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March 19, 2021 Hearing Transcript HEARING ON U.S. INVESTMENT IN CHINA’S CAPITAL MARKETS AND MILITARY-INDUSTRIAL COMPLEX HEARING BEFORE THE U.S.-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION ONE HUNDRED SEVENTEENTH CONGRESS FIRST SESSION FRIDAY, MARCH 19, 2021 Printed for use of the United States-China Economic and Security Review Commission Available via the World Wide Web: www.uscc.gov UNITED STATES-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION WASHINGTON: 2021 U.S.-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION CAROLYN BARTHOLOMEW, CHAIRMAN ROBIN CLEVELAND, VICE CHAIRMAN Commissioners: BOB BOROCHOFF DEREK SCISSORS JEFFREY FIEDLER HON. JAMES M. TALENT HON. CARTE P. GOODWIN ALEX N. WONG ROY D. KAMPHAUSEN MICHAEL R. WESSEL The Commission was created on October 30, 2000 by the Floyd D. Spence National Defense Authorization Act of 2001, Pub. L. No. 106–398 (codified at 22 U.S.C. § 7002), as amended by: The Treasury and General Government Appropriations Act, 2002, Pub. L. No. 107–67 (Nov. 12, 2001) (regarding employment status of staff and changing annual report due date from March to June); The Consolidated Appropriations Resolution, 2003, Pub. L. No. 108–7 (Feb. 20, 2003) (regarding Commission name change, terms of Commissioners, and responsibilities of the Commission); The Science, State, Justice, Commerce, and Related Agencies Appropriations Act, 2006, Pub. L. No. 109–108 (Nov. 22, 2005) (regarding responsibilities of the Commission and applicability of FACA); The Consolidated Appropriations Act, 2008, Pub. L. No. 110–161 (Dec. 26, 2007) (regarding submission of accounting reports; printing and binding; compensation for the executive director; changing annual report due date from June to December; and travel by members of the Commission and its staff); The Carl Levin and Howard P. ‘‘Buck’’ McKeon National Defense Authorization Act for Fiscal Year 2015, Pub. L. No. 113–291 (Dec. 19, 2014) (regarding responsibilities of the Commission). The Commission’s full charter and statutory mandate are available online at: https://www.uscc.gov/charter. ii CONTENTS FRIDAY, MARCH 19, 2021 HEARING ON U.S. INVESTMENT IN CHINA’S CAPITAL MARKETS AND MILITARY- INDUSTRIAL COMPLEX Opening Statement of Commissioner Bob Borochoff (Hearing Co-Chair) ..................................................................................................................... 1 Prepared Statement ...................................................................................................................... 3 Opening Statement of Commissioner Jeffrey Fiedler (Hearing Co-Chair) ..................................................................................................................... 4 Prepared Statement ...................................................................................................................... 5 Panel I: The Role of the State in China’s Stock, Debt, and Venture Capital and Private Equity Markets Panel I Introduction by Commissioner Jeffrey Fiedler (Hearing Co-Chair) ....................................................................................................................... 6 Statement of Tamar Groswald Ozery Fellow, Harvard Law School Program on Corporate Governance ................................................ 7 Prepared Statement ........................................................................................................................ 9 Statement of Meg Rithmire F. Warren McFarlan Associate Professor, Harvard Business School ..........................................27 Prepared Statement .......................................................................................................................30 Statement of Zachary Arnold Research Fellow, Center for Security and Emerging Technology ...............................................38 Prepared Statement .......................................................................................................................41 Statement of Anne Stevenson-Yang Co-Founder and Research Director, J Capital Research ..............................................................62 Prepared Statement .......................................................................................................................65 Panel I: Question and Answer. .........................................................................................................73 Panel II: U.S. Investment in China’s Stock, Debt, and Venture Capital and Private Equity Markets Panel II Introduction by Commissioner Bob Borochoff (Hearing Co-Chair) ......................................................................................................................95 Statement of Johannes Petry Postdoctoral Research Fellow, SCRIPTS Cluster of Excellence; Research Fellow, Centre for the Study of Globalization and Regionalization .................................................................................96 Prepared Statement .......................................................................................................................99 iii Statement of Teresa Kong Portfolio Manager, Matthews Asia ............................................................................................ 114 Prepared Statement .................................................................................................................... 117 Statement of Adam Lysenko Strider Technologies.................................................................................................................. 124 Prepared Statement .................................................................................................................... 127 Panel II: Question and Answer ..................................................................................................... 148 Panel III: U.S. National Security and China’s Stock, Debt, and Venture Capital and Private Equity Markets Panel III Introduction by Commissioner Jeffrey Fiedler (Hearing Co-Chair).................................................................................................................... 163 Statement of Jason Arterburn Program Director, C4ADS ........................................................................................................ 164 Prepared Statement .................................................................................................................... 167 Statement of Nathan Picarsic Co-Founder, Horizon Advisory; Senior Fellow, Foundation for Defense of Democracies ...... 188 Prepared Statement .................................................................................................................... 191 Statement of Emily Weinstein Research Analyst, Center for Security and Emerging Technology ............................................ 205 Prepared Statement .................................................................................................................... 207 Panel III: Question and Answer .................................................................................................... 227 Panel IV: U.S. Government Restrictions on Investment in China Panel IV Introduction by Commissioner Bob Borochoff (Hearing Co-Chair) ................................................................................................................. 244 Statement of Nazak Nikakhtar Partner International Trade and National Security Practice, Wiley Rein LLP; Former Assistant Secretary for Industry and Analysis, U.S. Department of Commerce, International Trade Administration ......................................................................................................................... 245 Prepared Statement .................................................................................................................. 248 Statement of Perth Tolle Founder, Life + Liberty Indexes ...............................................................................................271 Prepared Statement .................................................................................................................. 274 Statement of Ryan LaFond Deputy Chief Investment Officer, Algert Global .................................................................... 281 Prepared Statement .................................................................................................................. 283 Panel IV: Question and Answer .................................................................................................. 288 STATEMENT FOR THE RECORD Statement of Christopher Iacovella CEO, American Securities Association ................................................................................... 304 iv QUESTIONS FOR THE RECORD Responses from Ryan LaFond Deputy Chief Investment Officer, Algert Global .................................................................... 311 PUBLIC COMMENTS SUBMITTED FOR THE RECORD Public Comment from Alan Pan ................................................................................................. 312 Public Comment from Jean Public .............................................................................................. 315 v U.S. INVESTMENT IN CHINA’S CAPITAL MARKETS AND MILITARY- INDUSTRIAL COMPLEX FRIDAY, MARCH 19, 2021 U.S.-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION Washington, D.C. The Commission met in Room 253 of Russell Senate Office Building and via videoconference at 9:30 a.m., Commissioners Bob Borochoff and Jeffrey Fiedler (Hearing Co- Chairs), presiding. OPENING STATEMENT OF COMMISSIONER BOB BOROCHOFF HEARING
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