Hearings to examine China's toll on older Americans' health, finances, and security.

the us senate special committee on aging will now come to order the communist chinese communist party is not a uh trade competitor that plays by different rules it's not a diplomatic challenge to be managed through the right mix of engagement and pressure it's a country whose government has made a strategic goal of weakening the united states and that's as nice as way you can say it deciding that senior senior citizens are legitimate target This hearing will cover the concrete measurable harms that are being done to America's seniors by a government in Beijing led by the Communist Party, who views our country's most vulnerable as economic opportunity. The list of dangers that communist China presents has grown as they become more aggressive. Those threats now impact every square inch of American life. Let's start with fentanyl and other illicit drugs. America has lost hundreds of thousands of people to deadly drugs. Since twenty thirteen, China has been the primary source of fentanyl, and the precursor chemicals the drug cartels use to manufacture it and kill American citizens, thanks to Communist China. We hear a lot about young Americans dying from fentanyl poisons, and they are, but seniors are a growing share of the victims. Older Americans living with chronic pain, veterans managing injuries, and patients seeking alternative sources for its medications due to rising costs, are dying because Communist China profits from their death, and because the CCP has chosen again and again to look the other way. China has made some announcements about controlling per course or e- exports. We've heard those before and rarely do they hold up their end of the bargain. They never hold up their end of the bargain. Now let's talk about the pills themselves, legal ones that seniors depend on every day. As you heard in this committee time and again, our ninety percent, over ninety percent of the prescriptions filled at American pharmacies are generic drugs. The active pharmaceutical ingredients are APIs, and most of those drugs come from China or India. For many critical medicines, China isn't just a major supplier, they're the only supplier. There is no domestic alternative standing by. If Beijing decides tomorrow to restrict drug imports, as it has explicitly threatened to do in the CCP's state media, American seniors will feel it in weeks. According to a CPA report, Commerce China supplies eighty-seven percent of US antibiotic API imports and over eighty to ninety percent of global API production. We cannot fuel the military if China stopped exports. We saw how China withheld PPE during COVID. This is a real problem. China has leverage, communist China knows it has leverage, and our committee's investigative work has made it clear that they are not shy about reminding us. That is why legislation like the Clear Labels Act is important. It's time Americans truly know where their drugs come from. We would never, we would have never let the Soviets have this kind of leverage over us during the Cold War. We should not, we should be taking this issue just as seriously now. No sane country would act like this when their opponent wants to destroy them. We have to wake up. That's why we're pushing the federal government every day to support domestic manufacturing and leverage the full buying power of the government to support our domestic uh drug makers. And I want to thank the ranking member for her actions here. Here's another way Congress is trying to hurt our seniors, relentless scams. In twenty twenty four, Americans over sixty lost nearly five billion dollars to financial scams. It's not just a crime statistic, but a coordinated campaign, run at industrial scale by organized criminal enterprises, with direct ties to actors operating under the protection of or at the direction of the Chinese Communist Party. We held a hearing earlier this year on foreign scam compounds. These are physical facilities, physical facilities in Southeast Asia where trafficked workers are forced to run, fraud operations, targeting Americans around the clock. I'm sure you've gotten a scam call before. I actually get them every day. Who hasn't? These AI generated voice loan clones, deep fake video calls, grandparent romance, and investment scams all look and sound entirely legitimate until all of a sudden the money is gone. These sophisticated, well-funded criminals have focused on seniors because they have the retirement savings and are less likely to report what happened to them. Congress needs to act now and pass legislating legislation targeting these bad actors before even more Americans lose their life savings to these thugs. The scam act pass this on this Senate, stop scammers act as waiting, we need the rest of Congress to act with the same urgency that our seniors deserve. Finally, to talk about data, because everything else becomes more dangerous when the Chinese Communist Party knows your medical history, your financial accounts, your daily routine, and the names of your grandchildren. Communist China is systemically acquiring the personal, financial and health data of older Americans through connected devices, digital health platforms, data broker purchases, and cyber attacks on American institutions. We saw this with BGI, the Beijing Genomics Institute, potentially acquiring genomic data from US patients. That led to the passage of the Bio-Secure Act, which prohibited federal agencies and federally funded groups from utilizing biotechnology equipment and services from biotechnology companies of concern. For too long, Washington has treated all these issues as individual problems. I believe it's time we take a comprehensive approach to fighting communist China's growing threat. The legislation mentioned today is my opening is my opening and my opening is just the beginning but the breadth of that work cannot be captured in the opening statement. So today I'm posting online a list of bills I've sponsored or co-sponsored that speaks to the threats we exam or examining this hearing with a plain English summary of what each one does and I know the ranking member is is all over this. You deserve to know where your senator stands and I asked my colleagues on both sides uh to look at that list, and asked themselves The same question I ask every day, what are we waiting for? The bottom line here is that America has enemies, whether we like it or not, and we need to act like it. Communist China wants to destroy our way of life. Fifty years ago, we would never have given the Soviets the kind of leeway we give China, the access they have to our economy and our information, the dependence they enjoy from our supply chain. We need to get serious about this before it's too late. Now I'd like to recognize the ranking member, Gillibrand, for her opening statement.

Thank you, Mr. Chairman. I appreciate today's hearing. Thank you to our witnesses. Today's hearing gives the committee the unique opportunity to study several issues that impact the lives of older Americans through the same lens. How are the actions from China influencing these outcomes? We will discuss how Chinese government turns a blind eye to scam compounds that target Americans, leading to financial losses to the tune of billions of dollars for our citizens' hard-earned money. not to mention the emotional toll on the victims that they face after falling prey to a scam. To address this crisis, I've introduced bipartisan legislation which Chairman Scott called the National Strategy for Combating Scams Act, and that would require the FBI to create a unified government-wide strategy to tackle surging scam operations. This bill is a f first step to combat scams domestically, and complements the work of our colleagues on the Senate Foreign Relations Committee to crack down on foreign scam centers including by pushing to pass the bipartisan Scam Compound Accountability and Mobilization Act. I'm also eager to continue our discussion on Chinese dominance of the global supply chain for pharmaceuticals and the economic, national and health security implications of this dominance. This is a refrain that Chairman Scott and I continue to repeat throughout this entire Congress, to help Americans understand. Our health care system is a grave risk, in no small part due to the exposure to China for key starting materials and active pharmaceutical ingredients for our generic pharmaceuticals. This is not just a health security issue, but a national security issue. In the case of a crisis or conflict between us and China, Our country cannot be reliant on China for the bulk of our essential medicines, like antibiotics or the ingredients we need to make them. I'm proud to work this, I'm pr- the pr- I'm proud of the work of this committee that we've done to sh- shed light on the issue. We've introduced bipartisan legislation called the Clear Labels Act, and have dedicated our time to shining a light on this problem that has for too long been pushed aside by Congress. China has weaponized the supply chain, established choke points in medicine, foundational semiconductors, and printed circuit boards that are critical to all types of electronics. One of the things that should worry us most, and should immediately spark congressional action, is China's top-to-bottom efforts to dominate the next generation of biotechnology. It should be a wake-up call to to all of our members that China may surpass us in a few years, not decades, in the critical technology area. Bio-tech is not a future inflection point, but a present one. I look forward to collaborating with the Commissioners as well as my colleagues across the aisle, as we work together to understand and tackle China's influence in all of these spheres.

Thank you, ranking member. First off, I wanna thank all the witnesses for what you do every day. Um. And um, I know it's bipartisan and you guys do a great job. Our first witness is Joshua Hodges, uh, Commissioner on the US-China Economic and Security Review Commission, appointed by Speaker Mike Johnson. He brings nearly two decades of national security and foreign policy experience across the White House Congress the executive branch international development and the private sector he served as special assistant to the president and senior director of the National Security Council where he led US efforts to expose and counter China's malign act activity across the Americas and the Caribbean. serving as the US government's lead on regional economic strategies, designed to reduce dependency on China's backed, you know, on China backed financing. Most recently he served as National Security Advisor to speak at the House Mike Johnson during the a hundred and eighteenth Congress, the most senior national security staff position in the House, where he helped shape congressional responses to support for Israel, Russian aggression, US-China's strategic competition, and security threats at the southern border. Thank you for being here and please begin your testimony.

Chairman Scott, Ranking Member Gillibrand, and members of the committee. I'm grateful for this committee's sustained attention to these issues and for your recognition that the threat posed by the Chinese Communist Party is not only a geopolitical one but a direct threat here at home. Today's hearing on counting the cost and the impact on seniors' health, financial security and privacy could not be more timely, and the legislation that both of you mentioned is absolutely vital. Twenty-five years ago, Congress established the US-China Economic and Security Review Commission with a mandate to examine, to investigate, and to report to Congress. in an integrated way how the People's Republic of China's actions affect American economic and national security. As you can imagine, in that time our mandate has stayed constant, but the overlap in our work has increased dramatically. Our ind- our independent bipartisan commissioners represent a wide range of views with each of the leaders of the House and Senate appointing three commissioners each. We provide Congress with an annual report and other research and analysis to make policy recommendation for legislative and administrative actions, much of which is aligned with the legislation you were referencing earlier. The central finding I want to convey today is this, the Chinese Communist Party is engaged in a deliberate systematic campaign to build new leverage and choke points across multiple domains, from upstream raw material inputs, to industrial processing and manufacturing, to downstream applications, and certainly across frontier technologies, that will define the next generation of economic and national power. The CCP also seeks to eliminate American production capability, cross-sectors that Americans depend on for their health, financial security, and daily lives. The commission's twenty twenty five annual report documented this playbook in detail what the report describes as China shock two point O. The pattern is straightforward, China identifies critical input, deploys state backed overcapacity and below cost pricing to drive Western and allied producers out of the market and then owns the supply chain permanently. The commission's hearing series has examined several facets of this strategy, commodity derivatives market, data collection architecture, scam networks targeting older Americans, and supply chain chokepoints eroding America's security. Each hearing has revealed different instruments, each instrument a part of a strategy, and Beijing is focused aggressively on establishing firm leverage over the technologies that will dominate the future as you referenced earlier, including biotechnology, commercial space, and artificial intelligence. What the commission has formally beyond what the commission has formally examined, worth flagging concerns raised by the American industry and recently exposed in Europe, that I believe warrant this committee's attention. In line with its chokehold ambitions and leverage, China appears to be targeting specialty chemical supply chains that most Americans have never heard of but that flow directly into the products, keeping older Americans alive. These chemical compounds used to produ- are used to produce IV tubing, pacemaker leads, surgical implants, and other essential household products, increasingly dominated by Chinese producers, who often use below-cost pricing to drive Western manufacturers out of the market. In fact, the Defense Department has confirmed that f- for some of these materials, there are no functional substitute within a ten to fifteen year horizon. Combined together with our reliance on pharmaceuticals, we are dangerously close to a possible supply of disruption on medical devices and prescription drugs. And Washington has not yet connected those dots adequately, so we appreciate your legislation to address this. As part of the Commission's efforts to look over the horizon, We held a series of hearings since twenty twenty four that highlight aggressive activity to not only catch up to the US but to overtake us. The National Security Commission on Emerging Biotechnology concluded last year that the United States has a three year window to retain or in some cases regain biotechnology leadership or risk seeding profound military, geopolitical, and economic advantages to China. The consensus from the community, from the business community about this is that that time frame is even shorter than that. thr- that uh two year time period. China is no longer a fast follower in biotechnology, in certain domains biopharmaceutical info- innovation is now leading, it is now leading. Why is this relevant? Older Americans are the populations most exposed to every sector I've described. They're the heaviest users of generic drugs whose ingredients China controls. They are the patients with pacemakers and surgical implants containing materials and components from supply chains increasingly dependent on China. Separately, the energy and infrastructure vulnerabilities most directly relevant to this committee's constituents have not yet received adequate legislative attention Chinese manufacturing components in the American grid infrastructure may contain remote monitoring capabilities and, in some cases, remote access pathways. A deliberate power disruption would fall hardest on older Americans, dependent on home medical equipment, oxygen concentrators, ins insulin refrigeration, cardiac devices, dialysis machines, the list goes on. For this population, a grid failure is not an inconvenience, it's a medical emergency. The central challenge is in awareness. The problem is that we in Washington continue to treat these as separate issues across different jurisdictions, addressing each in isolation rather than looking at all of it together. So, very pleased to hear that you're working in across jurisdiction with other committees to actually get this moving forward and address it in a holistic way. Thank you for your time today to discuss the commission's annual reports and our hearings, and recommend the the the the annual report findings for each of you if you haven't had a chance to look at that. Thank you for having us today.

Thank you. Our next witness is Leland Miller, a Commissioner on the US-China Economic and Security Review Commission, appoint reappointed by Speaker Mike Johnson. He is the Co-Founder and CEO of China Beige Book, where for more than fifteen years he has run the world's largest private microeconomic survey of China's economy and financial system. He is one of the most widely cited independent authorities on China's economy, Trade Dynamics and US-China Technology Competition in the Country. Before founding China Beige Book, Commissioner Miller was a Capital Markets Attorney practicing out of New York and Hong Kong. Thank you for being here. Please begin your testimony.

Chairman Scott, Ranking Miller, Ranking Member Gillibrand, and members of the committee, thank you for the opportunity to testify. On April thirtieth, I co-chaired a hearing of the US-China Economic and Security Review Commission, titled "Taking a Bigger Bite: China's Expanding Strategy for Data Dominance". What our witnesses described, and what I want to convey today, is that Beijing has stopped treating data as a commercial by-product, and now treats it as an instrument of state power. And that ordinary Americans, including our oldest and most vulnerable citizens, are increasingly the raw material. The starting point is legal architecture. China's national security law, national intel- intelligence law, and data security law together compel any Chinese company to hand its data to the state on demand, In secret, with no independent court able to refuse and no transparency to reveal when it happens. The obligations run one way. As one witness put it, Beijing's operating principle is to control the outflow of data from China, while expanding the inflow from everywhere else. A data set does not have to hold national security value when it is collected. The, the value can emerge once the state fuses it with other data in its possession. Three mechanisms make this concrete for Americans. First, our networks. Chinese state-sponsored actors in the campaign known as Salt Typhoon penetrated the core of America's telecommunications carriers and reached call records data who is calling whom from where and when for vast numbers of Americans. The FBI has assessed that China's hacking program is larger than that of every other major nation combined. Second, our commercial data. Sensitive information about Americans, precise location, financial stress, health indicators, and family and professional networks is openly bought and sold through the data broker market and absorbed through apps, payment systems, and connected devices. None of it requires a hack. It can be purchased. Increasingly, these data streams come from products Amer- products Americans carry, wear, or drive every day. Modern smartphones, connected vehicles, fitness trackers, smart home devices, and other internet-connected products. continuously generate detailed records of where people travel, who they meet, what they buy, how they communicate, and even patterns in their physical activity and health. In many cases, supposedly anonymous data sets can be re-identified and linked across multiple sources, allowing disparate pieces of information to be fused into highly detailed portraits of individual lives. What appears commercially mundane in isolation becomes strategically valuable when aggregated at scale and combined with other sources of data. Third, our health and our biology. Witnesses were direct that Beijing regards genomic and clinical data as a strategic national resource, and is and is investing heavily to acquire it. Not only genetic sequences, but treatment histories and health records. Artificial intelligence is the force multiplier that ties all of this together. Bulk data that was once too voluminous for any human analyst to use, can now be fused automatically into detailed profiles of individuals. what one witness called the move from observation to prediction. This is where the risk to older Americans becomes acute. Older Americans hold a disproportionate share of the nation's wealth, carry the longest medical histories, and are the heaviest users of the health system, which means the financial, genomic, and clinical data Beijing prizes is in large part theirs. The same capability that lets an adversary build a targeting profile of a government official, also lowers the cost of precision fraud and social engineering against an eighty year old. Tailored, convincing, and delivered at scale. And the records most exposed to the harvest now, decrypt later strategy our witnesses described, collecting encrypted data today to break it with tomorrow's quantum computers, are precisely the long-lived medical and financial records that follow an older American for the rest of their life. The central lesson of our hearing is that Washington still treats privacy, telecommunication security, critical infrastructure resilience, and artificial intelligence as separate problems. Beijing does not. It is assembling a single decision advantage architecture, and it is doing so faster than our policy is adapting. The commission has not yet developed its recommendations in this space. That will not happen until our report comes out in November. Speaking now in my personal capacity, I would respectfully urge this committee to act on that integrated view, to place a national security data regime covering geolocation, health, genomic, financial, and telecommunications data, on durable statutory footing to harden the telecommunications and data broker ecosystems that make American data purchasable in the first place and to treat the protection of older Americans' financial and medical data as the homeland security matter has become. Thank you again for the opportunity to share these observations. I look forward to your questions.

Thanks, Mr. Mel. Now I turn it over to Ranking Member Gillibrand.

Thank you, Chairman Scott. I want to introduce our next witness, Reba Price. Miss Price is a Commissioner for the US-China Economic and

Chairman Scott, Ranking Member Gillibrand, and members of the committee. Thank you for the opportunity to testify on the evolving threat of Chinese-linked scam centers. My remarks draw on the US-China Economic and Security Review Commission's recent work, including two reports, travel to Southeast Asia and recommendations for Congress to protect American savings and the US national interests. I hope this testimony provides additional information to the important hearing and discussion this committee held on this topic earlier this year. The FBI's Internet Crimes Complaint Center, known as IC three, documents that Americans reported losing seventeen point seven billion into on-line scams in twenty twenty five, a twenty nine percent increase from twenty twenty four. This figure is striking, yet likely captures only a fraction of the total amount lost due to underreporting. And let me note, Chairman Scott, that your ReportScams dot Gov act introduced um just this week um would go a long way toward getting a more accurate number. It is important to note that nearly a quarter of these funds were stolen from citizens over age sixty. As you are aware, these on-line scams often take the form of investment or confidence schemes that can be traced to Chinese criminal syndicates overseas. Chinese criminal networks operate industrial scale scam centers that steal tens of billions of dollars annually. This is a massive criminal enterprise, rivaling the global trade, drug trade in scale and sophistication. For example, while estimates vary, scam centers in Burma, Cambodia and Laos alone generated approximately forty four billion, about forty percent of those country's combined GDP. Many of these Chinese criminal syndicates have spread throughout Southeast Asia, with at least implicit backing from elements of the Chinese government. Uh-huh. In some cases, known criminal groups have invested in projects linked to China's Belt and Road initiatives, alongside China's state-owned enterprises. We also have seen criminal leaders who appear to have gotten a pass by promoting messaging and other activities aligned with Chinese Communist Party priorities. At the same time, Beijing has used the scam crisis to expand its regional influence. Under the guise of cracking down on scams, China has pressured countries to agree to a greater role for Chinese security forces and has had success in Laos, Cambodia and even US ally Thailand. This inside-out strategy gives China greater leverage over the internal security apparatus of other countries. Chinese security forces have also confiscated electronic devices with Americans' personal data from raids on scam compounds. Initially, Many scams targeted Chinese citizens in so-called " pig-butchering" scams, the local colloquialism for winning a victim's trust to ultimately convince them to hand over a large sum of money. To its credit, China has cracked down on these operations, but it has done so selectively, largely turning a blind eye to scam centers victimizing foreigners. As a result, the Chinese criminal syndicates have been incentivized to shift towards targeting Americans, in foreign butchering scams. To illustrate this point, in twenty twenty four losses from online scams in China declined by about thirty percent while lo losses in the United States increased by roughly forty percent the problem is also evolving rapidly scam operations are now being turbo-charged by artificial intelligence AI allows criminals to create more convincing personas tailor content and operate across languages all at scale. At the same time, cryptocurrency is increasingly used both to defraud victims and to launder illicit proceeds. Scam centers are also spreading beyond Southeast Asia, including to the Pacific Islands and parts of Africa. Congress and the administration have taken initial steps to combat these sp- scams, but the problem continues to grow and we need to do much more. The commission has proposed eleven recommendations and considerations for Congress to help combat these threats. I would refer the committee to my written testimony, which lists them all in some detail, and hope we will have time during the conversation today to discuss them more full fully. In conclusion, scam centers run by Chinese criminal organizations threaten both the financial well-being of all Americans, seniors in particular, as well as broader US national security. As long as these networks can earn higher profits with lower risk, by targeting Americans, they will continue to do so. Thank you and I look forward to your questions.

Thank you. Um, our next witness is Chris Sleven. Mister Sleven became a Commissioner for the US, China, Economic and Security Review Commission after his appointment by House Democratic Leader, Joachim Jeffries. Previously, Mister Sle- Mister Sleven was Chief of Staff to the former Secretary of Commerce, Gina Raimondo, where he led the US Department of Commerce through the agency's expanded role in technology and national security including the Chips and Science Act. You may begin.

Thank you, Chairman Scott, Reigning Member Gillibrand, members of the committee. Uh, I'll focus my uh remarks on the pharmaceutical supply chain. First, the commission applauds the work this committee is doing to call attention to the vulnerable situation the country faces when the building blocks of our medicines are made in China. As this committee has outlined well, we have an uncomfortable reliance on China for active pharmaceutical ingredients and key starting materials. China's strategy is an integrated, state-directed effort to become indispensable at every stage, raw materials, APIs, contract research, the early clinical trials, and biologics. This strategy parallels China's playbook in sectors like EVs and batteries. China's weaponization of supply chains is not theoretical. China has made controlling global supply chains an explicit strategic goal. The drug supply chain is a prime example of that strategy succeeding. China's used expert controls on critical minerals as we've seen, gallium, germanium, rare earth magnets, as economic pressure tools since twenty twenty three. In twenty twenty five, China expanded that toolkit with new rounds of heavy rare earth elements, triggering price spikes, temporary factory closures in allied nations and in the US. Of course, medicines have a human health dimension that minerals do not. But the message from what we've seen on rare earths is clear. China is building the legal and institutional architecture to restrict access to whatever it chooses, whenever it chooses. China isn't just dominating US supply chains, it's embedding itself into drug manufacturing across Africa, Latin America and Southeast Asia. By doing so, it's positioning itself as the indispensable supplier to every country the US might turn to for alternatives. Congress knows this scenario from Telecom. This is the Huawei playbook in pharmaceuticals, and it warrants the same urgency and response. India. India supplies roughly half of all US generic drugs, but it relies on China for most of the building blocks, the KSMs. The commission visited India earlier this year. Among our findings, the Indian government has had some success in reducing reliance on Chinese APIs using its production-linked incentive program to help free-shore manufacturing to india china however is now targeting these incentive programs with below in their in those manufacturers with below cost predatory pricing the same playbook we have seen it used on solar on evs and it's restricting exports on certain pharma manufacturing equipment to india again the commission will further explore these issues and provide recommendations to congress this fall in the meantime i'd like to direct the committee's attention to three specific recommendations the commission made on these issues uh last year one fix the data problem first the fda has acknowledged and the commission's twenty twenty five report confirms that the us government does not have reliable data on actual volumes of api imports from china or the full proportion of us drug consumption dependent on chinese imports inputs you cannot use trade tools without data you can't file an anti-dumping case if you can't measure The CARES Act required manufacturers to report drug volumes, which is a good start, but not where the ingredients come from. We need to close that gap. The Chairman and ranking members' proposal to require greater transparency through country of origin labeling is also a critical step in this. Two, use the government's buying power as a demand signal. Durable demand turns the ship and begins to rebuild a viable US generics manufacturing sector. Congress should explore procurement and reimbursement authorities for medicines built on non-China starting materials, including price floor commitments that protect domestic producers against below-cost Chinese competition. Your committee's report outlining the need for a federal buyer's market is a strong proposal consistent with the commission's recommendations. Finally, treat this as industrial pa- uh, policy, not just drug policy. Consider chips act style financing, support for domestic api and generics manufacturing and advanced manufacturing incentives forty years of offshoring will not be reversed by guidance documents and study requirements this requires the scale of commitments that congress brought to semiconductors again we thank you for the attention you're giving to these issues if you still understand these critical vulnerabilities how they can be weaponized and what we can do to reverse them thank you again we look forward to your questions

Thank you, each of you, for being here. Uh, let me turn it over to Senator Tuberville.

Thank you, Mr. Chairman. Thank you, Commissioners, for being here. Mr. Sullivan, let's let's start where you where you just finished. How safe do we feel about the ingredients in pharmaceuticals from China? And how can we depend on that safety?

It's hard to know without the data, which is I think the primary recommendation that this commission has made thus far on the issue. um it's hard to know what to correct for if we don't have the data and if we don't have the visibility into um into the supply chains and to inspections the fta has authority to inspect um uh overseas um it's hard to execute on that the unannounced uh visits to factories are hard to execute on um so um there is reason the commission is concerned

So we just pretty much take it for granted that they're gonna do the right thing, right? Cuz we don't make it much here, right?

That's right. Uh, the last several decades we've seen the production increasingly offshored, and so the proximity that our agencies have to inspect unannounced um is uh is is more difficult to execute when the vast majority of facilities are overseas, particularly in China.

Thank you. Mr. Miller, China is known for its investment fraud and scam centers. What do these criminal enterprises look like? And is the Chinese Communist Party or syndicates with their protection or approval? Are they approving these?

Uh. I will give a little bit of an overview and I I welcome my colleague who's who's our expert on the scam centers to to to add on. Uh, I think that during our trip to Southeast Asia, uh, we were blown away by the scope of these centers. They take up not just floors of buildings, but buildings and sometimes entire city blocks. Uh, they're very mobile. So sometimes when something is shut down, they can pick up and relocate, uh, down the block or to the other side of the city. Uh, and they are, uh, they are done with the, uh, uh, implicit, at least, uh, approval of the governing authorities in these South Asian countries and often the Chinese Communist Party. Uh, these, or these entities are becoming more and more sophisticated. They're integrating AI. the things that they were doing five years ago doesn't touch the types of approaches they're using now in terms of voice uh voice alterations and uh other uh intricate ways of of getting at people's personal histories bringing them aboard and doing the pig butchering uh that my colleague was talking about in her testimony

Miss Price would you like to add to that

yeah um i think or or we have not found evidence that the chinese government's role in the southeast asian uh the direct role of the government's uh involvement. But there are links, as I mentioned in my testimony. Um there's uh indications of them looking the other way. There are people in these syndicates who uh do other work with the Chinese government. So there's uh a wink and a nod, so to speak, but direct government involvement, the FBI hasn't seen that yet, or reported that publicly.

Seems like every time I call for customer service it comes from India. Is that correct? Are they as much complicit?

Um, we didn't see any connection with uh uh those in India and um uh the scam centers, but there are scam centers uh all over the the world.

Yeah.

And to add on to that, sir, if you'll permit me.

Thank you.

One other thing that we have witnessed is that whenever these scam centers are directed towards Chinese citizens, there is this sort of surprising ability to turn that off and target it. And so again, it's it's not a direct linkage or evidence. But it is sort of an associated linkage that we've noticed.

Mister Miller, it seems like we're we're either denying it or agreeing with it that China is ahead of us in crypto. Uh, what's the consequences of that if we don't adjust one way or the other?

So China has a very interesting uh mentality towards crypto and the broader crypto universe. You know, technically crypto is banned in the mainland. But Hong Kong, which is obviously China as well uh at this point, uh, is a, is a hotbed of, of crypto innovation. And I think it's the mindset of the policymakers in Beijing that they can keep the, the, the, the dirtier side of crypto ring fenced away from mainland China, but they can go into some of the more innovative side of crypto, uh, in Hong Kong. Uh, I think we need to be keeping a very close watch on this. This is something that our, uh, Hong Kong chapter has put particular focus on over the last two years.

Are we ahead or behind them? Mister, I guess you might wanna.

Yeah, so one one thing to add to that, sir, and again this isn't, we haven't issued this as a formal recommendation or committee product yet. But one of the areas where we've started to look into is the, their efforts to use crypto overseas as a method of data collection. It's very well known that Chinese apps s soak up data. Um, and one thing we've, we're starting to dig into is, are there Chinese apps using crypto in third-party countries? that's gonna give them access to those individuals' data. And again, make it harder for the United States to work with those governments or those populaces.

Thank you, Mr. Chairman.

Senator Houston.

Thank you, Chairman Scott. Appreciate uh the witnesses being here today. Um, there was one report out recently and I believe uh w- w- one of you may have alluded to the fact that there are nearly seven hundred pharmaceuticals today in America that we couldn't make without china's acquiescence to send us at least some part of the supply chain for the production of those pharmaceuticals and mister uh slevin i guess i'll start with you what would happen if they just completely cut us off

uh be alarming uh to say the least um and you know the the that is the dire scenario that one can kind of imagine there's also just a more subtle um moves of of restricting licensing slowing the export that would um you know, it speaks to the leverage.

But I'm I'm tell you speaking more of the human consequence, we would have these are drugs that we're here to talk about uh you know, it's aging committee, but these are drugs that people rely on for their lives on a daily basis, right?

It would be an extremely dire situation that I think would make this issue rocket up to number one for the Congress to address.

And Senator, if I could add to that.

Yes.

Um, I co-chaired the commission's hearing on on Beijing's weaponization of supply chains back in twenty twenty four. Uh, one of the big frustrations we had in the build-up to that hearing was that we had our staff for months and months and months trying to get all the information they could, classified, unclassified, everything you can think of, on key starting materials and APIs so that we could put in our report and prepare our witnesses for what the actual exposure was so we could ask them about it. And we found out that we do not have that information. And it's not just we don't, nobody has that information. Uh, and this is something that we've seen constantly over the course of the last couple of years, we've traveled to India and we've asked them for their data on this and they don't know. Uh, we've worked with the administration, various agencies in administration, administration uh does not know, they don't have it. No one in the administration has what our ex- what our vulnerabilities are. So when we were drafting uh our our when we were working on our hearing and we were drafting our chapter, Uh, we were putting in ranges, wide ranges, and I think this goes back to the, to the problem that we do not have transparency into where China's position is in terms of the pharmaceutical universe. We know that, uh, uh, the vast majority of active pharmaceutical ingredients are produced by China and India. But when you peel back that onion and you look at what type of vulnerability India's APIs have to Chinese key starting materials, the answer is a lot but we couldn't get an answer. We do know is that they are concentrated in some of the things we care about the most, antibiotics, heparin, insulin, oncology medicine. So we know the problem is huge, but I think the frustration we've had, and I know that others in, uh, uh, I know that Congress had, has had as well, is that we cannot get to the bottom of what these supply chains actually look like, which has made it very difficult in turn for Congress to make good policy.

So we know it would be alarming, it would be catastrophic, it would But we don't even really have a full understanding of what the scope of the problem would be.

We do not, and I actually went through and I was checking it this morning to see if any new data have come out. There's just no good data on this at all. And I think this is a very big problem with uh, and and you can't scope out a solution to a problem when you don't have visibility into the problem itself.

And and this is happening now in a nation where pharmaceuticals were invented. We started, we started the whole process of developing, researching, developing medicines that would improve people's lives, save people's lives. America dominated this. But then somehow, when we decided that getting things cheaper from anybody that would sell them to us cheaper and letting China into the WTO Uh, that we were gonna throw out all of those all of the things that made us secure and just say We'll we'll let you do it. And so now we find ourselves in a position on pharmaceuticals, on rare earth, on telecom supply chain, on chips, where literally we have no leverage against China. And thus our economic and national security and the lives of our citizens are threatened because we were asleep at the wheel as a nation, and did nothing to track and prepare for this. Is that a fair conclusion?

Yes sir, I think it is, and I I'm very happy you brought up the words national security, because I think the major misstep that we have made for decades now, is seeing pharmaceuticals and other critical inputs into our economy as economic matters what can we get the cheapest prices and that's all we cared about. I think there's a recognition right now, it's certainly uh a big issue when we interact with Congress, uh that some things are so important that they need to be put in a separate bucket, not the economics bucket, the national security bucket. And when they're put in the national security bucket, they ra- they have a different profile. So instead of trying to find the lowest cost producers, we need to find secure supply chains. We need to risk de-risk these supply chains from potential adversaries. I think that that mentality has started to permeate, uh, but we're just getting to the start of it. We started it with critical minerals. We're just starting to touch this issue on pharmaceuticals.

Well, uh, thank you, Mister Chairman, for, uh, the opportunity to have these folks here today and I

Sorry, if you'll permit me to add ten seconds of words on this.

Yeah, sure, please.

Part of the part of the structural constraints this have been that the US for for far too long has looked at the commercial viability, instead of the strategic value. And that's something we we've started to raise with with the executive branch, but we're also wanting to to have conversations with you all on, because it's the strategic value and these needs that you're talking about, the dynamic and sort of the paradigm shift there has to change.

Well, th thank you, thanks uh for all the witnesses. It's clear that this is a problem. Uh, we got here f bad trade deals, too much regulation. uh, taking our eye off the ball, and I guess hopefully this will serve as a wake-up call that we reverse those, uh, failed strategies. Thank you.

Thank you, Senator. Who's next? Now, uh, ranking member Gillibrand.

Hi. In the twenty twenty five annual report to Congress, the commissioner wrote extensively on China's willingness to weaponize critical supply chain as a way to leverage their global power. While instances of these choke points being purposely squeezed are not uncommon, They shed light on the world's dependence on China's supply chain. While China dominates in upstream materials such as active pharmaceutical ingredients, printed circuit boards, and foundational semiconductors, they do not yet dominate in the frontier of technology and pharmaceuticals. For all the witnesses, which supply chains should we prioritize strengthening in the short and long term? Are there differences in how we should approach securing the supply chain for current technologies and emerging technologies that will become more important for american power in the future and what trade-offs should we consider chris do you wanna start

thanks senator i i sticking with the topic of antibiotics i'd say generic antibiotics we we make zero right now in this country and so it's imperative that we quickly um look at some of the work that this committee has taken on particularly as it relates to purchasing power how do you make the economics work and to do that you know looking at the government as a major purchaser looking at long-term purchasing agreements to make those economics work

Riva

Thank you um I would also um answer pharmaceuticals as a starting point um uh but in addition other areas or other um components that allow for remote access into critical infrastructure would be another place.

What do you mean by remote access into critical infrastructure?

If if if our um uh uh energy uh infrastructure relied on component parts, um that could be accessed remotely from other places, um that would raise serious concerns to me.

Understood. Leland?

I'm a little bit, thank you, Senator, I'm a little bit biased here because the uh the hearing that uh you ref you referred to we we spent a lot of time trying to work out what what our top five priorities would probably be. And they are some of the ones you mentioned earlier. Uh, I think the world has understood critical minerals and rare earth magnets are are a a today issue. Uh, pharmaceuticals being very top of the list after that, uh, foundational semi-conductors, printed circuit boards, and I would add batteries to that.

Batteries.

Mm-hmm.

Joshua?

Yeah, I'd I'd second everything that was already mentioned with pharmaceuticals, especially uh the the batteries component. Um, in addition to that, as I mentioned earlier, I think part of the issue isn't just looking at this at individual products that we need to be making, but structurally the capacity, the strategic value in the long near-term and long-term. And so I mentioned earlier sort of the chemical precursors. There's everyday household ha- products that if the trajectory continues to move forward, this is my opinion, not a commission's opinion, if the current trajectory continues to go in that direction, within two years we're probably not gonna be able to make most of these products here at home. So, everything that was just outlined I absolutely agree with. In addition to that I would say chemical precursors, and the ability to actually produce things here in the United States.