WASHINGTON — The Coalition for a Prosperous America (CPA) today submitted written testimony following a hearing in the House Financial Services Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets titled, “Taking Stock of China, Inc.: Examining Risks to Investors and the U.S. Posed by Foreign Issuers in U.S. Markets.” CPA National Security Advisor Robby Stephany Smith outlined several risks to American investors that are posed by non-vetted Chinese companies exploiting U.S. capital markets. Read the full testimony here.
“We applaud Chairman Brad Sherman and other Members of the House Financial Services Committee for finally giving this important issue the attention it deserves,” said Ms. Smith, CPA’s National Security Advisor. “For too long, the Chinese Communist Party—with Wall Street’s help—has exploited U.S. capital markets and tens of millions of unwitting American investors in order to fund China’s campaign of evil. China’s use of the Variable Interest Entity (VIE) structure to set up shell companies in the Cayman Islands and raising U.S. dollars for malign Chinese companies through Exchange Traded Funds cannot continue. Passing the Holding Foreign Companies Accountable Act was a welcome step, but it is clear that Congress must take additional action to address the risks posed to U.S. investors by China’s exploitation of our capital markets.”
Earlier this year, CPA outlined why the U.S. must do more to ensure that Chinese companies don’t dupe American investors out of billions with their Cayman Island shell company games and why Congress should take action to ensure Chinese companies comply with U.S. audit laws.
CPA’s written testimony outlined risks posed to U.S. investors from Chinese companies present in U.S. capital markets, including risks posed by:
- China’s Manipulative Behavior, Fundraising Schemes, Lack of Disclosure and Accountability, and Gaps in U.S. Law, including via VIEs and A-shares inclusion in passive investment vehicles;
- Lack of Disclosure and Accountability of Chinese Companies, including lauding companies in certain sectors that may qualify as ESG friendly based off their end-use industry despite rampant utilization of forced labor or other human rights violations; and
- Gaps and Inconsistencies in Imposition of U.S. Sanctions, including the need to do the following:
- Enhance application of the Global Magnitsky Human Rights Accountability Act or pass new legislation to create a State Department Corporate Human Rights Abusers List that then is used for applying capital markets sanctions
- Create reciprocity between the Commerce Department’s Entity List produced by BIS and the Treasury Department’s NS-CMIC List managed by OFAC
- Require that the Pentagon’s Chinese Military Companies List be added to the NS-CMIC List and the Entity List, ensuring that these companies cannot receive U.S. financing or technology exports support
- Enhance the existing sanctions lists to include additional companies, notably subsidiaries or parent companies of those already-sanctioned companies
