Thank you very much, Andrew for your very kind introduction and I’d like to say that I really appreciate the work that Andrew and Matt, our U.S. Attorneys for the Eastern and Western District of Michigan our doing here for the people of Michigan and all the law enforcement community from Michigan, that is here today. We really appreciate your work and as Andrew said, after my remarks they are going to put on a presentation of the China Initiative, which I think you’ll find very interesting, so if you have the time I urge you to stay for that. I would like to thank the leadership and staff of the Gerald R. Ford Presidential Museum — especially Elaine Didier — for hosting this event. I also thank the Ford Presidential Foundation and its Executive Director Joe Calvaruso. Even under normal circumstances, it’s hard to put together an event like this, but in the current circumstances it’s especially challenging and I really appreciate it. And I really appreciate all of you who’ve come, I know many have come from around the state and I appreciate the effort that was made to be here for these remarks.
I was last in Grand Rapids, it would be 30 years ago John. John Smietanka, from here, was one of my Principal Deputy when I was Deputy Attorney General and stayed on while I was Attorney General. He was U.S. Attorney here in the Western District, so John it’s great to see you here. I feel a special bond to the Ford Administration so it’s appropriate to be here today for these remarks, because I started out in the CIA in 1973 and President Ford took office and because of what was going on at the agency, I had the privilege of working closely with many of the superb people that he brought into government. Many of whom I had the opportunity to work with over the years, several of whom were my mentors. One of the people I met was the Attorney General, at that time, Ed Levi, who President Ford made Attorney General. His portrait is up in my conference room and his grandson Will Levi is my Chief of Staff, so as I say, I feel a special closeness with the Ford Administration even though I wasn’t a political appointee in that administration. Many of the political appointees that I work with over the years really cut their teeth during the Ford Administration.
I’m privileged to speak here today about what may prove to be the most important issue for our nation and the world in the twenty-first century and that is, the United States’ response to the global ambitions of the Chinese Communist Party. The CCP rules with an iron fist over one of the great ancient civilizations of the world. It seeks to leverage the immense power, productivity, and ingenuity of the Chinese people to overthrow the rule-based international system and to make the world safe for dictatorship. How the United States responds to this challenge will have historic implications and will determine whether the United States and its liberal democratic allies will continue to shape their own destiny or whether the CCP and its autocratic tributaries will continue, will control the future. Since the 1890’s, at least, the United States has been the technological leader of the world. And from that prowess, has come our prosperity, the opportunity for generations of Americans, and our security. It’s because of that that we were able to play such a pivotal role in world history, but turning back the threat of fascism and the threat of communism. What’s at stake these days is whether we can maintain that leadership position and that technological leadership. Are we going to be the generation that has allowed that to be stolen- which is really stealing the future of our children and our grandchildren?
Several weeks ago, National Security Advisor Robert O’Brien spoke about the CCP’s ideology and global ambitions. He declared, and I agree, that “the days of American passivity and naivety regarding the People’s Republic of China are over.” And last week, the FBI Director Chris Wray, described how the CCP pursues its ambitions through the nefarious and even illegal conduct, including industrial espionage, theft, extortion, cyberattacks, and malign influence activities. In the coming days, you will hear from Secretary Mike Pompeo, who will sum up what is at stake for the United States and the free world. Now, Chris Wray, told me that shortly after his speech last week, one of the leaders of the Chinese Communist Party pronounced that his speech was particularly disgusting. I told him that I was going to aim to be despicable, but I’ll settle for especially disgusting. But no matter how the Chinese seek to characterize it I do hope that my speech and Mike Pompeo speech will encourage the American people to reevaluate their relationship with China, so long as it continues to be ruled by the Chinese Communist Party. It is fitting that were here today at the Ford Presidential Museum. Gerald Ford served in the highest echelons of the government at the dawn of America's reengagement with China, which began obviously with President Nixon in 1972, and three years later in 1975, President Ford visited China for a summit with PRC leaders including Mao Zedong.
At the time it was unthinkable that China would emerge after the Cold War as a near-peer competitor of the United States. And even then, there were signs of China's immense latent power. In the joint report of their visit to China in 1972, House Majority Leader Hale Boggs and then minority leader Gerald Ford wrote: “If she manages to achieve as she aspires, China in the next half century can emerge as a self-sufficient power of a billion people… this last impression – of the reality of China's colossal potential – is perhaps the most vivid of our journey. As our small party traveled through that boundless land, this sense of a giant stirring, a dragon waking, gave us much to ponder.” It is now nearly fifty years later and the pressing pondering as of these two congressmen have come to pass.
Deng Xiaoping, whose economic reform launched China's remarkable rise had a famous motto: “hide your strength and bide your time.” That is precisely what China has done. China's economy has quietly grown from about 2 percent of the world's GDP in 1980, to nearly 20 percent today. And by some estimates based on purchasing parity, the Chinese economy is already larger than ours. The General Secretary of the Chinese Communist Party, Xi Jinping, who has centralized power to a degree not seen since the dictatorship of Mao Zedong, now speaks openly of China moving closer to the center stage, building a socialism that is superior to capitalism, and replacing the American dream with the Chinese solution. China is no longer hiding it strength nor biding its time. From the perspective of its communist rulers, China's time has arrived.
The People’s Republic of China is now engaged in an economic blitzkrieg—an aggressive, orchestrated, whole-of-government (indeed, whole-of-society) campaign to seize the commanding heights of the global economy and to surpass the United States as the world’s preeminent technological superpower. A centerpiece of this effort is the Chinese Communist Party’s “Made in China 2025” initiative, a plan for PRC domination of high-tech industries like robotics, advanced information technology, aviation, and electric vehicles, and many other technologies. Backed by hundreds of billions of dollars in subsidies, this initiative poses a real threat to U.S. technological leadership. Despite World Trade Organization rules prohibiting quotas for domestic output, “Made in China 2025” sets targets for domestic market share (sometimes as high as 70 percent) in core components and basic materials for industries such as robotics and telecommunications. It is clear that the PRC seeks not merely to join the ranks of other advanced industrial economies, but to replace them altogether.
“Made in China 2025” is the latest iteration of the PRC’s state-led, mercantilist economic model. For American companies in the global marketplace, free and fair competition with China has long been a fantasy. To tilt the playing field to its advantage, China’s communist government has perfected a wide array of predatory and often unlawful tactics: currency manipulation, tariffs, quotas, state-led strategic investment and acquisitions, theft and forced transfer of intellectual property, state subsidies, dumping, cyberattacks, and industrial espionage. About 80% of all federal economic espionage prosecutions have alleged conduct that would benefit the Chinese state, and about 60% of all trade secret theft cases have been connected to China.
The PRC also seeks to dominate key trade routes and infrastructure in Eurasia, Africa, and the Pacific. In the South China Sea, for example, through which about one-third of the world’s maritime trade passes, the PRC has asserted expansive and historically dubious claims to nearly the entire waterway, flouted the rulings of international courts, built artificial islands and placed military outposts on them, and harassed its neighbors’ ships and fishing boats.
Another ambitious project to spread its power and influence is the PRC’s “Belt and Road” infrastructure initiative. Although billed as “foreign aid,” in fact these investments appear designed to serve the PRC’s strategic interests and domestic economic needs. For example, the PRC has been criticized for loading poor countries up with debt, refusing to renegotiate terms, and then taking control of the infrastructure itself, as it did with the Sri Lankan port of Hambantota in 2017. This is little more than a form of modern-day colonialism.
Just as consequential, however, are the PRC’s plans to dominate the world’s digital infrastructure through its “Digital Silk Road” initiative. I have previously spoken at length about the grave risks of allowing the world’s most powerful dictatorship to build the next generation of global telecommunications networks, known as 5G. Perhaps less widely known are the PRC’s efforts to surpass the United States in other cutting-edge fields, like artificial intelligence. Through innovations such as machine learning and big data, artificial intelligence allows machines to mimic human functions, such as recognizing faces, interpreting spoken words, driving vehicles, and playing games of skill, much like chess or the even more complex Chinese game, Go. In 2017, Beijing unveiled its “Next Generation Artificial Intelligence Plan,” a blueprint for leading the world in AI by 2030. Whichever nation emerges as the global leader in AI will be best positioned to unlock not only its considerable economic potential, but a range of military applications, such as the use of computer vision to gather intelligence.
The PRC’s drive for technological supremacy is complemented by its plan to monopolize rare earth materials, which play a vital role in industries such as consumer electronics, electric vehicles, medical devices, and military hardware. According to the Congressional Research Service, from the 1960s to the 1980s, the United States led the world in rare earth production. “Since then, production has shifted almost entirely to China,” in large part due to lower labor costs and lighter economic and environmental regulation.
The United States is now dangerously dependent on the PRC for these essential materials. Overall, China is America’s top supplier, accounting for about 80 percent of our imports. The risks of dependence are real. In 2010, for example, Beijing cut exports of rare earth materials to Japan after an incident involving disputed islands in the East China Sea. The PRC could do the same to us. As China’s progress in these critical sectors illustrates, the PRC’s predatory economic policies are succeeding. For a hundred years, America was the world’s largest manufacturer — allowing us to serve as the world’s “arsenal of democracy.” China overtook the United States in manufacturing output in 2010. The PRC is now the world’s “arsenal of dictatorship.”
How did China accomplish all this? No one should underestimate the ingenuity and industry of the Chinese people. At the same time, no one should doubt that America made China’s meteoric rise possible. China has reaped enormous benefits from the free flow of American aid and trade. In 1980, Congress granted the PRC most-favored-nation trading status. In the 1990s, American companies strongly supported the PRC’s accession to the World Trade Organization and the permanent normalization of trade relations. Today, U.S.-China trade totals about $700 billion.
Last year, Newsweek ran a cover story titled “How America’s Biggest Companies Made China Great Again.” The article details how China’s communist leaders lured American business with the promise of market access, and then, having profited from American investment and know-how, turned increasingly hostile. The PRC used tariffs and quotas to pressure American companies to give up their technology and form joint ventures with Chinese companies. Regulators then discriminated against American firms, using tactics like holding up permits. Yet few companies, even Fortune 500 giants, have been willing to bring a formal trade complaint for fear of angering Beijing.
Just as American companies have become dependent on the Chinese market, the United States as a whole now relies on the PRC for many vital goods and services. The COVID-19 pandemic has shown a spotlight on that dependency. For example, China is the world’s largest producer of certain protective equipment, such as face masks and medical gowns. In March, as the pandemic spread around the world, the PRC hoarded the masks for itself, blocking producers — including American companies — from exporting them to other countries that needed them. It then attempted to exploit the shortage for propaganda purposes, shipping limited quantities of often defective equipment and requiring foreign leaders to publicly thank Beijing for these shipments.
China’s dominance of the world market for medical goods goes beyond masks and gowns. It has become the United States’ largest supplier of medical devices, while at the same time discriminating against American medical companies in China. China’s government has targeted foreign firms for greater regulatory scrutiny, instructed Chinese hospitals to buy products made in China, and pressured American firms to build factories in China, where their intellectual property is more vulnerable to theft. As one expert has observed, American medical device manufacturers are effectively “creating their own competitors.”
America also depends on Chinese supply, Chinese supply chains in other vital sectors, especially pharmaceuticals. America remains the global leader in drug discovery, but China is now the world’s largest producer of active pharmaceutical ingredients, known as “APIs.” As one Defense Health Agency official noted, “[s]hould China decide to limit or restrict the delivery of APIs to the [United States],” it “could result in severe shortages of pharmaceuticals for both domestic and military uses.”
To achieve dominance in pharmaceuticals, China’s rulers went to the same playbook they’ve used to gut other American industries. In 2008, the PRC designated pharmaceutical production as a “high-value-added-industry” and boosted Chinese companies with subsidies and export tax rebates. Meanwhile, the PRC has systematically preyed on American companies. American firms face well-known obstacles in China’s health market, including drug approval delays, unfair pricing limitations, IP theft, and counterfeiting. Chinese nationals working as employees at pharma companies have been caught stealing trade secrets both in America and in China. And the CCP has long engaged in cyber-espionage and hacking of U.S. academic medical centers and healthcare companies.
In fact, PRC-linked hackers have targeted American universities and firms in a bid to steal IP related to coronavirus treatments and vaccines, sometimes disrupting the work of our researchers. Having been caught covering up the coronavirus outbreak, Beijing is desperate for a public relations coup, and may hope that it will be able to claim credit for any medical breakthroughs.
As all of these examples should make clear, the ultimate ambition of China’s rulers isn’t to trade with the United States. It is to raid the United States. If you are an American business leader, appeasing the PRC may bring short-term rewards. But in the end, the PRC’s goal is to replace you. As a U.S. Chamber of Commerce report put it, “[t]he belief by foreign companies that large financial investments, the sharing of expertise and significant technology transfers would lead to an ever opening China market is being replaced by boardroom banter that win-win in China means China wins twice.”
Although Americans hoped that trade and investment would liberalize China’s political system, the fundamental character of the regime has never changed. As its ruthless crackdown of Hong Kong demonstrates once again, China is no closer to democracy today than it was in 1989 when tanks confronted pro-democracy protesters in Tiananmen Square. It remains an authoritarian, one-party state in which the Chinese Communist Party wields absolute power, unchecked by popular elections, the rule of law, or an independent judiciary. The CCP surveils its own people and assigns them social credit scores, employs an army of government censors, tortures dissidents, and persecutes religious and ethnic minorities, including a million Uighurs detained in indoctrination and labor camps.
If what happened in China stayed in China, that would be bad enough. But instead of America changing China, China is leveraging its economic power to change America. As this Administration’s China Strategy recognizes, “the CCP’s campaign to compel ideological conformity does not stop at China’s borders.” Rather, the CCP seeks to extend its influence around the world, including on American soil.
All too often, for the sake of short-term profits, American companies have succumbed to that influence — even at the expense of freedom and openness in the United States. Sadly, examples of American business bowing to Beijing are legion.
Take Hollywood. Hollywood’s actors, producers, and directors pride themselves on celebrating freedom and the human spirit. And every year at the Academy Awards, Americans are lectured about how this country falls short of Hollywood’s ideals of social justice. But Hollywood now regularly censors its own movies to appease the Chinese Communist Party, the world’s most powerful violator of human rights. This censorship infects not only versions of movies that are released in China, but also many that are shown in American theaters to American audiences.
For example, the hit movie World War Z depicts a zombie apocalypse caused by a virus. The original version of the film reportedly contained a scene with characters speculating that the virus may have originated in China. But the studio, Paramount Pictures, reportedly told producers to delete the reference to China in the hope of landing a Chinese distribution deal. The deal never materialized.
In the Marvel Studios blockbuster Dr. Strange, filmmakers changed the nationality of a major character known as the “Ancient One,” a Tibetan monk in the comic book, changed it from Tibetan to Celtic. When challenged about this, a screenwriter explained that “if you acknowledge that Tibet is a place and that he’s Tibetan, you risk alienating one billion people.” Or, as the Chinese government might say, “[w]e’re not going to show your movie because you decided to get political.”
These are just two examples of the many Hollywood films that have been altered, one way or another, to please the CCP. National Security Advisor O’Brien offered even more examples in his remarks. But many more scripts never see the light of day, because writers and producers know not to even test the limits. Chinese government censors don’t need to say a word, because Hollywood is doing their work for them. This is a massive propaganda coup for the Chinese Communist Party.
The story of the film industry’s submission to the CCP is a familiar one. In the past two decades, China has emerged as the world’s largest box office. The CCP has long tightly controlled access to that lucrative market — both through quotas on American films, imposed in violation of China’s WTO obligations, and a strict censorship regime. Increasingly, Hollywood also relies on Chinese money for financing. In 2018, films with Chinese investors accounted for 20 percent of U.S. box-office ticket sales, compared to only three percent five years earlier.
But in the long run, as with other American industries, the PRC may be less interested in cooperating with Hollywood than in co-opting Hollywood — and eventually replacing it with its own homegrown productions. To accomplish this, the CCP has been following its usual modus operandi. By imposing a quota on American films, the CCP pressures Hollywood studios to form joint ventures with Chinese companies, who then gain U.S. technology and know-how. As one Chinese film executive recently put it, “[e]verything we learned, we learned from Hollywood.” Notably, in 2019, eight of the 10 top-grossing films in China were produced in China.
Hollywood is far from alone in kowtowing to the PRC. America’s big tech companies have also allowed themselves to become pawns of Chinese influence. In the year 2000, when the United States normalized trade relations with China, President Clinton hailed the new century as one in which “liberty will be spread by cell phone and cable modem.” Instead, over the course of the next decade, American companies, such as Cisco, helped the Communist Party build the Great Firewall of China — the world’s most sophisticated system for Internet surveillance and censorship.
Over the years, corporations such as Google, Microsoft, Yahoo, and Apple have shown themselves all too willing to collaborate with the CCP. For example, Apple recently removed the news app Quartz from its app store in China, after the Chinese government complained about the coverage of the Hong Kong democracy protests. Apple also removed apps for virtual private networks, which had allowed users to circumvent the Great Firewall, and eliminated pro-democracy songs from its Chinese music store. Meanwhile, the company announced that it would be transferring some of its iCloud data to servers in China, despite concerns that the move would give the Communist Party easier access to e-mails, text messages, and other user information stored in the iCloud.
Recently, we were able to get into two cell phones used by the Al-Qaeda terrorist who shot eight Americans at the Pensacola Naval Air Station. During the gun fight with him, he stopped, disengaged, put his cell phones down and tried to destroy them, shooting a bullet into one of his two cell phones and we thought that suggested that there may be very important information about terrorist activities in those cell phones. And for four and a half months we tried to get in, without any help at all from Apple. Apple failed to give us any help getting into the cell phones. We were ultimately able to get in through a fluke that we will not be able to reproduce in the future, where we found communications with Al-Qaeda operatives in the Middle East up to the day before the attack. Do you think when Apple sells phones in China that Apple phones in China are impervious to penetration by Chinese authorities? They wouldn't be sold if they were impervious to Chinese authorities. And what we've asked for is a warrant – when we have a warrant from a court – that we should be able to get into because cellphones. That's the double standard that has been emerging among American tech companies.
The CCP has long used public threats of retaliation and barred market access to exert influence. More recently, however, the CCP has also stepped up behind-the-scenes efforts to cultivate and coerce American business executives to further its political objectives — efforts that are all the more pernicious because they are largely hidden from public view.
As China’s government loses credibility around the world, the Justice Department has seen more and more PRC officials and their proxies reaching out to corporate leaders and inveighing them to favor policies and actions favored by the Chinese Communist Party. Their objective varies, but their pitch is generally the same: the businessperson has economic interests in China, and there is a suggestion that things will go better (or worse) for them depending on their response to the PRC’s request. Privately pressuring or courting American corporate leaders to promote policies (or U.S. politicians) presents a significant threat, because hiding behind American voices allows the Chinese government to elevate its influence campaigns and put a “friendly face” on pro-regime policies. The legislator or policymaker who hears from these American businessmen is properly more sympathetic to that constituent than to a foreigner. And by masking its participation in our political process, the PRC avoids accountability for its influence efforts and the public outcry that might result, if its lobbying were exposed.
America’s corporate leaders might not think of themselves as lobbyists. You might think, for example, that cultivating a mutually beneficial relationship is just part of the “guanxi” — or system of influential social networking — necessary to do business with the PRC. But you should be alert to how you might be used, and how your efforts on behalf of a foreign company or government could implicate the Foreign Agents Registration Act. FARA does not prohibit any speech or conduct. But it does require those who are acting as the “agents” of foreign principals to publicly disclose that relationship, and their political or other similar activities, by registering with the Justice Department, allowing the audience to take into account the origin of the speech when evaluating credibility.
By focusing on American business leaders, of course, I don’t mean to suggest that they are the only targets of Chinese influence operations in the United States. The Chinese Communist Party also seeks to infiltrate, censor, or co-opt American academic and research institutions. For example, dozens of American universities host Chinese government-funded “Confucius Institutes,” which have been accused of pressuring host universities to silence discussion or cancel events on topics considered controversial by Beijing. Universities must stand up for each other; refuse to let the CCP dictate research efforts or suppress diverse voices; support colleagues and students who wish to speak their minds; and consider whether any sacrifice of academic integrity or freedom is worth the price of appeasing the CCP’s demands.
In a globalized world, American corporations and universities alike may view themselves as global citizens, rather than American institutions. But they should remember that what allowed them to succeed in the first place was the American free enterprise system, the rule of law, and the security afforded by America’s economic, technological, and military strength.
Globalization does not always point in the direction of greater freedom. A world marching to the beat of Communist China’s drums will not be a hospitable one for institutions that depend on free markets, free trade, or the free exchange of ideas. There was a time American companies understood this and they saw themselves as American and proudly defended American values.
In World War II, for example, the iconic American company, Disney, made dozens of public information films for the government, including training videos to educate American sailors on navigation tactics. During the war, over 90 percent of Disney employees were devoted to the production of training and public information films. To boost the morale of America’s troops, Disney also designed insignia that appeared on planes, trucks, flight jackets, and other military equipment used by American and Allied forces.
I suspect Walt Disney would be disheartened to see how the company he founded deals with the foreign dictatorships of our day. When Disney produced Kundun, the 1997 film about the PRC’s oppression of the Dalai Lama, the CCP objected to the project and pressured Disney to abandon it. Ultimately, Disney decided that it couldn’t let a foreign power dictate whether it would distribute a movie in the United States. But that moment of courage wouldn’t last long. After the CCP banned all Disney films in China, the company lobbied hard to regain access. The CEO apologized for Kundun, calling it a “stupid mistake.” Disney then began courting the PRC to open a $5.5 billion theme park in Shanghai. As part of that deal, Disney agreed to give Chinese government officials a role in management. Of the park’s full-time employees, 300 are active members of the Communist Party. They reportedly display hammer-and-sickle insignia at their desks and attend Party lectures at the facility during business hours.
Like other American companies, Disney may eventually learn the hard way the cost of compromising its principles. Soon after Disney opened its park in Shanghai, a Chinese-owned theme park popped up a couple hundred miles away featuring characters that, according to news reports, looked suspiciously like Snow White and other Disney trademarks.
American companies must understand the stakes. The Chinese Communist Party thinks in terms of decades and centuries, while we tend to focus on the next quarter’s earnings report. But if Disney and other American corporations continue to bow to Beijing, they risk undermining both their own future competitiveness and prosperity, as well as the classical liberal order that has allowed them to thrive.
During the Cold War, Lewis Powell — later Justice Powell — sent an important memorandum to the U.S. Chamber of Commerce. He noted that the free enterprise system was under unprecedented attack, and urged American companies to do more to preserve it. “[T]he time has come,” he said, “indeed, it is long overdue — for the wisdom, ingenuity and resources of American business to be marshaled against those who would destroy it.” So too today. The American people are more attuned than ever to the threat that the Chinese Communist Party poses not only to our way of life, but to our very lives and livelihoods. And they will increasingly call out corporate appeasement.
If individual companies are afraid to make a stand, there is strength in numbers. As Justice Powell wrote: “Strength lies in organization, in careful long-range planning and implementation, in consistency of action over an indefinite period of years, in the scale of financing available only through joint effort, and in the political power available only through united action and national organizations.” Despite years of acquiescence to communist authorities in China, American tech companies may finally be finding their courage through collective action. Following the recent imposition of the PRC’s draconian national security law in Hong Kong, many big tech companies, including Facebook, Google, Twitter, Zoom, and LinkedIn, reportedly announced that they would temporarily suspend compliance with governmental requests for user data. True to form, communist officials have threatened imprisonment for noncompliant company employees. We will see if these companies hold firm and how long they will hold firm. I hope they do. If they stand together, they will provide a worthy example for other American companies in resisting the Chinese Communist Party’s corrupt and dictatorial rule.
The CCP has launched an orchestrated campaign, across all of its many tentacles in Chinese government and society, to exploit the openness of our institutions in order to destroy them. To secure a world of freedom and prosperity for our children and grandchildren, the free world will need its own version of the whole-of-society approach, in which the public and private sectors maintain their essential separation but work together collaboratively to resist domination and to win the contest for the commanding heights of the global economy. America has done that before and we rekindle our love and devotion for our country and each other, I am confident that we — the American people, the American government, and American business together — can do it again. Our freedom depends on it.