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U.S. Senate, Hearing on China's Belt and Road Initiative, June 12, 2019

Chuck Grassley (R-Iowa) was committee chair of the finance committee and John Cornyn (R-Texas) was chair of the subcommittee on international trade. Cornyn chaired the hearing which included testimony from Carolyn Bartholomew, Roy Kamphausen, Daniel Klimen, and Derek Scissors.
June 12, 2019

Click on the link below to download the full transcript (including the testimony of Bartholomew, Kamphausen, Klimen and Scissors) of the hearing in pdf form.


From Sen. Cronyn's opening statement:

Since its accession to the World Trade Organization, China has consistently engaged in unfair trade practices that bolster  its  domestic  industries  at  the  expense  of  free  trade  and  global  stability.  

China has weaponized foreign investment to force transfer of cutting-edge  intellectual  property  to  steal  trade  secrets,  erode  the  technological  gap,  and  create  Chinese  state-controlled  competitors  for American companies. Last  Congress  I  authored  the  Foreign  Investment  Risk  Review  Modernization  Act,  which  gives  an  interagency  body  known  as  the  Committee  on  Foreign  Investment  in  the  United  States  additional tools  to  combat  these  threats.  I  am  proud  that  President  Trump  signed  this  important  legislation  into law  last  year  as  part  of  the National Defense Authorization Act. While  we  have  taken  this  important  step  to defend  Americans  against  predatory  Chinese  investment  practices,  China’s  ambitions are much more broad. In 2013, the Chinese Government announced the  Belt  and  Road  Initiative,  through  which  it  aims  to  construct  billions  of  dollars  of  infrastructure  projects  in  countries  around  the world. Since the creation of the Belt and Road Initiative, China has strategically  invested  hundreds  of billions of dollars in ports, railways, roads, and digital infrastructure. To date,  China  has  entered into  Belt  and  Road  agreements  with  more  than  70  countries  covering nearly two-thirds of the world’s population.

Belt and Road is a cornerstone of the Chinese Communist Party’s aggressive  foreign  policy  goals  and  expansionist  goals.  It  has  been  billed  by  its  leaders  as  a  way  to  modernize  infrastructure  corridors  and to construct ‘‘a community of common destiny.’’ Unfortunately,  this  community  of  common  destiny  referred  to  by  the Communist Party members is one in which China reshapes the global  order  and  imposes  its  authoritarian  economic  regime  and  controls  on  the  rest  of  the  world.  China’s  Belt  and  Road  Initiative  poses  three  fundamental  threats  to  the  United  States  and  our  allies  around  the  world:  trade  manipulation,  economic  exploitation, and security erosion.

At its core, the Belt and Road Initiative is fueled by China’s mission  to  manipulate  and  undermine  the  global  rules-based  trading  system  for  its  own  benefit.  China’s  internal  structures  are  predicated on the preferential treatment of its domestic industries, often at the expense of free and open competition.

This is further evidenced by the Made in China 2025 plan, which strategically  compliments  Belt  and  Road  and  seeks  to make  China  dominant in a number of high-tech sectors of interest to the United States,  including  rail  infrastructure, telecommunications,  and  artificial intelligence.

Belt  and  Road  has  not  only  exacerbated  China’s  unfair  trade  practices, it is in clear violation of their commitments as a member of  the  World  Trade  Organization.  That  is  because  Belt  and  Road  is  rigged  to  empower  and  create  monopolies  for  Chinese-owned  entities  like  Huawei,  ZTE,  and  CRRC  to  carry  out  these  projects  all
over the world.

But China’s strategic vision goes far beyond empowering its state-controlled  companies.  It  also  seeks  to  bend  unwitting  countries through their economic exploitation and ‘‘debt-trap’’ diplomacy. In numerous countries, China has financed projects resulting in  partner  nations  accruing  crippling  foreign  debt  from  which  they cannot escape. For  example,  when  Sri  Lanka  was  unable  to  service  billions  of dollars  in  Chinese-backed  loans  under  Belt  and  Road,  it  had  little choice  but  to  grant  China  a  99-year  lease  allowing  it  to  control  a  Sri Lankan port. In Venezuela, China reduced lending as the country’s  debt  spiraled  out  of  control.  In  order  to  renew  China’s  interest,  Venezuela  agreed  to  sell  nearly  10  percent  of  an  additional  stake in its state-owned oil enterprise.

But most concerning are the direct national security threats posed by Belt and Road. In 2017, China used construction of a Belt and  Road  seaport  in  the  African  nation  of  Djibouti  as  a  Trojan  horse  to  open  its  first  overseas  military  base  in  the  country.  Because of Djibouti’s strategic location on the Horn of Africa, it serves as a gateway to global shipping traffic through the Red Sea and the Middle East. It  is  not  hard  to  see  why  the  presence  of  the Chinese  military  near  the  Middle  East  could  destabilize  the  region  and  threaten  our own  national  security  interests.  But  that  is  exactly  the  objective  of  the Belt and Road Initiative. A  2018  Department  of  Defense  report  highlighted  the  long-term  implication  of  China’s  attempt  to  manage  civilian  ports,  stating that China has made requests for military access and basing agreements  which  could  allow  the  People’s  Liberation  Army  to  preposition  necessary  logistics  to  protect  its  interests.  Equally  concerning is  China’s  recent  shift  in  focus  from  port  and  rail  infrastructure projects to strategic plays in the world’s digital infrastructure. In  Chile,  the  Chinese  government  is  investing  more  than  $650  million  to  build  a  subsea  fiber-optic  cable,  which  will  become  the  largest  data  flow  between  Asia  and  Latin  America.  China  has  even  begun  providing  certain  countries,  like  Zimbabwe,  with  cutting-edge  facial  recognition  software,  which  will  give  China  control  over additional troves of data. Given  the  grave  threats  posed  by  the  Belt  and  Road  Initiative,  it  is  not  enough  for  Congress  to  simply  express  concern  or  opposition  to  China’s  efforts.  Congress  and  the  executive  branch  must work  together  to  develop  and  implement  a  coordinated  long-term  strategy  to  ensure  American  trade  and  security  policy  can  prevent the Belt and Road Initiative from achieving its stated objectives. So  I  look  forward  to  discussing  the  panel’s  perspectives  on  the  Belt  and  Road  Initiative  and  hope  this  hearing  serves  as  a  catalyst for the committee’s efforts to address the threat.