On Aug. 1, Mike Gallagher, Chairman of the U.S. House China Committee introduced a bill that, if passed, will force universities, nonprofits, and public pension plans to divest from Chinese companies or risk losing their tax-exempt status.
“American taxpayers should not be forced to subsidize investments that benefit the Chinese Communist Party [CCP],” Gallagher said. “Universities, non-profits, public pension funds, and other institutions that want preferential tax treatment must choose: are they committed to their professed values or to financing a genocidal communist regime?”
Gallagher has named the bill the “DITCH Act.”
Senator Josh Hawley is expected to introduce a companion version of the bill later this month.
Gallagher argues that American companies, investing in China, undermines U.S. national security by supporting the regime’s People’s Liberation Army (PLA), and that American companies should not help the CCP “finance its techno-totalitarian state.”
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Gallagher says that the bill prevents this by banning investment in any company incorporated or based in China, has more than 10 percent of stock owned by a combination of Chinese entities “or any company that is directly or indirectly owned by a Chinese entity, including through a derivative instrument or other contractual arrangements,” as reported by Fox News.
According to Gallagher’s office, numerous American universities and non-profits have invested in a number of Chinese companies that have ties to the PLA, including ZTE, China Mobile, and SenseTime, among others.
The bill grants the Treasury secretary the power to grant a waiver should an institution’s need to hold a certain Chinese investment outweighs national security risks, however, the bill also requires the Treasury secretary to publish its reasoning for granting the waiver.
In addition, the bill requires the Treasury secretary to publish a report within 360 days of providing a waiver, detailing patterns of outbound investment from the U.S. to China. An annual report is also required under the legislation.
Gallagher believes that Communist China “leverages private companies for military and surveillance purposes,” and fears that American investment in China assists the CCP in “modernizing its military, building its techno-totalitarian surveillance state, and perpetuating serious human rights abuses – including the ongoing genocide against the Uyghur people.”