Restrictions on investments in and exports to China should be increased, according to testimony during a U.S. House Committee on Financial Services subcommittee hearing Tuesday.
The Subcommittee on National Security, Illicit Finance, and International Financial Institutions heard from witnesses who advocated for greater restrictions and argued that restriction should focus more on specific entities, rather than on entire economic sectors.
Thomas Feddo, the founder of the Rubicon Advisors and a former assistant secretary of the treasury for investment security, said sectoral restrictions—those that focus on a particular technology or industry—are “slow and resource intensive,” whereas a focus on blocking specific entities from the U.S. financial system is “immediate and very efficient.”
Feddo explained that an entity-based approach is easier for the private sector to understand and comply with. Representative Andy Barr, R-Kentucky, concurred and argued that sectoral restrictions create an “ambiguous yellow light” for industry, instead of a clearer, binary choice that can be achieved with an entity-based approach.
Barr is the sponsor of the Chinese Military and Surveillance Company Sanctions Act, which would empower the president to “impose property-blocking sanctions” on individuals or companies in the military or surveillance industries “if the sanctions will address threats related to those sectors.” The bill was passed by the House Committee on Financial Services in September.
Emily Kilcrease, a senior fellow and director of the energy, economic and security program for the Center for a New American Security, argued that while it is important to restrict China’s access to “frontier” artificial intelligence and other technologies with potential military applications, “we can’t just say AI, we need to be specific with what we’re talking about,” because a lack of specificity will make sanctions policy difficult to enforce and comply with.
The American Securities Association, which has been strongly supportive of export controls related to China, wrote a letter to the subcommittee applauding its efforts: “The ASA appreciates the ongoing work of executive agencies and Congress—including members of this Committee—to further restrict the flow of U.S. capital to the [Chinese Communist Party.]”
The letter highlighted the recent decision of the Federal Retirement Thrift Investment Board to work to ensure the indexes on which its passive investment offerings are based exclude companies in China and Hong Kong.
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