US House panel plans Taiwan war game with Wall Street executives

The US House of Representatives China committee plans to hold a Taiwan war game with financial and business executives in New York on Monday, in an effort to raise awareness about the risks attached to Americans investing in China.

Mike Gallagher, the Republican head of the panel, and Raja Krishnamoorthi, its top Democrat, will lead the delegation, according to a person close to the committee.

The war-game participants include representatives from investment banks, in addition to current and former executives from pharmaceutical companies and retired four-star US military officers. The committee declined to name the financial executives who will participate.

The bipartisan delegation will also meet other financial executives in New York, as the committee steps up its scrutiny of how American investment in China could undermine US national security. On Tuesday they have scheduled a hearing that will include testimony from former chair of the Securities and Exchange Commission Jay Clayton and Jim Chanos, the hedge fund short seller.

The person familiar with the situation said the lawmakers wanted to hear from Wall Street executives about “the systemic risks that come with American capital flowing to China and how banks and other financial institutions think about their investments in China and exposure to the Chinese economy in the event of a political crisis”.

Krishnamoorthi told the Financial Times that it was “important that our committee hear from the financial industry about how [Chinese Communist party] policies are affecting Americans’ savings and investments and what Congress needs to do to help protect American investors and our national security”.

The war game would consider the economic implications of a conflict between the US and China over Taiwan. In April, the lawmakers took part in a Taiwan war game on Capitol Hill that raised questions about whether the US and its allies were doing enough to prepare for sanctions on China and an economic war with Beijing in the event of a Chinese attack on Taiwan.

Following meetings with Apple chief executive Tim Cook and Disney boss Bob Iger earlier this year, Gallagher told the FT that Hollywood and Silicon Valley executives were underestimating the odds that China would attack Taiwan.

The US state department last year shared research with European countries that warned that a conflict over Taiwan would trigger an economic shock causing annual losses of as much as $2.5tn.

The House China committee, which was created in January to focus on potential threats from the Chinese Communist party, has held hearings on topics ranging from Beijing’s economic aggression to human rights abuses. But in recent months it has probed commercial links between US companies and China.

In August, for example, the panel accused BlackRock and MSCI of “unwittingly funding” groups that develop weapons for China’s People’s Liberation Army, compromising US national security.

Roger Robinson, former chair of the Congressional US-China Economic and Security Review Commission, said the China committee should build on its “visionary investigation” of BlackRock and MSCI.

“As the committee has learned, when you scrutinise and follow the billions of US investor dollars flowing to CCP-controlled Chinese enterprises, courtesy of reckless Wall Street firms, it leads to nowhere good in many instances,” he said.

The rising congressional scrutiny comes as the White House tries to cut the flow of US money to Chinese groups in technology with military applications. President Joe Biden last month signed an order limiting US investment into China’s quantum computing, advanced chips and artificial intelligence sectors.

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