Winning the Economic Competition with China:  Working Families, the AI Race, and Energy

Thank you, Chairman Burlison, Ranking Member Frost, Members of the Subcommittee for inviting me to address this roundtable on Winning the Economic Competition with China: Working Families, the AI Race, and Energy.

It is good to be back on the Hill, where I spent over a dozen years, working in various foreign policy roles under Rep. Chris Smith (R-NJ), including most recently the Congressional-Executive Commission on China (CECC).

And having been on the Hill, I know the need to frame things within one’s jurisdictional purview. But first a little big picture tablesetting—while I understand why jurisdictionally you framed issues in terms of economic competition, that term does not fully capture what we are up against.

We cannot simply think of the People’s Republic of China (PRC), under the governance of the Chinese Communist Party (CCP), simply as an economic or even a strategic rival, but rather, it is best understood as a systemic rival, seeking to supplant the American-led post-War order, of which the United States has traditionally been the guarantor, and replace it with a Sinocentric one, with the PRC as hegemon and arbiter of the rules.

For the CCP has a long-term civilizational vision—what Michael Pillsbury called “the 100-year marathon,” pivoting off of the 1949 victory of the Communists on mainland China following a “century of humiliation” at the hands of the West—of restoring the “Middle Kingdom” to what it perceives as its rightful place at the center.

To that end, there is a multifront and multipronged agenda, from (a) creating or supporting alternative global alignments and structures such as what might be termed BRICS+ (Brazil, Russia, India, China, South Africa, joined now by other countries, including Iran) and the Shanghai Cooperation Organisation; to (b) challenging US dollar dominance by engaging in yuan-denominated transactions and currency swaps (e.g. petroyuan transactions); to (c) seeking to be the technology standard setter, from telecoms systems to AI; and to (d) redefining human rights standards, moving away from civil and political rights—or rights held by the people against a government—to a “right to development,” as articulated during the PRC’s Universal Periodic Review at the United Nations in 2024.

Again, this is best understood as a systemic challenge, and not simply an economic or even strategic one. (For a further elaboration of this point, please see remarks which I gave at the Parliamentary Security-Intelligence Forum in December of 2024.)

This idea of a multifront battlespace is consistent with what the CCP has told us. There was a book written in 1999 by two People’s Liberation Army colonels, Wang and Qiao, which is available in English, called Unrestricted Warfare whereby everything is considered a battlefield, with an emphasis on asymmetric tactics (e.g., lawfare and providing fentanyl precursors), which ultimately do not preclude kinetic warfare. A key battlespace is the mind, what is known as cognitive warfare, which includes propaganda narratives.

To that end, the CCP has engaged in a patient, long-term quest to give it a strategic advantage in certain critical areas, providing it with potential chokeholds. For example, rare earth magnets are an important component of high-performance munitions. In 1995, a Chinese consortium purchased an American company and former General Motors subsidiary called Magnequench, a critical component of the “mine-to-magnet ecosystem” which America once dominated. Today, we are dependent on the PRC for rare earth magnets, a national security vulnerability which China has leveraged against us.

Today we see also the targeting of carbon fiber manufacturers. Why carbon fiber? Carbon fiber is a key component in drones, which are indispensable in modern warfare. Thus the Missouri-based ZOLTEK Corporation, a subsidiary of Toray Industries, Inc., a Japanese company, is being undersold by China National Building Material Group, which is State subsidized. As the main use of carbon fiber is for wind turbine production, and many companies seek the lowest cost producer, Zoltek is under pressure, and military procurement is an insufficient stand-in in the absence of an industrial policy.

AFPI’s China policy team, which includes my colleagues Adam Savit and Royce Hood, just published a piece on carbon fiber, arguing that the United States should lead a “Pax Composita” consortium of nations, based on a Pax Silica model for chips, whereby we secure “non-red” supply chains among allies and like-minded partners for the manufacturing of drones: Pax Composita: A Strategy to Counter Chinese Carbon Fiber Dominance | Expert Insights | National Security

Underselling, and the willing participation of American companies to go with the lowest cost provider, is also an issue with regards to the AI race. The PRC’s DeepSeek open-weight models undersell American competitors such as OpenAI and Anthropic. You have US companies—as Microsoft is reportedly considering—running DeepSeek systems as a way to limit expenses. This underscores a blind spot: Chinese state-subsidized companies are treated as one would treat any other supplier, a delusion which ignores the CCP’s grand strategy and drive for global hegemony. (AI competition is also very much an energy fight, and why we need to develop new technologies such as small modular reactors along with like-minded countries such as South Korea.)

What is so critical about the AI battle is something Orwell warned us about: “Who controls the past controls the future. Who controls the present controls the past.” The PRC under the CCP is a totalitarian state—not simply an authoritarian one—that seeks to control historical narrative, rejecting any non-CCP interpretations as “historical nihilism.” But try getting an honest answer from DeepSeek about any of the three Ts: Tibet, Taiwan and Tiananmen.

As AI insinuates its way into high school learning and college term papers, at issue is what my co-panelist Glenn Tiffert’s colleague at the Hoover Institution, Rowena He, refers to as the “preservation of memory” versus Party-induced historical amnesia, a theme also explored by the novelist Milan Kundera in his Book of Laughter and Forgetting.

So what then are the take-away lessons?

What is tragic is that we subsidized the demise of our industrial base to a systemic rival that seeks to supplant us during the 1990s, when many bought into the “End of History” narrative and believed that by engaging and trading with the PRC—what we labelled an “authoritarian” regime, but which was in reality still a totalitarian one—it would matriculate into a democracy.

What a handful of visionaries in the 1990s saw, such as James Mann in his book The China Fantasy, and here in Congress my old boss Chris Smith, but also Nancy Pelosi, was that the “reform” era was an illusion, as the nature of the regime was the same, even if for a period it would modulate its behavior in an effort to attract foreign direct investment and enter the World Trade Organization.

Yet the long-term goals of the CCP never changed, and we welcomed into a free trade regime a nation that pursued a predatory, mercantilist policy utilizing forced labor, intellectual property theft and massive state subsidization of national champions, all while we deindustrialized and outsourced production. But a country that utilizes forced labor and suppressed labor will always have a comparative advantage on cost of goods, and all things being equal, will always undersell our domestic companies, be they carbon fiber producers or AI champions.

For decades we subsidized the rise of this systemic rival, which often presented an open face to the West while still suppressing their own people, including during the so-called “Reform Era.” (See, for example, the brutal suppression of the Falun Gong, which began under Jiang Zemin.)

There is a book of Chinese tactics designed to overcome an enemy, called the 36 stratagems, compiled most likely during the later Ming Dynasty (1368-1644). The first is “To deceive Heavens while crossing the oceans”—which was the tactic that the regime employed during the “Reform Era.” Indeed, we can be grateful to Xi Jinping, with his aggressive wolf warrior posturing, for taking the mask off.

The hour is late. Our corporations outsourced our industrial base and production, as we subsidized a systemic rival and existential threat. We can overcome this, but first we must be clear-eyed about the nature of our rivalry.

Thank you.

This testimony was given by Piero A. Tozzi to the House Committee on Oversight and Government Reform and the Economic Growth, Energy Policy and Regulatory Affairs Subcommittee on July 13, 2026.