The United States is unaware of the scope of its investment fund in China that is funding possibly harmful Chinese military and civilian technologies, according to Derek Scissors, a senior fellow at the American Enterprise Institute.
According to Scissors’s report titled “What to Do About American Investment in China,” almost $800 billion in U.S. investments poured into China from 2016 to 2020, but the United States “does not monitor what is being funded.”
“But we don’t know what stocks and what bonds, what industries, what companies because the Department of Treasury doesn’t tell us that,” Scissors told “China in Focus” on NTD, the sister media outlet of The Epoch Times.
“So one big problem of the U.S. policy is we’re considering restricting U.S. investment in China. Well, we don’t know what the U.S. invests in China,” said Scissors, also the chief economist for the China Beige Book.
“Since the end of 2016, the action has been in American purchases of Chinese securities. This, unfortunately, cannot be found in monthly data published by the Department of the Treasury. The once-a-month figures show the Cayman Islands as the top recipient of US investment in securities, at over $2.5 trillion, even though the Caymans do not have a securities market. These figures are nonsensical, hiding what American financials are actually doing,” his report reads.
“We know we should increase transparency; we know we should not support Chinese development of technologies that have potential military uses,” he noted.
Lack of Effort to Address Intransparency
Yet, according to the experts, minimal efforts have been taken by the United States to address intransparency.
He cited the National Critical Capabilities Defense Act, which passed in 2021 in the House but did not pass the Senate.
Another version of the bipartisan bill was reintroduced by Rep. Rosa DeLauro (D- Conn.), Brian Fitzpatrick (R- Pa.), and Bill Pascrell (D-N.J.) in May 2023.
“The legislation would establish a review process over the potential offshoring of critical United States’ supply chains to foreign adversaries like China and Russia. This legislation would create a whole-of-government screening process for outbound investments to ensure that the United States can quickly detect supply chain vulnerabilities and protect national, economic and health security interests where needed,” DeLauro said in a press release.
However, Scissors said of the bill in the report, “But it was excessively broad, addressing both supply chains and outbound investment and not specifying levels of technology to be covered.”
‘Undermining America’s Geopolitical Position’
In Scissors’s opinion, U.S. businesses that choose to maintain their ties to China are “undermining America’s geopolitical position.”
He noted that the United States is dependent on China not just for some pharmaceutical products, but also more broadly for the chemical inputs into pharmaceuticals that are shipped to the United States from third countries such as Ireland, India, and others.
“And I’m not going to pick on a drug company. But if you’re a drug company that says, ‘Oh, no, you know, we have to be in China, China’s the best,’ you’re harming the United States, you’re making us more vulnerable, you’re giving China more leverage,” he said.
“And then those that are still embracing China … they’re hurting U.S. national interest, maybe they can say it’s for the sake of their stockholders. But American policymakers should understand that the stockholders of a drug company, for example, are not the American people. The American people need to have alternative suppliers in case of a confrontation with China,” he added.
According to the expert, those relying on the Chinese market face immense risk.
“If you need goods from China, will they be available two years from now, four years from now, six years from now?
“China now is different from China 10 years ago. This is a leader [Xi Jinping] who doesn’t want to designate a successor, who never wants to leave office, but incredibly intolerant of dissent, treats his own companies poorly, much less foreign companies,” Scissors said.
