The House of Representatives Select Committee on the Chinese Communist Party (CCP) continues to expose how the CCP’s role in China’s economy harms American national security. At a hearing on July 13th, “Risky Business: Growing Peril for American Companies in China,” Chairman Mike Gallagher reinforced what American companies can expect when they do business in China: “Every foreign business that enters China takes on a sometimes silent, sometimes not-so-silent business partner: the Chinese Communist Party.”
Chief among the dangers for American businesses in China, besides massive intellectual property theft, is the fact that the CCP will weaponize American technology against the United States. As Gallagher stated, “China’s Military-Civil Fusion policy means any private company can be effectively turned into an arm of the PLA or communist intelligence apparatus.” Under MCF, the Chinese government mandates that all Chinese entities turn over to the Chinese military any technology with potential military application.
Sadly, the Commerce Department’s Bureau of Industry and Security (BIS) has for too long exercised willful blindness to this situation. BIS pretends that China confines dual-use technology to civilian purposes, and thus continues to rubber-stamp applications of American wares to China, including 99.5% of components bound for PLA-linked semiconductor manufacturer SMIC. The Chinese military has also used American technologies in hypersonic missiles. Former Pentagon export control specialist Steve Coonen has detailed for China Tech Threat how U.S. export control policy has neglected the reality of military-civil fusion (MCF) strategy, thereby permitting too many critical technologies to China.
The CCP’s MCF strategy—an official state policy—provides the rationale for the Party to ignore U.S. export control rules. As Rep. Richie Torres stated in the hearing, “ [Our] great competitive advantage is the rule of law, but the great competitive advantage of China…is the opposite: the CCP’s lawlessness creates the economic equivalent of asymmetric warfare.” As part of an effective MCF strategy, Chinese entities do not honor bilateral export control agreements, and transfer sensitive technologies to the Chinese military. China is cheating its way toward displacing the U.S. as the world’s top economic power.
As Chairman Gallagher reminded the country, “It’s time for American corporate executives to take off the golden blindfolds and stare with clear eyes at the growing peril of doing business in China.” Unfortunately, many American multinationals have failed to heed these calls of their own volition. It’s now time for accountability and tighter export control rules. Visit EveryChipMatters.com to see some of the solutions we have proposed.