U.S. House Report on Competition with Chinese Communist Party

On December 12, 2023, U.S. House of Representatives, select Committee on the Strategic Competition Between the United States and the Chinese Communist issued a 53 page report titled, “Party, Reset, Present, and Build: A Strategy to Win America’s Economic Competition with the Chinese Communist Party.”  Unsurprisingly, the report notes concerns with market access and intellectual property theft.  The report also takes on U.S. companies, including venture capitalists for funding China’s development, and China's WTO participation.  The report sets forth three pillars with key findings:

Pillar I: Reset the Terms of Our Economic Relationship with the PRC

1. The PRC’s economic system is incompatible with the WTO and undermines U.S. economic security.

2. Despite the heightened risks associated with U.S. investment in Chinese companies, the full extent and distribution of that risk and the implications for U.S. national security and financial stability remain unknown.

3. The United States lacks a contingency plan for the economic and financial impacts of conflict with the PRC.

4. The PRC uses an intricate web of industrial policies, including subsidies, forced technology transfer, and market access restrictions, to distort market behavior, achieve dominance in global markets, and increase U.S. dependency on PRC imports.

5. The widespread adoption of certain PRC-developed technologies in the United States poses a significant risk to U.S. national security and data protection concerns and threatens long-term U.S. technological competitiveness.

Pillar II: Stem the Flow of U.S. Capital and Technology Fueling the PRC’s Military Modernization and Human Rights Abuses

1. American investors wittingly and unwittingly support the PRC’s defense industry, emerging technology companies, and human rights abuses.

2. U.S. export controls have been slow to adapt to rapid changes in technology and attempts by adversaries to blur the lines between private and public sector entities, particularly the PRC’s strategy of Military-Civil Fusion.

3. The Committee on Foreign Investment in the United States (CFIUS) needs additional authorities and tools to effectively evaluate inbound investments from the PRC.

4. The PRC exploits the openness of the U.S. research environment to steal U.S. intellectual property (IP) and transfer technology to advance its economic and security interests to the detriment of the United States.

Pillar III: Invest in Technological Leadership and Build Collective Economic Resilience in Concert with Allies

1. The United States is falling behind in the race for leadership in certain critical technologies.

2. The PRC is gaining on the United States in the race for global talent.

3. By working with allies, the United States can increase U.S. exports, reduce supply chain reliance on the PRC, and counter the PRC’s economic and technology mercantilism.

4. The United States is dangerously dependent on the PRC for critical mineral imports.

5. The United States’ dependence on the PRC for pharmaceutical and medical device supply chains poses a distinct national security risk.

6. Through its Belt and Road Initiative, the CCP has expanded its influence around the world and gained significant positions in key supply chains and strategic infrastructure, such as ports and space facilities.

The findings are followed by specific policy prescriptions. For example, for pillar two, finding four, the policy prescriptions include:

Recommendation 4: Strengthen U.S. research security and defend against malign talent recruitment.

1. Build upon cross-agency disclosure guidance produced under National Security Presidential Memorandum 33 (NSPM-33) by the National Science Foundation (NSF) to mitigate research security risk by requiring all federal research funding applicants to disclose details about past, present, and pending relations and interest with foreign governments, foreign government controlled entities, or entities located in foreign adversary countries, in the past five years for themselves and any key member of their team who will be involved in fundamental research supported by the grant and update such disclosure annually throughout the funding period.

2. Create and maintain an unclassified database using open-source information to keep track of PRC research entities that engage in defense and military research and civil military fusion programs. This database can inform U.S. universities and researchers about current and future research collaborations and help federal grant-providing agencies vet grant proposals for risk mitigation.

3. Enact legislation that would prohibit U.S. entities from engaging in research collaborations with PRC entities involved with military and defense research and development (R&D), to include those that are on the International Trade Administration’s Consolidated Screening List, the Department of Defense’s Chinese Military Companies List, and the U.S. Air Force’s China Aerospace Studies Institute’s list of PRC Defense Science and Technology Key Labs.

4. Require U.S. research institutions to obtain an export control license if they intend to use any export-controlled item that has a clear and distinct national security nexus, during the course of research collaboration on critical and emerging technologies with any foreign adversary entity.

5. Exercise oversight on enforcement of existing rules in Sec. 117 of the Higher Education Act of 1965 (HEA) (P.L. 89–329) that requires U.S. universities to disclose of foreign gifts and contracts reaching certain threshold to the Department of Education.

6. Strengthen Sec. 117 of HEA by requiring U.S. universities to apply the “know-your-customer/donor” rule to understand who the benefactors are for foreign gifts and contracts channeled through U.S.-incorporated 501c(3) entities.

7. Require the Department of State to establish “human rights” and “military end-use” guardrails in any Science and Technology Agreement with the PRC and ensure sufficient consultations with appropriate Congressional committees throughout the negotiation process, as outlined in the Science and Technology Agreement Enhanced Congressional Notification Act of 2023 (H.R. 5245).

8. Require universities that receive federal grants for fundamental research to fully implement NSPM-33, to create and implement risk-based security reviews to detect and counter PRC malign influence and technology transfer risk.