The Senate’s Missed Opportunity to Counter China

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The Chinese and American flags flutter outside a company building in Shanghai, China, April 14, 2021. (Aly Song/Reuters)

The bill the Senate just passed gives Beijing carte blanche to continue exploiting the openness of America’s capital markets.

This week, the Senate passed the United States Innovation and Competition Act, what many mistakenly referred to as the “China bill.” It should have been an opportunity to strengthen our markets and national research infrastructure against the Chinese Communist Party’s (CCP) predatory behavior. Instead, it effectively gives Beijing carte blanche to keep exploiting one of America’s greatest economic vulnerabilities: the openness of our capital markets.

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When it comes to American economic power, there is no more efficient tool at our disposal than U.S. capital markets. Our stock markets are the most open and valuable in the world. However, they’re also fundamentally agnostic as to whether their investment goes to the U.S. or China; creates good jobs in America or depletes them; and allows the U.S. or Beijing to lead the 21st century.

This is not conjecture; in fact, it is codified into law.

Those of us committed to long-term prosperity and opportunity in our nation must recognize the massive vulnerabilities to Americans’ national and economic security this creates. For decades, Beijing has understood that the highest priority of America’s financial sector is to maximize short-term profits — even as investment, as well as research and development, collapses at home — and works daily to exploit that mindset. The results speak for themselves; 2019 was the first time in history that the U.S. became a net investor in China, and, over the last year, Americans’ investment in Chinese corporations has increased by nearly $70 billion.

At Wall Street’s direction, millions of Americans’ retirement accounts are today being used to fund the CCP’s century-defining efforts to supplant American leadership. Major American fund managers now speak openly about hedging their bets by investing in China, in case Beijing wins the competition for the 21st century. Our government’s own retirement fund, the Thrift Savings Plan, tried to invest in shady Chinese companies, arguing it was the new “industry standard.” In many cases, American service members’ retirement accounts are being invested in Chinese companies working to build the weapons designed to kill them.

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No other country would so willingly invest in an adversary. Our markets should serve our people and our national interests, not China’s. If you’re enjoying the many benefits of being an American corporation — a friendly business climate, proximity to the world’s greatest research institutions, a stable and fair legal system — you should feel invested in our nation’s future.

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But the United States Innovation and Competition Act ignores too many of these critical issues. When presented an opportunity to fix the problems, Senate majority leader Chuck Schumer (D., N.Y.) shut down the amendment process entirely.

As I explained back in May, a real China bill would have tackled these issues head on.

First, it should have banned American money from being invested in Communist Chinese military companies. No Chinese company on the U.S. Department of Commerce Entity List or the U.S. Department of Defense list of Communist Chinese military companies should be able to enrich itself off our capital markets. My American Financial Markets Integrity and Security Act would prevent exactly that.

Second, the bill should have ensured Americans aren’t providing financial support to other dangerous Chinese supply chains. My Shareholder National Security Awareness Act would require increased oversight of activist investors in companies tied to national-security work or supply chains, especially Chinese-tied ones. In 2019, I proposed the Taxpayers and Savers Protection Act to ensure that federal retirement-savings accounts don’t end up investing in dangerous Chinese companies. It should be a critical component of any comprehensive China bill.

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Finally, the Senate bill should have banned Chinese companies that routinely dodge U.S. regulatory oversight from publicly listing on U.S. stock exchanges, which could be accomplished through my No IPOs for Unaccountable Actors Act.

Too many in our financial sector might be okay with leveraging America’s future for a quick profit. I’m not. Policy-makers must act now to end the exploitation of U.S. capital markets, which is empowering a genocidal regime trying to beat us in the most important geopolitical contest of our lifetimes. The United States Innovation and Competition Act fails to accomplish this. It’s a major missed opportunity to correct a vulnerability that now risks haunting our nation for generations.

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