2021 Hearing on U.S. Investment in China

A Hearing was held March 19, 2021 in regards to United States (US) Investment in China. The main concerns include Chinese Co-option of traditional private sector enterprise as well as their domestic political economy that creates systemic risk and is dangerous to open-market economies.

Progrm Diretor CADSA Jasn Artenbrn starts with a brief description of a mechanism between Chinese Local government and private enterprise was given. A main component includes special deals between competing local governments to draw companies to their region. Negotiation usually revolves around protections preferential policies or capital access that the local government offers to the company if set up within in borders.

Specialists had relayed it is difficult through equity analysis to observe who owns, and what companies, or who owns which subsidiary. Although Private held capital grew significantly mostly for investors who are proximate to the state in their ventures. Successful private ventures may or may not more likely have political exposure.

The biggest challenges the United States faces, is in regards to diagnosis and prescription of policy. Diagnostic in how to define the threat. Prescriptive in how to address the issue and accurately inform policy with all the significant public information that is available. Exactly how does the party state relate to commercial enterprises. Under what circumstances can the state instrumentalize commercial enterprise to complete objectives are some of the main concerns.

It was suggested that the 2018 US provides National Data Strategy be made to be more attentive to high-value data-sets available. Examples include corporate records and other sources are free to access. Additionally, how we record, keep, edit records, and the impact such changes have on resultant information need to be determined.

The country pursues asymmetric position in international capital flows, concerned NSC lacks framework for assessing impact of capital market integration in the US-China context. New reporting, mandated disclosure, inform US public about domiciled pools of capital and Chinese national security apparatus. The 3 first panel witness advise a Systemic recalibration for a long-term peacetime competition.

US National Security.

Nathn Picarsc, a Cofounder, and senior fellow Defens of Democracies; starts testimony that Current terms such as “Great Power” labels appear in correspondence, that harken back to cold war, yet that today’s contest is not a cold war. Cold War hinged on containment that was supported by interior politics, and economic formations on both sides. He elaborates that today’s challenges with China revolves around weaponized integrations between economies. They are more economically integrated than Russia during the Cold War with a Foreign Trade to GDP ratio of 30%. The strategic environment has changed entirely, domains where government restrictions could be effective may be few and opportunities for cooperation need to be accurately and cautiously assessed and explored when available.

US financial entities invest in China through the nations Public private market equity and debt. Risks associate with the Nation’s Military Civil-Fusion Strategy (MCF), where capital integration greatly benefits their military’s cost of capital. Military Civil-Fusion contributors abroad benefit and attempt proximaty to US technological development.

Capital integration and broad state-led enterprise model can allow them imperial expansion and tactical control over populations with a low cost profile. The main methods used include Patriotic education, reproductive policy, propaganda, high tech monitoring and policing; developments in business and civil sector helps to automate elements of surveillance state where there are billions of dollars invested in what the department of defense calls Chinese military companies.

US Investment capital, profiles and interests are tied together with China-centric investment themes in funds to draw US Investment to support Chinese Military companies. The Vanguard Emerging Market Index Fund had stakes in several companies tied to Military companies specified by the DOD, including Hick Vision a surveillance firm. Investment spanned across others in other centric themes including rare-earth sources such as China Rare Earth Group and Lyre a chemical engineering company.

Emergng Technlogie’s Emly Whinstin explains that China poises their national development to make sure any one such development is shared so that military and economy are developed by any one advancement. Concept is not novel. Of High importance to the MCF strategy is developments of dual-use technologies where civil advancements are shared with military and military research is conducted over and on civilians.

Tools used to effect this strategy include university investment, industry alliance, and MCF venture capital and talent. University investment firms further MCF by connecting research to science and tech and extensions to the nation’s military apparatus.
Businesses within the Nation are more beholden to their government then their counterparts in the US. Industry alliances such as technology xfers and MCF venture capital/talent strategies help for the construction for their national defense science and technology (NDST)applications through whole of society education resources. The nation has an NDST scholarship for 2,000 undergraduates each year where graduates are required to work for defense industry for 5 years and can not join illegal organizations, or go against politics or nation.

Emily concludes that US policy-makers must have a trajectory specified with US-China relations. Policy-makers Should work to bolster our own ability mitigate the challenge posted by challenger and promote collaboration with US and China. The Nation tends to make surface level changes while continuing to pursue it’s own agenda.

Emily closes with recommendations that establish inter-agency working group to increase awareness of MCF efforts. Make sure agencies can make effective policy in jurisdictions. Create repository of open-source due diligence materials to allow more informed decisions. Improve US government’s and SEC’s ability to audit supply chains to ID significant choke points.

Leave a Comment

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.