China and Economic Security in the Shadow of Ukraine

China and Economic Security in the Shadow of Ukraine

We must act without delay, for Beijing is an aggressor of similar malevolence to that which Ronald Reagan vanquished, but of greater might across the spectrum of power.

Chinese corporations, which are covered by this law, will be required to use public accounting firms subject to inspection by the PCAOB. This is a great achievement in protecting both American investors and the nation’s security.

As a subsequent measure, the United States, through our Department of State, working in conjunction with other U.S. agencies, must urge America’s allies to adopt similar laws or rules. Nations with important capital markets should, of course, be our first priority.

As we close one door, Communist China, abetted by avaricious globalists, breaks through another. The HFCAA does not penetrate or capture index funds that may include great numbers of Chinese firms. The world’s largest asset managers are pouring hundreds of billions of dollars of investment capital into Chinese corporations controlled by that nation’s communist party.

China’s hope is that global finance will prove too complicated for retail investors to understand, and its country’s true intentions will remain hidden. These assumptions must be proven wrong.

Beijing's fundraising through opaque financial instruments and passive investment funds has passed the trillion-dollar threshold. President Trump and I, working with Congress, designed a financial architecture to defend scores of millions of Americans who, without their knowledge, have had their savings, in the form of investments, directed to sanctioned companies or those facilitating egregious human rights abuses or the underwriting of China's military-industrial complex.

It is up to us to address this hidden onslaught, which we did not seek but must counter. The financial security architecture that President Trump and I were erecting, strengthened investor protections, human rights, and our nation’s security. On November 12, 2020, President Trump signed Executive Order 13959: Addressing the Threat from Securities Investments that Finance Communist Chinese Military Companies.

In signing this executive order, the president determined that the People’s Republic of China was “increasingly exploiting United States capital to resource and to enable the development and modernization of its military, intelligence, and other security apparatuses.”

The executive order was designed to block American capital from being used directly to fund the Chinese military-industrial complex. Specifically recognized was China’s strategy of military-civil fusion that camouflages the purposes of putatively non-military Chinese companies, which, in fact, are obligated to support China’s belligerent actions.

Thus, the ability to peer inside China’s maze of companies and their interconnections is imperative but is masked by the inclusion of unregulated Chinese companies in global equity indexes. The economic-security structure that the Trump administration designed must be completed by creating market transparency for American investors, by banning Chinese companies that support the regime’s illegitimate ambitions, and by restricting China’s insertions into our media and thus into the companies that dominate the provision of information within our country.

We must not allow millions of American retail investors to be placed in the position of unknowingly funding Chinese companies that abet genocide and slave labor. We must not enable Chinese corporations that are complicit in these outrages as well as the communist party’s conduct of intelligence operations and those of its armed forces, including the construction of militarized islands in the South China Sea.

Simultaneously, we must confront the Biden administration, and we must challenge Wall Street and our nation’s corporations, for we cannot allow any misguided force to cripple America. In this battle, we retain great strengths. Indeed, we must inform our compatriots that our adversary has miscalculated in choosing financial and business domains as its new theater of warfare, for we dominate these endeavors. American capital markets comprise more than fifty percent of total world equity market value.

America leads the world in net financial assets per capita. The gross financial wealth per adult in the United States is almost thirteen times that in China, and the amount of capital that we can invest far exceeds that of any other nation.

The United States and our allies dominate this arena. The Bretton Woods Agreement of 1944 established the mechanisms that have governed international economic relations, which must not be adulterated.

Our dollar is the world’s reserve currency—not the nonconvertible yuan. These are the positions that our nation must hold and fortify despite China’s and Russia’s machinations. We must understand and use to our advantage the fact that while China’s economy approaches our own, it remains a far less affluent country, for its GDP must support over four times as many people. This fact must be used to our advantage if we are to negotiate with China from a position of strength.


The creation of new supply chains for medicines, critical components, and strategic materials, which do not rely on adversarial states, must be prioritized. Any action in this regard, however, must not erect new bureaucratic structures; instead, existing elements of the federal government should be reconstituted to deal with our reliance on uncertain or potentially hostile sources of supply.

We have the opportunity to use technology to link together vast numbers of businesses throughout the free nations of the world to build supply chains that do not contain companies resident in adversarial states. Unalterable, digital ledgers, such as blockchain, may provide one means of creating vertical supply chains that do not involve Chinese, Russian, or Iranian companies. Certain products contain thousands of components; only by harnessing the power of technology can we ensure that complex finished goods cannot be subverted by the withholding or the compromise of components made in adversarial countries.

President Biden’s Indo-Pacific Economic Framework (IPEF) acknowledges that the Trans-Pacific Partnership, which the Obama administration negotiated, was “fragile” and unacceptable to Congress. The new framework, however, is not posited as a treaty subject to the advice and consent of the Senate, nor does it address core trade inadequacies that involve the World Trade Organization (WTO). The new framework is not stout enough to meet our present challenges; it does not incorporate Taiwan; neither does its focus on decarbonization meet the economic realities of today.

China, the nation with the second-largest GDP in the world, must no longer be able to claim that it is a developing nation, entitled to benefits within the WTO. In addition, the WTO must take a firm stand against any commerce that is based upon enslavement.

Blockchain-enabled certifications may be used to attest that no constituent component of an item was produced using slave labor. We must apply advanced technologies to ensure that the scourge of slavery is permitted no refuge, for it is practiced within China, causing immense harm to that nation’s Muslim population.

Building upon America’s multilateral and bilateral alliances, new economic treaties should be negotiated that will become a phalanx, barring China’s domination of world trade. Our objective must be the creation of security-driven economic alliances that support secure, resilient supply chains that link together businesses in many countries, for this approach will constitute a major stimulus to small- and to medium-sized businesses outside China.


How must we contest China in the years to come? How can we ensure that the atrocities Russia is committing today are not perpetrated by China tomorrow?

As a cadet at the United States Military Academy at West Point and as a young officer serving as a tank platoon leader in Germany before the fall of the Berlin Wall, my standard for discernment, conduct, and action was Ronald Reagan, then president. This giant’s realism and grit established the course of my life.

In transcribing these words, my mind harkens back to Ronald Reagan’s great triumph. We live in the present, but we must study history to create a better future.

Think of the world that greeted our fortieth president. Not only were interest rates, energy prices, and inflation metrics sky high, but our principal adversary was living off Western democracies’ largesse. Concurrently, the Left speculated that Marxist socialism would prove to be superior to America’s market economy. Sound familiar?

President Reagan led the free world with unshakable faith in human liberty, which propelled his unambiguous animus to a regime that was the enemy of freedom. President Reagan detested communism and its veneration of the collective at the expense of the individual. He understood its internal contradictions, its corruption, and its dearth of innovation. He comprehended that the command economy of a totalitarian police state was doomed to failure.

The Reagan administration derailed the colossal, twin-stranded, Trans-Siberian gas pipeline project, which the Soviet Union intended to use to dominate the supply of natural gas to Europe. This would have radically increased Moscow's hard currency income at a crucial time.

If that massive project had been completed as conceived, in accordance with Moscow’s timetable, total Soviet domination of West European gas supplies and the near doubling of the Kremlin's annual hard currency income would have been assured. Indeed, Russia's weaponization of natural gas today is emblematic of the use of energy as a tool for coercion.

Then, as now, many businesses cared more about profits than America’s security. The Soviet Union's hard-currency financing gap had been funded by Western governments and commercial banks. A consortium of German banks helped finance this Soviet project; later, French banks and the Export-Import Bank of Japan would supply needed capital. These funds facilitated the systematic theft by Moscow of dual-use technologies that permitted their fielding of new weapon systems at a breakneck pace.