HOUSE FINANCIAL SERVICES COMMITTEE HEARING
Overview
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On February 25, the House Financial Services Committee held a hearing entitled “Examining Policies to Counter China.” Witnesses in the hearing were:
- John Miller, Senior Vice President of Policy for Trust, Data, and Technology and General Counsel, Information Technology Industry Council (ITI)
- Nicholas McMurray, Managing Director, ClearPath, International and Nuclear Policy
- John Cassara, Special Assistant, United States Department of Treasury (Retired)
- Martin Mühleisen, Nonresident Senior Fellow, GeoEconomics Center, Atlantic Council
- Dr. Rush Doshi, C.V. Starr Senior Fellow for Asia Studies and Director of the China Strategy Initiative, Council on Foreign Relations; and Assistant Professor, Edmund A. Walsh School of Foreign Service, Georgetown University
Below is a summary of the hearing prepared by Delta Strategy GroupDelta Strategy Group. It includes several high-level takeaways, followed by summaries of opening statements.
Key Takeaways
The following is a summary of the main topics explored in the hearing. Each is discussed in further detail in the Discussion section below.
- The hearing raised bipartisan concerns over China’s economic influence, foreign investment in U.S. sectors, illicit finance operations, and crypto-related money laundering. The Corporate Transparency Act (CTA), passed under President Trump, was cited as a key tool to counter illicit Chinese finance and foreign investment, enhancing financial transparency and limiting shell company abuse in addressing the need for stronger financial transparency laws to curb China-linked illicit finance networks.
- Representatives agreed that the U.S. needs to strength its global position in financial regulation and emerging markets, with discussion on how China’s state-backed industries distort global trade and undercut U.S. manufacturers. Representative Lucas (R-OK) stated that the U.S. needs to “play chess, not checkers” and warned against the U.S. being “flat-footed” in out-competing China in export markets, emphasizing that financing energy investments must be a top priority.
- Representative Barr (R-KY) emphasized the need for a red-light, green-light system to regulate outbound investment and prevent deals that threaten U.S. national security, citing the Chinese Military Surveillance Company Sanctions Act and the Comprehensive Outbound Investment National Security (COINS) Act as key legislative measures. Miller cautioned against overly broad investment restrictions, arguing that policymakers should balance national security risks with economic value rather than imposing blanket bans.
Opening Statements & Testimony
Chairman French Hill (R-AR)
The tools to counter China are embedded in the American system, and it is the health of our thriving system that ultimately decides who will prevail. Sanctions, export controls, and Committee on Foreign Investment in the U.S. (CFIUS) play a role, but they did not build a $30 trillion economy or create trillion-dollar tech companies. Beating China requires doubling down on our strengths: 1) maintaining a sustainable federal budget; 2) leading a transparent financial system that rejects non-transparent predatory lending and mercantilism while crafting and enforcing rules that safeguard economic growth and stability; and 3) and fostering markets that support startups from early funding to IPOs. We must ensure access to capital is paired with access to energy, championing an all-of-the-above energy strategy to counter China’s debt-driven projects.
Ranking Member Maxine Waters (D-CA)
Trump has given China a free pass to fill a void left by his retreat. Congressional Republicans 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.
John Miller, Senior Vice President of Policy, Information Technology Industry Council (ITI)
Policymakers must recognize the role of technology in driving U.S. innovation, economic strength, and national security, particularly in semiconductors, AI, quantum computing, and advanced manufacturing. The U.S. cannot take its technological lead over China for granted, as China has advanced in innovation and growth beyond just IP theft. Policies countering China’s rise should enhance U.S. competitiveness rather than isolate the U.S. or hinder domestic tech innovation. Supply chain, tax, and trade policies must sustain the U.S. advantage, with government and industry collaboration critical to fostering innovation and economic security. The ideal policy environment supports global success for U.S. firms while safeguarding critical technologies. Financial transaction reviews should strengthen economic ties with allies through clear, targeted national security criteria. Capital investments, both inbound and outbound, are essential for supply chain diversification, R&D, global talent acquisition, and market intelligence.
Overly broad restrictions from CFIUS or the Outbound Investment Security Program could harm U.S. economic security by limiting investment. The U.S. must reinvigorate trade leadership through strategic market access agreements, ensuring fair competition. Key priorities include restoring immediate R&D tax deductions to drive innovation and high-wage job creation and improving the CHIPS program through permitting reform and streamlined reporting to support semiconductor investments as a cornerstone of the modern digital economy.
Nicholas McMurray, Managing Director, ClearPath, International and Nuclear Policy
The rapidly evolving energy landscape presents a major opportunity for U.S. leadership, as global electricity demand could rise by 76 percent and U.S. demand could double by 2050. American private sector innovation is key, extending beyond domestic borders. In 2023, U.S. LNG exports surged, cutting Russia’s EU market share from forty percent in 2021 to eight percent in 2023, demonstrating a significant economic opportunity. Without decisive action, the world will turn to China’s cheaper energy options, with China’s all-of-the-above approach threatening to sideline U.S. companies unless domestic energy production is expanded. Strengthening trade and development finance tools is essential for global energy leadership. A more agile financing strategy is needed to de-risk projects and attract private capital.
The Export-Import Bank (EXIM) and U.S. International Development Finance Corporation (DFC) provide repayable loans and guarantees that expand business opportunities, create jobs, and enhance U.S. economic influence. With both up for reauthorization, Congress has a chance to refine U.S. foreign policy tools. DFC, created during the first Trump Administration to counter China’s Belt and Road Initiative, has proven effective. EXIM, despite its strengths, faces limitations that hinder U.S. energy dominance. Five key recommendations to bolster leadership include: 1) creating a national interest account to assess geostrategic investments; 2) expanding the China and Transformational Exports Program to cover broader technologies; 3) raising the default cap rate for nuclear projects; 4) reinforcing the U.S. jobs mandate; and 5) strengthening domestic manufacturing and modernizing EXIM’s mission.
John Cassara, Former Special Assistant, United States Department of Treasury
Communist China is an ideological, military, economic, commercial, high-tech, intelligence, and diplomatic rival of the U.S. and the West, with a growing exploitative presence in the developing world. While these threats are known, the Chinese Communist Party’s (CCP) involvement in transnational crime and money laundering is generally not recognized, understood, or investigated. Criminal activity has seemingly become part of the CCP’s overall strategy to grow its power. They leverage an underground banking system that has long served China’s immigrant diaspora and have developed other Chinese-centric money laundering methodologies that enable the global laundering of illicit proceeds. China uses trade-based money laundering, black market exchanges, underground financial systems, and mirror swaps facilitated by Chinese mobile phone apps. We cannot look at this in a vacuum or as an isolated concern because the CCP’s business model that fuels the fentanyl crisis is also active in many other sectors of crime and fraud, including counterfeit goods, intellectual property theft, human trafficking, and the illicit tobacco trade. China leads the world in eleven of the twelve largest categories of transnational crime, with CCP Inc.’s involvement in these crimes amounting to approximately $2 trillion a year, half of the $4 trillion laundered annually worldwide. These specified unlawful activities, methodologies, and enablers cannot be viewed in isolation because they are intertwined and must be addressed collectively. We need to emphasize law enforcement as well as effective monitoring of money and value trails in policy discussions.
Martin Mühleisen, Nonresident Senior Fellow, GeoEconomics Center, Atlantic Council
We must 1) hold China accountable for its bad lending decisions; 2) prioritize quality over quantity in multilateral programs; and 3) protect the dominant role of the U.S. dollar. Chinese loans have driven debt vulnerabilities in low-income countries, sometimes preventing them from securing new multilateral financing. While debt restructuring has accelerated, China remains reluctant to take haircuts to restore solvency when necessary. The U.S. should push the IMF to fully utilize its debt policies, including a stronger application of its Lending into Official Arrears policy, which allows lending to proceed even if a country is in default to another IMF member. This would improve debtor countries’ negotiation leverage and push China toward more meaningful debt relief.
Development banks, including the World Bank, have expanded lending to low-income countries, supported by a $650 billion issuance of IMF Special Drawing Rights. While these efforts provide critical financing, minimal loan conditionality can deter private lenders and increase reliance on China. To attract private capital, multilateral institutions should focus on raising long-term growth prospects through strategic loan conditions. The U.S. should work with these institutions to promote reforms, improving success rates through co-financing, investment funds, trade preferences, and private capital, which could open markets for future U.S. exports. Emerging markets, despite recent economic stability, remain vulnerable to external shocks. In a severe crisis, some may require access to U.S. dollar liquidity to prevent sharp devaluations and maintain financial stability. The IMF’s $1 trillion lending capacity could prevent contagion, leveraging U.S. contributions at a five-to-one ratio. Without this support, countries may seek to accumulate foreign exchange reserves, putting upward pressure on the U.S. dollar, or turn to China, potentially eroding U.S. dollar dominance. To safeguard U.S. interests, Congress should ratify last year’s IMF quota increase, strengthening the capital cushion and ensuring loans are available when needed.
Dr. Rush Doshi, Director of the China Strategy Initiative, Council on Foreign Relations
China’s grand strategy seeks to displace the U.S.-led global order by surpassing the U.S. technologically, reducing its reliance on foreign economies while increasing other countries’ dependence on China, and building military capabilities to defeat U.S. forces. Beijing views economic and technological competition as a struggle for power, not just prosperity, and believes history has been shaped by industrial revolutions. To lead the current industrial shift, China employs three key strategies: 1) acquiring foreign technology through purchases, forced transfers, and espionage; 2) shielding its firms from competition with tariffs, non-tariff barriers, and currency manipulation; and 3) heavily subsidizing industries with tax breaks, R&D funding, cheap credit, and state investment. Chinese firms endure losses with sustained state backing, dominating sectors before advancing to the next. China has likely stolen over $1 trillion in U.S. intellectual property, while its industrial subsidies, totaling around $400 billion annually, far exceed U.S. efforts like the $50 billion CHIPS and Science Act.
Since China joined the WTO, the U.S. share of global manufacturing has dropped from thirty to fifteen percent, while China’s has surged from six to thirty percent. China produces more manufacturing than the next nine countries combined, while leveraging this position for innovation and military strength. Despite economic challenges, China is doubling down on exports, driving a second “China shock” that is deindustrializing economies worldwide. Coordinating technology protections, research, and defensive trade policies is essential to counter China’s industrial overcapacity and reindustrialize the U.S. While China outpaces the U.S. in some industrial metrics, the U.S. and its allies collectively hold three times China’s GDP, half of global manufacturing, over twice its military spending, and dominant market power. To compete effectively, the U.S. should establish new institutions, such as a federal industrial investment bank to provide long-term loans, take equity in strategic industries, and coordinate with private capital to fund reshoring. The U.S. must also shift its economic incentives; China plays the long game, while U.S. companies focus on short-term earnings. Tax policies should promote long-term investment, and increased funding for basic scientific research is essential to maintaining a technological edge. Defensive measures must include calibrated tariffs, stronger export controls, research safeguards, and investment regulations to protect U.S. leadership.