China accused of using coercive economic practices 

American lawmakers warn of the dangers of doing business in the world’s second-largest economy

American lawmakers have charged the Chinese Communist Party with using coercive economic practices to achieve worldwide dominance over the United States.

The accusations on Thursday were made at a hearing in Washington of the US House Select Committee on Strategic Competition Between the United States and the Chinese Communist Party

They also came just days after US Treasury Secretary Janet Yellen met with Chinese officials in Beijing to discuss the nations’ economic relationship.

Yellen said that while the US was taking targeted national security actions, “a decoupling of the world’s two largest economies would be disastrous for interests for both countries and destabilizing for the world,” adding:

It would be virtually impossible to undertake. We want a dynamic and healthy global economy that is open, free and fair.

Increasing threats

Diplomatic relations between the two nations have been tense since the US downed a Chinese spy balloon earlier this year. Witnesses told the House panel that US companies are facing increasing threats operating inside China.

“There’s no such thing as a private company in China, a raft of legislation like the updated counterespionage law, the data security law, the anti-foreign sanctions law has codified what was always true,” committee Chairman Mike Gallagher said.

“China reserves the right to swipe any data, to seize any assets and take IP that it wishes,” he added.

A Chinese surveillance balloon spirals into the sea. Image: YouTube

According to committee members, China’s restrictive environment is resulting in a so-called “brain-drain” of its own business people. 

It is now the top country in the world for the departure of wealthy individuals, fleeing what they fear is the Communist Party’s ability to arbitrarily seize assets.

Witnesses testified the environment in the world’s second-largest economy is becoming increasingly restrictive for American companies and individuals.

“In the last few months, PRC [People’s Republic of China] authorities are now charging any domestic or foreign businessperson with espionage simply for providing any services using PRC information to grant or give to third-country-based customers,” Piper Lounsbury, the chief research and development officer at Strategy Risks, a risk management firm for companies doing business in China, said.

Business practices

“The crackdown on consulting businesses, the enhanced data, secrecy laws and the flow of PRC information just highlight the negative symmetry that we have with China. This means that even companies now can’t even do due diligence in advance of any sort of business transaction,” Lounsbury, said.

Earlier this week, the Chinese Foreign Affairs Ministry pushed back against criticism of its business practices in response to a US State Department travel advisory issued this month warning Americans citizens of the “risk of wrongful detention.” 

“China is a country under the rule of law. The decision of relevant departments to carry out [a] security review of foreign companies according to law is based on laws and facts,” Mao Ning, a spokesperson for the ministry, said.

China welcomes citizens and enterprises from all over the world to visit China and do business in China, and protects their safety and legitimate rights and interests in China, including freedom of exit and entry,” she added.

China has been accused of subverting global trade by the US. Image: Shutterstock

Witnesses, though, told the House select committee that American businesses face a restrictive environment led from the top down by President Xi Jinping, potential intellectual property theft and the constant threat of seized assets.

“The issue is how much do I need to lose to have access to the market, so it’s a balancing act,” said Desmond Shum, a businessman whose ex-wife, Whitney Duan, was arrested by the Chinese. 

Shum, the author of Red Roulette: An Insider’s Story of Wealth, Power, Corruption and Vengeance in Today’s China, told US news program 60 Minutes that he and his then-wife participated in corrupt business practices in China.

In its latest report to the US Congress in 2022, the US-China Economic and Security Review Commission said American businesses and investors were reevaluating their re-engagement in China.

Trade system

“China has subverted the global trade system and moved further from the spirit and letter of its obligations under its WTO accession protocol. China’s subsidies, overcapacity, intellectual property theft, and protectionist nonmarket policies exacerbate distortions to the global economy,”  the report said.

“These practices have harmed workers, producers, and innovators in the United States and other market-based countries,” it added.

The commission went on to say the United States’ ability to overcome harmful trade practices was undermined by the lack of a coherent strategy.

This is an edited version of an article, republished courtesy of Voice of America. Read the original article here.

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy of China Factor.