The Commerce Department approved sales of sensitive U.S. technology to China worth $23 billion during a six-month period last year, despite an announced policy by the Biden administration to prevent American know-how from being used to bolster the Chinese military.
Alan F. Estevez, Commerce undersecretary at the Bureau of Industry and Security (BIS), told a House Foreign Affairs Committee hearing on dealing with Chinese Communist Party “aggression” that his agency is “doing everything” to prevent U.S. technology from helping the Chinese military and intelligence and security services.
Tuesday’s session was one of the first foreign policy hearings organized by the new Republican majority in the House, and likely is a sign of things to come for the Biden administration over the next two years as it faces a bipartisan push on Capitol Hill to take a tougher line toward Beijing.
New House Foreign Affairs Committee Chairman Michael McCaul, Texas Republican, directly challenged the Biden administration’s claims of success in cutting off the flow of strategic technology to China.
The Commerce Department between January and March last year approved more than $23 billion worth of sensitive exports to companies on the Commerce blacklist of Chinese companies known as the “entities list,” Mr. McCaul said.
The department in 2020 and 2021 approved some $60 billion worth of exports to Huawei Technologies, the Chinese-based company U.S. officials say has links to China’s intelligence services, and the Chinese computer chip manufacturer SMIC, which was allowed to purchase $40 billion in sensitive U.S. goods during the same period, the Texas Republican said.
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“Both of these companies are military companies for the [Chinese Communist Party], and both are listed on the entities list,” Mr. McCaul said. “If BIS continues to mindlessly green-light sensitive technology sales, the CCP has proven they will use our own inventions against us.”
Mr. Estevez said the exports to China were approved after a review by government agencies, including the State Department and Pentagon, and goods put on the restricted “entity list” are not automatically blocked from sale abroad.
“The entity list is not a blanket embargo,” Mr. Estevez said, adding that Huawei and SMIC are subject to specific export control rules.
Huawei, one of the world’s largest manufacturers of mobile phones and one of China’s most successful global tech companies, was restricted from purchasing some sensitive technology by the Trump administration. SMIC was barred from purchasing advanced semiconductors under new rules put in place only five months ago in October. Mr. Estevez said.
Further exports licenses to China are “under recessment” — meaning suspension, the Commerce official added.
A total of 160 Chinese companies were placed on the entities list since the beginning of the Biden administration, he said.
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Mr. McCaul said in a statement after the hearing that it was “absolutely astounding” that the Commerce Department had approved the $23 billion in sensitive exports to China. He urged officials to update licensing policy and step up denials.
“We are currently in the middle of a struggle for the global balance of power – and the primary battleground is technology leadership,” Mr. McCaul said, adding that just 8% percent of export licenses on Chinese blacklisted companies were denied.
Daniel Kritenbrink, assistant secretary of state for East Asian and Pacific affairs, told lawmakers at the same hearing that the Biden administration’s policy approach to China was one of fierce competition while trying to prevent a more dangerous clash.
“The United States will compete and unapologetically stand up for our values and interests, but that we do not want conflict with the PRC and are not looking for a new Cold War,” he said.
The administration wants to keep communicating with Beijing to reduce the risk of an event that could lead to a conflict, he added.
Both Mr. Kritenbrink and Mr. Estevez said the administration opposes a policy of “decoupling” economically from China, as some critics of the communist government have called for. Two-way trade between the two countries hit a record $690 billion in 2022, according to the U.S. Bureau of Economic Analysis, and such U.S. companies as Apple, Tesla and General Motors remain heavily invested in the Chinese domestic market.
Mr. Kritenbrink also faced sharp questioning over the Biden’s administration’s decision to delay shooting a suspected Chinese surveillance balloon last month, with critics on the committee saying the craft should have been downed sooner.
“We tracked, we detected, we surveilled and then we took down the Chinese high-altitude balloon when it was safe to do so,” Mr. Kritenbrink said.
Mr. Kritenbrink said the balloon’s large payload would have caused a significant debris field that could have harmed people on the ground if shot down over land. As a result, a decision was made to fire a missile at the balloon over the Carolina coast, he said.
On export controls to China, Mr. Kritenbrink would not answer directly when asked during the hearing if the State Department had intervened to keep some Chinese firms off the entities list.
Government agencies discuss whether sanctioning them by placement on the blacklist will achieve policy goals or harm U.S. interests of allies, he said.
Rep. Andy Barr, Kentucky Republican, questioned Mr. Estevez on whether the Commerce Department coordinates its list of blacklisted Chinese companies with the Pentagon and Treasury Department, which have sanctioned Chinese firms with links to the country’s military and security forces.
Mr. Estevez said he did not have information on Chinese companies on the entities list that are currently listed on U.S. stock exchanges.
“That’s what we need. That’s what we don’t have right now,” Mr. Barr said. “We need list coordination.
American investors, the lawmaker said, are unwittingly financing sanctioned Chinese companies “and that’s a problem we need to fix,” he said.
Mr. Estevez said the Pentagon’s list of sanctioned Chinese military companies is not based on the same criteria used for placing Chinese companies on the Commerce Department’s entities list.
On Taiwan, Mr. Kritenbrink said some delays in getting U.S. arms and military goods to the democratic-ruled island had been delayed by production problems. The Biden administration has authorized $5 billion worth of defensive arms, including 13 different systems approved last year.
A total of $37 billion in arms were approved since 2010, and $21 billion for weapons has been added just since 2019, Mr. Kritenbrink said.
“We’re committed to not just arms sales to help Taiwan grow its deterrent capability, but also diplomatically with allies, partners and friends to support and enhance peace and stability,” he said.
Rep. Aumua Amata, Republican from American Samoa, asked Mr. Estevez why the Commerce Department is allowing sales of U.S. technology to SMIC.
“SMIC is on the entity list… with not a complete stop,” Mr. Estevez said. “We prevent the most advanced capabilities for making semiconductors from going to SMIC.”
The company is barred from getting equipment that would allow the manufacture of advanced semiconductors smaller than 14 nanometers, he said, adding the U.S. is also monitoring China to ensure that its microchips are not being exported to Russia in violation of U.S. sanctions on Moscow.
Mr. McCaul said in opening remarks that “there is no doubt that the growing aggression of the Chinese Communist Party poses a generational threat to the United States — from using a spy balloon to surveil some of America’s most sensitive military sites, to their theft of upwards of $600 billion of American [intellectual property] every year, much of which goes into their military, to their continued military aggression and expansion in the Indo-Pacific.”
Mr. McCaul also faulted the State Department for failing to counter Chinese propaganda “on the ideological battlefield.”
“Congress appropriated $325 million to the State Department to counter [China’s] malign influence around the world,” he said. “But, instead, that money was used to fund bakeries in Tunisia and electric vehicle charging stations in Vietnam.”
On the State Department-declared genocide in western Xinjiang Province, Rep. Bill Huizenga, Michigan Republican, asked Mr. Kritenbrink whether Deputy Secretary of State Wendy Sherman is delaying implementation of congressionally mandated sanctions on China.
“We continue to take a number of steps and we will take a number of steps to hold China accountable,” Mr. Kritenbrink said, promising to provide a clear answer in the future.