CCP select committee offers policies for US to beat China on economic front

The House Select Committee on the Strategic Competition Between the U.S. and the Chinese Communist Party (CCP) released a report Tuesday that contained a comprehensive strategy to reset the economic and technological competition between the world’s two largest economies and help America prevail.

The select committee’s report contained nearly 150 policy recommendations that seek to reset the terms of the economic relationship between the U.S. and the CCP, and to stem the flow of both U.S. capital and technology that aids the People’s Republic of China’s (PRC) military modernization and human rights abuses. It also suggests ways to invest in technological leadership and make the U.S. and its allies more economically resilient.

"With this report, the Select Committee has shown that the bipartisan will exists to meet the call of history," wrote Chairman Mike Gallagher, R-Wis., and Ranking Member Raja Krishnamoorthi, D-Ill., in a joint statement. "It embraces the clear reality that our current economic relationship with the People’s Republic of China needs to be reset in order to serve the economic and national security interests of the United States, while offering nearly 150 bipartisan recommendations for Congress to legislate."

"Collectively, these recommendations will reset the terms of our relationship with the PRC, prevent the flow of American capital and technology from supporting its military advances and human rights abuses, and build collective economic resilience in concert with our allies and partners while ensuring American leadership for decades to come," the leaders added.

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The select committee emphasized the need to reset the U.S. economic relationship with China given China’s failure to honor its commitments under the World Trade Organization (WTO). It noted that the CCP continues to empower state-owned enterprises while subsidizing domestic industries and limiting market access. The PRC has also sought to put U.S. companies at a disadvantage by propping up industries with low-cost or even free capital, as well as regulatory support.

The panel called for the U.S. to aggressively counter the PRC’s economic and trade strategy through tariffs to counteract unfair trade practices and reduce U.S. reliance on imports from China in critical sectors. 

It also urged the U.S. to pursue WTO disputes against China, mandate country-of-origin labeling and ensure that China cannot use America’s free trade agreements with countries like Canada and Mexico to circumvent trade barriers. It also urged the U.S. to pursue bilateral trade agreements with countries like Taiwan, Japan and the United Kingdom in addition to sector-specific agreements focused on areas like semiconductors, EV batteries and pharmaceutical ingredients.

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The report also called for increased transparency into the exposure of U.S. companies and investors to China with an eye toward what would happen if they suddenly lost access to the Chinese market – such as if the CCP attempted to invade Taiwan and a war with the U.S. ensued. 

It recommends that Congress regularly receive reports from financial regulators about the American financial system’s exposure to China in such a scenario, as well as foreign holdings of U.S. Treasury securities. The Federal Reserve would stress-test U.S. banks and provide classified reports about those assessments and how U.S. financial markets would be impacted by sanctions against China in the event of a conflict.

The panel also found that American investors are wittingly and unwittingly supporting entities linked to the PRC military, as well as its emerging technology firms and those linked to human rights abuses like those perpetrated against the Uyghurs. To counter that concern, it urged Congress to enact legislation banning investment in PRC companies on U.S. sanctions and red-flag lists.

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The U.S. has leaned on export controls, which prevent companies from exporting sensitive technology to countries of concern or adversaries like China without a license, as a means of preventing the CCP from using that tech to upgrade its military capability and make bigger strides in areas like artificial intelligence (AI).

However, the report found that export controls have not kept pace with rapid changes in technology and efforts by countries subject to such controls. To remedy this concern, the panel calls for restricting the flow of critical and emerging technologies – like advanced semiconductors – and dual-use technologies.

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The select committee also called for Congress to provide additional authority to the Committee on Foreign Investment in the U.S. (CFIUS) that it can use to screen inbound investments from China. Among the recommendations it makes is to broaden the definition of "critical technology" under the law. 

It also calls for the expansion of the list of sensitive sites CFIUS has jurisdiction over to include all military and intelligence sites, national laboratories, defense research facilities and critical infrastructure sites; and recommends that the Dept. of Agriculture be included in CFIUS, so it can review problematic land purchases.

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The select committee’s report also raised concerns that the U.S. is falling behind China in critical technologies. It called for prioritizing funding for peer-reviewed scientific research that involves technologies linked to national security, such as biotechnology, quantum computing, AI and the supply chain. 

Furthermore, to strengthen the U.S. defense industry the panel recommends the U.S. provide work authorizations for foreign nationals from partner countries in the Five Eyes intelligence partnership, the Quad and specific NATO countries if those workers have expertise in critical and emerging technology.