On January 17, Matt Pottinger, a visiting fellow at the Hoover Institution and former White House deputy National Security Advisor, testified before the House Foreign Affairs Committee. His testimony focused on the potential impact of U.S. investments on Chinese military and intelligence capabilities. According to his testimony published on the House Foreign Affairs Committee's website, Pottinger urged Congress to take a proactive role in implementing necessary changes.
Pottinger has an extensive background in national security affairs. As stated by the Hoover Institution's website, he served on the White House National Security Council staff for four years and was deputy National Security Advisor from 2019-2021. His area of expertise is primarily the Indo-Pacific region with a specific focus on China policy. He currently holds a position as a distinguished visiting fellow at the Hoover Institution.
In his testimony to the House, Pottinger asserted that American financial resources have inadvertently contributed to China's military development and surveillance systems expansion. He argued that U.S. companies, financial institutions, and investment funds have occasionally facilitated China’s modernization efforts for its People’s Liberation Army (PLA) and surveillance state without due caution. This assistance includes providing dual-use technologies such as advanced semiconductors, cutting-edge artificial intelligence applications, unmanned aerial vehicles, and next-generation communication systems - all of which are incorporated into Chinese military and intelligence programs.
Pottinger further explained that this transfer of American capital and knowledge enables Beijing to avoid costs and risks associated with independent research and development, effectively subsidizing Chinese leader Xi Jinping’s ambitions. Collaborations with Chinese firms backed by U.S. funds extend even to educational and research institutions, transforming them into conduits of expertise that support China’s military-industrial complex. "Outwardly commercial entities that receive American capital can be, and in fact routinely are, linked to the PLA," said Pottinger adding that many U.S investors seeking returns are often unaware of the strategic costs to the United States.
Pottinger also expressed skepticism about distinguishing Chinese private enterprises from state-backed entities with military ambitions, describing such a distinction as "increasingly illusory." He pointed out that this influence is embedded in Chinese law, such as the National Intelligence Law of 2017, which requires organizations and citizens to covertly support state intelligence efforts. "Corporate independence in today’s China is a façade that tries to hide the Chinese party-state’s pervasive influence over all entities, whether 'private' or state-owned, civilian or military, domestic or even foreign," Pottinger said. He cited ByteDance, parent company of TikTok, as an example of this complex relationship where American investments are channeled despite its links to China’s military modernization.
In his recommendations to Congress, Pottinger suggested adopting a sectoral approach that extends beyond semiconductors and AI. He proposed that regulations should apply to various types of investments including venture capital, private equity, and existing transactions involving entities like ByteDance and Microsoft Research Asia. According to Pottinger, the focus should shift from merely reviewing investments towards blocking them for increased transparency and addressing broader issues.
