Rep. Mike Gallagher Calls on Treasury Department to Crack Down on Firms Linked to CCP Espionage

Rep. Mike Gallagher's official portrait. U.S. House of Representatives Office of Photography

Rep. Mike Gallagher (R-Wis.), chairman of the House Select China Committee, has called on the U.S. Treasury Department to take a much more active role in the thwarting of Chinese firms involved with the espionage sector responsible for the deployment of the spy balloon shot down off the coast of South Carolina in early February. Gallagher also demanded tough and resolute action against American firms complicit in the financing and supplying of Chinese espionage.

In a highly detailed, four-page Feb. 20 letter to Treasury Secretary Janet Yellen, a copy of which has been obtained by The Epoch Times, Gallagher urged Yellen’s department “to take decisive action against PRC [People’s Republic of China] companies involved in the PRC spy balloon program and to ensure U.S. entities are not aiding and abetting this program.”

Gallagher went on to note that earlier in February, the U.S. Commerce Department added the names of six Chinese Communist Party (CCP) companies to its Entities List, thereby barring unlicensed exports from the United States to those companies, because the latter had lent support to the program to develop and deploy the spy balloon. The lawmaker cited news reports in The New York Times and The Wall Street Journal establishing links between Chinese firms and the balloon program, and noted that the manufacturer of the balloon even enjoys the status of a People’s Liberation Army (PLA) “approved vendor.”

But the addition of six names to the Entities List is insufficient to cut off the flow of support for Chinese espionage, Gallagher contended, because it does not specifically proscribe financial support for the CCP firms linked to espionage.

An effective strategy for ending complicity in CCP spying demands a more holistic approach, Gallagher believes.

“With the American homeland under the threat of surveillance from the PRC balloon program, it is vital to cut off U.S. technological and financial support to PRC companies that aid and abet its balloon surveillance program, especially given the history of U.S. technology aiding advanced PLA weapons systems,” the letter continued.

As an example of the failure of current policy, Gallagher noted that within the last few years, the Commerce Department has doled out export licenses worth more than $100 billion to two firms, Huawei and SMIC, that Gallagher called “PRC national champion tech companies.”

Expanding Blockage

To block support for Beijing’s military and spy initiatives, Gallagher urged the Treasury Department to add CCP firms involved with the balloon program to the Non-SDN Chinese Military Industrial Complex (NS-CMIC) List. He described the purpose of this list as penalizing U.S.-based individuals who aid companies that operate in the defense sector, defense materials, or the surveillance sector of the CCP’s economy, or are under the control or ownership of companies that do so. Gallagher said the evidence is strong that the names recently added to the Entities List also belong on the NS-CMIC List.

Gallagher went on to fault the Treasury Department for the narrowness of its NS-CMIC List, which he views as omitting firms that the Defense Department (DoD) considers to be bad actors. As an example, Gallagher noted that China National Chemical Corporation (ChemChina) is on the DoD’s NS-CMIC List but not the Treasury Department’s. A ChemChina subsidiary, Gallagher pointed out, holds a dominant position in the market for Chinese high-altitude balloons, producing no fewer than 75 percent of those of which the China Meteorological Association makes use.

“We have not yet discovered whether ChemChina has contributed to the PRC’s surveillance balloon program. However, ChemChina is precisely the sort of company that the U.S. government should have sanctioned long ago and should do so now,” Gallagher wrote.

Besides those firms that appear on the DoD’s 1260H list, Gallagher continued, there exist “likely hundreds or thousands” of other CCP companies that qualify for addition to the NS-CMIC List but are not currently on it.

“Treasury should diligently adhere to and implement Executive Order 13959, which established the NS-CMIC List, and add all companies that meet the definitions therein,” Gallagher added.

Closing the Gap

Gallagher made a further request in his letter to Yellen, calling on the Biden administration to order that all entities on the NS-CMIC List also go onto the Specially Designated Entity (SDN) List and be subject to full sanctions, to deny them access to U.S. technology and financial markets. Prohibiting U.S. citizens from buying or trading publicly held securities in such entities under Executive Order 13959 does not go far enough, Gallagher argued, because many of the companies in question are privately held and do not issue securities for trading in the first place.

“SDN-Listed companies’ assets are blocked, and U.S. persons are prohibited from transacting with them, effectively cutting them off from the U.S.-led global financial system. Only by placing the PRC companies involved in the balloon program on the SDN list can the Biden administration send a strong message to those entities and ensure U.S. persons and technology do not aid the surveillance program,” Gallagher wrote.

“If an entity is too dangerous to U.S. national security for U.S. persons to trade those entities’ public securities, U.S. persons should not be engaging in commercial transactions with them at all,” Gallagher added.

The Epoch Times has reached out to the Treasury Department for comment.