Select Committee on CCP Chairman Gallagher Discusses Recent California Trip

A bipartisan group of lawmakers led by House Select Committee on the Chinese Communist Party Chairman Rep. Mike Gallagher (R-WI) traveled to California last week for several high-level meetings with industry leaders, including studio executives from Hollywood, tech industry leaders in Silicon Valley, AI executives, and leaders from the rare-earth minerals mining industry, the Globe reported.

The Globe spoke with Rep. Gallagher following the trip, who said making the California trek made particular sense with Taiwan President Tsai Ing-Wen in California meeting with House Speaker Kevin McCarthy at the Ronald Reagan Presidential Library in Simi Valley last Wednesday.

“Most of us who do national security work know it involves Taiwan,” Gallagher said. He noted that Wall Street and the tech industries are involved in Taiwan, and China’s threats to invade the island country make it imperative to address. And Gallagher says those companies doing business in China can’t ignore that threat, nor can they ignore China’s genocide against the Uyghur people in the north-western region of Xinjiang, China’s largest minority ethnic group.

“China’s Xi Jinping is preparing his populace for enormous economic pain,” Gallagher said, while companies like Disney and Apple are ending their belief that America’s soft power engagement is playing a part in removing tension between China.

“Two decades of evidence shows it hasn’t worked – American commerce in China isn’t doing anything to improve relations,” Rep. Gallagher said.

The movie industry is highly censored in China, Gallagher said. “They wanted and got access to the China movie market, and then they steal your IT,” Gallagher said. “We are hoping they stop self-censoring in the hopes of making money in China.”

And now China is starting to cut off any outside movie studios, replacing them with their own productions.

On the positive side, even the most invested in China may still disagree about what Xi Jinping is going to do, but recognize that the political environment in Washington D.C. is going to change with the Republican-led Congress, Gallagher said.

“We are dealing with totalitarian, Orwellian types of governments around the world – selective decoupling is inevitable.” Gallagher said he is concerned that the Chinese Communist Party will use AI technology to expand its authoritarian model. “We are going a long way decoupling from China,” Gallagher added. “Nobody’s defending the idea that we should defend Chinese AI – we will put sensible controls around it.”

“I think our challenge … is to ensure that AI is used as an instrument for human flourishing and freedom,” Gallagher recently told Axios.

As Apple relies on Chinese labor for iphone production and is having supply chain issues, Gallagher said the company will need to reinforce its supply chain. CEO Tim Cook recently met with the China’s minister of commerce about supply chain issues.

“Disney will need to find a way to not think of Bejing,” Gallagher said. He said China has weaponized the supply chain in the past. At the beginning of the pandemic, Gallagher said China threatened to cut off pharmaceuticals and plunge the U.S. into COVID sickness. They also weaponized the supply chain of rare earth minerals when in 2010, China cut off rare earth mineral exports to Japan.

The Globe asked Rep. Gallagher about Elon Musk’s announcement Sunday that he plans to open a Megapack battery factory in Shanghai.

Our next Megafactory will be in Shanghai 🇨🇳—capable of producing 10k Megapacks per year pic.twitter.com/KlVGq5gYOg

— Tesla (@Tesla) April 9, 2023

The Megafactory is expected to produce 10,000 Megapack units a year, equal to around 40-gigawatt hours of energy storage, and complement a huge existing Shanghai plant making electric vehicles, Reuters reported.

Gallagher said, “SpaceX is a remarkable accomplishment. But Tesla seems entirely dependent on a U.S. tax credit and China.”

Bloomberg reported earlier on Tuesday, Jay Shambaugh, treasury Undersecretary said “the US is not seeking to decouple its economy from China or limit the country’s growth. We occasionally have issues with different economic policies in China and we will always defend US economic interests as well – but we will not in any way be trying to separate these two economies entirely. This is neither practical nor in our interest.”

Rep. Gallagher shared his thoughts from a January interview with Paul Gigot on Fox News:

“First, I think we need to recognize with a little bit of humility that this is what makes this competition so complex in some ways-the new Cold War is more complex than the old because we were never economically entangled with the Soviet Union. We didn’t have to consider selective economic decoupling. I think what’s reasonable for legislators like myself to ask Wall Street is, why is it that tax advantaged entities- be it university endowments or state and local pension funds- should be allowed to invest in certain Chinese industries that facilitate the genocide of Uyghur Muslims and facilitate China’s military modernization…I do believe we can consider a framework that still respects free enterprise, still respects the beauty of our capital markets here in America, while at the same time make sure that we are not unwittingly or wittingly funding genocide or Chinese military modernization.”

As for Silicon Valley venture capitalists and China, “There’s no love for Sequoia,” the venture capital firm, Gallagher said. American investors, including U.S. endowments are indirectly financing a rash of Chinese AI startups aspiring to be China’s answer to OpenAI, theinformation.com reported. These US investors back key Chinese VC firms such as Sequoia Capital China, Matrix Partners China, Qiming Venture Partners and Hillhouse Capital Management.

“Whether venture capital or major asset managers, they don’t want more government telling them what to do. They want clear bright lines from government, as long as it is predictable,” Gallagher said. “I’ve heard it time and time again.”

“The Select Committee on the CCP needs to come out with a strong framework for decoupling,” Gallagher said. “They have no love for us.”

Gallagher added, “We want American companies on Team America.”