FBI Director Christopher Wray said in congressional testimony on Wednesday that China requires US and other foreign-owned companies to host groups that monitor their compliance with Chinese Communist Party doctrine.
Ray told the House Judiciary Committee that it is one way the Chinese government has “exploited” joint ventures to obtain corporate secrets and information.
Wray testified, “No country, no one, is a broader and more comprehensive threat to our ideas, innovation, and economic security than the Chinese government and the Chinese Communist Party.”
“In many ways it represents, I think, the defining threat of our time,” he said.
Ray’s outspoken criticisms against the Chinese government’s alleged interference in foreign business, in a place where his language has been closely guarded, highlights the high tension between Beijing and Washington. His remarks also follow high-stakes visits to China by Secretary of State Antony Blinken and Treasury Secretary Janet Yellen.
Ray on Wednesday had been requested by the deputy. Lance Godin, R-Texas, on whether China is “in essence nationalizing American companies” by forcing companies doing business in the country to allow the Chinese Communist Party to run internal “political cells.”
“The CEOs I’ve talked to are afraid they’ll say something, say they came to the FBI,” Godin said.
Ray called it a “very important issue” that deserved more attention.
“While there is no law against joint ventures, the problem we face is that the Chinese government has frequently exploited these joint ventures to then use them as routes for improper access to corporate secrets and information,” said the FBI director.
Ray said Americans would be “shocked to hear” that nearly all companies that do business in China are required to allow those cells.
“If we try to install something like that in American companies, or if the British try to install something like that in British companies or any number of other places, people are going to lose their minds, and rightly so,” he said.
Wray did not name specific companies that were asked to house CCP cells in China. Nor did he directly respond to Godin’s concern that Beijing had stepped up its use of the cells.
The US Chamber of Commerce and CEO advocacy group Business Roundtable, whose members include leaders of major companies such as Apple and Nike, did not immediately respond to CNBC’s requests for comment on Wray’s remarks.
Business risk intelligence platform Sayari warned in a 2021 report that private companies in China face mounting pressure to give so-called CCP cells more influence.
These companies have been required since 2018 to create CCP hives in order to be listed on local exchanges, according to Sayari. The company said the cells, in turn, pushed to strengthen their role in corporate governance.
China has long requested such internal party committees, but implementation did not begin until after 2012, according to a report by the Center for Strategic and International Studies.
New rules last year required China’s securities investment funds to set up these internal party committees. When asked about the new rules, China’s securities regulator said they are in line with corporate governance principles and Chinese law, and you don’t have to worry about data security at all, according to CNBC’s Chinese translation.
The Financial Times reported earlier HSBC It incorporated the CCP into its banking business in China, making it the first foreign lender to do so.
This is not the first time Ray has raised concerns about Beijing’s alleged efforts to impose communist political views within foreign companies operating in China.
“It’s up to the point where, under Chinese law, Chinese companies of any size are required to host in-house,” Ray said in an interview with CNBC. “They call it a committee, but it is essentially a cell whose sole responsibility is to ensure that the company adheres to the orthodoxy of the Chinese Communist Party.”
“It doesn’t just apply to Chinese companies; it applies to foreign companies if they reach a certain size in China as well,” Ray told CNBC.
Those companies “must comply,” he added. “They have to cooperate.”
The conversation with Godin came as a respite from the hostile questions Ray received from the Republican majority on the committee. The Biden administration official answered heated questions and repeated interruptions from Republicans focused largely on the agency’s perceived political bias against conservatives.
– CNBC’s Christina Wilkie contributed to this report.
Update: This story has been updated to remove a reference to a Wall Street Journal editorial.