Key Takeaways
- •The hearing revealed that China has designated 17,000 "Little Giants" to dominate high-tech manufacturing, prompting calls for the SBA to integrate its lending and R&D tools.
- •Sean Murphy (Founder, Bison Blockchain) testified that his company faced a CCP-linked takeover attempt and "lawfare" that exploited hidden beneficial ownership near a strategic U.S. Air Force base.
- •Rep. Williams (R, TX-25) questioned Andrew Pahutski (Vice President and Fellow of Economic Security, Systems Planning and Analysis, Inc.) on investment risks, leading Pahutski to propose a "TRUST" framework.
- •Rep. Velázquez (D, NY-7) warned against ethnic profiling and criticized Trump-era tariffs, while Republicans emphasized the existential threat of CCP-linked IP theft and supply chain dependencies.
- •Members and witnesses urged the immediate reauthorization of the SBIR and STTR programs to ensure American innovators have access to non-dilutive capital to compete with Chinese subsidies.
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Hearing Analysis
Overview
This hearing examined the multifaceted threats posed by the Chinese Communist Party (CCP) to American small businesses, focusing on intellectual property (IP) theft, predatory investment strategies, and supply chain vulnerabilities. As the primary engines of U.S. innovation and manufacturing, small businesses are increasingly targeted by the CCP to erode America’s competitive advantage and compromise national security. The discussion highlighted the need for the federal government to provide better due diligence tools, secure capital alternatives, and coordinated policy responses to protect "Main Street" from state-sponsored economic espionage.
Key Testimony & Policy
The witnesses provided a stark assessment of the CCP’s industrial strategy, particularly its "Little Giants" program. Dr. Rush Doshi, Assistant Professor at Georgetown University, explained that China has designated over 17,000 small and medium enterprises as "Little Giants," providing them with a coordinated package of subsidies, low-cost capital, and state-backed research to dominate high-tech sectors like robotics and biotech. He argued that the U.S. must counter this with a similar "one-stop shop" for small tech firms, urging the immediate reauthorization and scaling of the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs, as well as the Manufacturing Extension Partnership (MEP).
Andrew Pahutski, Vice President at Systems Planning and Analysis, Inc., introduced the "TRUST" (Trusted Resilient U.S. Tracks) plan. This proposal includes ten pillars, such as launching small business-led trusted capital programs, incentivizing supply chain diversification through tax credits, and establishing vetted supplier lists. He emphasized that for many small businesses, the threat does not appear as coercion but as an "opportunity" for capital that carries hidden strategic risks.
Tom Lyons, Co-Founder of the 2430 Group, characterized the CCP’s actions as "unrestricted warfare" aimed at destroying a rival's competitive advantage. He proposed the Foreign Economic Espionage Designation Act, which would allow the President to designate specific entities as foreign economic espionage organizations, making it a federal crime to knowingly accept benefits from them. He also advocated for the Malign Foreign Interest Disclosure Act to require transparency from any entity receiving material state support from a country of concern.
Sean Murphy, Founder of Bison Blockchain, provided a cautionary case study. His company faced a takeover attempt by CCP-linked capital while building a Bitcoin mine near the Warren Air Force Base in Wyoming. The situation resulted in a Committee on Foreign Investment in the United States (CFIUS) divestment order and a grueling legal battle. Murphy highlighted the "lawfare" tactics used by CCP-linked entities, who hired 16 lawyers across six firms to crush his small business under legal fees.
Notable Exchanges & Partisan Dynamics
The hearing maintained a largely bipartisan tone regarding the severity of the CCP threat, though some ideological differences emerged regarding the methods of response. Ranking Member Nydia Velázquez (D, NY-7) opened the hearing with a stern warning against ethnic profiling, drawing parallels to the internment of Japanese Americans during World War II. She emphasized that the U.S. must protect national security without resorting to "inflammatory messaging and fear-mongering" against people of Chinese ancestry.
Rep. Hillary Scholten (D, MI-3) and Rep. Lateefah Simon (D, CA-12) focused on the administrative and funding lapses of current programs. They criticized the Trump administration for withholding $19 million in MEP funding and noted the "disastrous" impact of the six-month lapse in the SBIR/STTR programs. Dr. Doshi agreed, stating that while the U.S. "pushes pause" on these programs, China "pushes go" with tens of billions in funding.
On the Republican side, Chairman Roger Williams (R, TX-25) and Rep. Daniel Meuser (R, PA-9) focused on the need for the Small Business Administration (SBA) to shift from a policy-making role to an "action-doing" role. They explored how the SBA could provide better advocacy and vetting for small businesses at the "point of decision-making" to prevent them from accepting compromised capital. Rep. Tony Wied (R, WI-8) and Rep. Robert Bresnahan (R, PA-8) questioned witnesses on how to improve the speed of due diligence, noting that small businesses often have only "hours or days" to vet a deal before losing a contract.
Organizations Mentioned
* **Small Business Administration (SBA):** Discussed as the primary vehicle for providing non-dilutive capital and technical assistance, though witnesses argued it needs better vetting tools and a more coordinated "one-stop shop" approach for high-tech firms. * **Committee on Foreign Investment in the United States (CFIUS):** Mentioned in the context of the Bison Blockchain case; witnesses noted that while CFIUS is a vital national security tool, it is often too "reactive" to help small businesses during early-stage investment deals. * **Bison Blockchain:** Used as a primary case study for how CCP-linked capital can infiltrate a small business near sensitive military installations and use "lawfare" to attempt a takeover. * **Cybersecurity and Infrastructure Security Agency (CISA):** Identified as a resource for free cybersecurity information, though witnesses noted that small businesses often lack the financial resources to implement CISA’s recommendations. * **Michigan Manufacturing Technology Center (MMTC):** Praised for assisting over 145 manufacturing companies in Michigan, though its funding was discussed as being at risk due to federal budget freezes. * **2430 Group:** This nonprofit was highlighted for its work in educating the private sector on foreign espionage and proposing new legislative frameworks like the Foreign Economic Espionage Designation Act. * **CleanSpark:** Mentioned as the U.S. public company that purchased the Bison Blockchain site following the CFIUS divestment order, with Murphy raising concerns about their ongoing contracts with Chinese-linked firms like Bitmain.
What's Next
The committee signaled a strong intent to move forward with the reauthorization of the Small Business Innovation and Economic Security Act, which would secure the SBIR and STTR programs. Witnesses urged Congress to scale up the SBIC Critical Tech program and raise loan caps for the SBA’s manufacturing access to revolving credit program. There is also an expectation of further oversight regarding the SBA’s implementation of new lending policies that ban loans to businesses with foreign investor stakes, with members seeking to balance security concerns against the need for global talent and capital.
Transcript
Good morning to everyone, and I now call the Committee on Small Business to order. Without objection, the chair is authorized to declare a recess of the committee at any time. I now recognize myself for my opening statement, and I want to welcome today's hearing titled, "Defending Main Street: Combating CCP Threats to American Small Businesses." First, I want to thank our witnesses for being here today and for sharing their expertise on this important issue. I also thank my colleagues for joining us as we examine the challenges facing America's businesses in an increasingly competitive and complex global environment. Small businesses are essential to the American economy. They drive innovation, create jobs, and strengthen our communities. From cutting-edge technology startups to family-owned manufacturers, small businesses play a vital role in driving America's economy and reinforcing our national security. However, this vital engine of our economy is under threat. The Chinese Communist Party has made it a priority to challenge the United States economically and strategically. In doing so, the CCP is exploiting every opportunity to target American innovation. American entrepreneurs invest significant time, capital, and ingenuity into developing new products and technologies, yet far too often, these innovations are stolen, replicated overseas, and sold at a lower cost, undermining the very business that created them. CCP-linked investments in small businesses also raise serious concerns. Many small businesses, particularly startups, rely on outside capital to grow and scale. But when the capital comes from entities tied directly or indirectly to foreign adversaries, sensitive technologies and proprietary information risk being exposed and exploited. In some cases, these investments are structured in ways that obscure their true origin, making it difficult for entrepreneurs to identify the potential risk. Additionally, supply chain dependence on China continues to pose a serious threat. For decades, American businesses outsourced production to China due to low labor costs. While this was efficient in the short term, it also created significant risk, especially for small businesses that lack the resources to shift production or diversify suppliers. These challenges are not economic; they are matters of national security. Today's hearing is an opportunity to better understand how these threats impact small businesses and identify practical solutions. We must ensure that America's entrepreneurs have the tools they need to protect their innovations, secure trusted sources of capital, and build resilient supply chains. If we fail to act, we risk losing not only our competitive edge but also the ingenuity and entrepreneurial spirit that define our nation. I look forward to hearing from our witnesses about their experiences and recommendations for how Congress can support and protect America's small businesses. With that, I now yield to my friend and our distinguished ranking member from New York, Ms. Velázquez, for her opening remarks.
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