More Restrictions Needed to Counter Chinese Access to US Tech, Congressional Commission Says

As China continues to gain ground in technology competition with the U.S., Congress should pursue more investment and visa restrictions to prevent China from accessing sensitive U.S. technologies, the U.S.-China Economic and Security Review Commission said in a Dec. 1 report. Commissioners said China’s access to U.S. technologies is helping it innovate and export surveillance tools and other advanced technologies globally.

Although the report urges Congress to impose more restrictions on China, the commissioners said they expect trade restrictions to continue regardless. “I think it's clear that there is greater scrutiny [on China] and presumably greater action will come as a result of not only what Congress has done, but also the identification of numerous companies on the Entity List,” Commissioner Michael Wessel said during a Dec. 1 event hosted by the commission.

Although the commission said the U.S. should continue to use export controls to counter China, it should also better use its investment restrictions. The report said Chinese companies are still able to maliciously access U.S. companies and undermine U.S. national security through investments. “Several Chinese companies included in global investment indices are subject to U.S. export controls but not investment restrictions,” the report said. “This mismatch enables problematic Chinese companies to continue raising U.S. capital and reduces the strength with which the United States can defend against companies that threaten national security.”

The commission also said China’s government has created a “sprawling ecosystem of structures, programs, and policies” to “exploit” Chinese students who have gained technical expertise abroad. The report said China recruits those students to help with the country’s civil-military fusion programs and is particularly interested in students studying mobile communication, aviation, biotechnologies and new materials. “A notable element of the ecosystem is its focus on acquiring unclassified fundamental research,” the report said, “the transfer of which is not prohibited by U.S. export controls or intellectual property laws.” Universities have urged the Bureau of Industry and Security to refrain from restricting exports of fundamental research, which could broadly impact academic research (see 2011130037 and 2005120053).

The commission recommended that Congress amend the Immigration and Nationality Act to “clarify” that “association” with a foreign government’s technology transfer program may be considered grounds to deny a nonimmigrant visa if that government is a “strategic competitor” of the U.S. The U.S. should also deny a visa if the person seeking the visa has violated U.S. export controls or has participated in a foreign government program “designed to incentivize participants to transfer fundamental research to a foreign country via a talent recruitment program.”

The commission also said Congress should closely monitor China’s actions in the U.S. healthcare sector, particularly because of the COVID-19 pandemic. China has made collecting foreign healthcare data a “national priority,” the report said, doing so through investments in U.S. firms and “partnerships with U.S. universities and hospitals.” The Committee on Foreign Investment in the U.S. has increased scrutiny on transactions involving pharmaceuticals and healthcare technologies (see 2005290027 and 2003250033).

The report also said China is seeking to dominate the development of emerging technologies by securing leadership roles at international standards-setting bodies and “rewriting the norms by which they operate.” China is specifically hoping to exclude the U.S. and the European Union from these international institutions because it views technical standards as a “policy tool to advance its economic and geopolitical interests.” Experts told the commission earlier this year that the U.S. needs to do more to counter Chinese leadership at standards bodies (see 2006240039).

The U.S. should create an interagency executive committee on international standards to form a coordinated response to Chinese actions at these bodies, said Commissioner James Talent, a former Republican senator from Missouri. Talent said the committee would be modeled after CFIUS because it would be staffed by “high-level political appointees” from agencies with jurisdiction over standards setting, such as the Commerce Department.

“It would be a one-stop place where private sectors could go to work with the government,” Talent said. “The idea is to get an integrated response to China's attempt to subvert the international standards process.”