Communist Party cells influencing U.S. companies’ China operations, FBI Director Wray says

China is requiring U.S. and other foreign-owned companies to host groups that monitor their compliance with Chinese Communist Party orthodoxy, FBI Director Christopher Wray said in congressional testimony Wednesday.

It’s one way in which the Chinese government has “exploited” joint business ventures in order to obtain companies’ secrets and information, Wray told the House Judiciary Committee.

“There is no country, none, that presents a broader, more comprehensive threat to our ideas our innovation our economic security than the Chinese government and the Chinese Communist Party,” Wray testified.

“In many ways, it represents, I think, the defining threat of our era,” he said.

Wray’s blunt criticism against China’s alleged government intrusion into foreign business, in a venue where his language has otherwise been highly guarded, underscores the high tension between Beijing and Washington. His remarks also come on the heels of high-stakes visits to China by Secretary of State Antony Blinken and Treasury Secretary Janet Yellen.

Wray on Wednesday had been asked by Rep. Lance Gooden, R-Texas, about whether China is “in essence nationalizing American enterprises” by forcing companies doing business in the country to allow the CCP to operate internal “political cells.”

“The CEOs I’ve talked to are afraid to say something, they say they’ve come to the FBI,” Gooden said.

Wray called it “a very important issue” that deserves more attention.

“While there’s no law against joint ventures, The problem that we have is that the Chinese government all too often has exploited those joint ventures to then use them as ways to get improper access to companies secrets, and information,” the FBI director said.

Wray said that Americans “would be shocked to hear” that virtually all companies doing business in China are required to allow those cells.

“If we try to install something like that in American companies, or if the British tried to do it in British companies or any number of other places, people would go out of their minds, and rightly so,” he said.

Wray did not name specific companies who have been required to house CCP cells in China. He also did not directly respond to Gooden’s concern that Beijing had ramped up its use of those cells.

The U.S. Chamber of Commerce and the CEO advocacy group Business Roundtable, whose members include the leaders of major companies such as Apple and Nike, did not immediately respond to CNBC’s requests for comment on Wray’s remarks.

Commercial risk intelligence platform Sayari warned in a 2021 report that private companies in China face growing pressure to give the so-called CCP cells more influence.

Those companies have been required since 2018 to establish CCP cells in order to be listed on domestic stock exchanges, according to Sayari. The cells, in turn, have pushed to strengthen their role in corporate governance, the company said.

The Wall Street Journal reported last year that Chinese regulators had changed their rules for securities investments funds, including requiring foreign-owned firms such as BlackRock and Fidelity to create communist cells within their Chinese business operations.

The Financial Times previously reported that HSBC had installed a CCP committee in its banking business in China, making it the first foreign lender to do so. 

It’s not the first time Wray has raised concerns about Beijing’s alleged efforts to enforce communist political views within foreign companies operating in China.

“It’s even to the point where, under Chinese law, Chinese companies of any size are required to host inside the company,” Wray said in an interview with CNBC. “They call it a committee, but it’s essentially a cell whose sole responsibility is to ensure that company’s adherence to the Chinese Communist Party’s orthodoxy.”

“And it doesn’t just apply to Chinese companies; it applies to foreign companies if they get to a certain size in China, as well,” Wray told CNBC.

Those companies “have to comply,” he added. “They have to cooperate.”

The exchange with Gooden came as a respite to the mostly hostile questions Wray received from committee’s Republican majority. The Biden administration official fielded heated questions and frequent interruptions from Republicans largely centered on the agency’s perceived political bias against conservatives.

— CNBC’s Christina Wilkie contributed to this report.