US Congressional Advisory Panel: "Investment by US Companies in China Should Be More Strictly Regulated"

"China May Attack Taiwan for Xi Jinping's Long-Term Rule"
"US Investment in China Exceeds Defense Budget... Investment Regulation Needed"

[Image source=AP Yonhap News]

[Asia Economy Reporter Hyunwoo Lee] The US-China Economic and Security Review Commission (USCC), a bipartisan advisory body under the US Congress, pointed out in its annual report that China is preparing to invade Taiwan and indirectly supporting North Korea's nuclear development, thereby threatening US security. The USCC emphasized that investment restrictions on Chinese companies should be strengthened beyond the current level to counter these threats. Although the recent first virtual summit between the two countries laid the groundwork for dialogue, the report suggests that sharp military and economic confrontations will continue both domestically and internationally.

On the 17th (local time), USCC Chair Caroline Bartolomu announced the annual report via video conference at the US Congress, warning, "The Chinese Communist Party is intensifying its belligerence and coercive actions in its 100th founding anniversary year, and the risk of a short-term invasion of Taiwan is increasing." She added, "China's nuclear force enhancement also escalates regional crisis tensions and raises unpredictable risks of escalation such as accidental nuclear conflict."

The USCC stated in the report, "If China attacks Taiwan with its current military power, Chinese losses are expected to be significant, but there is a possibility that President Xi Jinping may attack Taiwan to create a political legacy for his long-term rule." It further noted, "If US policy is unclear and the Chinese leadership takes opportunistic short-term action against Taiwan, the US may find it difficult to respond quickly," urging a tougher policy of pressure against China than currently in place.

The report also criticized China for indirectly supporting North Korea's nuclear development. The USCC pointed out, "Chinese financial institutions and private businesses facilitate North Korea's access to foreign currency necessary to fund its nuclear development program," and "Chinese financial institutions indirectly support the acquisition of dual-use items that can be diverted for military purposes."

To counter China's threats, the USCC emphasized the need to more strictly regulate US investment in China and significantly increase the number of Chinese companies banned from investment. The USCC stated, "US investments in Chinese companies reached $1.2 trillion last year (approximately 1,418 trillion won), greatly exceeding the US defense budget," recommending that the US Congress enact stronger regulatory legislation on US investors' investments in Chinese companies and increase the number of Chinese companies subject to investment bans.

Additionally, the USCC called for the US Treasury Department to prepare and disclose an annual report warning about the risks of investing in China. The USCC noted, "Seventy-three percent of Chinese private companies are linked to the Chinese Communist Party organization, which strongly intervenes in corporate personnel and management, obstructing major business decisions," and added, "The US Treasury Department should disclose in detail how much US capital is invested in Chinese industrial sectors that could threaten US security, the types of investment institutions involved, and the exposure (risk amount) to companies subject to investment bans."

Concerns are growing that US capital will rapidly withdraw not only from Chinese capital markets such as the Hong Kong and Shanghai stock exchanges but also from Chinese companies still listed in the US. The Hong Kong South China Morning Post (SCMP) reported, "China's major information technology (IT) companies mostly have a 'Variable Interest Entity (VIE)' structure, where holding companies established overseas control domestic companies to circumvent Chinese authorities' restrictions on overseas investment." It added, "If US investment funds rapidly exit, it could significantly impact the corporate governance of Chinese companies."

This content was produced with the assistance of AI translation services.