By Nikita Bondale, Staff Writer
On July 13, 2023, the House Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party held a hearing to discuss the growing concerns regarding American businesses in China. The committee included committee chairman and Wisconsin Congressman Mike Gallagher and ranking member Congressman Raja Krishnamoorthi of Illinois. The hearing featured three witnesses: Piper Lounsbury, Chief Research and Development Officer at Strategy Risks, Shehzad Qazi, Chief Operating Officer and Managing Director at China Beige Book International, and Desmond Shum, author of Red Roulette: An Insider’s Story of Wealth, Power, Corruption and Vengeance in Today’s China.
Ranking Member Krishnamoorthi began by describing the specific risks that are posed by business dealings with China. He states that there has been an estimated “$600 billion of IP theft” and that due to this and other reasons, it is “time to invest more in America than CCP.” Following this, the floor was opened up to the witnesses to give their opening statements.
As a witness, Piper Lounsbury emphasized that an essential part of moving forward and preventing continual issues is to “help make Americans aware of the supply chain, tax incentives and purchase credits, to target negative practices of the People’s Republic of China, and to find ways of protecting United States data information.”
Qazi, another witness, testified by describing China’s authority as an “unreliable black box” with censorship that has forced journalists out of Beijing. He alluded to the impacts that the pandemic had on not only China’s economy, but also businesses linked to China. He described how businesses may feel inclined to sell their information to Chinese companies, due to economic downturns, they should be wary of intellectual property theft and potential consequences of their interactions.
The final witness, Desmond Shum, recounted personal experiences, describing how after investing in Chinese technology companies, he realized that “in China, there is no such thing as a level playing field.” He stated how his ex-wife, Whitney Duan, disappeared in 2017 and did not reappear until the release of his tell-all novel, Red Roulette. He concluded by describing the Chinese Communist Party as “above the law” in China.
Following witness statements, representatives had the opportunity to ask questions to the witnesses. Primarily, questions were asked regarding Chinese policies and the current economy under the Chinese Communist Party, the breadth and depth of concerns regarding use of Chinese-based American companies, and also potential current and future solutions.
Representative Hinson asked the witnesses what they see as the top issue that China has to do to tackle this and asked how the United States can better track intellectual property theft. Lounsbury responded saying “Universities. That is where tech startups with small capital and attraction of funding are required with more investments with Chinese partners or IP trading.” Essentially, Lounsbury emphasized the tactic of simply “following the money” and finding the most common sources, one of which seems to be United States universities.
Representative Barr asked Qazi about potential ways that the United States government could better communicate these risks to the public. Qazi said that just like medicine has warning labels and instructions, so should involvement in Variable Interest Entities, a common business structure in China that American companies typically may engage in. Qazi described the need of warning investors and average Americans in a very simple and straightforward way to best communicate risks.
