▶ 0:00:20The Select Committee will come to order, and good morning everyone. Uh thank you for being here. And uh before we begin, I want to acknowledge a new member of the committee, our good from New York, Representative Tom Suozzi. Welcome. It's great to have you on the committee. Uh today's hearing is on the Chinese Communist Party's economic espionage and malign influence targeted at the subnational level.
▶ 0:00:48This is an active threat, and we will examine how these activities have accelerated in scale, intensity, and sophistication over the past decade. The CCP's professed desire for constructive relations, its pursuit of so-called win-win outcomes, and its supposed respect for the sovereignty of other nations are all promises the CCP breaks.
▶ 0:01:13The CCP is engaged in an epic campaign to undermine the United States here at home, spanning economic and traditional espionage, state-directed cyber intrusions, talent recruitment programs, information warfare, covert influence networks, legal and illegal lobbying, blackmail, infiltrating our critical and transnational repression aimed at the Chinese diaspora.
▶ 0:01:41In fact, the CCP is the largest oppressor of Chinese people in the world, and it has targeted Chinese Americans who courageously speak out against it. Just last month, Eileen Wang, the mayor of Arcadia, California, which is home to 60,000 people, was arrested for acting as an illegal agent of the Chinese government for activities undertaken before she was She pled guilty
▶ 0:02:12and is now in prison. This Chinese government agent, acting at the direction of PRC government took advantage of our free and open society to carry out an agenda on behalf of the CCP.
▶ 0:02:27This is an alarm bell for all of the us that the CCP's malign influence must be United Front Work, one of the CCP's primary instruments for political influence, is a core component of this What makes it uniquely concerning is that it is not simply a foreign intelligence activity conducted from It is a comprehensive influence operation that reaches deep into communities,
▶ 0:02:58businesses, and institutions across the United States, often though seemingly benign cultural, academic, or commercial engagement. It operates by exploiting these three primary levers: coercion, and incentives. First, it seeks to access state and local officials, business leaders, university researchers, and community organizations.
▶ 0:03:26In many cases, this access is earned through partnerships that appear mutually beneficial, trade delegations, sister city relationships, student exchanges, or local investment However, these channels can be repurposed to collect strategic information, shape local decision-making, or identify individuals who can be influenced or co-opted. Second, coercion plays a central role.
▶ 0:03:56The CCP cruelly exploits vulnerabilities among diaspora communities, including family ties in China, business dependencies, or immigration concerns. Individuals may be pressured subtly or directly to support party-aligned positions, silence criticism, or pass along information.
▶ 0:04:21These coercive tactics are often deliberately obscured, making them difficult for local authorities or community organizations to detect, let alone counter. Third, the CCP employs a wide spectrum of incentives. These include commercial benefits, political access, or opportunities for personal advancement.
▶ 0:04:42Yet, these promises often come with expectations that local officials will support PRC-backed initiatives, that academic partners will share research, or that community leaders will echo narratives favorable to Beijing. The CCP does not distinguish between national and subnational targets.
▶ 0:05:03State legislatures, municipal governments, school boards, public universities, local businesses, and community associations are all soft A strategic investment pitch to a mayor, a partnership with a local university, or outreach to a diaspora civic groups can yield long-term advantages for the CCP's objectives.
▶ 0:05:28Because these engagements often occur far from Washington, they can unfold with limited oversight, inconsistent safeguards, and even uneven awareness of the risks involved. This gap between federal insight and local exposure represents one of our most significant vulnerabilities.
▶ 0:05:51Closing it requires sustained collaboration across all levels of Federal agencies must share actionable intelligence and best practices with state and local partners in ways that are clear, accessible, and timely. Local leaders from mayors to university administrators to community officials must be equipped with guidance that helps them distinguish legitimate engagement from attempts at manipulation or exploitation.
▶ 0:06:23Above all, our response must reflect the same whole-of-society approach that the CCP employs. Protecting our economic competitiveness, safeguarding our research, and strengthening the resilience of our communities requires participation from government, industry, academia, civil society, and diaspora communities.
▶ 0:06:47The goal is to have an honest and open cultural and economic exchange that is transparent, secure, and mutually Today's hearing will highlight the CCP's continuing abuse of the United States sovereignty and the divergence between the CCP's words and their deeds.
▶ 0:07:08The hearing will focus on two fronts of this battle that demand action from the CCP's economic espionage and its malign influence at the state More importantly, we hope that today's hearing will provide an important step toward building that coordinated nationwide response. Thank you, and I now recognize the ranking member for his remarks.
▶ 0:07:34Thank you, Mr. Chairman, and I appreciate the bipartisan way you have conducted uh this committee and uh your leadership. Uh uh share the concerns about China's economic espionage. It is undisputed that they have stolen intellectual property from American manufacturers, that they required coercive joint venture agreements.
▶ 0:07:59Our companies went and basically to have access to the market were required to give up intellectual property and they have tried to get intellectual property from our technology companies and our manufacturers and we need to stop that. We need to stop the offshoring of our jobs to China, the offshore offshoring of our industrial base to China and certainly make sure that we have a level fair playing field.
▶ 0:08:28We don't steal China's technology, they shouldn't be stealing ours. We don't have economic espionage with China, they shouldn't be having economic espionage with us and we need to have self-reliance on critical industries in this country and so I look forward on to to working on a bipartisan basis.
▶ 0:08:49But I do want to also as a Asian American, as a son of immigrants, speak to the United States troubled history with discrimination based on race or national origin and I appreciate Mr. John Yang being here to help provide that perspective which is so important as we consider the real threats that the United States faces.
▶ 0:09:10You can go back to Frederick Douglass from his composite nation speech in 1869 where he stood up for the rights of Chinese immigrants and soon after urging that we have Chinese immigrants in the United States, unfortunately the country went in a different direction. They had the 1882 exclusion act.
▶ 0:09:31We have had a history of discriminating against Asian immigrants to be citizens, to own And uh we had this awful thing called the China Initiative, which Mr. Yang has done incredible work on, which basically went after Chinese American professors and Chinese American scientists and made them feel unwelcome, made them feel profiled, harassed them.
▶ 0:10:00And now it's been discontinued because they recognize that Chinese Americans actually contribute to the United States. Did you know that of the top AI researchers in the United States, 38% of them are of Chinese origin? We would not have Silicon Valley if we did not have the Chinese origin top AI researchers in this country. Jensen Huang, was who leads the entire AI revolution, is someone who was of Chinese origin.
▶ 0:10:29The reality is that the top 72% of of STEM graduates, 72% of them come from countries outside the United States. So, I am very very passionate, Mr.
▶ 0:10:46Chairman, that as we look at the legitimate threats that Chinese government poses to America's economic independence, we do not in any way conflate it with the harassment of Chinese immigrants, of Chinese Americans, of Chinese students, and we recognize the incredible value and role that they play in the United States. So, I look forward to that conversation and hope we can keep that distinction in mind.
▶ 0:11:16Thank you, Ranking Member, and I totally concur with making that distinction and and our goal is really to have policies that protect Chinese Americans and make sure they have their constitutional rights just like every American should have and free from the CCP's malign influence. So, I think we're in total agreement on that.
▶ 0:11:38Um I also just want to recognize uh today that we're in joined by uh our friend uh Representative Jason Smith, who is the chairman of the Ways and Means Committee. And we are honored to have you here with us today. And I ask unanimous consent for Chairman Smith to offer a statement. And without objection, I recognize Chairman Smith for 5 minutes.
▶ 0:12:01Thank you Thank you, Chairman Moolenaar. Um Ranking Member Khanna, um it's a it's a true honor to be here with you all this morning. Thanks for having me. I commend you and your your fellow committee members for the important work you all have been doing um to expose efforts by the the Chinese Communist Party to infiltrate and influence our nation's economic activities as well as our political and public discourses.
▶ 0:12:31I particularly appreciate the working relationship our two committees, the Select Committee on China and the Ways and Means Committee, have had when it comes to combating combating China's harmful influence.
▶ 0:12:46That includes the letter that Chairman Moolenaar and I led to Treasury Secretary Bessin and IRS CEO Bizzignano earlier this year calling on Treasury and the IRS to examine tax-exempt organizations right here in the United States that have close ties to the CCP.
▶ 0:13:08Specifically, we raised concerns about China's United Front tax-exempt organizations that are peddling communist propaganda propaganda and influencing our elections in violation of their tax-exempt status.
▶ 0:13:25The The and Means Committee has spent years years investigating tax-exempt We have found that several of these organizations, which enjoy generous generous financial benefits due to their tax-exempt status, have been causing chaos and stoking violence in our communities while also interfering in our political system.
▶ 0:13:50What's even more shocking is the level to which these US-based organizations are funded by foreign nationals that are influenced by foreign governments. Most notably, Our oversight investigation into the Chinese Communist Party's efforts to meddle in our public discourse has uncovered a large network of US-based tax-exempt organizations
▶ 0:14:20tied to Neville Roy Singham,
▶ 0:14:24a wealthy American tech mogul who operates his net network out of Shanghai Singham enjoys close ties to the CCP and shares office space with a Chinese propaganda company which says its goal is to, quote, "Tell China's story well." Mr.
▶ 0:14:46Singham has also participated in a workshop about promoting the CCP During a hearing of the Ways and Means Committee earlier this year, an expert witness testified to how the Singham network mobilizes, trains, and amplifies protests to vandalize property, burn our flag, assault local law enforcement officers, shut down airports and bridges in major cities like
▶ 0:15:16New York City and Los Angeles, all in an effort to harm our institutions and disrupt our way of The Ways and Means Committee is seeking information and documentation from the three Singham Network organizations, Breakthrough News, and The People's Forum. The People's Forum alone received over $20 million from the Singham Network.
▶ 0:15:46We have made it clear to all three that we will use every tool at our disposal, including congressional subpoena powers, to conduct our oversight Most recently though, Mr.
▶ 0:15:59Chairman, foreign money from CCP-aligned has flowed into US nonprofits data centers in what can only assume is an attempt to undermine America's position as the global technology China would like to dominate the future of artificial intelligence.
▶ 0:16:27And it is clear that they are actively to exploit Americans' legitimate Americans' legitimate concerns and sow discord in our own backyard for one purpose, and that is to seize this techno- technological advantage for themselves.
▶ 0:16:49Americans have every right to question the size, the scale, and scope of projects in their backyard, but we cannot, Mr. Chairman, allow the US tax code to be weaponized against our national security interest. We will follow the money and get to the bottom of the dark web of funding sources and fiscal sponsorships that support rogue tax-exempt organizations often at the behest of the Chinese Communist Party.
▶ 0:17:20I want to thank you again um to all the members of the China Select Committee, Chairman Moolenaar, Ranking Member Khanna uh for continuing to investigate the harmful influence China and its proxies are having on American communities.
▶ 0:17:35This work is is incredibly important not only to protect the integrity of our tax laws that govern and provide generous benefits to many of these organizations, but also to the safety and security of our communities and the health of our society. Thank you once again for having
▶ 0:17:57Thank you, Chairman Smith. Uh if any other member wishes to submit a statement for the record, without objection, those statements will be added to the record. I'd now like to welcome and introduce our three witnesses today. Uh Mr. David Shedd served as acting director of the Defense Intelligence Agency following a distinguished career in the intelligence community.
▶ 0:18:24He is off also the author of a new book published this year, The Great Heist: China's Epic Campaign to Steal America's Secrets. Mr. Michael Lucci is the founder, CEO, and chairman of State Armor, which is doing important work in equipping state and local governments with the necessary legal tools and policy solutions to deal with global security threats. Mr.
▶ 0:18:53John Yang is the president and executive director of Asian Americans Advancing Justice, which focuses on civil rights for Asian Americans through advocacy, education, and litigation. And with that, I want to welcome all of our witnesses today and thank you for being here this morning. Uh Mr. Shedd, you are now recognized for your opening
▶ 0:19:17Thank you, Mr. Chairman. Chairman Moolenaar, ranking member Khanna, distinguished members of the Select Committee on China. Thank you for this opportunity to speak today about one of the most pressing in the free world. China's unprecedented campaign of industrial espionage, that is.
▶ 0:19:38As former acting director of the Defense Intelligence Agency who spent decades in the intelligence community and on the National Security Council staff, I want to thank you for the opportunity to speak today about this epic campaign to steal America's industrial secrets.
▶ 0:19:57In 1984, Deng Xiaoping, the successor to Chinese Communist Party Chairman Mao reset the strategic direction of the His vision has been implemented by successive Chinese leaders, including Xi Jinping, since 2012.
▶ 0:20:16Deng underscored that China would retain ideological stability, code words for the CCP's single-party but would introduce managed capitalism under socialist guardrails to enable social transformation.
▶ 0:20:34China's economic transformation took off in earnest once China joined the World Trade Organization in December 2001, during the period that I was in the White House NSC staff. Since then, China has orchestrated a highly strategic, highly accelerated, and multifaceted effort to steal commercial and technological secrets from the United States and and other Western nations.
▶ 0:21:01The campaign, which blends cyber espionage, human intelligence, academic collaboration, and commercial investments has been instrumental in propelling China's rapid economic and military rise. Since joining the WTO, China has transformed from an economic backwater into a global superpower leveraging stolen technology and property to dominate critical technologies such as telecommunications, artificial intelligence, quantum computing, hypersonic
▶ 0:21:32weapons, biotechnology, and yes, even in the agriculture sector. No commercial area is out of bounds for China's reach. China's approach is unique and Unlike traditional espionage that I know a little something about, which typically targets government-to-government classified information, Beijing has adopted this whole-of-society strategy.
▶ 0:21:57Under Xi, the security and intelligence capabilities of the Ministry of State Security have ballooned in size, vastly outstripping the CIA, the NSA, the DIA, and the FBI. Their mandate is to carry out the world's greatest and grandest larceny.
▶ 0:22:15The CCP strategy fuses military and civilian collection objectives, and the People's Liberation Army has the first rights to use purloined commercial proprietary intelligence to enable its vast military modernization.
▶ 0:22:32Corporate America, professors, academic researchers are all fair targets for the The CCP has weaponized venture capital, private equity, and academic partnerships to acquire sensitive technology, research and development, and intellectual property that it could not obtain legally.
▶ 0:22:53This decentralized but highly strategic collection method, combined with theft, graft, hacking operations, has allowed China to leapfrog the West in key areas of innovation. The implications of the campaign this this campaign is profound.
▶ 0:23:10Emerging technologies are the battlegrounds of great power competition today, and China's theft of secret the theft of the secrets threatens not only the national security of Western nations, but also the competitive standing of their companies in the global marketplace. As former Attorney General Eric Holder aptly stated, there are only two categories of companies affected by the trade secret theft from China. Those who know that they've been compromised and those who don't.
▶ 0:23:41Yet many private sector leaders remain to the long-term consequences of fueling Chinese economic superiority in pursuit of short-term profits. Western governments and security apparatuses have failed to react appropriately to safeguard against the CCP's steadily evolving campaign of theft.
▶ 0:24:01Traditional legal and regulatory frameworks are ill-suited to address the modern tactics employed by China, making prosecution of theft cases difficult even when evidence is overwhelming. As Secretary of State Marco Rubio has warned, American companies are committing corporate suicide. And I quote, by failing to prioritize IP security and guard their assets. This is not just a commercial war.
▶ 0:24:29It is a unilateral campaign by China to reshape and dominate the global order. In the Great Heist, my co-author Andrew Badgerow and I document the systematic campaign driven by initiatives such as Made in China 2025, which was launched in 2015 and represents, according to former FBI Director Chris Wray, the largest transfer of wealth and knowledge in history, estimated to be about $600 billion annually.
▶ 0:24:57While direct military confrontation is not inevitable, the risk of a hot war over Taiwan grows with each passing day. CCP Chairman Xi has declared his intent to reunite the island by 2027. And of course, this would have could happen even sooner. Such a conflict would likely involve deployment of new lethal technologies and could target the American homeland itself.
▶ 0:25:24I urge policy makers and US corporate leaders to recognize the gravity of these PRC CCP actions and take decisive actions to protect our national interests and secure the future of the free world. I welcome your questions and once again, thank you for the opportunity to be an part of this very important hearing. I yield back.
▶ 0:25:48Thank you very much. Mr. Lucci, you may proceed.
▶ 0:25:54Chairman Moultonar, ranking member Khanna, and members of the committee. My name is Michael Lucci. I'm the founder and CEO of State Armor, a nonprofit that works with state governments to protect the American My message is simple. The American homeland is contested. States are on the front lines of this contest. And the Chinese Communist Party is exploiting vulnerabilities at the state and local level that can go overlooked here in Washington, D.C.
▶ 0:26:23My remarks will focus on pre-positioning near critical assets, influence operations, their impact on state institutions, state protective responses with a focus on Nebraska and Texas, and finally, the pressure campaigns that have been put upon the state lawmakers who have enacted these protective First on pre-positioning. Federal leaders have been very clear that the Chinese Communist Party is pre-positioning on critical infrastructure and creating vulnerabilities in our supply chains.
▶ 0:26:53What state leaders find is that they are also physically pre-positioning near military installations. I'll give just a few examples. A former officer in the People's Liberation Army bought 140,000 acres near Laughlin Air Force Base base in Texas where he tried to directly access the Texas energy grid near the base. Huawei equipment surrounded new nuclear missile silos in western Nebraska.
▶ 0:27:17Fufeng Group was building a grain silo 12 miles from Grand Forks Air Force Base until the Air Force itself said that this was a clear national security Governor Cox of Utah removed a CCP front company from its industrial location near a weapons testing facility in Utah.
▶ 0:27:36And then property owners tied to Chinese intelligence have been found with properties that literally touch the fence lines of Whiteman Air Force Base and Barksdale Air Force Base in Missouri and in Such pre-positioning allows for surveillance. Someday it could allow for sabotage of those assets. States have taken action to mitigate these threats that they see in their backyard.
▶ 0:28:01On influence operations to penetrate state institutions, from our view the penetration of universities is a national security crisis. The interference operations in state houses, which I'll discuss later, is a scandal.
▶ 0:28:16Reports from this committee have documented thousands of federally funded military-focused grants that go to American universities who then turn around and partner with entities in China tied to China's military and defense industrial base to develop military technologies. So the way we see it is we are funding their military modernization through our Pentagon grants, Department of Energy grants.
▶ 0:28:42These partnerships are inexcusable, but from what we've seen, they are the tip of the iceberg for infiltration of our In terms of state responses, Nebraska and Texas have been the leading states. Most of this work has been bipartisan. In Nebraska in particular, Republican Governor Jim Pillen partners with uh state Senator Eliot Bostar of Lincoln, uh a Democrat, for the best model of bipartisan teamwork at the state level.
▶ 0:29:08In Texas, Governor Abbott has led with executive orders and the legislature has enacted overwhelming bipartisan responses to protect state assets in Texas. I'll give you a few examples of what's occurred in these states. Creation of committees to prepare for the fallout, the domestic fallout of a Pacific conflict. Military, critical infrastructure, and supply chain protections. Foreign agent registration for adversary nations. Bans on Chinese Communist Party funds in lobbying in state houses.
▶ 0:29:38The first laws in the country on transnational oppression came first in Texas and then second in Protections of research security and campus integrity, pension divestment, and protecting genetic data of Americans from the People's Liberation Army. Finally, Texas even created a state cyber command to counteract threats that are hitting small communities across Texas, rural and otherwise.
▶ 0:30:03In addition, the attorneys general of these states, Mike Hilgers in Nebraska and Ken Paxton in Texas, have driven consumer fraud cases against Chinese technology providers based upon the claim that these technologies contain contain backdoors or dangerous malware that is not disclosed to the consumer. They've worked with the FCC on this Yet when states push back against threats, they encounter sophisticated pressure campaigns.
▶ 0:30:31Jamestown Foundation's Sherry Yu describes how the Chinese Communist Party's United Front system co-opts individuals, nonprofits, and businesses to advance party interests. This happens in state houses. State Senator Eliot Bostar testified earlier this month before the CECC that he personally received threats from a large Chinese business in the state of Nebraska about what might happen to the economy of Nebraska if Senator Bostar's foreign agent registration bill
▶ 0:31:01Governor Pillen of Nebraska has come out and said that he would prefer that Chinese Communist Party companies that engage this behavior just leave the state of Nebraska. Digital threats have been sent to people who testify in front of committees in Nebraska. Omaha reportedly has a United Front service In Texas, lawmakers and Chinese Americans who testify in committee in favor of these protective measures have received threats.
▶ 0:31:28Chinese Communist Party state media talking points are repeated in hearings for hours in Texas even when they have no relation to the underlying bill. Pastor Bob Fu in Texas has been a victim of transnational oppression. There was even a hearing of Texas's equivalent committee of your committee. So, Texas had a committee on on foreign adversary threats. That hearing was shut down by a cyber attack in September of 2024. This is not normal advocacy.
▶ 0:31:56It is a pressure campaign from a non-democratic actor acting within our democratic system. It happens across the country, although I highlight just the examples of Nebraska and Texas today. Our openness is a strength. So, is our federalist system. But our open system cannot endure endless attacks and exploit exploitation from state actors who do not agree with our democratic values. Thank you for addressing these concerns.
▶ 0:32:25Thank you for interest in influence operations at the subnational level, and I look forward to your questions.
▶ 0:32:32Thank you. Now, let's turn to Mr. Yang.
▶ 0:32:36Thank you very much. Thank you, Chair Molinar, Ranking Member Khanna, and members of the Select Committee. Good morning. My name is John C. Yang. I'm the President and Executive Director of Asian Americans Advancing Justice, which is a national advocacy organization that advances the civil and human rights of Asian Americans and seeks to promote a fair and equitable society for all. This committee was created to confront the security challenges that the Chinese Communist Party presents to the United States. We do not dispute that this challenge is real. Just as the challenges posed by the Putin regime and any other autocracy is real.
▶ 0:33:07These governments are autocracies and dictators. And they do not respect civil rights, human rights, or That said, my purpose here today is to help this committee address these challenges without repeating the mistakes that our country unfortunately has sometimes made in the past, substituting ethnicity-based suspicion for evidence-based enforcement in the name of national security.
▶ 0:33:30When we in the United States have failed to recognize the distinction between and the people subjugated and ruled by those governments, we have subjugated people in our country, often our own citizens and residents, to harm and Unfortunately, Asian Americans have too often been the victim in the name of national security. Now, this risk is not hypothetical.
▶ 0:33:52We saw the lynching of Chinese Americans and the passage of Chinese Exclusion Act when some believed that Chinese laborers, some of the same laborers that helped to build the transcontinental railroad, were taking jobs from from white Americans. We saw the incarceration of Americans of Japanese descent during World War II and the murder of Sikh Americans and countless hate crimes against Arabs, Muslims, uh Middle East, and South Asians after 9/11.
▶ 0:34:18More recently, we experienced tens of thousands of hate incidents, not to mention physical violence, against the Asian American community because of In each of these cases, there were legitimate concerns related to foreign affairs. But in each of these cases, our domestic community, our fellow Americans, were harmed. Unfortunately, this is not a vestige of a bygone era, but rather manifests itself in policies today.
▶ 0:34:43As many of you know, your colleague, Representative Judy Chu, has been faced with accusations of divided loyalty simply for her stalwart advocacy on behalf of the Chinese American community. More recently, Maryland Delegate Chao Wu has been slandered in part simply because he has an accent. These are not the profiles of foreign agents. These are the profiles of Americans serving our country. Policies and initiatives have likewise unfairly targeted the Chinese American and broader Asian American community.
▶ 0:35:10The Department of Justice's China Initiative, launched in 2018, shifted from targeting people acting on behalf of the Chinese government to targeting scientists and researchers who simply had a nexus to China. Most cases involve no espionage charges at all, but rather involve administrative errors on disclosure When considering policies meant to combat state-based espionage and subnational influence, I would ask lawmakers to engage in a thorough cost-benefit analysis with the nuance necessary to develop real solutions
▶ 0:35:40to precise problems. Saying that a policy will benefit national security is too simplistic and does not lead to effective results. On the other side of the ledger, the cost to the Asian American community is clear. Surveys conducted by Pew and the Asian American Foundation found that one in two Asian Americans no longer feel safe because of their race or ethnicity. The number of scientists and students that are interested in coming to the United States, not just from China for but from countries all over the world, is dwindling.
▶ 0:36:09This brain drain does not benefit national security. National security is not only about keeping back the bad actors out. It's also about keeping good innovative contributors in. I offered this community I offered this committee five specific recommendations for developing policies that will have a net benefit to America without unnecessary costs.
▶ 0:36:31First, let's predicate policies on specific articulable evidence of conduct, not ancestry, and ensure that anyone charged with enforcing those policies have the proper training and expertise to determine wrongful conduct.
▶ 0:36:45Second, avoid over-criminalizing administrative errors and ensure that resources are devoted to investigating issues where security is truly Third, tailor ownership or lending restrictions to actual indicators of foreign government control, not ordinary immigrant family ties. Fourth, build anti-bias training, civil rights due process protections, along with a reporting mechanism that ensures transparency in our system.
▶ 0:37:13And fifth, invest in language access and education to ensure that our communities receive the information they need to contribute to our economy and our Finally, I urge this committee to pair enforcement with renewed people-to-people exchange. Asian Americans are not a security liability to be managed. We are an asset, a community uniquely positioned to rebuild the scientific, academic, and business ties that have historically reduced the between nations.
▶ 0:37:42A targeted approach is not necessarily a softer approach, rather it is a more effective one. Thank you very much. I look forward to your questions.
▶ 0:37:50Thank you. Uh now we'd like to turn to questions and I'll recognize myself for 5 minutes of questions. Uh Mr. Shed, you've discussed the importance of protecting the crown jewels of American technology, including our cutting-edge AI models.
▶ 0:38:08This week news broke that Alibaba targeted Anthropic with a distillation attack to steal Anthropic's intellectual Given your expertise and China's espionage methods, what does this tell us about how China is targeting our
▶ 0:38:27Thank you for Thank you for that question. Uh you hit on a keyword, And perhaps the audience doesn't know the term, but essentially it is uh uh the data that's in very expensive models that have been built by Anthropic and others uh in terms of artificial That then the Chinese are taking that data and if I can use the term dummying it down in
▶ 0:38:58order so that they can put it on the market at a much lower cost and with greater accessibility to it. So tells me that we're looking at the CCP's ability to generate new requirements and new capabilities uh uh uh adapting to the transformation and the growth of AI.
▶ 0:39:24So when we look backwards and look at DeepSeek as an example, when they rolled that out, their capabilities surprised many in terms of of having their own version of And in doing so, it told me that they are on the path of monetizing but then also accessing the data of all users that would have anything to do with these models that then they distill from these much larger and expensive
▶ 0:39:56But the bottom line is financial as much as it is the intelligence collection as They're able to bypass the investment that these large AI companies in the United States have put into it, whether they're still in private equity or outside of that or in the on the path to becoming uh an IPO. And and therefore don't have to invest in that area and simply leapfrog into having it.
▶ 0:40:25So it tells me that their great heist continues in the area of both data and technology with with regards to uh to what they've appeared to be doing with Anthropic and the distillation of these models.
▶ 0:40:42And following up on a related topic, but if there was one action that Congress could take today to raise the cost of the CCP's malign influence operations against the United States, what what would it be? What would the one thing we could do be?
▶ 0:41:00to me, I I have looked at the deal with TikTok and ByteDance, which is the parent of TikTok, and the arrangement of a 20% or ownership by ByteDance still of TikTok, being able to carry out what was the mandate of Congress in closing down TikTok would be a great step forward. It would do a couple of things.
▶ 0:41:30It would obviously cut off the access to data, but by extension, and my witness colleagues may speak to this more in terms of malign influence, the ability to control the uh the clicks associated with it.
▶ 0:41:46But it would also signal to the Chinese that that is an unacceptable flat platform to have in the United States, of which there is 170 million users and 1.7 billion globally, and that would be one action, but would be taking the action that Congress and the mandate that Congress gave to that in in shutting it down.
▶ 0:42:09Thank you. Uh Mr. Lucci, giving the CCP's whole-of-society mobilization through its United Front strategy, how can we help federal, state, and local partners address PRC-linked activity that exploits US openness?
▶ 0:42:25Chairman, I think that what states could use a lot more of is expertise from the federal government about what these operations look like. So, they're they're dealing with uh things ad hoc. They see very strange activities in state houses. They see Chinese diaspora being targeted in places like Houston. And it it's a new problem for them to deal with. I've spoken with law enforcement at the state level on the issue of, say, transnational repression. And what they'll say is, "We know it's a real thing.
▶ 0:42:54When people talk to us about it, we we know it's happening. We know it's likely a state actor behind it, but we've really kind of never trained on this stuff as you would train on any number of other issues in your law enforcement training." And so, that's the type of thing um I I know that there are proposals on transnational repression from this committee and others uh that could help state leaders understand from a national security Washington, D.C.
▶ 0:43:18level what to understand and look for in these threats and how to counter these threats so that they're not kind of having to deal with it ad hoc as they see and learn about it in process, that they could actually train on it and learn about it. Some states, Utah, Texas, and otherwise, are creating their own training modules to counter transnational repression, but I think that they would all seek federal expertise on that issue.
▶ 0:43:42Thank you very much. And now I'd like to recognize Ranking Member Khanna for 5 minutes of questions.
▶ 0:43:48Thank you, Mr. Chairman. Mr. Lucci, a few months ago you tweeted out, quote, "Two Chinese Americans accused of attempted bombing at MacDill Air Force Base gained US citizenship via They are not loyal to the USA. There are more, quote, Chinese Americans as born in Saipan, which is a US territory, and raised in communist China. Denaturalize them all.
▶ 0:44:18I'd like to offer you an opportunity to correct the record for such a bigoted and xenophobic statement. Do you believe millions of Chinese Americans who gained citizenship through birthright should be denaturalized or are you simply a
▶ 0:44:33Uh Congressman, what I'm referring to are uh Chinese folks who are just born in a US territory and then go immediately back to China. They live their whole life in China. The estimate of 1.5 million comes from a book that came out
▶ 0:44:47asking you a simple question. Do you believe these people should be denaturalized? It's a US law that anyone born in a US territory is a American citizen. Do you believe they that 1.5 million should be denaturalized?
▶ 0:44:59I think that if they're loyal to the Chinese Communist Party
▶ 0:45:02I'm not asking that. I'm saying they're born here. Do you think they should be denaturalized? 1.5 million.
▶ 0:45:07Congressman, I understand under the current laws that they have citizenship this year.
▶ 0:45:11And And you think that should be
▶ 0:45:13I think that if they have practically zero nexus to the United States of America other than they were born in a territory, I think it's worth considering that, yes.
▶ 0:45:22Do you believe Chinese Americans uh are more disloyal than uh other Americans?
▶ 0:45:28Congressman, there are seven Chinese Americans who live in my household. I do not think that they are more disloyal than other
▶ 0:45:34just think that they should be denaturalized even if they were born So there there are two types of of issue we're talking about here. There are folks who are born here. They're just raised here. They're They're Americans like you and I. Uh it's a very different thing when you have folks, my understanding is about 50,000 per year, are just born in a territory, they're there for a couple weeks, and then they go back and they're raised in China. I think that the situation
▶ 0:46:01Right, there's 50,000, and then you add it up over years. 50 to 100,000 per year. It's going on 15 to 20 years of this. So, I think that I actually think that this is a very clear security threat because we've seen this so that there's a a gentleman
▶ 0:46:13Are you Are you saying this for So, are you saying any American born here who then goes to a foreign country and is raised there should be denaturalized? Is that your position?
▶ 0:46:22That's not my position.
▶ 0:46:24What What is your position then?
▶ 0:46:25When the federal government defines adversaries, which federal government and then the federal government says these adversaries pose a national security risk to us, and then when you
▶ 0:46:35You're not You're not talking about You're talking about a blanket statement. You're saying basically in your tweet you say and you I can't believe you're not walking it back. I I fundamentally find it fundamentally racist. I mean, I and I don't use that word. I don't think I've used that word in 10 years in a committee hearing. But, the reality is that you're basically saying that if you're a Chinese American uh and you're born under US law uh in a territory, you're you you should be denaturalized. And I'm asking you, is that just applied to China?
▶ 0:47:03Or are you saying anyone who's born in a US territory uh if they then go to live in another country and are there raised till 18 that they should be
▶ 0:47:15Congressman, let me restate. My household has eight people in it.
▶ 0:47:18I don't really care about your household. That's like saying I'm friends with someone who's black, but I'm still a racist. I want to know what your actual policy is.
▶ 0:47:25Congressman, you you accused me of racism against
▶ 0:47:27Yes, I do. I think you're a racist. I think you are a racist.
▶ 0:47:30So, you're accusing me of racism
▶ 0:47:32I'm not accusing you. I'm saying the actual statement. I think your statements are racist against Chinese Americans and I'm trying to understand whether you believe that this is just Chinese Americans who should be denaturalized or whether you believe that anyone born here who goes to a foreign country and is raised should be
▶ 0:47:50The second part, certainly that's not what I said. What I said was that when folks are born in a territory, they're there for a week or two. They go back to communist China. They have no real nexus to the United States of America that we should consider that. I think that that's it creates a clear
▶ 0:48:06Are you saying that just for Chinese Americans or for anyone born in the United States who goes and is raised in a foreign country should be
▶ 0:48:14I would consider it for foreign adversary nations as defined by the federal government. That's where the federal government
▶ 0:48:19You want to denaturalize Iranian Americans, you want to denaturalize Russian Americans, you want to denaturalize Korean Americans, North Korean I mean, where does this end?
▶ 0:48:28when when folks have no My point was in the number of 1.5. Obviously, there are way more people of Chinese descent born in the United States of America birthright through that. 1.5 is the estimated number of people born just in a territory. They're there for a very short amount of time and then they're raised in China loyal to the Chinese Communist Party. I think that that's a clear security risk. I'll repeat. I I take, you know, direct offense. You're saying I'm racist against my own family.
▶ 0:48:55You think you're racist against Chinese Americans? Yes, I do.
▶ 0:48:58I Congressman, with all due respect, I think that's no that makes no
▶ 0:49:01We'll put out this exchange and the American people can decide when you're talking about eliminating birthright citizenship for Chinese Americans whether they think you're a racist. I think a lot of Asian Americans and many Americans will think you are.
▶ 0:49:12I think that when people see that I have a Chinese wife and four Chinese children
▶ 0:49:17I don't think that excuses racism.
▶ 0:49:19I don't think they're going to see racism in that, sir.
▶ 0:49:23Representative Johnson.
▶ 0:49:26Thank you, Mr. Chairman. My line of questioning will be for Mr. Shed. Of course, one of the reasons that we know the American economic system is superior to that of China is that by and large the priorities and the market conduct of our companies are determined by managers and owners as opposed to government officials.
▶ 0:49:45Now, of course, that being said, I I do understand the real value that come from properly constructed export controls and other IP IP But I just want to I want to chat with you a little bit about how do we strike that right balance? How do we get the Goldilocks spot? I think a number of members of the committee have been properly captivated by your crown jewels doctrine.
▶ 0:50:10how do we ensure that we don't overstep with the regulations around American company behavior? And are there some things that we should endeavor to not do as we attempt to make sure the companies in America that their interests are well aligned with our national security interests?
▶ 0:50:32Thank you very much for your question, I am struck by someone who grew up for a period of time in Chile under communism, 1970 to 1970 late 1972. And I can tell you it wasn't
▶ 0:50:49Sir, perhaps the gentleman could pull the microphone just a little closer. Thank you.
▶ 0:50:53Is that better? Um and having grown up in Latin America and in Chile during that period of time, it's not a world that I want to live under and having state control of the private So to your to your premise, how do we find that that sweet spot, that perfect state? I'd give you three ideas.
▶ 0:51:18The first is encouraging corporate America, and I don't mean legislatively, but certainly as my colleague to the left has talked about better educating with what the federal government knows the Chinese are doing to corporate America to be able to have them protect those crown jewels as I refer to them in what I call a small yard with high fences. That is the cyber protections around that.
▶ 0:51:46That may not be 80, 90% of the rest of the company, but where that IP is that they do not want to lose, that needs to be very clearly defined. I would look at the the area of of investments by China in the United States and the front companies that they set up in terms of whether it's venture capital or into private equity in where they own a piece of the of
▶ 0:52:16the company that they're a part of. And again, I would encourage that the that my former colleagues of the Federal Bureau of Investigation have those kind of discussions at at a at a at a higher level.
▶ 0:52:30And finally, and again, it's not a legislative action, and I have spoken to a number of the Fortune 500 chief security officers as a result of this book, that security be elevated into the C-suite if if I can put it that way. In other words, treating it as it should be in terms of the threat that it represents.
▶ 0:52:53But I am not here to argue that we are better off if the federal government introduces more legislative corporate America, but rather that it be an education process in which they're able then to take the actions themselves, motivated by the way by quarter-on-quarter profits that are affected by the stealing of their intellectual property.
▶ 0:53:15So yes, I think the way you laid that out provides me more confidence when you talk about educating and encouraging companies to do the right thing. I mean, I think that makes sense. You know, in your testimony you talked about requiring companies to treat their R&D and intellectual property as national security infrastructure. What Give me example of what What form does that requirement take?
▶ 0:53:38So I coming out of an intelligence and defense background, I look at the the listing of which you have an a known affiliation by the Chinese, whether it's intelligence, security, or PLA in terms of its support, which is virtually indistinguishable, that has a relationship with Department of War Contracts. There you need to call that out. That is regulatory.
▶ 0:54:07And so you would be identifying that list of of those companies that have that association. And frankly, when that's identified, if there is a merging of contract money that the taxpayers, the US taxpayers, putting into it with known Chinese association on the other side, that needs That's the regulated part. That's one example.
▶ 0:54:32Thank you, Mr. Chairman. I yield.
▶ 0:54:36Thank you. Representative Castor.
▶ 0:54:39Well, thank you, Mr. Chairman. Thank you to our witnesses today. Mr. Shed, thank you for your decades of of service to to the country, especially our national security and intelligence agencies. In your book, The Great Heist, China's Epic Campaign to Steal America's Secrets, you delve deeply into the ways that the CCP has malign designs and steals our America's intellectual property.
▶ 0:55:04And you've just given us a few um pieces of advice to not overdo it from a legislative perspective, but um there in your testimony, you mentioned that we need to prosecute these thefts more effectively. Do you have any explicit recommendations for us on how we really hold the CCP accountable for their theft of IP? I think the tone is set at the top.
▶ 0:55:32And when I say that, I mean the White House and the Department of Justice in looking at cases where the prosecutors are are somehow incentivized to prosecute known espionage. This isn't about profiling.
▶ 0:55:53It is about the facts of that activity in a way that I'm not sure that my former colleagues at the FBI think of the Chinese economic espionage in in the way in the scale that it represents.
▶ 0:56:09And the ability then to prosecute them with uh an understanding that for example, building a a witness capability of where a number of those witnesses have either fled back to China uh against a now uh clear case in terms of the prosecution, there ought to still be a way to bring that conclu- a conclusion to that prosecution uh in
▶ 0:56:40in that manner. And secondly, uh I I think it's back to the education in in the direction from the top. The the scope, the size, the depth of what the Chinese are doing is so broad and so wide that I think our DOJ needs to think more uh proactively about how how they stem that through the process of of
▶ 0:57:06Yeah, and part of I've been concerned with the mix mixed messages coming from the top of the administration when it comes to uh what the CCP is doing. And the Office of the Director of National Intelligence has been in the news lately uh and over the past year for sure. And last year, they scaled back the Foreign Malign Influence Center.
▶ 0:57:30That seems like it that would be particularly counterproductive to American interests when we're trying to to counter the what China what the PRC is doing to to steal our intellectual property. What is your view on this the scaling back of the floor formal line influence center that was intended to to take on these threats.
▶ 0:57:53Uh without having any insights as to how effective it was clearly on the surface of scaling it back is a mistake. Uh not only has that malign influence continued, it has continued to grow. And as I gave the example of TikTok as as as an example of the capabilities of having a platform. But you have the Confucius Institutes 100 I believe is is the number in inside the United States.
▶ 0:58:24And understanding what they're doing. Now, I'm not arguing that that ought to be a CIA or DIA mandate, but it should be a an FBI mandate. Uh and so scaling that back to me in with without knowing the details of why and how that decision was taken is at its core a mistake.
▶ 0:58:42Raises red flags to me. Mr. Yang, in your testimony you state that American greatness was built on the students who came to study at American universities and stayed to build American companies, researchers who collaborated across borders and advanced American science and business relationships. Uh particularly in the context of academic research, what types of research security policies do you think would be helpful at this time?
▶ 0:59:05Well, thank you for that question. Certainly one favorable development that we've seen is the implementation of what's called NSPM 33. So, this is a directive that was initiated by President Trump and carried through by President Biden that really standardized how disclosure forms work with respect to federal grants through the NIH or other federal grants for science and One of the problems that researchers encountered was there was a patchwork of different disclosure requirements. They did not understand them. Often times they violated it.
▶ 0:59:34And frankly, what we saw were Asian-American scientists and researchers got targeted because of these types of violations. By standardizing these conflict disclosure forms, now we actually can get some more transparency as to what is happening. And we can And each university, this is where I would agree with Mr.
▶ 0:59:51Shed, education is important is universities should be educated about what are the actual conflicts, what are the pain points, the security points that we should be aware of so that we can address them in a very precise way rather than overgeneralizing. You are absolutely right with respect to researchers. One thing that should be noted, there was a There's been studies done by the Migration Policy Institute and Asian-Americans Scholars Forum that shows that approximately 75% of all foreign scientists stay in the United States.
▶ 1:00:21That says something about the contribution that foreign scientists can give to the United States. So, part of this is how do we make sure that we keep them here to allow them to innovate and continue to grow our economy.
▶ 1:00:32Thank you.
▶ 1:00:33I'll go back.
▶ 1:00:35Thank you, Representative Bill Pascrell. Not sure if this thing's on or not. Okay, it is working. Okay, thank you very much. Uh Thanks for holding this hearing, Mr. Chairman. I do have quite a few questions here and I know I have a limited amount of time, but I do want to give Mr.
▶ 1:00:53Lutsi an opportunity to respond at the accusation that one of my colleagues made with regard to him possibly being a uh I don't believe this, but it a racist. Please, but briefly, sir.
▶ 1:01:08Congressman, thank you.
▶ 1:01:08you the opportunity.
▶ 1:01:09I think that there are real policy issues to discuss here. What immigration looks like, who we let go near military bases, and furthermore, that policy debate is destroyed when someone is accused of being racist against their own children. It's absurd. It makes zero sense. Policy is policy. But the whole conversation gets destroyed if we just throw the race card around against people as I said my my household's a big household. We have eight people.
▶ 1:01:39I'm the only one with no Chinese ethnicity in my entire household. So for the congresswoman to say that I'm motivated by racism against my own wife, my own children, my own in-laws. It's completely absurd and it destroys our ability to come to real policy solutions. We should avoid this type of you know race card about everything. Let's have a policy conversation because this is a very very serious threat we face from the Chinese Communist Party. Thank you.
▶ 1:02:10Thank you. Agreed. Uh Mr. Mr. Shedd, you briefly mentioned in your written testimony the challenges of managing the modern threat of legal Chinese acquisition of American companies with sensitive technologies, customer data, or IP. How does the intelligence community currently assess that risk and how does that assessment compare if that information was transferred via cyber breach?
▶ 1:02:39Uh thank you for your question. Um I again, while I still hold my clearances, I'm not in the day-to-day business of of the intelligence community give a an opinion on that. Certainly uh what I understand the intelligence community position to be though is that that risk is still very high uh in response to your question.
▶ 1:03:01And that the moderation or the the modification that the Chinese are doing now, and when I say the Chinese I'm referring to the CCP, is to Made in China 2025, which was launched in 2015, now has been extended to 2030 and we know that within that plan they have two very high priorities of focus. One is aerospace and the second one is biotechnology.
▶ 1:03:29Because they did not meet their goals out of the 12-ish or so of those goals within made of made in China 2025. And so that's that's where I I would I would place that.
▶ 1:03:42Thank you. We're going to go to the third question cuz I know I don't have much time. Uh Mr. Shed, uh when the intelligence community identifies foreign actors with potential strategic intent to acquire sensitive US intellectual property or technology through transactions that fall uh outside the the uh CFIUS uh jurisdiction, what mechanisms exist, if for communicating relevant risk information to policy makers
▶ 1:04:13or the private sector prior to deal completion,
▶ 1:04:17Uh thank you for that question which is a profoundly complex one to answer because the intelligence community as a whole has not focused as the Chinese have focused on economic intelligence or economic uh espionage and intelligence by extension.
▶ 1:04:34And so in an understanding the CFIUS process and what is behind that, of which I was a member of when when when I was still in government, in reviewing that, I think it's critical to be able to get economic and and uh financial intelligence from the Chinese as a collection matter in order to be better informed to understand what the ultimate objectives of of that particular CFIUS review process
▶ 1:05:05is when it comes to the foreign investment related that that could present a uh not necessarily dispositive, but could present a national security threat to the United States.
▶ 1:05:17Thank you very much and I again Mr. I don't believe you're a racist. And I and I I know how much you love your your family. So thank you very much Mr. Chairman and I yield back.
▶ 1:05:32Thank you. Representative Carson.
▶ 1:05:37Thank you Chairman and ranking member. Mr. Lucci, many states have passed laws direct Chinese land purchases or investments near sensitive sites. Do those laws reach Chinese controlled entities operating under American brand names and can a Chinese owned company that presents as an American employer lobby state legislators accept economic development initiatives or influence state
▶ 1:06:07procurement without triggering any disclosure requirements?
▶ 1:06:10Congressman, you said without triggering I missed the last few words there.
▶ 1:06:14Uh triggering disclosure requirements.
▶ 1:06:17Congressman, thank you. In terms of the purchases of land, usually that that's determined by who actually owns the entity. So it's an American subsidiary, for example, Sears owned by Chinese military company and so purchases by Sears would be subject to such laws. I'll give you one example, Sears just blocked a critical infrastructure protection in Florida because it would have impacted them and their access to critical infrastructure in the state.
▶ 1:06:45In terms of economic incentives, actually again Sears was supporting a law in Tennessee to give themselves economic incentives for being in Tennessee. It is very normal for foreign adversary companies to benefit from economic incentives at the state local level, perhaps at the federal level as well. I don't look at that as much. There have been states Nebraska and otherwise who've cut off those economic tax incentives to foreign adversary companies, whether China, Russia, Iranian, or otherwise.
▶ 1:07:13In terms of disclosures, so some states have done foreign agent laws. Those will also tend to look through and say, "Who's actually behind this this company?" And again, the companies, say for example, American name, but it's owned by China. Smithfield would be impacted by a foreign agent registration law at the state level. And in fact, that's the company that issued a veiled threat to Nebraska state senator Eliot Bostar for advancing a foreign agent bill in Nebraska.
▶ 1:07:43They went to his office and they talked about economic disruptions to the state if that bill were to advance. Thank you.
▶ 1:07:49Yes, sir. Thank you. Uh Mr. Shedd, you spent 33 years in intelligence. Thank you, sir. Um please help the committee understand this. If China hacked an American company and walked out with customer data, manufacturing secrets, and even R&D, uh we'd have the FBI at their door.
▶ 1:08:08And I I I I I come out of the IC, but if they buy that same company through a legal acquisition, and they get all of that and more with a handshake and and a press release, is our government effectively treating those two scenarios as equally dangerous? Or does a legal paperwork give us kind of a blind spot that we can afford to overlook?
▶ 1:08:35Well, thank you for that question. Thank you for your service in the IC. I I do believe that there is a blind spot with that. And it has to do with all the very legal means in which Chinese investment is is being done in the United States, whether it's at the venture capital level into private equity, or or directly in terms of of what they're buying.
▶ 1:08:58So, as you say in your scenario of the first case, it would be treated as economic espionage if it were taken out, but then buying the company and then having that intellectual property and the rest of uh the knowledge and the and and the capability associated with it would be under a a legal framework.
▶ 1:09:17And so I think that is an area that needs to be looked at very very carefully if we again can find that directive or that direction uh from the CCP and the Ministry of State Security as a security matter, and that may not be all companies inside the United States by any means.
▶ 1:09:36But certainly in your example, if it first was uh treated as economic espionage and they buy that exact same company, it sounds to me like there is a loophole that's available to uh the Chinese buyers.
▶ 1:09:49Yes, sir. Um lastly and quickly, Mr. Yang, you've documented how uh the China Initiative devastated careers of innocent scientists, um people who made minor disclosures uh and even errors, but not espionage as it were. Um I want to ask you the harder question, sir. Do you believe that there is a way to aggressively target genuine CCC CCP infiltration of university research, um the kind of partnerships that Mr.
▶ 1:10:18Lucci while fully protecting Chinese American students and faculty from being treated as suspects?
▶ 1:10:25I I think there is a way. There's a couple of things that I would suggest. Number one, like I said, NSM 33 is a start because it provides for the disclosures that are necessary to identify real conflicts of interest. Number two, I would offer that we should make sure to educate universities on the types of conflicts that are involved, the sensitive technologies that are involved, so that we could understand what areas we all need to be clear on.
▶ 1:10:48Similarly for FBI and law enforcement, making sure that they are educated about what constitutes open research that is part of the research world versus what constitutes actual national security threats. Lastly, I would want to incentivize to make sure that those researchers that that want to be here, most of them come here because they want to be here, have the means of doing so. One area I think that there is agreement is this includes reform of our immigration laws to make it easier for them to become citizens here.
▶ 1:11:17Reform of our immigration laws so they could bring their family members here so they they would not be subject to that transnational repression that we're talking about.
▶ 1:11:26Thank you. Representative Gimenez.
▶ 1:11:31Thank you, Mr. Chairman. And Mr. Chairman, going back to to what my my colleague went back and I I also believe that you're not a racist and I just want just want to ask you again, members of your family, your wife, where is she
▶ 1:11:46She's from she was born in Tianjin, China. She came here for graduate
▶ 1:11:50And I guess then that makes you your children will be, you know, half half half Chinese. Your in-laws, they're also
▶ 1:11:59They are, yes.
▶ 1:12:00Thank you. And so it it kind of makes it I understand now why one of my colleagues was cutting you off because the answers would be a little bit inconvenient to a a charge of racism when in fact your your household is mostly mostly made up of Chinese
▶ 1:12:19Congressman, it's as if I would be called anti-Italian even though I have Italian ancestry because I simply criticize the mafia.
▶ 1:12:26I got you.
▶ 1:12:27I think that Italians can criticize the mafia without being anti-Italian.
▶ 1:12:30Correct. I understand and then it's easy to cut you off and and and say you're a racist and then anything that you say will be discarded because you are in fact a racist, right? I mean that's that's the whole point of the of the of the questioning. Now, do you know where I'm from?
▶ 1:12:45Congressman, I believe you're from Southern Florida.
▶ 1:12:48No, but you know where I was born?
▶ 1:12:50I I born in Cuba, you know, I came here when I was seven, all right? You know who I'm loyal to?
▶ 1:12:56Congressman, I assume it's the United
▶ 1:12:57I'm loyal to the United States of And I was And I stayed I stayed 6 years in 6 and 1/2 almost 7 years in Cuba. I am loyal to the United States of Uh I am certainly not loyal to the Communist Party of Cuba. Um and so I understand your reasoning uh that somebody that comes here for 2 weeks and then lives their entire life in China may not be loyal to the United States of America uh because I am not loyal to the country of my origin.
▶ 1:13:28I'm loyal to the United States of Would it surprise you to know that um and by the way I support uh birthright citizenship. I do, okay? But you also have uh to understand that there are variations of that, all right? And uh and that we have to be smart and to protect American American security. And so uh would it surprise you to that uh China does not have birthright citizenship?
▶ 1:13:54Congressman, my understanding is that our birthright citizenship is is quite
▶ 1:13:58Right. But would also surprise you that as soon as you as a Chinese national then go out to another country and get a be a citizen try to be a citizen of another country, you know what happens to you? You lose your your Chinese uh citizenship automatically. Did you know
▶ 1:14:19Yes, Congressman. I I think an important point to add on to that is the party doesn't care if a Chinese ethnic person is American citizen. The party still considers Chinese Americans subject to their rule. They just uh an ethnic unity law is going into effect July 1st of this year. And the party says that it gives them more power to go after anyone in the United States with any Chinese ethnicity. So the party doesn't care what your citizenship is. They're the ones who focus everything on race.
▶ 1:14:48If you have any Chinese ethnicity, the party says they get to go after you.
▶ 1:14:53I understand and I don't want to be like the Communist Chinese Party, okay? So, I don't want America to be that, but I understand the reasoning that hey, we may even have to look at those folks that have been spending all their life in China that may have American citizen maybe a little bit different, maybe, because it's just I can see myself, all right? Uh like I said, I'm I'm loyal to the United States of America. I'm not loyal to to Cuba, uh even though I was born there and stayed 7 years there.
▶ 1:15:22Um going off that. Um I believe that there's a pattern that's developing of attacking AI. And I believe that there I you know, I guess the the suspicious nature in me says that somehow the CCP is involved in this because they want us to stop doing what we're doing so that they can get uh and and win the race to AI. Am I far off in my thinking, uh Mr. Shed?
▶ 1:15:50I think you're spot-on in the race for artificial intelligence and who's going to come out ahead. They have every vested interest to create conflict in the United States and I think the term uh sow discord in the United States over data centers and everything that's associated with that and and their goal is ultimately to merge ahead using all tools available to in order to create this friction
▶ 1:16:20point, uh which is beginning to emerge uh in in a very, very decided way in terms of the political implications and all of that. They they then combine that with uh they they mix it up with the issues of the electric grid and all the rest of the other aspects of it. No, that is not a coincidence.
▶ 1:16:42Yeah, and I think they're using that to for for for their advantage and try to put an anchor around our research into AI because they understand how critical it is for us for us to win AI, for them to win AI, because frankly it's it's a future. Finally, I don't know if I have how much time I have left with one final question. We have a a number of large corporations that operate out of China. And I know that there are laws that say they need to they must cooperate with the PLA and Chinese intelligence agencies.
▶ 1:17:10Some of these large corporations have been telling us that no, that they don't they they don't comply with that. Um I don't know who can answer this, but do you believe those large corporations or do you believe that they're just telling us that so that we allow them to remain there because I actually believe it's a huge security risk for for the United States for those large and their intellectual property to be uh in China and actually cooperating with Chinese authorities.
▶ 1:17:38Every one of those corporations that operate in China have CCP employees. At hard stop. That's just the reality of it. They have a duty to report and collect on that company. Secondly, every US corporation that's a or Western corporation that's vested or invested in China does not have control of its cyber capabilities within the mainland. That those belong to the Chinese Communist Party.
▶ 1:18:07Thirdly, every one of those now is affected by new laws that have been passed since 2015, the cybersecurity law, in which the data then that they intend to extract is is prohibited from being taken out. Their profits are now being affected in terms of what they can remove.
▶ 1:18:27And the most nefarious is the national intelligence law that was passed in 2018, and that's Article 7, in which that every Chinese citizen, when called upon, and that's an important point to underscore. When called upon, must cooperate with the Chinese Communist Party through the mechanisms of the Ministry of State Security both at the provincial level and all the way up to the their their version of the federal level.
▶ 1:18:52If I might, if I could have the opportunity, since I served as legal director for an American company, Illinois Tool Works, in China, I I will say that there are manners in which our company was able to manage our intellectual property, manage our trade secrets in a manner that would protect our company and protect our innovation in remaining in the country. I agree with Mr. Shedd that there are challenges to all of that and there are is evolving network.
▶ 1:19:18I think this is where I I would agree with him that education of our companies is so vital to this because there are manners in which we can do this, but it requires cooperation, requires education, requires a level of expertise that sometimes we're just being a little bit too simplistic about.
▶ 1:19:34Representative Takano.
▶ 1:19:38Thank you, Mr. Chair. Um you know, as the great granddaughter of a Japanese American who was imprisoned during World War II, I'm acutely aware that [clears throat] some of our worst violations of civil liberties in our nation's history have been carried out under the banner of national security. And looking back, we know that criminalizing an entire community, you know, made Americans not stronger or safer, but actually weaker and more vulnerable.
▶ 1:20:09We must ensure that our response to Chinese espionage does not repeat the egregious mistakes of treating people as suspicious because of their ancestry rather than because of the evidence at hand. Um Mr. Shedd, can someone born in the United States be disloyal to America? Just say yes or no.
▶ 1:20:31Can someone who lives their entire life in the United States be disloyal to America? Yes or no?
▶ 1:20:38Can someone who is not of Chinese descent be loyal to China? Yes or no?
▶ 1:20:46So, you know, we're a country that tends to be focused on classifying by race. But, if we look at the ODNI and the FBI China threat investigation, um Chinese intelligence agencies do not use race or ethnicity as a primary criteria for their recruitment. They instead focus on specific access, clearance, or expertise of an individual. We also know that a significant share of known espionage cases involve non-Chinese operatives.
▶ 1:21:17If we're focusing so much of our suspicion on people with a particular ethnic background, aren't we effectively looking in the wrong places while creating the very kind of fear and destruction and division that our adversaries and their propaganda seek to
▶ 1:21:36I assume that question is directed at
▶ 1:21:38Uh I I think both things can be right at the same time. Both things being there is this imperative by the Chinese Communist Party to use ethnic Chinese in terms of access that they may have.
▶ 1:21:55And that is not to say that they are all spies by any means or any stretch of the on the other hand, there's clearly non-Chinese who have spied on behalf, including from my former agency, the And we know those cases.
▶ 1:22:13They're now public because they've been prosecuted, in which the Chinese targeted them in order to get access to, as you referred to it, classified information and all of The the the storyboard of the great heist, though, is largely focused on how the Chinese go after their targets, and they will use whatever means is available to them.
▶ 1:22:39And I don't believe they do it strictly off of ethnic profiling on their part, but rather what is the requirement that they need to to meet. On the other hand, and I think the words were used in terms of uh from the chairman, the access, the the coercion, and then the incentives.
▶ 1:23:02The Chinese government, the CCP in particular, pushes those three lines of against those who they have the greatest part of their access to, and that would be Chinese Americans or Chinese And again, that is what it has to be looked at that way because that's how they're leveraging it.
▶ 1:23:25I I understand that, but I do feel that we're creating a self-imposed imposed blind spot here by simply classifying vulnerability, potential for coercion based upon one's ethnicity. Quite frankly, China's government wants Americans to believe that competition with the CCP is not competition with them, but with people of Chinese descent.
▶ 1:23:47If we're going to allow ourselves to blur that distinction, quite frankly, I think we're handing them a propaganda victory, and simultaneously we're undermining the trust and cooperation that we need for effective counterintelligence measures as well. You know, right now, and this will be my last question, Mr. Chair, I know I'm running over time, press reports are indicating that the ODNI is working to take over This is where we need to have that trust.
▶ 1:24:13We need to be able to effectively have allies on our side to let us know what's going on, but the DNI is working to take over counter intelligence responsibility from the FBI and given that the new acting director Bill Pucci has zero experience in intelligence, zero experience in counter intelligence, zero experience quite frankly in national security, um if China is truly in fact our urgent and growing threat, aren't we just handing them a huge window of opportunity, especially given China's
▶ 1:24:43reliance on pushing the propaganda that we are simply looking at Chinese descent and Chinese Americans and Chinese researchers and scientists and and companies versus act- actually in many cases, the operatives that they're recruiting based upon their access, based upon their experience, all of these things, which in many cases a significant number of these operatives are not in fact of Chinese descent at
▶ 1:25:09Uh thank you for your question and I agree that the uh capabilities of counter intelligence ought to stay with the professionals. And that would be the FBI. They have a long history of running counter intelligence operations. And the second half of your question and commentary that I agree with as well is that the Chinese want to foster this division around race. Uh I'm I'm on many other reasons in terms of creating discord.
▶ 1:25:37So it is a propaganda benefit to them to to generate that kind of uh uh image that that we're we're doing it on on the basis of race profiling.
▶ 1:25:48Thank you, Mr. Chairman.
▶ 1:25:50Just in closing, I would um just remind people that we have been in this place in history many times over, as has been brought up, whether it's the Chinese Exclusion Act, whether it's the internment of Japanese Americans like my GG, my great grandfather.
▶ 1:26:04We need to start to learn from the mistakes that we made, that if in fact this is about true competition, if in fact this is about taking out our adversaries before they they spy on us, then we have to learn from the mistakes of our past and not judge people by the color of their skin or where they were um but in fact take a look at the evidence and really be able to make sure that we're running intelligence intelligently. Thank you, Mr. Chair. Yield back.
▶ 1:26:28Thank you, Representative Stanton.
▶ 1:26:31Thank you very much, Mr. Chairman. Thank you for the witnesses for being here Uh our national security agencies play such a critical role in countering foreign malign influence operations from the PRC. The Office of Director of National Intelligence and the State Department had offices dedicated to monitoring combating foreign influence, the called the Foreign Malign Influence Center and the Counter Foreign Information Manipulation and Interference Hub, Unfortunately, this administration shut those offices down.
▶ 1:26:59In doing so, this administration dismantled the last remaining federal government offices dedicated to tracking and analyzing malign influence operations that harm US national interests. And just this week, dozens of career intel officers were let go by acting Director uh Pultney, further eroding the expertise needed to tackle these critical issues at a time when Congress is demanding answers as to what our government is doing to counter foreign malign influence. This administration has clearly taken a step in the wrong direction.
▶ 1:27:29Mr. Shed, how does the loss of dedicated resources and expertise across our national security agencies create vulnerabilities for the United States?
▶ 1:27:39Thank you for your question. Um clearly, I care passionately about being able to counter the the malign influence. Losing professionals that I worked for for the better part of uh almost three and a half decades uh as a result of whatever decisions are being made in in the administration, and particularly in uh in the intelligence community that I so so much love and and and respect, uh has the effect of really
▶ 1:28:11tearing down the capabilities that ought to be built up at a very critical time. Now, is there an opportunity at the same time? This would have been my approach is, let's look at the effectiveness of those efforts within these offices. Were they really being as effective as they should be?
▶ 1:28:29That's a very different question and then outcome than simply saying, "We're doing away with that office." Notwithstanding what we see as this enormous line of threat that that that we face.
▶ 1:28:42Yeah, I think we're in agreement that those offices should stay open. They could always be improved, but work on always improvement. Shifting gears, um IP theft. The FBI has found that the annual cost to the US economy of counterfeit goods, pirated software, theft of the trade secrets to be between 225 billion and 600 billion dollars.
▶ 1:29:01Several Chinese companies that the US government has formally designated as national security threats, including Huawei, BOE Technology Group, and Tencent rank among the top recipients of US patents, receiving thousands each year. These companies have used these patents to sue American firms, transfer rights of to patent trolls, and as in the ongoing YMTC versus Micron case, compel disclosure of sensitive trade secrets through discovery. Mr.
▶ 1:29:27Shed, should entities that our own government has flagged as national security risks continue to receive US patent protection that they can turn around and use as a weapon against American companies?
▶ 1:29:38Thank you for that question in the abs- In the answers, absolutely not. Uh that is a it is beyond just a paradox that that would occur. Uh once you have that evidence that you cited in in those examples, uh and I find it highly disturbing that that's allowed to happen, that the very companies that that are part of the threat are are allowed to turn around and sue as a result of of of having those patents.
▶ 1:30:05Thank you very much. One final question, Mr. Yang. In your testimony, you state American greatness was built on quote, "Students who came to study American universities and stayed to build American companies, researchers who collaborated across borders and advanced American science and business relationships that gave both countries a stake in the other's stability." Uh Mr. Yang, how do we ensure that while being attentive to real national security concerns, we continue to make sure our country is a place where talent from all over the world continues to come to study and work?
▶ 1:30:35Uh thank you for that question. I think there's two things that are important. One is just rhetoric. Uh I am very concerned when I hear categorizations of an entire group of people as foreign adversaries. Yes, the Chinese government is a foreign adversary. No question about that. But when we say that the people are foreign adversaries or that is how it is defined in legislation, that becomes a problem. Even with respect to Chinese companies, certainly there are Chinese companies that are state-run that present true national security threats.
▶ 1:31:02But then there are also companies that are just engaged in capitalism like all of us. Having rhetoric that say that all Chinese students are spies, all Chinese and Indian immigrants are gangsters with laptops, or that we should have China Initiative case in every jurisdiction in the United States, are categorizations that lead to bad results. Then the second thing is making sure that we have policy that is narrowly tailored. We should use a scalpel, not a sledgehammer, not engage in broad categorizations, but engage in that type of nuance that is necessary.
▶ 1:31:33Thank you very much. I yield back.
▶ 1:31:34Thank you, Chairman.
▶ 1:31:36Thank you. Uh I want to thank all of our witnesses today. Very much appreciate uh your testimony. Uh questions for the record are due 1 week from today, and without objection, the committee hearing is adjourned.