i CHINESE INVESTMENT IN THE UNITED STATES: IMPACTS AND ISSUES FOR POLICYMAKERS HEARING BEFORE THE U.S.-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION ONE HUNDRED FIFTEENTH CONGRESS FIRST SESSION THURSDAY, JANUARY 26, 2017 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: 2017 ii U.S.-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION CAROLYN BARTHOLOMEW, CHAIRMAN HON. DENNIS C. SHEA, VICE CHAIRMAN Commissioners: ROBIN CLEVELAND HON. JONATHAN STIVERS HON. BYRON L. DORGAN HON. JAMES TALENT HON. CARTE P. GOODWIN DR. KATHERINE C. TOBIN DANIEL M. SLANE MICHAEL R. WESSEL MICHAEL R. DANIS, Executive Director The Commission was created on October 30, 2000 by the Floyd D. Spence National Defense Authorization Act for 2001 § 1238, Public Law No. 106-398, 114 STAT. 1654A-334 (2000) (codified at 22 U.S.C. § 7002 (2001), as amended by the Treasury and General Government Appropriations Act for 2002 § 645 (regarding employment status of staff) & § 648 (regarding changing annual report due date from March to June), Public Law No. 107-67, 115 STAT. 514 (Nov. 12, 2001); as amended by Division P of 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); as amended by Public Law No. 109- 108 (H.R. 2862) (Nov. 22, 2005) (regarding responsibilities of Commission and applicability of FACA); as amended by Division J of the “Consolidated Appropriations Act, 2008,” Public Law Nol. 110-161 (December 26, 2007) (regarding responsibilities of the Commission, and changing the Annual Report due date from June to December); as amended by the Carl Levin and Howard P. “Buck” McKeon National Defense Authorization Act for Fiscal Year 2015, P.L. 113-291 (December 19, 2014) (regarding responsibilities of the Commission). The Commission’s full charter is available at www.uscc.gov. iii March 9, 2017 The Honorable Orrin Hatch President Pro Tempore of the Senate, Washington, DC 20510 The Honorable Paul Ryan Speaker of the House of Representatives, Washington, DC 20515 DEAR SENATOR HATCH AND SPEAKER RYAN: We are pleased to transmit the record of our January 26, 2017 public hearing on “Chinese Investment in the United States: Impacts and Issues for Policymakers.” The Floyd D. Spence National Defense Authorization Act for 2001 § 1238, Pub. L. No. 106-398 (as amended by the Carl Levin and Howard P. “Buck” McKeon National Defense Authorization Act for Fiscal Year 2015 § 1259b, Pub. L. No. 113-291) provides the basis for this hearing. At the hearing, the Commissioners heard from the following witnesses: Thilo Hanemann, Director and Economist, Rhodium Group; Jeff Johnson, President and CEO, SquirrelWerkz; James Stengel, Partner, Orrick Herrington Sutcliffe LLP; Robert Atkinson, President, Information Technology and Innovation Foundation; Patrick Woodall, Research Director and Senior Policy Advocate, Food & Water Watch; Patrick Jenevein, CEO, Tang Energy Group and Chairman, WattStock LLC; Shaswat Das, Senior Attorney, Hunton & Williams LLP; Paul Gillis, Professor of Practice, Peking University’s Guanghua School of Management; Peter Halesworth, Managing Partner, Heng Ren Partners LLC.The subjects covered included recent trends in Chinese investment in the United States, the implications of Chinese investments in strategic sectors of the U.S. economy, and the activities of Chinese companies listed on U.S. stock exchanges. We note that the full transcript of the hearing will be posted to the Commission’s website when completed. The prepared statements and supporting documents submitted by the participants are now posted on the Commission’s website at www.uscc.gov. Members and the staff of the Commission are available to provide more detailed briefings. We hope these materials will be helpful to the Congress as it continues its assessment of U.S.-China relations and their impact on U.S. security. The Commission will examine in greater depth these issues, and the other issues enumerated in its statutory mandate, in its 2017 Annual Report that will be submitted to Congress in November 2017. Should you have any questions regarding this hearing or any other issue related to China, please do not hesitate to have your staff contact our Congressional Liaison, Leslie Tisdale, at 202-624-1496 or [email protected]. Sincerely yours, Carolyn Bartholomew Hon. Dennis C. Shea Chairman Vice Chairman cc: Members of Congress and Congressional Staff iv CONTENTS THURSDAY, JANUARY 26, 2017 CHINESE INVESTMENT IN THE UNITED STATES: IMPACTS AND ISSUES FOR POLICYMAKERS Opening Statement of Commissioner Michael R. Wessel (Hearing Co-Chair) .........................................................................................................1 Prepared Statement ...........................................................................................................3 Opening Statement of Commissioner Robin Cleveland (Hearing Co-Chair) .........................................................................................................5 Prepared Statement ...........................................................................................................6 Panel I: Trends and Impacts of Chinese Investment in the United States Panel I Introduction by Commissioner Robin Cleveland (Hearing Co-Chair) .........................................................................................................7 Statement of Thilo Hanemann Director and Economist, Rhodium Group ........................................................................8 Prepared Statement .........................................................................................................11 Statement of James Stengel Partner, Orrick ................................................................................................................22 Prepared Statement .........................................................................................................25 Statement of Jeff Johnson President and CEO, SquirrelWerkz ................................................................................39 Prepared Statement .........................................................................................................42 Panel I: Question and Answer......................................................................................35, 65 Panel II: Industry Case Studies Panel II Introduction by Commissioner Michael R. Wessel (Hearing Co-Chair) .......................................................................................................83 Statement of Robert Atkinson President, Information Technology and Innovation Foundation ...................................84 Prepared Statement .........................................................................................................86 Statement of Patrick Woodall Research Director and Senior Policy Advocate Food and Water Watch .................................................................................................115 Prepared Statement .......................................................................................................117 Statement of Patrick Jenevein CEO, Tang Energy Group and Chairman, WattStock LLC ...........................................................................................136 v Prepared Statement .......................................................................................................138 Panel II: Question and Answer ........................................................................................146 Panel III: Chinese Firms on U.S. Stock Exchanges Panel III Introduction by Commissioner Robin Cleveland (Hearing Co-Chair) .....................................................................................................165 Statement of Shaswat Das Senior Attorney, Hunton & Williams LLP ..................................................................166 Prepared Statement .......................................................................................................170 Statement of Paul Gillis Professor of Practice Guanghua School of Management, Peking University ................................................179 Prepared Statement .......................................................................................................181 Statement of Pete Halesworth Managing Partner, Heng Ren Partners LLC ................................................................191 Prepared Statement .......................................................................................................193 Panel III: Question and Answer ......................................................................................196 1 CHINESE INVESTMENT IN THE UNITED STATES: IMPACTS AND ISSUES FOR POLICYMAKERS THURSDAY, JANUARY 26, 2017 U.S.-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION Washington, D.C. The Commission met in Room 419 of Dirksen Senate Building, Washington, D.C. at 9:00 a.m., Commissioners Robin Cleveland and Michael R. Wessel (Hearing Co-Chairs), presiding. OPENING STATEMENT OF COMMISSIONER MICHAEL R. WESSEL HEARING CO-CHAIR HEARING CO-CHAIR WESSEL: Welcome to the first hearing of the U.S.-China Economic and Security Review Commission's 2017 Annual Report cycle. I want to thank all of you for joining us today--and one of our witnesses will be here shortly. I also want to recommend and invite