Sec. 101. Findings
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Congress finds the following: In its 2020 report to Congress, the bipartisan United States-China Economic and Security Review Commission issued the following key findings: As Beijing strategically opens its financial sector to secure foreign capital and global investment indices shift asset allocations toward Chinese securities, United States investors’ exposure to the unique and significant risks accumulated in China’s capital markets rises. These risks center around the opacity of China’s financial system and Beijing’s interference in market activity to advance its political objectives.
Increased financial exposure to China threatens to undermine the efforts of the United States to defend against China’s unfair economic practices and protect the policy interests of the United States. Several Chinese companies included in global investment indices are subject to United States export controls but not investment restrictions. This mismatch enables problematic Chinese companies to continue raising United States capital and reduces the strength with which the United States can defend against companies that threaten national security.
Beijing continues to deny United States audit regulators full visibility into the financials of U.S.-listed Chinese companies in line with United States accounting standards. These evasions from effective regulation and oversight, together with United States-listed Chinese companies’ complex ownership structures, deprive United States investors of both full transparency and the opportunity for legal redress in cases of accounting fraud, eroding the integrity of United States capital markets.
The Chinese Communist Party’s commitment to their Military-Civil Fusion development strategy, which supports the modernization goals of the People’s Liberation Army
(PLA)by ensuring its access to advanced technologies and expertise acquired and developed by even those Chinese companies, universities, and research programs that appear to be civilian entities, remains a grave threat to the national security of the United States. The efforts of the Government of the United States to stymie China’s utilization of United States capital markets is an ongoing, multi-agency, and decades-long effort. The colloquially titled Section 1237 List of the Strom Thurmond National Defense Authorization Act for Fiscal Year 1999, as well as the Section 1260H List of the William M.
(Mac)Thornberry National Defense Authorization Act for Fiscal Year 2021, both highlight companies who pose a serious threat to the national security of the United States. On June 3, 2021, the Department of Defense released a list of 47 entities identified as Chinese military companies operating in the United States in accordance with section 1260H of the William M. ( Mac ) Thornberry National Defense Authorization Act for Fiscal Year 2021 ( Public Law 116–283 ). On January 14, 2021, the Department of Defense released the names of additional Communist Chinese military companies operating directly or indirectly in the United States in accordance with the statutory requirement of section 1237 of the National Defense Authorization Act for Fiscal Year 1999. Those companies included: Advanced Micro-Fabrication Equipment Inc. (AMEC), Luokung Technology Corp. (LKCO), Xiaomi Corporation, Beijing Zhongguancun Development Investment Center, GOWIN Semiconductor Corp, Grand China Air Co. Ltd. (GCAC), Global Tone Communication Technology Co. Ltd. (GTCOM), China National Aviation Holding Co. Ltd. (CNAH), and Commercial Aircraft Corporation of China, Ltd. (COMAC). On March 12, 2021, the United States District Court for the District of Columbia issued an order in Xiaomi Corporation v. Department of Defense (Case No. 1:21–cv–00280–RC) that forestalled the Defense Department’s designation of the Xiaomi Corporation as a Communist Chinese military company. On May 6, 2021, the Nasdaq-listed Luokung Technology Corporation became the second China-based company to avoid sanctions imposed under Executive Order 13959. These companies have been able to avoid sanctions because the Chinese Communist Party actively blocks United States Government agencies from obtaining information relevant to determining the ownership and control of China-based enterprises. Several Chinese military or military related companies, as well as surveillance and technology companies, including Hikvision, a major manufacturer of video surveillance equipment, materially contribute to either the ongoing genocide in Xinjiang or to other gross violations of internationally recognized human rights across the People’s Republic of China (PRC). On January 19, 2021, then-Secretary of State Michael R. Pompeo determined that the Chinese Communist Party
(CCP)has committed genocide against the predominantly Muslim Uyghurs and other ethnic and religious minority groups in Xinjiang. Then-Secretary Pompeo’s designation cited the State Department’s exhaustive documentation of CCP human rights abuses in Xinjiang, indicating that since at least March 2017, local authorities dramatically escalated their decades-long campaign of repression against Uyghur Muslims and members of other ethnic and religious minority groups, including ethnic Kazakhs and ethnic Kyrgyz . The genocide determination also cited the CCP’s regular dehumanization of the Uyghur people in Xinjiang, including by labeling them as malignant tumors , citing the Islamic faith as a communicable plague , and justifying the grotesque treatment of the Uyghur people in stark, unsettling terms: you can’t uproot all the weeds hidden among the crops in the field one-by-one; you need to spray chemicals to kill them all . On April 21, 2021, the United States House Committee on Foreign Affairs approved without objection H.R. 1155, which affirmed that the PRC, since 2017, has arbitrarily detained as many as 1.8 million Uyghurs, Kazakhs, Kyrgyz, and members of other Muslim minority groups in a system of extrajudicial mass internment camps, in addition to arbitrarily detaining many in formal prisons and detention centers, and has subjected detainees to forced labor, torture, political indoctrination, and other severe human rights abuses. The State Department’s January 2021 genocide designation further cited the forced sterilization of Uyghur and other minority women, with the purpose of eliminating the minority population in Xinjiang. Media reporting has documented widespread and systemic efforts by PRC authorities to force Uyghur women to take contraceptives or to subject them to sterilization or abortion, threatening to detain those who do not comply. In many detention facilities and labor camps across the PRC, Falun Gong prisoners of conscience have at times comprised the majority of the population, and have been said to receive the longest sentences and the worst treatment, including torture. The persecution and killing of religious and political prisoners for any purpose, including for the purpose of selling their organs for transplant, is an egregious and intolerable violation of the fundamental right to life. On November 18, 2020, the United States House of Representatives approved without objection H. Res. 697, which affirms the cultural and religious significance of the goal of genuine autonomy for the people of Tibet and the deep bond between the American and Tibetan people . The Foreign Relations Authorization Act, Fiscal Years 1992 and 1993 established, with respect to Tibet, the following sense of Congress: It is the policy of the United States to oppose aggression and other illegal uses of force by one country against the sovereignty of another as a manner of acquiring territory, and to condemn violations of international law, including the illegal occupation of one country by another. . Protecting United States capital markets against PRC-based companies that support the PLA’s modernization efforts or else aid and abet grotesque and barbaric violations of internationally recognized human rights is a national security imperative. As argued by the Uyghur Human Rights Project: [It is] still legal for shareholders to make profits from ownership of these complicit Chinese companies, some of which are publicly traded, including through . emerging markets indexes. It is time for much more serious action: no U.S. persons should be permitted to hold the stocks and bonds of the Chinese companies that are under U.S. human rights sanctions.
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