China requires US and other foreign-owned companies to host groups monitoring their adherence to Chinese Communist Party orthodoxy, FBI Director Christopher Wray said in congressional testimony Wednesday.
It’s one 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, nothing, that presents a broader, more comprehensive threat to our ideas of our transformation to 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 time,” he said.
Wray’s outspoken criticism of the Chinese government’s alleged interference in foreign business, in an area where his language is highly guarded, underscores the high tension between Beijing and Washington. His remarks also came on the heels of visits to China by Secretary of State Antony Blinken and Treasury Secretary Janet Yellen.
Wray on Wednesday was asked by Rep. Lance Gooden, R-Texas, on whether China is “essentially nationalizing American businesses” by forcing companies doing business in the country to allow the CCP to operate internal “political cells.”
“The CEOs I talked to were afraid to say something, they said they went to the FBI,” Gooden said.
Wray called it “a very important issue” that deserves more attention.
“Although there is no law against joint ventures, our problem is that the Chinese government often exploits those joint ventures to use them as ways to gain improper access to company secrets , and information,” said the FBI director.
Wray said Americans would be “shocked to hear” that almost all companies doing business in China would be required to allow those cells.
“If we tried to install something like this in American companies, or if the British tried to do it in British companies or any number of other places, people would lose their minds, and rightly so. ,” he says.
Wray did not name the specific companies required to place CCP cells in China. He also did not directly address Gooden’s concern that Beijing has increased its use of those cells.
The US Chamber of Commerce and the CEO advocacy group Business Roundtable, whose members include the heads of major companies such as Apple and Nike, did not immediately respond to CNBC’s requests for comment on Wray’s remarks. .
Commercial risk intelligence platform Sayari warned in a 2021 report that private companies in China are facing growing pressure to give more influence to so-called CCP cells.
Those companies have been required since 2018 to establish CCP cells to be listed on domestic stock exchanges, according to Sayari. The cells, in turn, have pushed to strengthen their role in corporate governance, the company said.
China has long demanded such internal party committees, but implementation only began after 2012, according to a report from Center for Strategic and International Studies.
New rules last year required Chinese securities investment funds to set up these internal party committees. When asked about the new rules, China’s securities regulator said they are in line with corporate governance principles and Chinese law, and there is “no need to worry” about data security, according to a CNBC translation of Chinese.
The Financial Times used to be reported already HSBC has installed a CCP committee in its China banking business, making it the first foreign lender to do so.
This is not the first time 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 are required to host internally,” Wray said in an interview with CNBC. “They call it a committee, but it is essentially a cell whose sole responsibility is to ensure the company’s adherence 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 get to a certain size in China, as well,” Wray told CNBC.
Those companies “have to comply,” he added. “They have to work together.”
The exchange with Gooden came as a break from the mostly hostile questions Wray received from the committee’s Republican majority. Biden administration officials have fielded heated questions and frequent interruptions from Republicans largely centered on the agency’s perceived political bias against conservatives.
— CNBC’s Christina Wilkie contributed to this report.
Update: This story has been updated to remove a reference to a Wall Street Journal op-ed.