Chinese companies listed on U.S. stock exchanges have a combined market capitalization of over half a trillion dollars. But they don’t comply with American financial regulations, because Beijing restricts access to full audits.
Congressional members on both sides of the aisle have demanded more transparency, and the Trump administration has made moves to stop U.S. pension funds from investing in Chinese firms.
So where is the U.S.-China relationship headed? Will the U.S. decouple completely?
And why does it look like the Chinese leadership is getting nervous about their ability to maintain power?
In this episode, we sit down with former congressman Dave Brat, dean of the Liberty University School of Business.
This is American Thought Leaders 🇺🇸, and I’m Jan Jekielek.
Jan Jekielek: Dave Brat, great to have you back on American Thought Leaders.
Dave Brat: Thank you. Thank you, Jan. Great to be here.
Mr. Jekielek: It’s great for me to be here. You’re organizing this event. How is it that Liberty U has appeared here in DC for a couple of days? And what’s the motivation here?
Mr. Brat: Well, the Falkirk Center is sponsoring the event, and that comes from a combination of President Jerry Falwell and Charlie Kirk, so “Falkirk.” The center is devoted to faith and freedom. And so we just pay attention to the first principles and the Judeo-Christian tradition, the Constitution, rule of law, free markets, pro-business attitude, the Founders that set the foundation.
This event is dedicated to 1.4 billion Chinese who live behind a firewall, who don’t have liberty, who don’t have information, who are being repressed beyond comprehension, right, working a seven-day week, 12 hours a day, no one knows about it. If you don’t obey, there’s a social credit score, your reputation gets nixed and you get penalized. We don’t like that. And so we just want to make the world aware of what’s going on with 1.4 billion people created in God’s image.
We’ve had just a stellar set of panels with Tom Cotton. Ted Cruz is in today, and Charlie Kirk is in today, and Senator Marsha Blackburn yesterday and the Freedom Caucus. It’s just all centered around trying to get some information out to the American people. They’re starting to get the memo. But it’s hard.
Even the first hurdle is hard to get over: just the idea that, regardless of intent or not, China sent us the virus. It came out of Wuhan. I don’t think the people have the memo on that yet. I think it’s a little more than that. I think there is intent, and it’s clear. … They shut down their airports in Wuhan and shut down Beijing, their own capital, but they sent 400,000 flights abroad to Milan, New York City, San Francisco.
They came to the White House. All their higher-ups shook hands after they knew there’s human to human contact with the president of the United States and the entire leadership in the White House. That’s just kind of a shocker. And then you have the lies with the WHO and all that, and so we just are trying to get the basic facts out. For some reason, some of the press don’t want to cover anything having to do with China. And then you wonder what the motives are there. I taught economics for 20 years, and so I always think, “Follow the money.”
Mr. Jekielek: Well, so let’s talk about that briefly. One of the things we talked about yesterday with Congressman [Jim] Banks is something that he’s been following, but almost nobody has been willing to cover: this idea of the China Daily, one of the propaganda mouthpieces of the CCP, appearing at the front door of every congressional office.
Mr. Brat: It’s amazing.
Mr. Jekielek: In the middle of COVID, it doesn’t matter rain or shine. And to this day, it’s not clear how this is actually happening. So you’re talking about some kind of financial incentive. What kind of media complicity? What is it that you’re talking about here?
Mr. Brat: Well, the American people are pluralistic, and we’re used to it. And so if another paper shows up, it’s no big deal until you realize it is part of the propaganda wing of the CCP. And most Americans right now couldn’t tell you what the CCP is, right? So if there’s a paper that shows up, it’s another paper. We live in a land where all ideas are welcome, but now that’s under threat, right?
So across universities, the neo-Marxist faculty are in charge of the universities, and it’s hard to teach religion and philosophy and ethics and history and all that. And it’s crazy, but it mirrors the Cultural Revolution that took place in China. They got rid of all the olds, right? The old history, the old language, the old ethics, Confucianism, the old everything, they got rid of all of it. The Chinese come after religion and ideas first because that’s a threat to the ruling regime.
The American people don’t get the intent there, that this is the CCP just slowly [invading]. Everybody that’s in the know knows China is at war with us, it’s an information war, and it’s not kinetic. They don’t want to do kinetic. They saw what we did in the Gulf War. They know there’s no match. And so kinetic war’s out, but the information war is a slow drip.
For the Chinese, the politics is the war, and the politics is the use of language. The use of language most effectively goes to the press and the ideology. And so it’s coming in, it’s affected our K-12. Confucius Institutes are the most obvious on higher-ed campuses, but it’s far more deep than that. And so that’s what we’re trying to get out through this summit.
Mr. Jekielek: You mentioned free markets, that’s something that Falkirk Center’s behind and I know you personally are very behind. I think there’s a number of people who probably have accused and are accusing some of the speakers here and even perhaps your own position as being a protectionist one. Can you speak to that, please?
Mr. Brat: Yes. Well, that has been a change for me personally. I worked at the World Bank, and I did economics. I did regressions with all the countries—there are 180 countries in the world roughly—in the data set. You run a regression on growth, on all the independent variables. In those regressions, this is Barrow, Mantoux. These are the highest Harvard guys and the Nobel winning papers.
They exclude communist countries, command economies, from the data set, because all the underpinning microeconomics and macroeconomics is based on the assumption that the price system is at work and that you have free markets working. In a command system, you don’t have that, so they’re set aside in pure economics.
But getting to the question, it’s become more apparent to some economists at least, and especially on the political level, that there is no “free trade” with a totalitarian regime that controls everything. They have no profit motive, right. They control the balance sheet and profit statement of every firm. No one knows that, right? And we let their firms into our index funds and exchanges, and they don’t have to be audited by the SEC [U.S. Securities and Exchange Commission], and all of our firms do.
This is a shocker to American people. You can own a Chinese firm, and no questions in the past when you’re growing at 10% like the Chinese have been, you’re going to make money. But now it’s 9, 8, 7, 6, 5, 4% maybe, and maybe a little dive with the virus below that, so now you better watch your money. And so we’re zooming in on that.
But just to get back to your question, the free market assumption, we’re not dealing with free trade partners. And after World War II, we set up the liberal Bretton Woods order with the rest of Europe and the rest of the world. Everybody’s on board with that platform, and everybody got rich. We made friends with our arch-enemies, the Japanese and the Germans. We’re friends with them now. We traded, we got rich together, we share the same basic, liberal, fundamental institutional setups.
But China is the different one, and we were hoping for 30 years, right? Kissinger, Nixon, all the way through, [we thought], “Hey, okay, we’re going to start out; we’re going to get their next-generation rich. They’re going to like markets; they’re going to like capitalism. Then democracy will follow.” That has not followed, and the evidence has been in for too long now.
Not only hasn’t it followed, in 1999, they wrote a document called “Unrestricted Warfare,” and they said, “We’re at war with you.” We’ve been slow, right? The Americans are thinking, “What do you mean you’re at war with us?” And so everybody should read that document. They’re at war. And the virus, even if not 100 percent intentional of a punch, they are using it and the instability to message and spread disunity in this country across the land. They’re a part of it, and there’s no doubt about it. That’s in the papers that come to our office from China every day.
Mr. Jekielek: In Germany and Japan and the US and other countries, there’s a set of rules, as you mentioned. … Of course, there’s always people trying to skirt the rules, but generally the rules are followed. There’s ways to hold people accountable and so forth. But to your point of asymmetrical warfare, under the Chinese Communist Party, China has been pretending to follow the rules, giving lip service to follow the rules, but the actions have been very different. Tell me what you know about that.
Mr. Brat: Well, the most explicit, I think it was last year, they’re in the Rose Garden in the White House saying they will never weaponize the South China Sea islands. Six months later, they’re weaponizing the islands. And we found out that the US pension fund system for all retirees and government and Congress and the military are invested in weapon systems in China. We are investing in Chinese weapon systems and companies aimed at us. So the president ended that a few weeks ago. That was called TSP, the Thrift Savings Plan.
That went through the Senate 98-0. Shocking. So we got some bipartisan [support]. I was a little surprised at that, and I’m very happy with that. But now the next piece is the audit piece. You have firms like Alibaba, located in the Cayman Islands, which are not audited. Their balance sheet is only as good as China’s balance sheet. If China says, “You got zero tomorrow morning, Alibaba,” they got zero. And it’s the same with every other Chinese firm.
And then you have the information warfare, TikTok and all the Chinese info firms. Your kids are addicted to this kind of thing. And by law, at the back end of every one of those IT firms, platforms, the information must flow to the CCP, the Chinese Communist Party. And just to be clear, when I say China, I’m talking about the CCP here, right? Our goal is to liberate the Chinese people from the CCP repression.
Mr. Jekielek: Well, that’s interesting. So you’re I guess alluding to Secretary Mike Pompeo’s recent speech, where it was certainly the first time I’ve ever seen a sitting Secretary of State talk about connecting directly with the Chinese people and identifying the Chinese Communist Party in the same discussion as the enemy. How do you see this as playing out in the near future?
Mr. Brat: The Attorney General Barr gave a speech with the same underpinnings. And he did the same on the homefront playing out. He said if you’re a firm in the US and you’re collaborating with the Chinese CCP, you’re on notice, right? We’re watching. There you have on the domestic front, a clear signal being sent. Watch your P’s and Q’s and be careful what you’re sharing, because there’s legal issues at stake.
And then Secretary Pompeo similarly, in terms of the relation between nation-states etc., sent clear signals that the CCP [is not trustworthy]. He made a remark off the Reagan “trust, but verify” with respect to the Soviet Union. But China is far more of a threat. And so his line there was “distrust, and verify.” Boy, that’s quite a strong remark, right? That first of all, we distrust you because you’ve lied too many times. Right? In the Rose Garden, and then with the World Health Organization and the person to person [transmission]. And we’ve managed all this.
I’ve heard some of the more famous Chinese people make a quip the other day: during the Cultural Revolution, tens of millions of people were dying of starvation, agriculture was in the dumps, and China’s press statement said, “bumper crops.” Just amazing. Tens of million people dying from starvation, and the CCP communist press etiology, communication is “bumper crops,” crops overflowing with abundance.
The same thing is going on now, right? The dams are getting ready to break. There’s going to be huge repercussions in the region where the dams affect two-thirds of the agricultural productivity. They’re already hurting. And China is basically saying the same thing now, right? “We’re growing fast. It’s all good. The middle class is good, bumper crops.” No, no, it’s all not true. And their own people don’t have any way of knowing that. That’s the tragedy.
Mr. Jekielek: So I think you were referring to the Great Leap Forward alongside the Cultural Revolution earlier. That’s really fascinating. One of the things that people have been talking about here is this idea of bringing manufacturing back to the US, or at least making the manufacturing not be based in China, where it could be a national security threat. Notably, I saw Rosemary Gibson is around, who literally wrote the book on how prescription medicine precursors are largely manufactured in China. What are your thoughts on this? There’s been a lot of debate. Big pharma is really uninterested in seeing this happen, this repatriation. That’s what we’re seeing. How important is this? And how much of a national security issue is this?
Mr. Brat: Well, the “China Rx” book by Rosemary, there’s no question that’s all coming back, because that’s a national [issue]. We don’t have lifesaving anti-infection drugs made in the United States. Zero. Right, and so some of that has to come back.
And now, the interesting part is the firms, all the MBAs coming out of Harvard, somehow missed Econ 101, [including] antitrust, don’t put all your eggs in one basket. They missed Finance 101, which is don’t put all your eggs in one investment basket. Well, they did! It’s just shocking. They violated all the rules of Economics and Finance 101—diversify. And so now they’re in a bind because it’s going to recoil.
Those supply chains are coming back whether you want to or not, just from public pressure and the Chinese decline in GDP growth. Right? So now the demand is not there like it was. And so the supply chains are coming back for a bunch of reasons. Now that poses significant [issues] just in the operation aspect for business. You have to run that supply chain somehow and retract it somehow quickly. Those are not easy business questions to manage. And so we’re going to be in a mess for several years, right? And I think everybody kind of knows that.
Mr. Jekielek: Japan is paying supporting companies who wish to repatriate their supply chains, or at least move them out of China. What do you think of that type of a policy? What do you think about the US doing it?
Mr. Brat: It’s super. Some sort of tax credit for moving the supply chain back here. [Senator] Tom Cotton said yesterday he’s got legislation to that effect. And now you just mentioned Japan [as an example]. Trump has been pursuing this America First thing, and it sounds narrow, self-interested, and myopic at first blush.
But it’s fascinating that we have basically a freedom alliance right now building. Japan is one of our best friends and India with [Prime Minister Narendra] Modi and then Australia and you go around the whole Asian community and then the sub-Saharan African presidents are railing at China because they’ve abused them on the Belt and Road Initiative where China is trying to buy UN votes and they’ve abused the sub-Saharan African countries, treated them terribly. The Horn of Africa countries, Ethiopia, etc. And it’s a mess.
And so ironically, the America First policy has the Queen Elizabeth battleship and fleet now coming from the UK going through the South China Sea. Isn’t that refreshing? We got the band back together, right? It’s the good guys versus the bad guys. And the UK is with us, and Europe now is with us. I think Germany and the UK are rethinking Huawei investments in infrastructure platforms, which it was kind of shocking they were going to go in that direction. And so there’s a lot of good news coming in on the international front. It turns out the USA is a good friend. Right? But we just expect everybody to play by the same rules and pay part of the bill.
Mr. Jekielek: So you said it’s good guys and bad guys again. Is it really that simple?
Mr. Brat: Yes, it is that simple. The Chinese know good from evil, Confucian ethics, respect your elders, tell the truth. If you want to just do Aristotelian ethics, on kind of a neutral, secular ground, they know good from bad. But the CCP does not, and they will not allow the teaching of anything that transcends the Party. Right. So the first thing they go after—underground Catholic Church, underground Protestant church, whatever—is God. They say “If you’re going to worship God, you have to worship Xi Jinping and the CCP first. That’s on top of God.”
I think China is cracking right now. There’s a paper called the “Beige Book.” It’s the best data we have. One of the chamber guys shared it; I forget his name right off. But in the third quarter of 2019, all the red lights were blinking on the China dashboard. All the economic fundamentals for red light, red light, red light, all of them. And it’s been going on for a few years prior, but all of them are going off.
And then, not causality, but boy, it’s one heck of a coincidence, in the fourth quarter of 2019, the virus goes. Xi Jinping and former leaders told Bush [when asked], “What’s your worst nightmare?” that “My nightmare is I have to feed the middle class.” Well if you got all the red lights going off and your economy’s tanking—This is prior to the virus, and then the fourth quarter, the virus goes out. I mean, curious minds wonder what’s going on. And then at a minimum, they’ve used this as an assault on us. But I think there are some signs that China is not as strong as we thought. And so we need to analyze that and take a good look.
Mr. Jekielek: A lot of people here are saying this word that strikes fear into the hearts of many: decoupling. Some sort of complete separation. Definitely not something that a lot of free-market folk would be thinking about very often. What are your thoughts on America decoupling from the Chinese economy?
Mr. Brat: Well, the way I go at it is fairly simple. There’s a virus that came from Wuhan, China. It’s caused deaths in the tens of hundreds of thousands in our country. We would like to know the DNA makeup and structure of that virus. We would like to know the source, where it came from, and the information so we can help find a vaccine to fix that. In my view, if China is even in the realm of being a civilized country, you say, “China, we would like to come in. We want to investigate that lab, talk to your people, because we want to solve that problem.” If they say no to that proposition, you absolutely decouple 100%. Bye bye. Right?
Tariffs are this big [gestures about 3 inches with fingers]. Tariffs are a few hundred billion. The financial sector going through Wall Street is in the trillions. Right? So [hit] that one and China’s cooked. And China, I was hinting with the Beige Book that they’re hurting a little bit. [Here’s] one sign that they hurting. They were moving toward a consumption economy, right? That’s their goal. The government investment piece wore out it’s welcome. They got skyscrapers all over the place. You build the first airport, the rate of return is okay, and then the second one is lower and the third one, you’re broke. So they’re at their end run.
Now the sign that tells me they’re weak and scared that the word’s getting out is Hong Kong. I think they’re willing to give up Hong Kong, and Hong Kong isn’t just some little trading port, right? That’s their dollar mechanism. That’s how they get dollars in the trillions to fund the CCP. And so if they’re willing to give up Hong Kong as a dollar trading hub, that tells me they’re looking internally … and that’s even scarier.
A CCP that’s internally repressive is just scary beyond comprehension. But that’s a little indicator that if they’re willing to give up Hong Kong and the external trade routes, etc., and the full external that made them rich, they may be looking inward way too much in a sign of weakness.
Mr. Jekielek: Are they counting on US big business or international big business in preventing that from happening? There’s certainly been a lot of voices from Wall Street and the like that are very uninterested in any discussion of this nature.
Mr. Brat: Well, there’s going to be inertia. It’s not going to go overnight, and Wall Street’s going to go kicking and screaming. All of a sudden, you have the Wall Street Journal writing articles, “We care about the people of Hong Kong,” you know, “Don’t do this too fast, because it’s going to hurt the people of Hong Kong.”
The people of Hong Kong are screaming for us to take their side in this fight. Right? I mean, if anyone cares about the people of Hong Kong, why don’t you go talk to them, and why don’t you also care about 1.4 billion people [in China]. No one’s shown this humane, liberal strand of caring for the Chinese until the capital is ready to leave. Then all of a sudden, the sympathy comes out. So I think it’s a little late in the game on that one. But the big firms’ [transition] is going to be delayed. There’s not going to be some overnight transformation. But China knows that too. So they have an unwind period over the next five or ten years probably, and they’re going to have to restructure.
Mr. Jekielek: How long will this sort of decoupling take in your mind?
Mr. Brat: I’ve made one big error so far. It depends on this election. Right? So Trump came in, the first president in 40 years to take on China head to head. If Biden wins—Biden and Clinton did the most favored nation stuff; they ensured that China didn’t have to be audited with all the comments to pass. So if Biden wins, he’s a friend of China. Biden’s kid got a $1.5 billion deal from China. That’s been widely reported. If that case happens, then there will not be decoupling.
Biden and the Democrat Party will protect the billionaire class and their investments in China, and we’ll revert back to the status quo in some sense. There’ll still be rational business decisions that, “Hey, China’s not all it’s cracked up to be.” And some of those supply chains will come back for that reason. But politically at the international level, if Biden wins, then China and the US will have a much more robust relationship than if Trump wins.
Mr. Jekielek: Okay, so let’s say decoupling does work out by whatever channel. It was Bill Clinton that set up the MFN status and everything else. Actually, as you’re probably aware, Speaker Pelosi was one of the people very much leading the charge against that back in the day. And maybe this speaks to some of the bipartisanship around China. But let’s say by whatever means the decoupling does progress, how long is that going to take?
Mr. Brat: I think it takes a decade or two for decoupling to take place. There’s just so much inertia and production lines and supply chains and parts and pieces to the puzzle. You can’t just rip that band-aid off, right? Even if you go at it with that intent, it’s still going to be a decade.
But as for the announcement effect, markets are forward-looking. So if the US announces decoupling and that we’re moving, that psychology is what’s most important for economics. Even though the decoupling might take [time], everybody gets the clear signal. If we say, “Hey, we’re decoupling.” Wow, that’s a shocker. The announcement effect alone coming from Pompeo, already, I’d say you’re already 20 percent on the way there. Just that he’s laid down a marker, and it’s going to be hard for any secretary to come back and argue against the premise of his argument, which is very powerful.
Mr. Jekielek: So there’s a lot of stats out there that show us that Americans are much more aware of the China threat. And not just Americans, across almost every nation certainly in the free world, there’s a greater awareness of China being a threat and China not being a positive entity. In your press release, if I recall, you said that Americans aren’t very aware of this. So, what will it take to get Americans aware? And what exactly is the most important thing for them to be aware of?
Mr. Brat: Well, I think one fact, the fact that China intentionally sent the virus our way, right? To what extent, did they formulate the virus in a lab? We don’t have that evidence yet. But did they open up and allow the virus to go out? Yes. So there’s intent in the mind, that’s clear. If the American people see that one fact—
And the media is not covering this. The CNNs, the NBCs, and the New York Times, the Washington Post are not getting near this thing because they politicized the thing. They know that’s very helpful for President Trump and very damaging to Biden if that one fact gets out. The virus came. Six months ago, you were going to sporting events, you were going to church, you were going out to eat, and you were in good health.
All of that is a disaster. We’re in a dystopian nightmare right now across the board. Forty million displaced from their work, tens of thousands of deaths, illness all over the place. No sports, you haven’t gone to Easter service for the first time in 2000 years. That’s a shocker, right? This has never happened. That is all because the virus came from Wuhan. All of that. So that’s why that one hurdle is devastating. If that claim is true that they sent us the virus, everything else hangs on that premise. The left knows it, and they’re horrified of it.
Mr. Jekielek: So how is this information being spread? How’s Liberty U involved? This certainly is a fact.
Mr. Brat: Yesterday, I asked every single candidate up there that question, from Cotton to Blackburn in the Senate to the 14 House Freedom Caucus folks to Banks and [Dan] Crenshaw in the House. They’ve been leading the fight on China. And everyone agreed: China sent the virus. The word is getting out. It’s a matter of how they articulate that.
The American people have still a strong historical residue of the Judeo-Christian tradition: love your neighbor, be kind. They cannot fathom that there’s another system out there, the CCP—not the Chinese, but the CCP—that could do an evil act of that magnitude. They cannot internalize that evil. It’s too much. And so part of this, it’ll take a while for the American psyche to absorb it. And when they do, like Churchill or whoever said, the American people are good; they screw up all the time, but in the end, they do the right thing. So if I’m China, I’m scared because the American people are basically good people. And in the end, we will do the right thing, and they’re going down.
Mr. Jekielek: So it’s very interesting. What you just described is basically what I’ve said to people over the past decade and a half about this murder for organs industry that’s still alive and well. Horrible pun, but in China, it’s just hard to fathom. It’s hard to imagine. You can’t just believe it on the face of it. I need evidence. I need a smoking gun. How can I believe that?
Mr. Brat: Live organ harvesting in China on living patients, and the patients are dissidents who are the good people. They’re in jail and being punished because they wanted freedom. And instead of getting justice, they’re murdered. Their organs are sold to rich folks who need an organ for transplant at the last minute.
In the American psyche again, you have so much negativity to look at already. You hear that on the news, you’re just like, “I’m sorry, I just can’t handle it. I’m checking out.” But it’s a reality, and it’s not just a data point. It’s a significant magnitude of dissidents and this live organ harvesting and the Uyghurs and Tibet and you can just go on and on and on.
Mr. Jekielek: Well, what about the students at Liberty U? First of all, how many students do you have and how are they learning about these facts?
Mr. Brat: That’s part of it: the next generation learns. And the next generation does care, right? I think I read they’re the first generation in world history that likes their parents. So this is promising. It’s unique. They want to help their neighbor. They want to do good in the world. So that’s a huge positive. We have 15,000 students on campus.
Mr. Jekielek: So that’s Generation Z or what?
Mr. Brat: I don’t even know where the cutoffs are. I get confused, but we have 15,000 students on campus, and then 110,000 students out there online across the world. The Judeo-Christian tradition—and we train Champions for Christ; that is our goal—is love, but it’s also justice. And so there’s tension there, but we have to get our folks educated so that they can discern what the right thing to do is.
Mr. Jekielek: I guess so my question is, you said that there’s this one fact that the Chinese Communist Party sent the virus. If Americans know that, do all 125,000 students of Liberty U know?
Mr. Brat: Right. That’s my goal. I’m Dean of the Business School. But we’re putting all of that up. We’re going to have endless news clips coming up from this summit, from other summits, putting together the voices of the people you heard, probably putting up Epoch Times. And just using all of that. It’s a think tank. But we call it an action summit because we don’t want to just have a white paper and be done. We want to learn and then go out and change the world, build the Kingdom of God. So that’s our goal. This is probably the most significant issue of our age, and so that should be part of the education, and we’re going to get it through.
Mr. Jekielek: Alright, any final words before we finish up?
Mr. Brat: No, I just thank you for the Epoch Times and the work you do. I know there’s a moral commitment there for the right reason to help the Chinese. And I know you have a lot of Chinese dissident friends that you work with, and your heart’s in the right place because everyone knows we have a big problem on our hands. We have to fix it, make the world good.
Mr. Jekielek: Right, well, we’ll keep doing what we can. Such a pleasure to have you.
Mr. Brat: Thank you, Jan. Thank you again.
This interview has been edited for clarity and brevity.
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