U.S. Official Spells Out Concerns with Chinese Government Involvement in Private Companies

At a Georgetown University Law Center event last week, a U.S. government official working for the U.S. House of Representatives Select Committee on Strategic Competition between the United States and the Chinese Communist Party offered some comments on the issue of Chinese government influence over private companies, and the difficulties that creates for how the U.S. government views these companies.

During a panel on "Navigating China Amid Rising Geopolitical Tensions" at Georgetown's annual International Trade Update conference, moderator Mary Lovely of the Peterson Institute brought up the issue of the scope of U.S. restrictions on Chinese trade and investment. In this regard, she asked, "[i]s it really necessary to ban Chinese companies and products in the US, are we moving toward that?" And, "[i]s it possible to also engage with the Chinese but in a circumscribed way"?

Sara Schuman, a former USTR official who spent almost seven years with the U.S. Embassy in Beijing and who is now an adviser for the House Committee, responded by first noting that in Congress, "there's a lot of legislation right now coming down the pike where we talk about 'foreign adversary companies,'" which has implications for Chinese companies. One important factor here, she noted, is that "having dependencies on companies from a country that is a non-market economy, that has shown it can and will coerce its companies to do what it thinks is necessary for its national security, ... creates a national security risk for us particularly in ... critical industries."

On this point, she added that "it's not at all uncommon, in fact, it's very common, for Chinese companies to be under a lot of pressure from the Chinese government," even those that don't want to be. These companies are "not all evil," she emphasized, but rather they are "under a tremendous amount of pressure, and they have absolutely no choice."

This has "gotten much worse in the last probably five years," she said. In the past, there had been a line between the private sector and the government, and that line "has all but been erased."

One of the best things China could do for its economy, she argued, "is really put up a very defined line between the private sector and the government." If the Chinese government "did not intervene in the commercial decisions, [if] it didn't pressure companies to do essentially its bidding, that would be good for the Chinese economy and it would also make it unnecessary for us to treat Chinese companies like their instrument, essentially, of the party state."

She then expressed skepticism, however, that this was likely to happen, noting "that's not the world we're in and we're not expecting that world to change." There's "absolutely no indication of that," she said, and "[i]n fact, everything coming out of Beijing suggests the opposite." So, "we're in a world where we have to look at Chinese companies through this lens."