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US Select Committee on China Calls for More Sanctions, Taiwan Plan

The U.S. should impose a range of new sanctions and other restrictions on Chinese companies with ties to human rights violations in the Xinjiang region, including by imposing financial sanctions on companies on the Entity List and introducing outbound investment restrictions, the House Select Committee on China said this week. The committee also said the U.S. and its allies need to better coordinate on a potential sanctions response -- and be ready to deploy those measures -- if China invades Taiwan.

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The recommendations, outlined in two reports approved by the committee during a May 24 voice vote, were the product of compromises between Democrats and Republicans, Chair Mike Gallagher, R-Wis., said in a press conference after the vote. “This is our first attempt at a policy process where we can identify the center of gravity for action in this Congress, pushing back against [Chinese Communist Party] aggression, and then we'll continue to iterate off of that," he said.

Several recommendations in the committee’s report on China’s “ongoing Uyghur genocide” said the U.S. needs to take a tougher stance on Beijing for its repression of the minority group. Congress can start by passing the Uyghur Human Rights Sanctions Review Act, which would require the Treasury Department to make sanctions “determinations” on 10 Chinese companies for their “complicity in the Uyghur genocide,” including several companies on the Entity List: Hikvision, Dahua and BGI.

“These companies, among others, supply the equipment used by the CCP to commit genocide against Uyghurs,” the report said. “The sanctions required under this Act would prohibit U.S. persons from conducting transactions with these [People’s Republic of China] entities and cut them off from the U.S. financial system.”

Congress also should consider legislation that would “isolate further already sanctioned entities,” such as the Xinjiang Production and Construction Corps. The lawmakers suggested secondary sanctions to “force non-U.S. businesses to decide between having access to the U.S. financial system and continuing to deal with the most abusive PRC entities implicated in the Uyghur genocide.”

Lawmakers also should pass legislation to mandate new outbound investment restrictions or other “disincentives” for investors, including university endowments and pension funds, to invest in Chinese companies that support China’s “Uyghur genocide,” the report said. The committee, formally known as the House Select Committee on the Strategic Competition between the United States and the Chinese Communist Party, suggested passing a bill similar to the DITCH Act, introduced during the last Congress, which could deny tax exemptions to organizations investing in those entities. problematic PRC entities, illustrates the kind of disincentives that might be created.

“The opaque matrix of economic and financial ties between the United States and the PRC has made American investors indirectly and often unknowingly complicit in the CCP’s human rights abuses,” the committee said. “Without legislation prohibiting pension funds from investing in problematic PRC entities, fund managers have no obligation to consider whether a company is complicit in the CCP’s genocidal policies when investing.”

The committee’s second report on Taiwan calls on the U.S. to “strengthen and better coordinate collective planning” for how it will work with its allies to sanction China if it invades Taiwan. The committee said it held a tabletop exercise simulating an invasion in which the U.S. had to “rapidly assemble a sanctions package without the benefit of fully consulting with U.S. allies. As a result, economic measures had a limited effect on CCP decision-making.”

Sanctions would be most effective if imposed by U.S. allies in the G-7, NATO, NATO+5 and the Quad, the committee said, adding that Congress should pass a bill similar to the STAND with Taiwan Act of 2023 that mandates the “development of an economic sanctions package to be employed” in the case of an invasion. “Much like we do joint contingency planning for war fighting,” the lawmakers said, “we need to coordinate in peacetime with U.S. allies.”