An Eroding China is Dangerous, But Presents Opportunity, Pompeo and Panetta Testify

By Cathalijne Adams
Jan 31 2024 |
Screenshot from the House Committee on the Chinese Communist Party’s YouTube stream

The former Cabinet officials were united in their praise of the House Select Committee on the Chinese Communist Party’s work to push back against Beijing’s economic manipulation.

Former Secretary of State Mike Pompeo and former Secretary of Defense Leon Panetta urged policymakers to protect the U.S. economy from the Chinese Communist Party’s (CCP) economic coercion in their testimony before the House Select Committee on the CCP on Tuesday.

Both Pompeo, who served in the Trump administration, and Panetta, who served under former President Barack Obama, praised the committee’s work, with Panetta calling its recently released U.S.-China strategy “right on point.”

“There’s no question in my mind that [Chinese premier Xi Jinping] has been cornered in a number of ways,” Panetta said. “Both in the way that he dealt with COVID and the way that’s dealing with his economy. There is one fundamental focus that Xi has: It’s on China. And his problem right now is that China is eroding right under him. And I think that makes him more dangerous, not less.”

Despite the CCP’s efforts to scrub the internet of commentaries on China’s economic crisis, all signs point to China growing increasingly unstable. Evergrande’s meltdown is reverberating throughout the nation’s financial system, and its manufacturing activity is in decline. Already, Beijing has demonstrated that it’s falling back on the playbook it always uses to cope with crisis: export the pain. And America must act now to keep that flood of dumped goods from eroding our own economy through strong trade action.

Pompeo cautioned American businesses to “think about alternative markets and how do you derisk your balance sheet from a presence in China and doing so immediately.”

“Don’t count on the fact that it would be a U.S. policy decision that drives [U.S. business] out of [China],” Pompeo, who co-founded a specialized aircraft machinery manufacturer in Wichita, Kan., before his political career,  said. “We can see this already today. Executives being detained, products not being permitted to move. The Chinese Communist Party will have a say in the level of disconnection between our two countries, and I think Xi Jinping is intent upon making his country more self-reliant.”

In light of China’s volatility, Pompeo underscored the importance of securing America’s supply chain for dual-use materials, or materials with both military and civilian applications, as well as “the resources that we need to continue to deliver American manufacturing across the world.”

“This should be the place we should focus intensely in the near term,” Pompeo said.

Panetta called upon policymakers to counter Chinese trade cheating.  

“I’m a believer in free trade, but I’m also a believer in fair trade,” Panetta said. “The problem with China is that we engage in trade, but they don’t believe in fair trade in the way they operate. And what we have to do is we’ve got to be able to put, and you did it with your recommendations on the economy.”

The House Select Committee on the CCP’s more than 150 recommendations include passing de minimis reform, enacting the Leveling the Playing Field Act 2.0, and passing the COOL Online Act, among a number of other strategies that would provide U.S. Trade Representative Katherine Tai the modern trade tools she has often requested.

Pompeo encouraged the committee to act on these recommendations if it wishes because “the Chinese Communist Party is far more dependent on America than we are on them, and we ought to use that to our advantage.”

“These things matter to American economic growth for years in front of us, and if we get it wrong, then our children and grandchildren will live in an America that looks fundamentally different,” he said. “We can’t permit that to happen, and so it is not about something 6,000 miles away. It is about something just down the street for you, your family and your neighbors.”