China requires U.S. and other foreign firms to host groups that monitor their adherence to the orthodoxy of the Chinese Communist Party, FBI Director Christopher Wray said in Wednesday’s testimony before Congress.
That is a method the Chinese government has “exploited” joint business ventures to acquire company secrets and data, Wray told the House Judiciary Committee.
“There is no such thing as a country, no country, that poses a broader, more comprehensive threat to our ideas, innovation, our economic security than the Chinese government and the Chinese Communist Party,” Wray testified.
“In some ways, it represents, I think, the defining threat of our era,” he said.
Wray’s harsh criticism of the Chinese government’s alleged interference in foreign business, in a spot where his language was heavily guarded, underscores the high tension between Beijing and Washington. His remarks also come after essential visits by Secretary of State Antony Blinken and Secretary of the Treasury Janet Yellen to China.
Wray on Wednesday was asked by Representative Lance Gooden of Texas whether China was “essentially nationalizing American firms” by forcing firms doing business in the country to permit the CCP to run internal “political cells.”
“The CEOs I’ve spoken to are afraid to say something, they are saying they’ve come to the FBI,” Gooden said.
Wray called it a “very essential point” that deserves more attention.
“While there is no such thing as a law against joint ventures, our problem is that the Chinese government too often uses these joint ventures after which uses them as a approach to gain inappropriate access to company secrets and data,” said the FBI director.
Wray said Americans “could be shocked to listen to” that virtually all firms doing business in China are required to permit these cells.
“If we try to put in something like this in American firms, or if the British attempt to do it in British firms or any variety of other places, people will go crazy and rightly so,” he said.
Wray didn’t name the precise firms that were required to deal with the CCP cells in China. He also did in a roundabout way reply to Gooden’s concerns that Beijing had increased using these cells.
The U.S. Chamber of Commerce and the CEO Business Roundtable, whose members include leaders from major firms like Apple and Nike, didn’t immediately reply to CNBC’s requests for comment on Wray’s remarks.
Sayari trading risk evaluation platform warned in a 2021 report that personal firms in China are under increasing pressure to present so-called CCP cells more influence.
Based on Sayari, these firms are obliged from 2018 to create CCP cells in order that they could be listed on national stock exchanges. The cells, in turn, sought to strengthen their role in corporate governance, the corporate said.
China has long required such internal party committees, but enforcement only began to realize momentum after 2012. Center for Strategic and International Studies.
Latest rules last 12 months required securities mutual funds in China to establish these internal party committees. When asked concerning the recent rules, China’s securities regulator said they were in line with corporate governance and Chinese law, and “no have to worry in any respect” about data security, in accordance with CNBC’s Chinese translation.
Financial Times earlier reported This HSBC installed a CCP committee in its banking operations in China, making it the primary foreign lender to achieve this.
This is not the primary time Wray has expressed concern about Beijing’s alleged efforts to impose communist political beliefs on foreign firms operating in China.
“It’s even attending to the purpose where under Chinese law, Chinese firms of all sizes need to host the corporate,” Wray said in an interview with CNBC. “They call it a committee, but principally it is a cell whose only duty is to be sure that the corporate adheres to the orthodoxy of the Chinese Communist Party.”
“And it is not just Chinese firms; this also applies to foreign firms in the event that they reach a certain size in China,” Wray told CNBC.
He added that these firms “have to adapt”. “They need to cooperate.”
The exchange with Gooden was a respite from many of the hostile questions Wray received from the committee’s Republican majority. The Biden administration official responded to heated questions and frequent pauses from Republicans, largely focused on the agency’s perceived political bias against conservatives.
— Christina Wilkie of CNBC contributed to this report.
Update: This story has been updated to remove reference to the Wall Street Journal article.