I yield back, Mr. Chairman.

Rep. Daniel Meuser (R-PA)SPEAKER_31

gentlelady yields. Gentlewoman from Texas, Ms. De La Cruz, vice chair of Subcommittee on Housing and Insurance, is now recognized for 5 minutes.

Rep. Monica De La Cruz (R-TX)SPEAKER_33

Thank you so much, Chairman, and thank you to all the witnesses for being here today. This is an important topic when we discuss China and the United States and the competitiveness, especially. There's so much going on in our country, but one of the things that has affected Americans from deep South Texas, which is where I'm from, to Chicago, Atlanta, California, is fentanyl and the rise of fentanyl that has happened under the Biden administration. Under the Biden administration, we saw fentanyl pouring into our borders. We saw deaths due to the fentanyl crisis that happened under the Biden administration. That being said, fentanyl comes from China. It has destroyed our families. I sat with mothers over the holidays who had empty chairs at their holiday tables because they lost a child or a spouse. And so this is a very important and difficult topic. Drug overdoses are the leading cause of deaths between 18- and 45-year-olds, with fentanyl being responsible for 70% of those overdoses. 1 gram of fentanyl can kill potentially 500 people. In deep South Texas, in the last Congress, one of our brave law enforcement officers found 3 gallons of fentanyl in South Texas. That was enough to kill two times the size of Houston, Texas. Can you imagine that? Just thousands and thousands of people who would be affected had that drug successfully gotten to its destination. Part of the solution is we need better border security, and part is that we can do work on this committee to stop the financing of fentanyl. I'm proud to say that last year my bill, H.R. 1076, Preventing the Financing of Illegal Synthetic Drugs Act, was signed into law to start taking real steps to address the financing of these drugs. So to my question, Mr. Cassara, what role does Chinese money laundering organizations, CMLOs, play in laundering proceeds from drug trafficking, and how critical are CMLOs to the U.S. drug trade?

Mr. John CassaraSPEAKER_21

Thank you for the question. I have a perspective of decades going back anti-money laundering work, and I've examined hemispheric laundering. For example, the Colombian black market peso exchange evolving into the Mexican black market peso exchange. And then maybe 10 years ago or so, the Chinese presence, Chinese money laundering organizations started to become the money launderers of choice for the cartels. And they've pioneered innovative methods of laundering

Rep. Monica De La Cruz (R-TX)SPEAKER_33

Why do you think that is?

Mr. John CassaraSPEAKER_21

Why do I think that is? I think that the Chinese are very skilled in what they do. They are very, very good business people, and they are incentivized to undercut their competitors. They also take advantage of the Chinese presence here in the United States. A lot of them are upstanding citizens, but nevertheless, some of these people wittingly or unwittingly get involved in taking some of this illicit money, putting it into their regular business activities, and laundering that money through underground financial systems and mobile phone apps, other techniques and enablers that I describe in my testimony.

Rep. Monica De La Cruz (R-TX)SPEAKER_33

Excellent. What vulnerabilities in the U.S. are CMLOs most effectively exploiting, and where do gaps in regulatory oversight persist?

Mr. John CassaraSPEAKER_21

I think the biggest vulnerabilities that we have vis-à-vis Chinese money laundering organizations in the United States is their ability to bypass our most important anti-money laundering countermeasure, which is financial intelligence, Bank Secrecy Act information. The techniques they use pretty pretty effectively go around these types of reporting requirements, whether it be trade-based money laundering, feiqian flying money, trade-based value transfer, this type of thing. We need to crack down in these areas. And once again, in my written testimony, I give some ideas on how that can be done.

Rep. Monica De La Cruz (R-TX)SPEAKER_33

Thank you. I yield back.

Rep. Daniel Meuser (R-PA)SPEAKER_31

The gentlelady yields. The gentleman from Texas, Mr. Green, ranking member on the Subcommittee on Oversight and Investigations, is now recognized for 5 minutes.

Rep. Al Green (D-TX)SPEAKER_02

Thank you, Mr. Chairman, and thank you for your very kind and warm expression of an introduction. I would like to associate myself with the comments of the ranking member as they relate to China. I think she spoke well and covered much of what I would say. I do agree that there's a problem with fentanyl, but I'm also concerned about Russia. I'm concerned about Russia because it seems that we have embarked upon a course of conduct that would allow us to reward Russian aggression. You cannot reward aggression and assume that you will have peace. I'm concerned about what's happening with Ukraine and this belief that somehow Ukraine is the aggressor and started this war. I think that we would have to suspend all of our common sense to agree with this premise because we saw the tanks moving into Ukraine. It's very difficult to even consider the notion that one would now blame Ukraine for Russian aggression. It seems that our president, unfortunately, has embarked upon a course of appeasement. Russia wants to surrender no land taken. President agrees. That's appeasement. Russia is desiring that there be no security provided Ukraine. Looks like we are backing off, but as we back away, we will take precious minerals that Ukraine might have. Russia is of the opinion that Ukraine should not be a part of NATO. Seems like our president agrees. That's appeasement. I'm really concerned about the president's approach to Russia when, on just yesterday, we had a UN resolution blaming Russia for its encroachment, its invasion of Ukraine. We voted against that resolution. The united States of America. In 2023, a similar resolution was presented. We voted for it. Has so much changed in such a short period of time that we would now support Russian aggression? I'm concerned about China. My colleagues on both sides have made good points. But we cannot overlook the fact that China and Russia are in bed together. After China abstained yesterday on this resolution condemning Russia, President Xi Jinping called, called Putin, called him and explained, "I'm with you. We're neighbors." There has to be some concern shown for what's happening with this country as it relates to Russia and the way we're turning our back on our allies. What has Canada done to deserve this sort of treatment? Canada has been a loyal, faithful ally of the United States for years upon years. Yet we find ourselves now cozying up to Putin directly. And I'm not sure that there's a lot of space between the efforts to cozy up to China with the president. So here's my question, and I'll ask the question of I'm hoping that I'll pronounce your name correctly, sir. Let's see, I have it here at the very end. Yes, sir, would you pronounce your name

Dr. Rush DoshiSPEAKER_07

Dr. Doshi, sir. Thank

Rep. Al Green (D-TX)SPEAKER_02

Okay. Thank you, sir. My question to you, sir: What signal did we send yesterday when we voted to oppose blaming Russia for the invasion of Ukraine?

Dr. Rush DoshiSPEAKER_07

Well, thank you, Congressman, for the question. I think China was watching that very closely. They're interested in whether or not we will successfully pry Russia from China. I think, as you note, that's very hard to do, and we might be sending the signal that we wouldn't necessarily stand with Taiwan if the question were called. Thank you.

Rep. Daniel Meuser (R-PA)SPEAKER_31

Thank you,

Dr. Rush DoshiSPEAKER_07

Mr. Chairman. I yield back.

Rep. Daniel Meuser (R-PA)SPEAKER_31

Chairman yields. The gentleman from Wisconsin, Mr. Steil, chair of the Subcommittee on Digital Assets, Financial Technology, and Artificial Intelligence, is now recognized for 5 minutes.

Rep. Bryan Steil (R-WI)SPEAKER_11

Thank you very much, Mr. Chairman. Thank you all for being here. This is a really important hearing. I want to start with you, Mr. Mühleisen, if I can. In your testimony today, you spoke about the importance of the United States dollar being the world reserve currency, how we maintain that position. We're seeing advancements in China and artificial intelligence, in AI, a position where the United States has really been a leader for some time. And as we look at the development of Web 3.0, as we look at the need for the future in the financial services space, I think we have to focus on what's going to make sure that the U.S. maintains its dominant position. And if we look back to to Web 1.0, Web 2.0, what you saw was a development that occurred inside the United States. Whatever your issue is with big tech, and I have plenty of them—one of them, with one exception really being TikTok, is that these tech companies are at least domiciled in the United States, whether or not that's Google or Amazon, etc., they're domiciled here. And if we don't have rules and regulations of the road, we risk allowing other countries to move forward to being and to outcompete the United States. It needs to be a premise, I believe, for policymakers here to make sure that we are outcompeting other countries and in particular China. And so, the question that I would have for you as it relates to China specifically is, what regulatory approaches are they taking that can impact their financial services markets or U.S. consumers?

Mr. Martin MühleisenSPEAKER_06

I'm not an expert on the Chinese financial system, but it would behoove China, as a big player, to make sure, also for the stability of its financial institutions, to make sure that their investments are sound and that they follow international standards. China's financial sector has many weaknesses, including because of the crisis from the real estate sector. And the market for artificial intelligence, cryptocurrencies, and the like is very volatile. And so, from a prudential perspective, that would also minimize the potential spillovers to the rest of the world. One would hope that China adopts very prudential regulations and enforces those.

Rep. Bryan Steil (R-WI)SPEAKER_11

But they're not today, right? I mean, I think that's one of the big distinctions is that they're not really enforcing in a manner that the US markets are, which is a benefit to US consumers and US investors, right?

Mr. Martin MühleisenSPEAKER_06

I don't know exactly what standards you mean that they're not enforcing. Again, I don't know too much about the Chinese financial sector per se.

Rep. Bryan Steil (R-WI)SPEAKER_11

Let me shift and come to you, Mr. Cassara, if I can. You wrote an essay last year, China's Digital Authoritarianism Is Coming Our Way. Can you just put a little meat on the bone on digital authoritarianism and what financial levers the CCP has at its disposal? There's a lot of discussion about central bank digital currency, the concern of that. I share a lot of those concerns. Could you comment?

Mr. John CassaraSPEAKER_21

Thank you for the question. Yes, I'm concerned as well about the Chinese development of the central bank digital currency. That's exactly why I wrote the article. There are various models, as you know, of central bank digital currencies. But what concerns me the most is what I call the Chinese model, the authoritarian model, because they overlay it with social monitoring, social control, social scoring, intensive and intrusive surveillance. And basically, they're doing this to control their population. And they can do this basically with the flip of a switch. They can demonetize a citizen. That individual is not able to to get on a metro, not able to pay for their child's education, not able to buy groceries, this type of thing. It scares me from a civil libertarian perspective, and I don't want that model to be adopted here or anywhere else.

Rep. Bryan Steil (R-WI)SPEAKER_11

100% share your concern. Something we're going to have to remain vigilant of to make sure that we don't allow a federal government of the United States to have that type of control. In my final minute left, I want to come to you, Mr. Miller. AI, going to be critical development of new technology here in the United States. A question that we're going to be looking at is how do we make sure that we're extending the Trump tax cuts, in particular on the R&D or accelerated depreciation? In 20 seconds, could you explain the importance of that as it relates to financial services?

Mr. John MillerSPEAKER_09

Uh, yeah, absolutely. I mean, we should be doing everything we can to incentivize R&D, including through, uh, the tax code. I mean, every, every dollar saved, quite frankly, through, uh, through taxes is being plowed by American companies back

Rep. Bryan Steil (R-WI)SPEAKER_11

into innovation. You'd agree that that has a direct impact on the investment that's needed for AI and the technology? Yes, yes, absolutely. Thank you very much, Mr. Chairman. I yield back.

Rep. Daniel Meuser (R-PA)SPEAKER_31

Gentleman yields. Gentleman from Nebraska, Mr. Flood, Chairman of the Subcommittee on Housing and Insurance, is now recognized for 5 minutes.

Rep. Mike Flood (R-NE)SPEAKER_18

Thank you, Mr. Chairman. Maybe somebody's bugged the doors to this chamber. They seem to keep opening on their own today. Mr. Cassara, in your testimony, I found it was interesting you wrote at length on customs fraud, which is when an importer and exporter work together to misrepresent the value of goods transferred for illicit reasons. Now, given President Trump's interest in using tariffs on Chinese goods, I would imagine that customs fraud could become even more common the next four years. Do you agree with that assessment? How would authorities work to combat that? And particularly, how would we combat that from Chinese vendors looking to avoid tariffs?

Mr. John CassaraSPEAKER_21

Thank you for the question. I believe that trade-based money laundering and value transfer is probably the largest, most pervasive money laundering methodology in the world today if you if you take into consideration all the various iterations of it and various, various models. As far as countermeasures go, it's very hard, because what happens is the occasional illicit transaction gets intermingled with the overwhelming licit trade transactions, because trade volume is so high, it's very, very difficult to pick out those isolated illicit transactions. Nevertheless, the volume of trade being so high, the amount of TBML is off the charts, and we don't have good countermeasures in place. The best countermeasure in my estimation is something I came up with a number of years ago that was adopted by the US government, and that's the formulation of trade transparency units, or TTUs, looking at customs data between countries, spotting those anomalies between trade. It's going to be very, very problematical, particularly with countries like China, but it's something we have to we have to look at.

Rep. Mike Flood (R-NE)SPEAKER_18

Thank you. I appreciate that. One of the things I find very interesting about China's extension of credit to these developing nations is that it has led to a serious default risk. 60% of China's overseas lending was owed by countries experiencing debt distress in 2022, but yet they're all over the African continent. They are expanding their reach. Mr. Mühleisen, at some point, inability to pay back hefty loans will start to become a problem for China, but they can also use their loans as leverage to obtain unrelated concessions from developing nations. Is seeking troubled customers for their loans a feature or a bug as it relates to China's global strategy?

Mr. Martin MühleisenSPEAKER_06

I would say that looking for geopolitical allies in developing countries and emerging markets is a feature. Putting countries into debt distress, I don't want to say it's a feature, it's probably a bit more than a bug, it's maybe carelessness, but it certainly is something that, as I said in my statement, China should be held responsible for. And I have various proposals there, especially the IMF's lending into official arrears policy.

Rep. Mike Flood (R-NE)SPEAKER_18

Do you think that— how should that change our national strategy around international finance? Should we be more aggressive ourselves, or is China's strategy unsustainable in the long term?

Mr. Martin MühleisenSPEAKER_06

China will certainly take losses from its strategy, like many countries before it have already done over the last century. But the growing demand, or the demand for these loans, also reflects a big need on the part of the recipient countries. And the United States has a chance to leverage its own capital in the international financial institutions by extending loans to these countries to compete, but also by using these institutions to provide not necessarily monetary incentives, but other geopolitical incentives or trade incentives to get back into closer relations with low-income and developing countries. There is a need to compete because right now there is one kid on the block with a lot of money in its pockets, and they're spending it like crazy.

Rep. Mike Flood (R-NE)SPEAKER_18

I'm going to stop you right there. I just want to say before my time is up, thank you for the discussion. On one hand, it's clear that many Americans are not interested in further extending our global reach and feel we need to be more focused on what's happening here at home. I understand that sentiment. But China isn't going to sit back. China will be aggressive in expanding their influence through whatever means they have available. And I'm interested in working to figure out what we can do to project American power in a way that's cost-effective and sensible without running afoul of legitimate sentiments, sentiments of many that we need to remain focused on what's going on at home. And with that, Mr. Chairman, I yield back.

Rep. Daniel Meuser (R-PA)SPEAKER_31

Chairman yields. Gentleman from Indiana, Mr. Stutzman, is now recognized for 5 minutes.

Rep. Marlin Stutzman (R-IN)SPEAKER_13

Thank you, Mr. Chairman, and thank you, gentlemen, for being here today. Very important topic, an interesting topic, and one that obviously is going to affect not only us but future generations here in America. Mr. McMurray, I'd like to come to you and talk a little bit about how energy security is national security. And so my district in Northeast Indiana, we are a heavy manufacturing and ag district. We have a heavy footprint, and so we rely on an abundance of energy of all types. We just actually had Google announce that they're going to be putting in a data center in the district, which consumes a lot of energy. And so there's a concern about our ability to maintain, to sustain strong energy supply, independence, and sustainability. Generally, in Indiana, we rely on affordable energy, but lately we felt some pain after the previous administration. So I'm really looking forward to working with my colleagues in Congress to make sure that we here in the United States dominate in the energy supply and production. So as we saw, President Trump took significant steps to move us in that direction. I'd like to talk to you or ask a little bit about the IFIs, like the World Bank. What disadvantages do U.S. energy companies currently face in their attempts to secure international energy financing projects?

Mr. Nicholas McMurraySPEAKER_08

Yeah, thank you, Congressman. As you said, energy security is national security, and right now we need to make it easier for U.S. companies to be able to build and compete abroad. Right now, that's very challenging when it comes to different state-owned enterprises that can offer very lucrative financing packages, and leveraging either our institutions such as EXIM or DFC, or entities like the World Bank can help put our companies on a level playing field. Now, there's a big opportunity this Congress with both EXIM and DFC needing to be reauthorized to give them more tools so U.S. companies can compete, which will also have direct benefits for U.S. jobs.

Rep. Marlin Stutzman (R-IN)SPEAKER_13

Do the Chinese firms, or the state-backed energy firms, do they face a similar disadvantage?

Mr. Nicholas McMurraySPEAKER_08

In some cases, no. They don't comply by OECD rules, so they can offer financing packages that are more competitive than what other countries can offer. That is also where entities like CTEP, China Transformational Exports Program, part of EXIM, and the DFC are tailored to be able to try to compete with those financing packages.

Rep. Marlin Stutzman (R-IN)SPEAKER_13

We know China plays by their own set of rules. Any suggestions or any reforms that you would suggest needed here in the United States to maintain, to outpace China?

Mr. Nicholas McMurraySPEAKER_08

Yeah, I think first domestically we have to make it easier for U.S. companies to be able to build. In many cases countries are going to want to see projects built in the U.S. before they are sold abroad. That requires improving the permitting system, that requires continued investments and support to innovative companies through the Department of Energy and the national labs, and then it requires predictability for these companies to be able to make investments in the long term. Looking globally, that's where the upcoming reauthorization has the ability to kind of sharpen some of those tools to expand eligible technologies that EXIM is able to support, also make it very clear of what is the right metric or outcome that EXIM should be focused on, such as jobs. And so taking that together can really help U.S. companies compete globally and ensure that the U.S. is a player when it's looking, when it is considered by other countries.

Rep. Marlin Stutzman (R-IN)SPEAKER_13

Yeah, and I know that, in Indiana, of course, we used to be a coal-producing state. A lot of coal power. Now we're shifting more to natural gas. A lot of talk about nuclear. It seems like the permitting process is always the piece that hangs us up. Can that be streamlined? What can be done to make our permitting process better?

Mr. Nicholas McMurraySPEAKER_08

Yeah, Indiana's governor is making great strides in trying to attract nuclear to the state, and as well as working with other states, which I think is a really exciting opportunity to deploy nuclear here in the U.S. As for the permitting process, I used to work at the Nuclear Regulatory Commission, so there have been a lot of progre— there has been a lot of progress at the NRC. There's also been a lot of bipartisan support in Congress to improve the licensing process. Just last Congress, both the House and the Senate enacted with overwhelming bipartisan support the ADVANCE Act, and Energy and Commerce's bill, the Atomic Energy Advancement Act, really tried to tailor a couple key provisions to improve the licensing and permitting process at the NRC so those companies can have better outcomes and better predictability.

Rep. Marlin Stutzman (R-IN)SPEAKER_13

Yeah, well, thank you. I appreciate your comments. And I just know that we've got the ability, we've got the know-how, we've got everything in place. We just need to make sure government doesn't stand in the way of progress. And we need to continue to make sure our nuclear power is, is at the forefront of our minds and we can outpace China. So thank you. I yield back.

Rep. Daniel Meuser (R-PA)SPEAKER_31

Gentleman yields. Gentleman from Iowa, Mr. Nunn, Vice Chair of the Subcommittee on National Security, is now recognized for 5 minutes.

Rep. Zachary Nunn (R-IA)SPEAKER_25

Thank you, Mr. Chairman, and appreciate you all joining us for this very important conversation on China and its role in the world. I'm coming at it from a decade-plus as a counterintelligence officer working out of facilities, running operations in Guangzhou. I now serve on the China Select Committee. We've all seen firsthand how dangerous China can be in its predatory lending practices. Here in the United States, we very much support an open opportunity for free trade, for mercantilism, for the opportunity for an entrepreneur to really take off. Obviously, China has a much more opaque, closed system, one that not only suppresses its own population, but one that will cannibalize its own industry and that of others to try and effectively take over countries and how they operate. We've seen this since 2017 as China being the world's largest official creditor, and this is concerning to the global financial system because it's cheap, it's predatory, its infrastructural aids aim to buy up global influence, undercut other countries' export, and distort international trade. If this was a used car company, it would have been shut down a long time ago. But the reality is here that they've been able to lead an entire initiative, the Belt and Road Initiative, that has targeted a number of areas specifically of interest to China and developed nations now over 10% of their GDP to the Chinese state. Pakistan owes China $77 billion and climbing. Sri Lanka, $11 billion. Kenya, $9 billion. The list goes on and on, all areas where China has purchased and now owns its way to controlling these countries and certainly their governments. The time to combat China, I think we all agree, is not yesterday, but is today. It's not in the next 10 years. The greatest threat from China is not its military. I would offer, Mr. Chairman, it's their economic tactics, including intellectual property theft to drain skills and inventions created right here in the United States, as well as pull our trade, jobs, and other profits outside of our country. It's one of the reasons I'm so proud to be working with this committee on a bill that I led called the Neutralizing Unfair Chinese Subsidy Act of 2025. It's to counter China's predatory lending practices. Now, Mr. Mühleisen, you are an expert on Chinese lending. Do you agree that we need a strategy here in the U.S. to combat these destabilizing tactics and ensure that China follows OECD's Arrangement on Officially Supported Export Credits?

Mr. Martin MühleisenSPEAKER_06

I agree with what you just said about what happens, and also I agree with what you just proposed.

Rep. Zachary Nunn (R-IA)SPEAKER_25

Talk to us a little bit, when we talk about neutralizing unfair Chinese subsidies, how China has done this not just in the past, but how it continues to be a predatory lender in this space.

Mr. Martin MühleisenSPEAKER_06

Well, china has pursued two objectives. First, it wanted to export its construction services to generate jobs at home, and second, it acquired strategic advantages in exchange for its loans for many countries. And it has not, in my opinion, shrunk back from all sorts of means to sway decisions into Chinese companies getting orders. But it also has affected the quality of the projects, and I think it's backfiring on China. Countries would, I think, prefer not to have to pay a lot of money for projects that are either not really providing an economic return or have to be repaired and replaced within a short period.

Rep. Zachary Nunn (R-IA)SPEAKER_25

Absolutely right. In fact, it ends up costing everybody more in the long run. Mr. Miller, you are a leader here when it comes to addressing, you know, what America does, I think, very well in the world: competitive bids, being able to grow, harnessing innovation in a way that really takes off. It's one of the reasons why 9 of the top 10 companies valued at over $1 trillion reside right here in the United States. How many reside in China? Zero. And that's a direct result of a state-owned entity which capitalizes on everything. I think that there's no accident here that the free market helps us foster our innovation. Could you explain the importance of strengthening our American markets on the international scene with the time that we have left?

Mr. John MillerSPEAKER_09

Sure, I'd be happy to do that. You're absolutely right to say that we need to focus on economics and economic security and not just view China as a national security threat. Again, not understating that at all, but we really need a balanced and holistic approach to this entire set of issues. We released a paper today on economic security that offers 10 recommendations dealing with everything from sanctions and investment reviews to trade policy and other innovation-friendly policies. And we really need to double down on our strengths. You weren't here for the chair's opening statement, but he mentioned that beating China means doubling down on US strengths. And I completely agree with that.

Rep. Zachary Nunn (R-IA)SPEAKER_25

Mr. Miller, I yield my time back just to say thank you for providing a playbook that this government can start using today. With that, I yield my time. Thank you, Mr. Chair.

Rep. Daniel Meuser (R-PA)SPEAKER_31

The gentleman yields. We would like to thank all the witnesses for your testimony today. Without objection, all members will have 5 legislative days to submit additional written questions for the witnesses to the chair. Questions will be forwarded to the witness for his response. Witnesses, please respond no later than March 31st, 2025. This hearing is adjourned.