When we must choose between Wall Street’s profits and the strength and security of the United States, we have every right and duty to prioritize the latter.
When we must choose between Wall Street’s profits and the strength and security of the United States, we have every right and duty to prioritize the latter.
F or decades, there was a bipartisan assumption that American investment in China would lift hundreds of millions of people out of poverty and transform the Chinese Communist Party (CCP) into a responsible actor on the world stage. So, starting in earnest in the 1990s, American businesses poured billions into China to build factories and warehouses.
It is worth considering what we got from all that investment, and whether our assumptions stood the test of time. Certainly, all of that money helped China grow rich and powerful. Its companies siphoned off jobs and stole intellectual property from the United States. China is now the “world’s factory,” manufacturing roughly 30 percent of all goods.
But what about the CCP? Did it reform? In short, no. The stronger China got from Western money, the more brazen Beijing became. CCP general secretary Xi Jinping is now explicit that he wants the party to be the “gravedigger of capitalism.” He also holds fast to Mao Zedong’s admonition for China to “overtake” America as the most powerful country in the world. Like Dr. Frankenstein, America created its own monster.
Congress is now reconsidering whether it is in America’s interest to have U.S. companies pouring money into Chinese companies, especially those that threaten our national security. We should follow through by passing legislation to shed light on — and ultimately restrict — investments in critical industries in China.
To be clear, we’re not talking about staking money in coffee shops or restaurant chains. To the contrary, a recent investigation reveals that U.S. firm BlackRock is funneling the assets of millions of unwitting Americans into Chinese companies directly backed by Beijing — including the manufacturers of fighter jets, aircraft carriers, and artillery shells for the People’s Liberation Army, and a genomics firm that abets mass Uyghur slavery in Xinjiang.
A separate report has uncovered similar behavior from Vanguard, the world’s second-largest asset manager. In other words, tens if not hundreds of billions of American dollars are strengthening China at our expense, all thanks to Wall Street — and all unbeknownst to everyday American investors.
Sadly, this doesn’t come as a surprise. A lack of patriotism and basic moral decency is just what Americans have come to expect from the corporate class. This is true on the historically pro-business right as well as on the left. According to a recent American Compass poll, roughly 60 percent of Republicans believe “investors are getting rich doing things that weaken our economy.” Increasingly, people are aware that the drive for the next quarterly profit leads companies to make dumb and bad decisions that harm America and their own companies in the long run.
But as awareness grows, so does the will to act. A first step to a common-sense solution is outbound-investment screening, which would require firms such as BlackRock and Vanguard to notify the U.S. government when they invest in potentially dangerous foreign companies.
Earlier this year, the Senate adopted an outbound-investment-screening mechanism into the annual defense bill. The provision would have required investors to tell Washington when they invest in China in the fields of artificial intelligence, quantum computing, or cutting-edge computer chips. These are areas the CCP has publicly identified as critical to its effort to modernize the Chinese military and surpass the United States. The screening mechanism passed the Senate with overwhelming bipartisan support by a vote of 91 to six.
Unfortunately, disagreements in the House appear likely to strip this provision from the final bill.
Critics of the provision warned that requiring disclosure of outbound investments would discourage such investments altogether. That argument is telling — if a U.S. company is going to be embarrassed by its investments in China, should it really be making those investments in the first place? Legislation already exists to ensure transparency and security across a broad spectrum of U.S. investments, so why the fear of further transparency with China?
What came next was even more revealing. The critics warned that the provision would ultimately backfire because “we want Americans on the boards of Chinese companies spreading Western standards and complying with U.S. laws.” In other words, they still believe that the more money and presence Wall Street has in China, the more China will conform to American values.
The evidence doesn’t support the claim. In fact, the evidence says the opposite. Just look at the lengthy catalog of CEOs who spent $40,000 apiece to dine with Xi Jinping in San Francisco on November 16 — and gave the genocidal dictator a standing ovation to boot — because they hoped their fawning would win them favorable business prospects.
It doesn’t stop there, either. Wall Street has raised $620 million for SenseTime, the Chinese tech group whose Orwellian facial-recognition software is used to monitor Uyghurs in Xinjiang. Meanwhile, Silicon Valley has embarked on dozens of joint ventures with Chinese chip producers, despite our struggle to keep ahead of China on semiconductors. The list goes on.
Congress’s response should be a no-brainer. We need to enact outbound investment screening, and then, when we can see the scale of the problem, we need to ban U.S. investments in critical industries in China. We should also consider eliminating favorable tax treatment for American investment in China, to further discourage financial decisions that enrich and empower our greatest adversary.
Companies exist to make money, and if that’s all they want to focus on, that’s their decision. But policy-makers exist to make America strong and keep Americans safe. When we must choose between Wall Street’s profits and the strength and security of the United States — and make no mistake, the time for choosing is now — we have every right and duty to prioritize the latter.