Rep. McCaul Previews China Threat Report, and a Surprise Finding: ‘We’re Just Playing With Fire’

As a young prosecutor in the Department of Justice, Representative Michael McCaul (R., Texas) worked on the case of Johnny Chung, a California businessman convicted in 1998 for funneling money to the 1996 Clinton campaign from Chinese military intelligence.

“This story really could easily be a headline today,” McCaul said in February. “And the threat from Chairman Xi’s Chinese Communist Party largely remains the same. But it’s now more aggressive, it’s more expansive, more sophisticated, and better resourced.”

Over two decades later, McCaul, the ranking Republican on the House Foreign Affairs Committee, is now heading the China Task Force, a working group formed by House Republicans in May to rethink America’s relationship with the PRC amid the COVID-19 pandemic. “This task force is some of the most consequential work that many of us who serve on it have done in our entire time in the Congress,” member Andy Barr (R., Ky.) told National Review last week.

While the group was initially conceived as bipartisan, Republicans have said that Democrats chose to back out ahead of its launch. The final report, set to be released Wednesday, includes 82 “key findings” and over 400 recommendations, including the prioritization of reshoring for domestic manufacturing in key industries, forming an international coalition of democracies to counter China’s 5G hegemony, and evaluating whether the CCP’s crimes against the Uyghur ethnic minority amount to genocide. Ahead of the release, McCaul spoke to National Review about its findings.

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Tobias Hoonhout: You’ve had experience dealing with the Chinese Communist Party and its nefarious influence for more than 20 years. Only now, in the midst of the pandemic, it seems like the U.S. is starting to wake up to the threat of China. What took so long?

Michael McCaul: That’s a great question. I just remember back in 1996, I was a little younger back then, but that was my first introduction to espionage and probably the most fascinating case — certainly that I prosecuted and I think one of the more fascinating prosecutions out there — only because it did lead us to China aerospace. Liu Chaoying, trying to get access to the White House, getting access to the Department of Commerce, to help with the Export Control Act so they can get more aerospace technology satellites delivered into China, and then of course, he meets with the director of Chinese intelligence. $360,000 deposit slip from Liu Chaoying and his Hong Kong bank account into the Clinton campaign, so it’s interesting. It’s kind of come full circle, it’s not the first time a foreign power has tried to do this, certainly won’t be the last, and I find it very interesting going into this election cycle, because a lot of the classified briefings that I’ve been getting are how China’s really upping their game and trying to influence these elections. To your point, why did this take so long? I think for two decades, we tried to win them over, bringing them into the family of nations, turning them into a capitalistic society, a democracy, thinking they can be allies and friends. And Secretary Baker [United States Secretary of the Treasury under President Reagan, and U.S. Secretary of State under President George H. W. Bush] told me the other day, he said “we tried, and it just didn’t work.” And that’s just the sad fact and we are where we are today.

Hoonhout: Speaking of elections, what does November mean for the task force’s impact? You have a number of bipartisan recommendations, but you didn’t add Democrats to your team. If Democrats maintain control of the House or if Joe Biden wins the White House, how does the CTF move forward?

McCaul: Well, it was supposed to be bipartisan. McCarthy and I talked to Steny Hoyer, he agreed to do it a year ago, and at the last minute, Pelosi said it was a diversion. And I think that’s to their detriment, I think this is going to be a document that is going to be a guide for Congress for the next several years. And we wanted it to not be a political exercise, but a policy exercise. And that’s why two-thirds of the recommendations are bipartisan. And so, if Congress is controlled by the Democrats, we can fall back on what two-thirds of these recommendations are bipartisan. I can’t speak for them, or the speaker, but I think they get this — there has been what I call an awakening on the part of the American people.

Hoonhout: One thing that jumped out from the task force’s recommendations is the focus on safeguarding American institutions from the CCP’s influence, particularly in regards to higher education and the financial system. Do you see the two as intertwined — take American university endowment investment, for example?

McCaul: It’s really two separate issues. On the university issue, they use our open academic system of education, and they use it against us. I remember going to the Kennedy School, and there were a lot of Chinese students that were from China and, I kind of wondered about that, at the time. Now that’s their soft power. Their hard power is the Thousand Talents program, which is what you saw happen at MD Anderson, the Texas A&M professor getting indicted for espionage, selling NASA secrets —which is another reason why they were in Houston, because you get the Medical Center in NASA [Professor Zhengdong Cheng, who allegedly led a NASA research team, was charged by the DOJ in August for conspiracy, making false statements, and wire fraud]. What I am very heartened to see is the Justice Department — that not since the time I was there — is really taking it seriously and really ramping up investigations and indictments, of Chinese officials, of PLA-sponsored students, and the espionage on the part of some of the faculty.

On the investment side, for anybody who wants to invest in a Chinese company, if it is directly tied to the PLA, we recommend a disclosure to the investor that they’re actually investing in China’s military fusion center. And then also, we think the same rules should apply to Chinese stocks traded on the stock exchange in the United States — the same rules we apply to Americans under Sarbanes-Oxley [a bill passed in 2002 in response to corporate scandals like Enron and Tyco, creating the Public Company Accounting Oversight Board to oversee the auditors of publicly-traded companies] should also apply to China stocks on our stock exchange.

Hoonhout: As well as leading the China Task Force, you also run the Republican side of the House Foreign Affairs Committee, which has heavily scrutinized the World Health Organization’s handling of the pandemic over the last few month. Amid a reassessment of the U.S.’s relationship with China, how is that projected onto international organizations?

McCaul: In my judgment, [WHO director general] Tedros was either willfully ignorant or complicit with President Xi — who helped him get his appointment to that position — by not reporting it to the world that it was human-to-human. It was a different type of virus that required reporting to the WHO, a SARS-like virus. I call for his resignation and reform. And China is systematically taking over key positions in the United Nations, and we need to be very mindful of this with our allies, that whether it’s the United States or our allies, we get in these key positions of the United Nations that we fund the majority of the bill for. But I think, you got to be on the field, right? I think we have got to be engaged globally, and I think we have to be engaged with the WHO, and not just walk away from it, if we want to seriously reform it. I think the WHO is a very necessary institution and body within the United Nations — I mean, nothing proves that more than this pandemic — but it didn’t do a very good job, it needs to be reformed, and the WTO as well. So we don’t advocate in the report that we just walk away, we advocate that we try to advance change from within the institution. Otherwise you’re going to turn over the Chinese, and that’s the worst result.

Hoonhout: What’s one finding that the task force made that you were not expecting?

McCaul: I think really just the level of supply chain vulnerability. Honestly, that’s what American people woke up to with COVID, it was, “my God, they make all our PPEs.” I didn’t realize that they nationalized 3M and GM within China and did not allow them to export that to the United States. And the generics and the antibiotics, it just shows you how vulnerable we are, and we’re just playing with fire, because they can turn the switch off. And the same with the technology piece, these advanced semiconductor chips, we’ve got to bring this manufacturing, either through key allied nations or back home to the United States. That’s why I introduced the Chips for America Act, which will take what is basically the brains within all of our electronics, everything military, everything that we do, tied to the Internet of Things. And these advanced chips are very, very sophisticated. The Chinese have said they want to invest a trillion dollars in a digital economy, including advanced semiconductor chips, so this is an area where we’ve been intensely focused with the administration. I got it tasked in the National Defense Authorization bill, we have the tax incentives passed, along with the funding for a grant program to incentivize companies like Intel and Samsung, GlobalFoundries, and others to manufacture here in the United States. This is a message that, by the way, really resonates with the American people, because they don’t like what the Chinese Communist Party did. They think they should be punished, and I’m often asked, “what should be the consequences?” I really think it goes to the free market, and supply chain, and countries bringing more manufacturing out of China and back home. And that’s going to be a key recommendation in the report. And I think that is a way — if there’s any punitive measure or consequence to hold them accountable, that certainly is a big one.