Most American executives don’t mind being photographed with Chinese officials during their travels to Beijing. In fact, they seek out the opportunity. It’s good for business. But they gave Congress a different treatment last week.
“Almost everyone we met with, with a few exceptions, has asked that we keep their identities secret,” Mike Gallagher, the chairman of the new House Select Committee on the Chinese Communist Party, said at a hearing in Manhattan. He added: “When they meet with members of Congress, it’s like we’re in some witness protection program.”
Gallagher, along with the committee’s top Democrat, Raja Krishnamoorthi, and some of their colleagues had made the trip to meet with top business leaders for conversations both on the risks the Chinese Communist Party poses to business and the actions that Congress is taking to mitigate them. During the hearing, they fielded policy ideas from a former SEC chairman about how to insulate Americans from the risks posed by the secretiveness of Chinese firms.
Judging by Gallagher’s remarks and subsequent reports, one gathers that, while some big companies took meetings with the members of Congress, even participating in a closed-door exercise simulating a blockade of Taiwan, they did so rather awkwardly.
After all, his committee, which has operated in a remarkably bipartisan way, is questioning and pushing back against the financial-services industry’s long-standing comfort with indirectly funding China’s military buildup. The House select committee is pushing for legislation that would strengthen Biden’s executive order on outbound investment in China and has launched high-profile investigations into BlackRock and MSCI for offering products that direct capital to Chinese military firms.
Gallagher is also pushing a broader agenda that would restrict other types of investment in firms linked to China’s military and that fail to share information with U.S. shareholders. As he points out, tackling outbound private equity and venture-capital investment deals with only 17 percent of U.S. capital flows to China. It does nothing to keep pension funds from aiding the Chinese military, for example.
The committee’s attention to these issues itself has already spooked executives: BlackRock recently shuttered one of the equity funds scrutinized by the committee’s investigation. And while the committee announced probes into only two firms, that news is bound to lead others to reevaluate their practices.
China’s economic crisis has also put a fine point on the argument that Gallagher and Krishnamoorthi were making: that being as entwined with China as many U.S. firms have been for decades is a massive risk. The Chinese Communist Party’s designs on Taiwan make it doubly so.
There are some indications that American executives are starting to take notice. Since the start of the invasion of Ukraine, there’s been more talk than ever before about the risk that a Chinese invasion of Taiwan would wipe out billions, if not trillions, of dollars in shareholder value overnight.
But Wall Street has been relatively slow to come to terms with the sizeable threat that Chinese aggression poses to global economic stability.
Gallagher closed his trip with a shot at businessmen’s reluctance to take a stronger stance on Chinese threats. He visited the Tiananmen massacre memorial museum in Manhattan after the hearing, telling reporters that even after the mass killings, “there was a lot of greed,” and concern for human rights waned over time. The risks of doing business with China are moral as well as economic and geopolitical.
If Wall Street doesn’t get Gallagher’s message, Congress should.