economic retaliation. For example, in June 2018, the Wall Street Journal reported that Xi

110 economic retaliation. For example, in June 2018, the Wall Street Journal reported that Xi warned a group of global CEOs that China would retaliate with “qualitative measures” targeted at their companies, if the United States did not back off from the tariff war.** Second, China is seeking to pressure American companies into legitimizing its geopolitical claims and interests, for example by demanding that Western firms overtly acknowledge that Taiwan is an irreversible part of China. Third, China has wooed American companies with both sticks and carrots into serving its strategic interests abroad, most notably via its interactions with Hollywood. China’s source of leverage over American companies comes from its large domestic market and its key role in international supply chains; by contrast, China holds little direct ownership in American companies. American affiliates (i.e., those at least half-owned by American multinational companies) employ 1.7 million Chinese workers and are indirectly responsible for the employment of millions more.* More than fifty American companies report that they generate at least 20 percent of their revenues from China.*° Naturally, many companies (and industry associations) with large stakes in China lobby the American government on issues related to China, often seeking to exert a moderating influence on US policy. This is not in itself evidence of improper influence, but it merits scrutiny and should be weighed in the context of other evidence in this section.” Seeking to Influence American Politics via Corporate Interests China does, in fact, exert influence on how at least some American companies and corporate executives interact with the American government. This influence generally takes two forms. In the first, China relies on American corporations to retard efforts by the American government to investigate and sanction Chinese behavior deemed harmful to national economic or strategic interests. For example, some American corporations have expressed reservations about cooperating with US trade investigations for fear of retaliation by China. Chinese officials also regularly convene senior American executives at special meetings with government officials or major conferences. During these engagements, Western CEOs’ positive comments on the country receive wide play in the foreign and domestic media, one of many ways in which the Party continues to seek the appearance of outside legitimization for domestic purposes. In addition, China uses these meetings to attempt to coerce American executives to take China’s side in disputes with the US government. As the risk of a trade war mounted in spring 2018, Chinese officials explicitly warned gathered executives to lobby the US government to back down or risk disruption to their business in China.** The US government does not strategically convene foreign business leaders, let alone instruct them to use their influence to shape policy favorable to the United States in their home countries. Corporations HOUSE_OVERSIGHT_020569