Top GOP lawmaker disclosed holdings in Chinese company he criticized
Rep. Mike McCaul was tapped on to head a GOP House panel scrutinizing China. Disclosures show his family holds stock in a Chinese internet company.
A top GOP lawmaker tapped to lead a House panel scrutinizing China disclosed his family’s investment in a major Chinese tech company linked to surveillance and censorship, according to a congressional form filed in his name.
A periodic transaction report filed on April 20 in the name of Rep. Michael McCaul, who represents Texas’ 10th district and serves as ranking member of the House Foreign Affairs Committee, lists the purchase of $50,000-$100,000 worth of shares in Chinese tech behemoth Tencent Holdings in late February.
An attorney for McCaul, Elliot Berke, said that the lawmaker is not the owner of the shares. “Congressman McCaul did not purchase any shares in China’s Tencent Holdings or any other Chinese company,” Berke said. “Congressman McCaul’s wife has assets she solely owns and a third party manager made the purchase without her direction.” Members of the House are required to disclose certain information concerning spousal assets under congressional ethics rules.
McCaul has disclosed family holdings in Tencent for years, even as he has described the company as a threat to U.S. national security and an integral part of the Chinese Communist Party’s “dystopian” system of social control.
McCaul’s willingness to criticize China while his family holds stock in one of that country’s biggest tech firms can also be perceived as principled, and it's common for investors to put money into funds without awareness of the companies involved.
But the disclosures threaten to become yet another political weapon in the race between Democrats and Republicans to distance themselves from the Chinese government, which has become radioactive amid a global pandemic that began in China and has claimed more than 70,000 American lives: McCaul was selected on Thursday by House Minority Leader Kevin McCarthy to chair a new China Task Force that will aim to “take bold action to address the [Chinese Communist Party’s] malign agenda and better compete with China on the world stage.”
In a statement, McCaul described his mission as developing “new and enduring policy solutions that, among others, enhance our economic strength and create jobs, protect our national security, rethink our supply chains and grow our competitive edge in technology.”
McCaul is a consistent critic of the Chinese government. He signed on to a letter by House Republicans earlier this week calling for an investigation into China’s alleged espionage and disinformation efforts at American universities.
“For decades, technology and intellectual property has been a concern vis a vis the Chinese government,” the letter reads. “Only under this Administration, has the federal government begun cracking down on this international crime and economic threat.”
Tencent Holdings, which owns Chinese social media platforms WeChat and QQ, signed a deal to set up a laboratory in March to develop a cloud gaming platform with Huawei, a Chinese tech firm that was essentially blacklisted by the U.S. Commerce Department last year following Trump’s declaration of a national emergency over threats against U.S. technology.
And Tencent itself is considered by many experts to be a surveillance arm of the Chinese Communist Party—the United Nations backed out of a partnership with Tencent last month, following a backlash from U.S. officials, and Republican Sens. Ted Cruz and Josh Hawley called for a ban last week on federal employees’ use of Tencent products because of the alleged national security risks.
"Companies like Tencent and Huawei are espionage operations for the Chinese Communist party, masquerading as telecom companies for the 21st century," Cruz said in a statement.
The University of Toronto’s security research group Citizen Lab concluded in a report released on Thursday that WeChat has been monitoring the activity of its international users as well as those inside mainland China. Citizen Lab also found in March that WeChat had been censoring keywords about the coronavirus outbreak and blocking related criticism of Chinese President Xi Jinping since January.
Tencent did not respond to a request for comment, but has said in the past that "respecting user privacy has always been one of the most important principles of WeChat. We have neither the authority nor the motive to look into users' chat histories."
McCaul disclosed his family holdings in Tencent in 2013, 2014, and 2017, according to the Center for Responsive Politics, which estimated his net worth at over $96 million in 2017. The Tencent shares were not put into a blind trust, a person with knowledge of the congressman’s financial arrangements said.
Last year, Sarah Cook, a senior research analyst for China, Hong Kong, and Taiwan at Freedom House, outlined Tencent’s “pattern of censorship and data sharing with China’s repressive government,” pointing to incidents of conversations on Tencent applications being relayed to police stations and authorities across China and Tencent CEO Pony Ma’s seat in China’s parliament.
“Regardless of whether Tencent is a reluctant or an eager accomplice to the Chinese government’s repressive policies, the reality is that Tencent employees can be expected to censor, monitor, and report private communications and personal data, in many cases leading to innocent people’s arrest and torture,” Cook wrote. “This should be the starting point for anyone considering using, regulating, or investing in the company’s services.”
McCaul characterized Tencent as a national security threat and “an integral part of the Chinese Communist Party’s industrial policies” as recently as November 2019, just three months before the new purchase of shares in the company.
In an op-ed for Government Executive published on November 18, McCaul criticized the Federal Retirement Thrift Investment Board’s decision to use the MSCI All Country World ex.-U.S. Investable Market Index (IMI) for its International Fund, noting that the index includes “Chinese companies that threaten America’s economic and national security.”
“For instance, Tencent Holdings, an integral part of the Chinese Communist Party’s industrial policies and one of four national champions for artificial intelligence, accounts for a significant number of shares in the IMI,” he wrote. “Tencent is also heavily involved in the development of the social credit system, a dystopian system China has implemented to score its citizens’ behavior.”
McCaul has also called for an investigation into whether the government withheld information about the coronavirus outbreak from the world. Last month, he characterized China and the World Health Organization as “co-conspirators” in a coverup and called on Secretary of State Mike Pompeo to probe the Chinese Communist Party’s “various lies” and “disinformation campaign.”
“There is a case to be made here that this is the worst cover-up in human history,” McCaul told Fox News on April 10. “This is a cover-up by the Chinese Communist Party, which has now led to one of the worst pandemics we’ve ever seen.”