09/24/2021 | Press release | Distributed by Public on 09/23/2021 19:31
By Rep. Blaine Luetkemeyer and Rep. Bill Huizenga
This summer, regulators in China blocked Didi Chuxing, the country's largest ride-hailing service, from signing up new customers through its app after Chinese regulators claimed the company was lax in protecting users' personal data. This move followed Beijing's eleventh-hour intervention last November to prevent Ant Group's $35 billion IPO after Ant founder Jack Ma's speech criticizing Chinese banks. More recently, the potential default of one of China's leading real estate developers, Evergrande Group, due to reckless actions and overexpansion has led to speculation of whether China will bail out the company to avoid widespread losses in Chinese markets.
Some may think Beijing's targeting of large tech companies such as Didi and Ant, and the potential actions toward Evergrande is a relief. A sign the Chinese are not quite ready to directly compete with the U.S. as the premier global economy.
But in reality, these are all aimed at one goal: ensuring the Chinese Communist Party's control is absolute. The more extreme the action, the clearer the message that entrepreneurs and investors can't seek refuge in China. Washington must acknowledge this reality and cannot become complacent in defending U.S. interests.
Unfortunately, calls to confront China can lead American policymakers to be short-sighted, steering our agenda toward short-term headlines rather than long-term policies aimed at outrunning them with free people and free markets.
While China is busy making foreign investors question its ability to govern responsibly, the U.S. should be reaffirming our commitment to a financial system that is open and thoughtful. A smart, responsible regulatory regime that encourages economic growth through innovation and promotes economic freedom is an incredibly potent weapon to us against the top-down control that China exerts. Even in cases where Washington must use its financial might to counter Beijing, our approach should consider the long-term impacts and effects of U.S. policies, specifically how they combat the long-term aspirations of the CCP.
For instance, the U.S.-China Economic and Security Review Commission has warned that Chinese companies have increasingly raised capital from American investors. This could support firms that help Beijing in its rivalry with the U.S. But does this mean capital controls and delistings from U.S. exchanges alone will change China's behavior? Probably not.
Thankfully, the U.S. already has alternative, effective, and powerful tools in its toolbelt. We can sanction Chinese firms that pose a threat to national security, which often compels third-country financial institutions to sever their ties as well. We can also use export controls to deprive the Chinese of advanced technologies that they need, then rally allies to impose those controls as well. This may help avoid the disruption that can accompany sanctions, which carries longer-term risks if it pushes countries to seek out alternatives to the dollar.
Rather than force U.S. securities regulators to chase foreign policy objectives, an idea that has backfired in the past, Washington should leave national security to the specialists. What regulators can do to widen America's lead over China is redouble efforts to find risks in China's financial institutions--a task complicated by Beijing's opaque governance and non-adherence to international credit norms.
This approach, as proposed in bipartisan legislation, would better inform American firms and investors of actual risk in China's financial sector. This would strengthen the U.S. by making our economy more resilient, not by picking and choosing where Americans can invest their money.
Under the previous administration, the U.S. became increasingly concerned by Chinese investors' influence in cutting-edge U.S. firms. As a result, Republicans and Democrats joined in 2018 to enact the most important overhaul of foreign investment screening and export controls in a generation. These reforms recognized competing against China involves varied approaches on multiple fronts. The U.S. should continue to use a bipartisan approach that pinpoints the cornerstones of Beijing's aggression toward the United States.
To be clear, there will be times when the U.S. will have to go after China. American sanctions targeting the Chinese government have risen sharply, and there's bipartisan agreement that Beijing's ambitions pose national security risks.
As we protect the health of our financial system, we must ensure our actions are measured, appropriate, and well-defined. Failure to push back against China on numerous fronts is not only ineffective, but weakness or poorly targeted measures in these areas will only embolden China to push the boundaries of international law to accomplish their goal on unseating the U.S. as the world's premier economy.