China raising billions in U.S. markets
A Commerce Department official warned Congress recently that China is raising billions of dollars in U.S. capital markets and the activity could undermine American security.

Nazak Nikakhtar, assistant secretary for international trade at the Commerce Department, testified last month that Chinese companies raised $48 billion from American capital markets from 2013 through the end of last year.

Ms. Nikakhtar told the congressional U.S.-China Economic and Security Review Commission that 172 Chinese companies in September were listed on the three largest U.S. exchanges — Nasdaq, the New York Stock Exchange and the NYSE American — with a total market capitalization of more than $1 trillion.

The investments are part of the Chinese Communist Party’s doctrine of civil-military integration and means U.S. markets may be funding China’s military buildup, which includes an array of new missiles, warships and aircraft.

“This doctrine subordinates the civilian economy to the needs of the Chinese national security apparatus and was formally adopted by the Central Military Commission in December 2015,” Ms. Nikakhtar said. “In essence, this doctrine mandates that the Chinese government or military may direct any civilian sector entity — indeed any commercial corporate entity — to act on behalf of the Chinese government or military.”

China’s cash is also funding its “Belt and Road” initiative, the multitrillion-dollar infrastructure investment program in the developing world that is aimed at expanding Beijing’s geopolitical reach.

“These investments can serve as ‘persuasion’ for nations to follow Beijing’s directions,” Ms. Nikakhtar added.

Another concern is China’s implementation of a nationwide social credit rating system that critics warn can be used to coerce American businesses in China to give up corporate secrets. Under the system, multinational companies in China would be forced to transfer internal data to the Chinese government.

Beijing could use a failing credit score to impose sanctions or taxes, along with blacklisting businesses.

“The foregoing facts demonstrate the Chinese government’s efforts to dominate the global economy through data and technological hegemony, as explicitly stated in its Made in China 2025 plan,” Ms. Nikakhtar said. “Key to this effort is its ability to grow corporate champions through access to capital markets. In this context, we need to understand how China has accessed capital markets in the past and how it will participate in the global securities markets in the future.”

Reagan administration financial warfare expert Roger Robinson was among the first to sound the alarm about China’s use of the largely unregulated capital markets.

Mr. Robinson said China is funding part of its military buildup, including a new aircraft carrier, through the market penetration, and he warned that Beijing could use its access to those markets to influence U.S. policies in ways favorable to Beijing.

“There are a sizable number of Chinese corporate ‘bad actors’ presently in the debt and equity portfolios of scores of millions of unwitting American investors, often through their holdings of various funds and other products arranged for them by their individual fund managers and/or institutional investors,” Mr. Robinson said.

“The penetration of the U.S. debt and equity markets by Chinese bad actors represents a national security peril, both in terms of serving as an important source of funding for some of China’s most ominous security threats to vital U.S. and allied security interests, and, over time, giving rise to a massive new China lobby of beholden U.S. investors,” he added.

China, Ms. Nikakhtar said, is seeking to develop its own capital markets that she said “not only compete directly against American firms but may ultimately threaten U.S. national security interests.”

Chinese companies and financial firms “are subject to a patchwork of national security-oriented laws that allow Chinese security and intelligence services to effectively leverage Chinese firms for espionage and other purposes,” she said.

Ms. Nikakhtar warned that U.S. investors in Chinese firms may not be aware they are funding Chinese activities and bad actors, including companies under U.S. sanctions.

“China’s growth in the international capital markets is expanding, and this has significant implications for U.S. economic and national security,” she said. “It is in this context that we need to reexamine our policies to determine how to prioritize our interests to preserve our nation’s economic strength and national security for both today and tomorrow.”

CHINA DECLARES ‘PEOPLE’S WAR’ ON VIRUS
The ruling Chinese Communist Party has declared a “People’s War” on the deadly Wuhan virus, as the party struggles to fend off growing popular anger over the mishandling of the epidemic.

The CCP mouthpiece People’s Daily is urging Chinese to rally around President Xi Jinping and that doing so will lead to victory over the deadly, fast-spreading virus.

Bill Bishop, a China specialist who publishes the newsletter Sinocism, reported this week that the effort to curtail the spread of the virus may not be working. “So far the virus continues its advance,” he stated.

The epidemic has killed at least 490 people in mainland China, most of them in Wuhan and Hubei province. Nearly 25,000 cases have been confirmed.

Mr. Bishop said Mr. Xi has dropped out of sight, which is unusual considering the supreme leader has assumed Mao-like status since assuming the top leadership spot in 2012.

“[Chinese] propaganda organs are all emphasizing Xi’s leading role in responding to the outbreak, but there have been no new images of him in the leading propaganda outlets since Jan. 28,” he said. “There have been periods in the past where he has ‘disappeared’ from view for several days, but this ‘absence’ in the midst of a crisis is spurring rumors even faster than usual.”

Rumors that Mr. Xi himself is sick from the virus or has been removed in a coup are not credible.

“One of the key political tasks of all party members is to protect the core, i.e., Xi Jinping, and while you would think the ‘people’s leader’ would want to be seen close to the people perhaps in this case the risk of him catching the virus may be too high, and images of him wearing a mask might be anathema to the propaganda wizards,” Mr. Bishop said.

Still, the unusual lack of visibility of Mr. Xi could be a sign of trouble at the top ranks of the Chinese Communist Party.

WUHAN’S FRENCH-SUPPLIED BIO LAB
The French government conducted a fierce internal government debate in 2012 over whether to provide China with an advanced biological research laboratory, according to a report several years ago by the Paris-based Intelligence Online newsletter.

The newsletter, which is believed to have close ties to the French intelligence community, reported in 2013 that the export of sensitive germ technology raised questions after reports surfaced that China had created a strain of bird flu virus that could be transmitted to humans.

The bird virus report “caused a stir in the scientific community — and revived debate over the controversial French export of a Class-4 pathogen laboratory to China,” the newsletter reported in May 2013.

According to the newsletter, Beijing approached the Paris government about jointly building a laboratory for research into untreatable viruses, similar to France’s Jean Merieux-Inserm Laboratory in Lyon.

“There was heated debate about the project between France’s ministries but it was approved, according to our sources, and the facility is currently under construction at a site that was chosen by Beijing in Wuhan, capital of the province of Hubei,” the newsletter said.

No details about which ministries and departments took part were provided. The facility came to be known as the Wuhan Institute of Virology, and its National Biosafety Laboratory is the only secure laboratory in China equipped to study deadly viruses.

Labover also supplied sensitive medical equipment to China in 2004, including four mobile laboratories sold to the Chinese Academy of Medical Sciences.