Chinese Military Companies Are in GOP Crosshairs

F or over two decades, presidents of both parties neglected to enforce an entirely overlooked law authorizing sanctions against Chinese military-linked firms in the United States.

As the United States barreled toward normalizing trade relations with the People’s Republic of China, Congress included a provision in the 1999 National Defense Authorization Act requiring the president to make a list of firms with ties to the Chinese Communist Party’s paramilitary wing, the People’s Liberation Army. Although the law mandates the creation of that list, it authorizes, but does not require, the president to implement sanctions against the entities on it.

After receiving bipartisan pressure to do so, President Trump designated 35 such firms to be sanctioned during the final year of his presidency — but soon after taking office, President Biden froze the move until May. In response to the Biden team’s decision, House Republicans are launching a push to change the 1999 law, making the sanctions mandatory.

“It should be common sense to prohibit investment in Chinese Communist military companies, which threaten America’s national security, jeopardize American intellectual property, and aid China in carrying out genocide against its own people,” said Representative Ronny Jackson (R., Texas), the freshman congressman introducing the legislation, his first bill. “Now President Biden has cast doubt on the future of these important sanctions, making clear that Congress needs to change the law from an authorization to a requirement.”

Jackson’s office provided National Review an early look at the legislation — which will be announced in a press release later today — before he introduced it on Thursday afternoon. It’s a short bill that merely changes the language used by the 1999 defense-bill provision to require that the sanctions be put in place.

The bill fits into a broader Republican Study Committee push to hold the new administration to account on China-related issues, Representative Jim Banks (R., Ind.), the RSC’s chairman, told NR. “Encouraging China’s rise means encouraging America’s demise. That’s something the Trump administration understood, but the Biden administration doesn’t. That’s why the RSC will hold the Biden administration’s feet to the flames and encourage Congress to pass legislation that would keep sanctions on Chinese military companies,” Banks said.

Nevertheless, if enacted, it could have a significant impact, strengthening a previously underappreciated law.

Congress passed that 1999 provision as it became increasingly apparent that the U.S. would normalize trade relations with the People’s Republic of China. Although there was widespread support for boosting U.S.–China trade ties at the time, some analysts still worried that the potential security implications were being ignored.

Writing in 2000, the Heritage Foundation’s Larry Wortzel noted that the debate over bolstering trade relations between the two countries overlooked the possibility that Chinese firms could export key military technology to China, which is why Congress mandated that the Pentagon draft a list of Chinese firms. But then-president Bill Clinton declined to comply with it. “Congress should take up this matter now by demanding that the Administration comply with the law and publish the required list so appropriate action can be taken to ensure that sensitive dual-use American technology is not being acquired by the PLA,” Wortzel wrote.

The Clinton administration was no outlier, though, and the issue of Chinese military-linked firms operating in the United States went largely unremarked upon by successive presidential administrations — until last year.

This issue came to the fore once again as tensions between Washington and Beijing reached a nadir. In September 2019, Senators Tom Cotton and Chuck Schumer wrote to former secretary of defense Mark Esper requesting that he take steps to confront China’s civil-military technology transfer efforts, “including powers that have lain dormant for years.” In other words, they wanted to Trump administration to revive the 1999 Chinese military firm designations that had never been enforced.

The Trump administration complied and by early 2021 had added a total of 35 companies to the list mandated by the 1999 law. These firms included Chinese tech giants such as semiconductor manufacturer SMIC, smartphone company Xiaomi, and CNOOC, a state-owned oil company.

All of these companies would have been subject to a November 2020 executive order prohibiting American investors from trading publicly listed companies designated under the Pentagon’s list, and a month later, the Treasury Department announced stringent enforcement guidelines fought for by hawks in the Trump administration. This move “ensures U.S. capital does not contribute to the development and modernization of the People’s Republic of China’s (PRC) military, intelligence, and security services,” Mike Pompeo, then-secretary of state, said at the time.

But soon after Biden took office, his administration announced that enforcement of the new regulations would be delayed as part of a broader review of Trump-era measures.

If the new administration upholds the sanctions at all, they will be implemented in May. Lawmakers are encouraging the president to keep them in place. In a Washington Post op-ed the day after the sanctions freeze was reported, Senator Marco Rubio wrote that the Biden administration should build on the Trump-era rules. Rubio contended that “leaving the executive order in place would make Biden the second president in history to convey to the CCP that it will no longer be able to exploit our financial system.” Biden, though, has at least temporarily declined that opportunity.

Perhaps the RSC’s messaging push will contribute to a Biden administration decision to maintain the Trump-era Chinese military-linked company designations, whether or not Jackson’s bill becomes law. But if it is passed, the measure stands a chance of beefing up sanctions authorities that will come to play a foundational part in the new U.S. stance toward China.