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China’s unchecked access to American investors 

A man works at a manufacturer of Integrated Chip encapsulation in Nantong in eastern China’s Jiangsu province on Friday, Sept. 16, 2022. Growth in Chinese factory activity was weak in September, export orders fell and employers cut jobs, two surveys showed Friday, Sept. 30, adding to pressure on lackluster economic growth (Chinatopix Via AP)

China’s command economy has the capability to manipulate global reserve currencies and completely upend global trade through the dictates of the Chinese Communist Party (CCP). With over 20 percent of all global manufacturing supply chains, the CCP has a stranglehold on the West and our allies. If we are to maintain a robust economy and remain the leaders of the free world, we must leave behind the exploitative realpolitik perspective of Richard Nixon and Henry Kissinger and reconnect to the foundational democratic values that make us great. We must pursue policies that, grasp the full reality of what China is today— a powerful and repressive communist regime juxtaposed to constitutional democracy, human rights, free markets, free press, religious freedom, and any form of dissent. For too long we have allowed our values to fall by the wayside to gain access to markets and turn a profit. If we are to overcome this dangerous regime, we must bring American values back into our global economic policy. This means one thing; we must steer our economy away from China. 

I am by no means the first to call for a paradigm shift in U.S. economic policy toward China. It is obvious that my colleagues in Congress from both sides of the aisle recognize that it is imperative for us to decouple our economy, especially critical sectors, from Communist China and take a firm stand against their tyrannical political system.  

Should Republicans, as they have stated in the Commitment to America, want to act to strengthen supply chains and end dependence on China, we must start in the markets. From as early as 2000 until December of 2022, U.S. regulators allowed un-audited Chinese firms into U.S. Markets. These firms, with a market cap between $775 billion and $1.5 trillion, are systematically draining billions of dollars out of U.S. taxpayer’s investment accounts and funneling this cash into civil-military fusion projects within China. Without knowing, American investors are funding People’s Liberation Army (PLA) activities, including their modernization efforts and research and development. Strategic economic disentanglement from China will reestablish the strength of U.S. global leadership and mitigate innumerable economic risks.  

As of now, Chinese companies on U.S. exchanges have more latitude than any other country and have received preferential treatment to U.S.-based goods and services for two decades. Even if U.S. regulators are able to audit these companies, what is concerning is that their ties with the CCP remain unchecked. These companies have become virtually institutionalized on U.S. markets and are now a standard holding for many Exchange Traded Funds (ETFs). This further hides their non-compliance, human rights abuses, and military aims beneath a thin veneer of capital gains.  

They have no need to disclose who is on their board or if their board reports to the CCP. They do not need to verify how much cash is held in operations in mainland China or if that cash can ever be withdrawn. We do not know the frequency of employee interactions with members of the CCP, how much those meetings cost, or if access to investor data is given to CCP members. Under current law, Chinese companies do not need to report if their goods and services have been procured by the PLA or other military related clientele.  

The opaque financial structures like Variable Interest Entities, used by nearly every Chinese company on U.S. exchanges, provides zero legal recourse for U.S. investors to recover their funds if the company was to delist.   

Congress must require all Chinese firms to adhere to a new set of disclosures that allow American families and enterprises to know exactly where their money is going. My legislation, the Securing American Families and Enterprises (SAFE) from PRC Investments Act, will help secure American families and enterprises from these shady Chinese investments. The first step to ending our dependency on China begins with exposing their nefarious activities and the neglect of our regulators. American families have been taken advantage of by the CCP for decades and now, finally, it is high time for this to end.  

America’s markets are being invaded, our hard-earned money is funding the Chinese military, our intellectual property is being stolen, and our businesses are suffering. We can no longer allow an anti-free market nation to threaten the future prosperity of the United States and our allies. The Chinese Communist Party must be reined in. Standing by the values that make our nation great will ensure victory. We do not support human rights abuse, we do not support systematic ethnic cleansing, or the repression of thought and religion. We are the United States of America, the leader of the free world and we must guide our allies away from the tyranny of communist economic influence.  

Pat Fallon represents the 4th District of Texas and is a member of the Armed Services Committee and the Oversight and Accountability Committee. 

Tags China Henry Kissinger Richard Nixon SAFE from PRC Investments Act

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