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We’re ‘Subsidizing Our Own Destruction’: Rep. Mike Gallagher on Wall Street's Investments Into Blacklisted Chinese Companies

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[FULL TRANSCRIPT BELOW] “Our investigation, even in its early stages … has revealed that money continues to flow into companies that are blacklisted … We found that MSCI and BlackRock have directed investment in companies that produce the Chinese Communist Party's military aircraft, its aircraft carriers, its aerospace technology, its artillery shells, even advanced nuclear technology,” says Rep. Mike Gallagher (R-Wis.), chairman of the House Select Committee on the Chinese Communist Party.
“We are … subsidizing our own destruction,” says Mr. Gallagher.
In this “ATL:NOW” episode, we discuss Wall Street investments in China, the Chinese regime purchasing land near sensitive U.S. military installations, and what Xi Jinping’s economic and demographic troubles could mean.


Jan Jekielek: Hello everyone and welcome to American Thought Leaders Now, our news-focused variant of American Thought Leaders. Today we have a very special guest, Congressman Mike Gallagher, the chairman of the Select Committee on the United States Competition Between the United States and the Chinese Communist Party. We usually call it the Select Committee on the CCP. Congressman Gallagher, so good to have you.
Congressman Mike Gallagher: It's great to be with you.
Mr. Jekielek: The Epoch Times has been covering various investment funds passively investing into the Chinese Communist Party, including into Chinese military companies. Recently the Select Committee announced an investigation into BlackRock and the MSCI [Morgan Stanley Capital International] index. Why did you finally pull the trigger to officially figure out what's going on here?
Congressman Gallagher: A few years ago during the Trump administration, we had this controversy about the fact that military and federal government employee retirement through the Thrift Savings Plan [TSP] was being invested passively, by tracking an MSCI index in China. The concern at the time was that military retirement funds could be used to invest in Chinese companies that were building things designed to kill American military service members in a future conflict, which is, of course, absurd on its face. That's where the kernel of it started.
The Trump administration wrestled with this idea. Now the Biden administration is wrestling with it. But our investigation, even in its early stages, has revealed that money continues to flow into companies that are blacklisted. They're on an American blacklist. We found that MSCI and BlackRock have directed investment into companies that produce the Chinese Communist Party's military aircraft.
It's aircraft carriers, it's aerospace technology, it's artillery shells, and even advanced nuclear technology. They've directed investments into companies like BGI Genomics, which collaborated with the Chinese military to collect genetic data on foreign persons without their consent, and other companies found to be complicit in supporting forced labor and human rights abuses in China.
Reasonable people can disagree about where exactly you draw the line for economic decoupling from China, but no one, Republican or Democrat, would think that we should be allowing American money to invest in companies like this. In some meaningful sense, and in some very troubling sense, we are subsidizing our own destruction.
Mr. Jekielek: There is one specific instance that you mentioned, which is the military Thrift Savings Plan investing in Chinese military companies. Is that still happening?
Congressman Gallagher: The Trump administration took action to stop it. There's a board via the Department of Labor that oversees it that was divided. Trump's labor secretary ultimately went forward with it, but the reality is that we've only scratched the surface in terms of how much money is being invested in China. Then there's the problem of military-civil fusion in China. It could very well be the case that TSP is still exposed to the Chinese market, and it's very difficult for even very sophisticated investors to draw a line between China's military companies and so-called civilian companies.
Of course, there is no such thing as a private company in China. Every company is subject to the whims of the Chinese Communist Party. Put that aside though, because TSP was really a small subset of this issue. It was just a few billion dollars, if you include passive capital and public investments, not just the private investments and active capital in the form of private equity and venture capital.
We're talking trillions of dollars of American money that's still flowing into China with the immediate risk of subsidizing companies that are doing bad things, that are complicit in genocide, and that are helping the CCP’s military expedite those ambitions. Overall, what's happening is you're making the health of American retirees dependent upon the success of the Chinese Communist Party, and that success augers for a very bleak future. That's what we need to stop. Again, I know that people are divided on this issue, but we just can't be in the business of subsidizing our own destruction here.
Mr. Jekielek: Everyone agrees that there's more exposure in the Chinese economy now than there has ever been in the past, not even talking about their ability to basically stop any U.S. company from functioning.
Congressman Gallagher: Yes, notwithstanding all the disruption we saw during the pandemic, which likely came from the Wuhan Institute of Virology, notwithstanding all the supply chain issues that we had during the pandemic, notwithstanding the threats by the CCP to weaponize those supply chain to potentially cut off the export of advanced pharmaceutical ingredients—American investors and people on Wall Street that have already made billions of dollars off of China's rise continue to pour money into China and continue to lobby against Congress taking aggressive effort to reclaim our economic independence from China and to selectively decouple in key financial and economic areas.
They've been all over Capitol Hill saying, "Hey, China's open for business again. Xi Jinping has reversed zero-COVID. There's an opportunity to continue investing. We can make money. We can go back to the good old days."
It's a total fantasy. How much more evidence do we need to understand that we are not dealing with a responsible stakeholder in the form of the Chinese Communist Party? We're dealing with an increasingly hostile Marxist-Leninist regime that's threatening war in the near term, and threatening to dominate the globe over the long term. That's what we're up against here, and it's time to take off the golden blindfolds and have a more realistic approach.
Mr. Jekielek: Commerce Secretary Raimondo is heading to China in the near future to discuss a working group on export controls. Please explain to me what you make of this, given what you just said.
Congressman Gallagher: It would be a mistake for the Commerce Secretary to agree to join any working group. The fact is that the Chinese Communist Party shouldn't get any say in our decisions over export controls. We have legitimate national security concerns about American technology going to China to fuel its ongoing genocide in the Xinjiang autonomous region, and its perfection of a Orwellian, totalitarian surveillance state. China shouldn't get a say in those issues. If anything, the secretary should go to China and express the fact that the American Congress in bipartisan fashion and the executive branch has serious concerns about the use of American technology to further the CCP’s ambitions.
I very much hope that they won't agree to the working group. I hope that we won't continue to slow down the key defensive action we need to take, just to sit down and have photo ops with high level CCP officials. Overall, I'm concerned about the Biden administration's revival of economic and diplomatic engagement as the foundation of our approach to China. If for no other reason than that, this approach has failed for over two decades. To think it's going to succeed now is a fantasy and a fundamental misreading of who we're dealing with in the form of Xi Jinping and the high levels of the Chinese Communist Party.
Mr. Jekielek: Given what you've said, President Biden has actually just instituted an executive order to limit investment, especially in some very sensitive sectors into China. This seems like a step in the right direction.
Congressman Gallagher: It's a small step in the right direction. However, I'm concerned it doesn't go far enough. For example, it puts the Treasury Department in the lead. As we know, the Treasury Department has a more dovish position on China. Janet Yellen is out there explicitly making the case in China and in America that we cannot decouple from China, and that we have to put a floor on the relationship.
There are a ton of off-ramps the Treasury Department could take to prevent U.S. capital from going to China. They define it in terms of a narrow subset of sectors. Important sub-sectors like nuclear and biotech are excluded from the executive order. Then there is the biggest loophole, which is that it only deals with active investment of private capital, which is at most 15 percent of the problem, and does not deal with passive capital and public investments, which is the real thing that we need to tackle here.
Mr. Jekielek: With some of the recent economic data, and Evergrande filing for bankruptcy on the U.S. side, there has been some discussion of the Chinese economy potentially crashing. It's obviously slowing, which would have huge ripple effects globally, because they're very integrated everywhere. People are talking about a bailout of the Chinese economy. How would you approach such a situation?
Congressman Gallagher: The first thing is to say that we don't know, but it does seem like economic storm clouds are on the horizon for China. The one thing we know for certain is that demographic storm clouds are on the horizon. Xi Jinping is going to have to deal with a demographic buzz saw, unlike any society in human history. The risk is that it could make them, and him particularly, more aggressive in the near term.
Put differently, if he sees that he has an economic and a demographic problem, perhaps he expedites his timeline for taking Taiwan by force, in part to distract his people from their internal economic issues, and in part because he'll never get a better chance than he will have in the next five years. That's why we have entered the window of maximum danger with respect to a kinetic confrontation with China over Taiwan.
How should we handle this? There should be no bailout talk. We need to keep up the economic pressure on China. We need to keep up the efforts to rebuild our military deterrent, because in order to work, our entire deterrent posture needs to be built on a foundation of solid, hard power. That's where we are really struggling.
The Biden administration is not taking aggressive steps to rebuild the Navy, and the Navy is getting smaller. We still haven't replenished our stockpiles of munition systems. We need to be moving heaven and earth to ensure that Xi Jinping never wakes up and thinks he can actually successfully accomplish an invasion of Taiwan. That would be far more destructive for the global economy than any short-term economic storms that the CCP has to weather.
Mr. Jekielek: Please briefly explain that. In your view, why is Taiwan so strategically important to the U.S. and the global economy?
Congressman Gallagher: Primarily, because it's a semiconductor superpower. TSMC [Taiwan Semiconductor Manufacturing Company] has a dominant position, particularly when it comes to producing the most advanced semiconductors, which all of our technology, including sensitive military technology, relies upon. If the CCP were to take Taiwan, it could hold the rest of the world hostage economically. Given the amount of trade that goes through the Indo-Pacific, and given Taiwan's advantageous geographic position, if they were to take Taiwan, they would be able to do economic coercion on a much bigger scale than they're already doing right now.
Furthermore, we would be unable to fulfill our treaty commitments to key countries like Japan and the Philippines. All the more reason we need to be working very aggressively to deter such an invasion and to prevent a war. The best way to maintain peace is through strength, of course. Right now we don't have a foreign policy built on American strength.
Mr. Jekielek: Looking at China’s approach to the pandemic, we can see they are very open to using economic coercion, and they're into other types of coercion as well. This wouldn't be a new thing. We all agree that there is a genocide happening in China, and it's highly documented that CCP is perpetrating it on the Uyghur people. Why do we still have this level of engagement with a country that is acknowledged to be committing genocide, at least in one instance, and perhaps in several others?
Congressman Gallagher: To one point you made, there is a cultural genocide happening in Tibet. Then there's a massive oppression of a variety of religions inside of China, including Christianity and other religious sects. In some cases, they're rewriting the Bible and rewriting the gospel to fit the CCP’s vision, which is a vision of total party control, with no higher authority, and no God above Xi Jinping himself.
Yes, the phrase was supposed to be, “Never again,” after World War II. But the reality is we've gotten complacent. We believed this idea that after the fall of the Soviet Union, we were the ascendant superpower. We didn't have to invest in our own defense. We could focus internally, and that we could somehow integrate China into the global economy, and that would moderate their behavior.
That policy failed utterly and completely. Now, it's taken us too long to take off the blinders and understand what's actually going on. We need to shake ourselves out of our complacency. We need to stand up to this totalitarian regime before it's too late, before we stumble into a war for which we are ill-prepared, or before we lose a cold war, which we're not waging aggressively enough right now.
Mr. Jekielek: You've also been vocal about the CCP’s purchasing land in the United States, both farmland and land close to sensitive military installations, and also farm-related IP. This is something that should be of great significance to Americans. Sometimes people ask, "Why should we worry about China? We've got so many issues at home." This is very much an issue at home.
Congressman Gallagher: Obviously, we don't want to allow the Chinese Communist Party to control land near sensitive military facilities. Imagine if we were to get into a conflict with China over the defense of Taiwan, what they could do with that land. It would potentially give them the ability to shut off power, shut off normal workings at various bases, prevent our ability to surge men and material forward, or just simply conduct espionage on what's going on at various bases. It is sensible for us to take steps to restrict such land purchases near military bases.
As a matter of reciprocity, and as a matter of basic fairness, we should insist that such restrictions go forward, because Americans aren't allowed to buy land in China. We continually open up the door for China because we're good-intentioned Americans, but the door remains closed in China. It's a non-reciprocal, asymmetric relationship. For too long, we've allowed the Chinese Communist Party to wage economic and cyber warfare against us to expand its espionage efforts against us without taking the necessary steps to defend ourselves.
Mr. Jekielek: Congressman Gallagher, you have a peace through strength approach to the strategic competition with the CCP. Why is it important to make the distinction between the CCP and China?
Congressman Gallagher: Because it conveys at least two things. One, that this is a party state. This is a totalitarian, Marxist-Leninist dictatorship in which a small number of elites control everything and they oppress their own people. That stands in self-evident contrast to the republic and the system of self-government that we have in America. More to the point, just as Reagan constantly and brilliantly drew a distinction between the Russian people and the Soviets, we need to do the same today, because the Chinese people are not our enemy.
The Chinese people are in many ways the primary victims of the Chinese Communist Party's depravity. The more we make that distinction, the more we can blunt any accusations that being tough on the CCP is tantamount to anti-Asian racism, and the more effective we can be in terms of pushing back against growing CCP aggression. Because the one thing we know is that the CCP fears its own people more than anything else.
Mr. Jekielek: Congressman, as we finish up, please explain the breadth and scope of the Select Committee, and where you are hoping to take it.
Congressman Gallagher: Our primary mission is to explain to our colleagues and by extension the American people, why any of this matters—why someone in Green Bay, Wisconsin, or anywhere in America or in Congress should care about the threat posed by the CCP. We need to make the case that it's not a distant, over-there, type of problem. It's a right-here-at-home problem. Towards that end, the Speaker of the House has asked us in bipartisan fashion to identify what policy and legislation we can pass, even in the divided government of this Congress. What are the steps we can take over the next year-and-a-half in order to put ourselves in a better position to win this long-term competition with the Chinese Communist Party?
That's what we're doing. We have a series of policy recommendations that are coming out in terms of our military competition, our economic statecraft, and our ideological competition. We're hoping to generate support for a sensible set of policies that put us on a better footing as a country, and that ultimately ensures that we win this competition.
Mr. Jekielek: I was at one of your hearings. It was incredibly instructive with a whole lot of valuable information. Also notable was the highly bipartisan nature of the discussion, which really isn’t that common these days. Clearly, you're doing something right. Congratulations on the work of the committee. We've learned quite a bit about the CCP through the work that you've done. Any final thoughts?
Congressman Gallagher: No, I just want to thank The Epoch Times for your coverage of this issue. You've been doing it in greater depth than almost anybody else. It’s important that the American people understand the nature of the regime we're dealing with. We're in the early stages of a new Cold War, and the stakes couldn't be higher. I think we can win it. We can win it without resorting to actual war, but it's going to require a lot of energy, and a lot of sacrifice, particularly on the part of our elected officials. Thank you for having this conversation. I truly enjoyed it.
Mr. Jekielek: Congressman Mike Gallagher, it's such a pleasure to have you on the show.
Congressman Gallagher: Thank you so much. Have a great day.
This interview has been edited for clarity and brevity.