China requires US and foreign-owned companies to host groups that monitor their compliance with Chinese Communist Party orthodoxy, FBI Director Christopher Wray said Wednesday in testimony before Congress.
It’s a way the Chinese government has “exploited” joint business ventures to obtain company secrets and information, Wray told the House Judiciary Committee.
“There is no country, no country, that presents a broader and more comprehensive threat to our ideas, our innovation, our economic security than the Chinese government and the Chinese Communist Party,” Wray testified.
“In many ways, it represents, I think, the defining threat of our age,” he said.
Wray’s forceful criticism of the Chinese government’s alleged intrusion into foreign business, in a place where its language has been highly secretive, underscores the high tension between Beijing and Washington. Her comments also come on the heels of high-stakes visits to China by Secretary of State Antony Blinken and Treasury Secretary Janet Yellen.
On Wednesday, Rep. Lance Gooden, R-Texas, asked Wray if China is “in essence, nationalizing corporate America” by forcing companies that do business in the country to allow the CCP to operate internal “political cells.” .
“The CEOs I’ve talked to are afraid to say anything, they say they went to the FBI,” Gooden said.
Wray called it “a very important issue” that deserves more attention.
“While there is no law against joint ventures, the problem we have is that the Chinese government has too often exploited those joint ventures and then used them as ways to gain improper access to company secrets and information,” said the director of the FBI.
Wray said Americans “would be surprised to hear” that virtually all companies doing business in China are required to allow such cells.
“If we tried to install something like that in American companies, or if the British tried to install it in British companies or anywhere else, people would go crazy, and rightly so,” he said.
Wray did not name specific companies that have been asked to host CCP cells in China. He also did not directly respond to Gooden’s concern that Beijing had increased its use of such cells.
The US Chamber of Commerce and the CEO advocacy group Business Roundtable, whose members include the leaders of major companies such as Apple and Nike, did not immediately respond to CNBC’s requests for comment on Wray’s comments. .
Sayari Business Risk Intelligence Platform warned in a 2021 report that private companies in China face increasing pressure to give so-called CCP cells more leverage.
Those companies have been required since 2018 to establish CCP cells in order to be listed on national stock exchanges, according to Sayari. The cells, in turn, have pushed to strengthen their role in corporate governance, the company said.
The Wall Street Journal reported last year that Chinese regulators had changed their rules for equity mutual funds, including the requirement that foreign-owned companies such as black rock and Fidelity to create communist cells within their Chinese business operations.
The Financial Times formerly reported that HSBC had installed a CCP committee in its banking business in China, becoming the first foreign lender to do so.
It is not the first time that Wray has raised concerns about Beijing’s alleged efforts to enforce communist political views within foreign companies operating in China.
“It’s even to the point where, under Chinese law, Chinese companies of any size must be housed within the company,” Wray said in an interview with CNBC. “They call it a committee, but it is essentially a cell whose sole responsibility is to ensure that the company adheres to the orthodoxy of the Chinese Communist Party.”
“And it doesn’t just apply to Chinese companies, it also applies to foreign companies if they reach a certain size in China,” Wray told CNBC.
Those companies “have to comply,” he added. “They have to cooperate.”
The exchange with Gooden was a respite from the mostly hostile questions Wray received from the committee’s Republican majority. The Biden administration official fielded heated questions and frequent interruptions from Republicans centered largely on the agency’s perceived political bias against conservatives.
— CNBC’s Christina Wilkie contributed to this report.