China is requiring U.S. and other foreign-owned corporations to host groups that monitor their compliance with Chinese Communist Party orthodoxy, FBI Director Christopher Wray said in congressional testimony Wednesday.
It’s a method by which the Chinese government has “exploited” joint business ventures in an effort to obtain corporations’ secrets and knowledge, Wray told the House Judiciary Committee.
“There is no such thing as a country, none, that presents a broader, more comprehensive threat to our ideas our innovation our economic security than the Chinese government and the Chinese Communist Party,” Wray testified.
“In some ways, it represents, I believe, the defining threat of our era,” he said.
Wray’s blunt criticism against China’s alleged government intrusion into foreign business, in a venue where his language has otherwise been highly guarded, underscores the high tension between Beijing and Washington. His remarks also come on the heels of high-stakes visits to China by Secretary of State Antony Blinken and Treasury Secretary Janet Yellen.
Wray on Wednesday had been asked by Rep. Lance Gooden, R-Texas, about whether China is “in essence nationalizing American enterprises” by forcing corporations doing business within the country to permit the CCP to operate internal “political cells.”
“The CEOs I’ve talked to are afraid to say something, they are saying they’ve come to the FBI,” Gooden said.
Wray called it “an important issue” that deserves more attention.
“While there is not any law against joint ventures, The issue that we have now is that the Chinese government all too often has exploited those joint ventures to then use them as ways to get improper access to corporations secrets, and knowledge,” the FBI director said.
Wray said that Americans “could be shocked to listen to” that virtually all corporations doing business in China are required to permit those cells.
“If we try to put in something like that in American corporations, or if the British tried to do it in British corporations or any variety of other places, people would exit of their minds, and rightly so,” he said.
Wray didn’t name specific corporations who’ve been required to accommodate CCP cells in China. He also did indirectly reply to Gooden’s concern that Beijing had ramped up its use of those cells.
The U.S. Chamber of Commerce and the CEO advocacy group Business Roundtable, whose members include the leaders of major corporations equivalent to Apple and Nike, didn’t immediately reply to CNBC’s requests for comment on Wray’s remarks.
Business risk intelligence platform Sayari warned in a 2021 report that personal corporations in China face growing pressure to provide the so-called CCP cells more influence.
Those corporations have been required since 2018 to determine CCP cells in an effort to be listed on domestic stock exchanges, in accordance with Sayari. The cells, in turn, have pushed to strengthen their role in corporate governance, the corporate said.
The Wall Street Journal reported last yr that Chinese regulators had modified their rules for securities investments funds, including requiring foreign-owned firms equivalent to BlackRock and Fidelity to create communist cells inside their Chinese business operations.
The Financial Times previously reported that HSBC had installed a CCP committee in its banking business in China, making it the primary foreign lender to achieve this.Â
It isn’t the primary time Wray has raised concerns about Beijing’s alleged efforts to implement communist political opinions inside foreign corporations operating in China.
“It’s even to the purpose where, under Chinese law, Chinese corporations of any size are required to host contained in the company,” Wray said in an interview with CNBC. “They call it a committee, nevertheless it’s essentially a cell whose sole responsibility is to be sure that company’s adherence to the Chinese Communist Party’s orthodoxy.”
“And it doesn’t just apply to Chinese corporations; it applies to foreign corporations in the event that they get to a certain size in China, as well,” Wray told CNBC.
Those corporations “must comply,” he added. “They must cooperate.”
The exchange with Gooden got here as a respite to the mostly hostile questions Wray received from committee’s Republican majority. The Biden administration official fielded heated questions and frequent interruptions from Republicans largely centered on the agency’s perceived political bias against conservatives.
— CNBC’s Christina Wilkie contributed to this report.
