China

Floor Speech

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Mr. SULLIVAN. Mr. President, I am going to pose a simple question here related to this guy. That is the dictator of China, Xi Jinping. Imagine if a Chinese financial institution, one of their banks, one of their private equity funds--they have a lot of them. Imagine if a Chinese financial institution started to invest in the United States in big technologies that would make the U.S. military much stronger. What do you think would happen to those executives in China? They are taking Chinese money, and they are pouring it into companies that work directly with the Pentagon, making the U.S. Army, Navy, Marine Corps, and Air Force stronger and more lethal. What would this dictator do to those Chinese executives?

I will tell you what he would do. A, he would never let them do it. But if they did do it, he would arrest them, put them in jail, and shoot them at sunup. That is what he would do.

There is not one person in this body, not one person in America-- heck, not one person in China--who would disagree with that.

That is what he would do.

So what happens when American investment companies--financial institutions, private equity firms, hedge funds, venture capital firms, investment banks--what happens when they invest in Chinese companies that make the Chinese military more lethal and stronger? What happens?

The answer: pretty much nothing. Worse, we have a hard time knowing which American firms are even doing this.

This is a huge knowledge gap in an asymmetrical advantage that our biggest adversary--right here, Xi Jinping and the Chinese Communist Party--has over us.

They can't invest. They won't invest. They will get the death penalty if they invest in an American company that will help our military become stronger.

We have, who knows, a lot of financial institutions investing in Chinese companies to make their military stronger. We have financial companies that are investing in the Chinese Communist Party, companies that are producing things like advanced semiconductors, artificial intelligence, quantum computing, hypersonics--all technologies that are critical to dominating the 21st century battlefield. This is a giant American national security issue.

I don't normally come down to the Senate floor and quote Lenin. I am not a big fan of Lenin. But he purportedly said that ``capitalists will sell us the rope with which we will hang them.''

There is a little bit of that going on right now here in the United States of America. We have executives in this country and certain financial institutions--by the way, these American financial institutions and executives owe everything to their success by being American, being in the greatest country in the world, with the rule of law and our capital markets and our dynamic economy. Their success is because of the great Nation we live in, and yet some, kind of addicted to making more money--listen to Lenin. They are like, you know, maybe I will do that advanced chip manufacturing investment in the Chinese economy; maybe I will help them a little bit with artificial intelligence or quantum computing.

By the way, quantum computing, if you get really good at that, you can break any code that our military uses. You are toast if you can't communicate in a covered fashion--encrypted.

This is really dangerous stuff. I was first, actually, made aware of this many years ago by, in my view, one of the best Chairmen of the Joint Chiefs of Staff for our military that we have had in decades, Marine Corps Gen. Joe Dunford. He is just a fantastic Marine officer, just a fantastic Chairman. He is very measured, very smart, very strategic.

He raised this issue with me many years ago: Senator, we, America, have financial institutions--American financial institutions using American investment money--you know, the Iowa teachers' retirement plan, the laborers' retirement plan. They are taking that money, and they are investing it in China in some really advanced technologies.

There is a problem. The Chinese don't have that kind of investment capital and professionalism to grow these companies, but we do.

So this was first brought up to me by a great Marine general. So I started digging into it over the years and years, and it is a giant problem. Senior administration officials in the Biden administration agree. A whole host of top national security officials in the Trump administration agree. This is a bipartisan issue in terms of the concern. It is a blinking red light for our national security.

So some might ask: Well, wait a minute. What is wrong with an American financial company making an investment in the Chinese private economy?

Well, look, it depends on what part of the Chinese private economy. If you want to go make more hamburgers over there and sell--I don't know--refrigerators, that is fine. But these are investments in some of the critical technological needs of the military that will enable whichever military dominates these sectors to dominate the 21st century battlefield.

And, by the way, there is no such thing as a private company in China. If you are a private equity firm in America, you are saying: Well, I am just investing in this private company in China to help them with their quantum computing capability.

We all know that this guy and the Chinese military--the PLA and the Chinese Communist Party--they own that. They own that. They will take it, use it, dominate it.

So what can we do about this problem? Well, look, there are a lot of ideas on what we can do about this problem. I am working on legislation that would actually have the U.S. Government, believe it or not--and I am not a big government guy--look into the investments being made by American financial institutions into some of the most high-tech areas of China, what we would call outbound CFIUS. CFIUS is this process for inbound investment.

Let's look at what is happening outbound. It is a little more controversial. I think we need it, unfortunately, because we have a lot of--not a ton but, certainly, a number of--American financial executives who are like: Look, man, whatever--patriotism, I will leave that at the door. I am not really worried about that. I am not worried about that guy. I just want to make a big buck. It is too bad, but we got them. So we need this.

Here is an easier starting point. Let's have a transparency provision that enables us, the U.S. Government, to say: All right, big financial American firms or private equity firms or hedge funds, the American investment dollars that you are getting from the Illinois teachers' retirement fund, we want to know if you are putting that into quantum computing that can help this guy dominate Taiwan.

We want to know that. We want transparency. It is pretty good idea.

Now, Senator Cornyn offered a bill--I was a cosponsor of it--that we attached to the NDAA, saying we want outbound investment transparency. We want to know: What are American financial firms doing helping this guy become stronger?

It is pretty easy. Guess what, Mr. President. It is super bipartisan. That bill is brought to the floor as part of the National Defense Authorization Act and passed 91 to 6--91 to 6. Very few things pass 91 to 6 here. That did because it made sense. It is very bipartisan and relatively simple. It is just transparency.

Hey, Sequoia Capital--I am going to talk about them in minute--a big private equity firm, are they investing in quantum computing that can help this guy dominate the world? We should know, especially if it is American investment dollars, right?

So that is a good start. There is a lot of agreement.

Here is a letter from Dr. Kevin Roberts, the head of the Heritage Foundation.

``Congress must seize opportunities in this year's National Defense Authorization Act (NDAA) to counter threats from Communist China and deliver for the American people. Reports that the House of Representatives may abandon efforts to track the billions of dollars of U.S. capital flowing into China, including into sanctioned Chinese military and technology companies, are extremely concerning. Doing so would all but ensure that the House will close out its first year of Republican leadership without notching any meaningful legislative accomplishments to address the most critical national security threats from China.

Multiple efforts to address threats from China are in danger of being omitted from the NDAA, including provisions to sanction fentanyl traffickers, protect U.S. agricultural land, and end the funneling of taxpayer dollars to Chinese drone and biotech companies. However, the most important effort would begin to tackle a massive problem: today, U.S. capital freely flows into China with few restrictions, little oversight, and minimal prohibitions. The pensions and savings of millions of Americans are literally financing China's military buildup. Nevertheless, reports indicate that efforts by House Financial Services Chairman Patrick McHenry may succeed in blocking the Senate's bipartisan Outbound Investment Transparency Act, which would begin scrutinizing these problematic investments in China.

``Failing to advance outbound investment reform would be a gift to Xi Jinping and the Chinese Communist Party. Congress works for the American people, not Wall Street. It is long past time to stop funding our own destruction and end business as usual with Beijing. Politicians like talking the talk about being tough on China--it's time to walk the walk.''

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Mr. SULLIVAN. He was talking about how we need to be able to track U.S. capital flowing into China, and it would be extremely concerning if that Cornyn amendment didn't make it into the final NDAA.

So he is saying: Hey, Senators, House Members, make sure that stays in.

Thank you, President Roberts of Heritage.

He also wrote the leadership of the House and Senate: Senator McConnell, Senator Schumer, Speaker Johnson, and Congressman Jeffries.

Hon. Mike Johnson, Speaker of the House, House of Representatives, Washington, DC. Hon. Charles E. Schumer, Majority Leader, U.S. Senate, Washington, DC. Hon. Hakeem Jeffries, Minority Leader, House of Representatives, Washington, DC. Hon. Mitch McConnell, Minority Leader, U.S. Senate, Washington, DC.

Dear Speaker Johnson, Leader Jeffries, Leader Schumer, and Leader McConnell: As the FY2024 National Defense Authorization Act (NDAA) moves through conference committee, we write to urge Congress's support for security-related restrictions on outbound investment of American capital to the People's Republic of China (PRC). Many outbound investments into China are jeopardizing our national security by accelerating sensitive dual civilian and military technology development for the PRC, thereby strengthening its military, intelligence, surveillance, and security capabilities.

Some in Congress incorrectly argue that restricting such investments will impede the economic growth produced by adhering to free market principles. House Financial Services Chairman Patrick McHenry, for example, has argued that ``If we oppose China's state-run economy, we want more private investment--not less. Of those private investors, we want more of them to be Americans--not fewer. And if we are truly concerned by China's technology companies, we want as many Americans as possible steering them, spreading Western standards, and complying with U.S. laws.''

This argument does not apply to a state-controlled economy like China's, where businesses succeed only at the pleasure of the Chinese Communist Party (CCP). We regularly observe how the PRC cajoles American businesses into advancing CCP interests and values, from Hollywood studios and professional sports leagues preserving their market access by self- censoring, to major American companies promising to uphold ``core socialist values.'' It is both unwise and unconscionable to finance the capabilities of an adversary hostile to American interests and values.

Recognition of the risks associated with U.S. investment flowing to the PRC is growing. In his letter of August 3, 2023, Chairman Mike Gallagher of the Select Committee on the Strategic Competition between the United States and the Chinese Communist Party warned that much of the more than $1 trillion that the U.S. invests in the PRC through public markets ``directly finances PRC technology companies with documented connections to the Chinese military and the Chinese Community Party's (CCP) abhorrent human rights abuses.'' President Biden's recent Executive Order 14105 of August 9, 2023 purports to speak to this concern, as do numerous legislative proposals. On July 25, 2023,the Senate voted 91-6 to include in the FY24 NDAA the Outbound Investment Transparency Act, which would require notification of U.S. investments in key industries in foreign countries of concern.

Congress must establish sensible restrictions on U.S. capital flowing to sensitive industries and technologies in China. As a starting point, the FY24 NDAA must maintain the Senate's approach of establishing a disclosure and transparency regime for high-tech investments. Building on that foundation with meaningful restrictions in further critical technology sectors would be an even better outcome for American national security.

Nor should Congress accept attempts to substitute sanctions for outbound investment screening. Opponents of meaningful restrictions on outbound investment into China have argued that additional sanctions authorities are an acceptable alternative, despite the continuing lax enforcement of even mandatory sanctions towards China. While we strongly support enhancing and more sensibly harmonizing the U.S. sanctions regime, sanctions alone are piecemeal and backwards looking, rather than comprehensive and preventative. Predictability, efficiency, and efficacy all favor broad, robust prohibitions as default. Specifically, the Committee passed Chinese Military and Surveillance Company Sanctions Act should not replace the Outbound Investment Transparency Act.

Congress cannot allow American investment--including the investment of millions of average Americans' retirement funds--to bankroll threats to America's national security, the erosion of America's technological edge, and the violation of our nation's essential commitments to freedom and human dignity. Congress works for the American people, not Wall Street. As the FY24 NDAA is finalized, it must retain the Outbound Investment Transparency Act. Sincerely, Chris Griswold,

Policy Director, American Compass. Victoria Coates,

Vice President, Davis Institute for National Security and Foreign Policy, The Heritage Foundation. Thomas J. Duesterberg,

Senior Fellow Hudson Institute. Michael A. Needham,

Executive Director, America2100. Hon. Steve Yates,

China Policy Initiative, America First Policy Institute. Joseph Miller,

Executive Director, Citizens for Renewing America. Jon Toomey,

Senior VP of Government Relations, Coalition for a Prosperous America.

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Mr. SULLIVAN. The letter says this is really important--this Outbound Investment Transparency Act, 91 to 6. Let's get it in the final NDAA.

It is pretty simple, pretty noncontroversial.

But, Mr. President, as you know, nothing here is ever simple. Evidently, the chairman of the House Financial Services Committee, Patrick McHenry--I don't know him. He seems like a nice guy, from what I hear. But, boy, is this guy misguided because it is all over the press that he fought like crazy to strip this provision out of the NDAA.

Why would he do that? By the way, he is retiring. So I am not sure why we give him a lot of say anymore. But somehow, some way, one Congressman--Republican, by the way--over in the House convinced the House to strip this transparency provision that is meant to undermine this bad guy. They stripped it out of the NDAA. So it is not in the National Defense Authorization Act because one Congressman said: I don't want it in. Ninety-one Senators said: We need it in. And, by the way, the vast majority of the House wants it in.

You have a really strong House Member, Congressman Gallagher, who is leading this bipartisan China commission. He says it is really important.

The Biden administration wants it in. I have talked to Secretary of Commerce Raimondo and the Secretary of Defense. They all want it in. But one Congressman, who is not even going to be around anymore, gets to strip it out so we don't know what American investments are going to make this guy stronger? He gets the final say?

This is an outrage. And this is enough of an outrage that Senator Cornyn and I, 2 weeks ago, in a lunch, when the Speaker of the House came to visit us, we said: Hey, Mr. Speaker, we are hearing some things about this really important, simple transparency investment provision, that you guys might strip it out. Why?

Come on. Some of us have been focused on the China threat for years, and now, we have one Congressman, who is leaving, and he says we strip it out, when 91 Senators say we need it.

So the Speaker said to me and Senator Cornyn--we were pretty forceful in the meeting. I am a big fan of the new Speaker, Speaker Johnson. But he said: Well, it might not make it in the NDAA, but we will bring to the floor of the House a vote on the McCaul bill.

This is the chairman of the House Foreign Affairs Committee, Chairman McCaul, who has an amendment that is very similar to the Cornyn amendment. Actually, it is a little bit tougher. So he doesn't like it. Xi Jinping doesn't like it. So we said: All right, Mr. Speaker. It sounds like a good compromise. Let's do it. Thank you, Mr. Speaker.

Since that meeting, I think I have gotten a commitment, and I think Senator Cornyn thinks he has gotten a commitment from the Speaker of the House to a bunch of U.S. Senators, saying: Don't worry, we got this.

Since that time, I have been reading press reports. Now, look, the press can get a lot of things wrong. The press is saying: No, actually, the Speaker is not going to bring up a vote on the McCaul bill--which, by the way, in the House, will get 340 votes easy, and if that came back here, it would get 91, maybe more. So it would be super bipartisan, and this guy, this dictator, would hate it. Let's do it. Let's do it.

But just lately, the press is reporting that the Speaker is now saying: Maybe I won't do what I told the Senators. Maybe I am going to put some kind of Commission together, and we will study it.

Well, as you know, when you start studying things here, that is a way to kick the can down the road.

So my first priority here is to call out the Speaker of the House and say: Mr. Speaker, I am pretty sure you said you were going to bring the McCaul bill to the House floor soon--maybe before Christmas but certainly January. Let's get it voted on. We will pass it here in the Senate, I guarantee you. The majority leader will bring it up. Let's do that.

So I hope you continue to make that commitment, Mr. Speaker. It would be really disappointing if somehow a Congressman who is leaving-- leaving--teams up with the people who don't want us to know how Americans are investing in this guy's military industrial complex. That wouldn't be good.

So I call on the Speaker to keep that commitment that he made to a bunch of U.S. Senators recently and not put forward some kind of baloney Commission that is just kicking the can down the road. That wouldn't be good.

But let me end with just a reason--like, why does transparency matter? Why does it matter? Well, I am going to give one small example, but it is a pretty good one.

This is a venture capital firm called Sequoia. Very successful. Americans. They benefited from being an American company working in the American economy. Really, really smart guys and women. Highly successful. Their executives are very wealthy, and that is great. This is a capitalist country; I love that.

But they were also known as one of these firms that were doing what I said: making big investments over many, many years in very high-tech components of the Chinese economy--advanced computer chip manufacturing, quantum computing, things like that. I think that is wrong, that Americans and American executives and American investment dollars are going to China to help develop weapon systems that will be used to kill U.S. marines and U.S. sailors if we ever get in a fight in the Taiwan Strait.

So Sequoia Capital came to meet with me a couple years ago, and I essentially told them that. Hey, look, you are very successful. That is great. You live in the greatest country in the world. You have done a lot to help our economy. But why are you helping the Chinese economy? Why are you investing in things that are going to give them a military advantage over our soldiers, sailors, airmen, and marines? Why are you doing that?

They didn't have a good answer.

It wasn't a very cordial meeting, to be honest, because we didn't see it the same way. But at the very end of the meeting, actually, one of them got up and said: Well, you know, Senator, if we don't do these kinds of investments in China, the Saudis and Emirates will.

I was like: Wait. What? That is your drop-the-mic argument at the end? You requested the meeting with me. That is a pathetic argument. What about patriotism? What about American interests?

So I started kind of blowing the whistle a little bit on this company in hearings and stuff. We did a lot of research. They were doing a lot of big-time investments in some of the highest tech elements of the Chinese economy that will help their military kill American sailors and soldiers if we ever get in a fight. That is wrong.

So we started--some of us--putting a little pressure on these guys. Transparency. Calling them out--Americans doing this kind of thing. Well, some of that worked. They announced a big separation agreement. They are not going to do it anymore. They are getting pressure from the Congress--by the way, legitimate pressure.

Here is a headline from the Wall Street Journal: ``Sequoia Made a Fortune Investing in the U.S. and China''--China high technology that will help their military--``Then It Had to Pick One.'' It had to pick one because Members of Congress were saying: Enough. That is transparency.

So we want to know how many more Sequoias are out there. It is a pretty legitimate ask. It is actually a very legitimate ask. It is so legitimate that 91 U.S. Senators voted for this. And we have one Congressman over there who is leaving--not sure where he is going; maybe he is going to Sequoia Capital--and he is blocking it.

So we need to fix this. We need to make sure the vast majority of U.S. Senators and U.S. House Members who want transparency on this really important national security issue--that this gets fixed.

So once again I am calling on the Speaker to keep his commitment, bring the McCaul bill to the floor soon--next week, 2 weeks, January. But don't let one Congressman who is walking out the door thwart the vast, vast majority of the U.S. Senate and the U.S. House on a very important national security issue.

You know, a lot of us talk a lot about China and the threats. I have been coming out here since I got elected in 2015 to talk about the challenges of this dictator. He is a menace, dangerous, and they are growing their power. But do you know what? A lot of it is talk. A lot of it is talk. This was something that was action. It wasn't a huge deal--transparency, action.

Right now, we have Republican House Members--hopefully not the Speaker, but certainly the chairman of the Financial Committee, the Banking Committee--who are saying: No, I want to keep it in the dark, what Americans are doing to invest in making this guy stronger.

That is wrong. Mr. President, 99.9 percent of Americans would think that is wrong. So we need to fix it. The House needs to take leadership on this issue. And my Republican colleagues keep talking tough on China. It is time to act. It is time to act.

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