China Exploits Lobbying Loophole to Dodge Disclosure

Huawei, TikTok hide multimillion-dollar lobbying operations on Capitol Hill

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April 27, 2021

Chinese tech companies facing federal indictment and sanctions are exploiting a legal loophole to hide their army of Capitol Hill lobbyists from public scrutiny.

Chinese tech giants such as Huawei and Tiktok have spent millions of dollars hiring lobbyists to push their agenda in Congress in the last 10 years. But the companies—all of which are either owned or closely linked to the Chinese government—have avoided registering the vast majority of their lobbyists as foreign agents through a loophole. 

Lobbyists for foreign entities must register under the Foreign Agents Registration Act (FARA) and disclose detailed information about their influence-peddling operations. Huawei, a telecommunications company facing multiple indictments, has spent more than $8 million to hire more than 20 lobbyists to work the Hill in the last decade; none of these lobbyists have registered as foreign agents connected to Huawei. Tiktok's parent, Bytedance, has also never filed FARA disclosures concerning its multimillion-dollar attempt to influence the federal government.

This unseen group of Chinese tech lobbyists has scored key victories. Tiktok lobbyists fought off Republican attempts to remove the popular short-video app from the app store in 2020. Without FARA registration, government watchdogs will struggle to track how these foreign corporations were able to extract concessions from a Beltway elite that is increasingly hostile to China. 

"We've been quite concerned about the loophole for a long time," Mandy Smithberger, a director at the Project on Government Oversight, told the Washington Free Beacon. 

Federal law exempts lobbyists from foreign agent registration "as long as the representation is not on behalf of a foreign government or foreign political party." Because they are only advocating on behalf of regime-linked companies, these foreign lobbyists only have to comply with federal Lobbying Disclosure Act requirements, which have far fewer transparency standards. Subjecting foreign tech lobbyists to FARA would force them to disclose a wide swath of information—every single pamphlet, email, and document that they send to members of Congress—and comply with stricter rules regarding campaign donations. Domestic lobbyists are able to keep most of that information secret, so long as they reveal their compensation and the issues they lobbied for.

The lobbying exemption was carved out in the 1990s to reduce red tape for the many foreign companies active in the United States, according to Smithberger. Companies such as Toyota and Rolex, the thinking went, were independent corporations rather than agents of a foreign government.

But while Huawei and Tiktok are nominally independent companies, the Chinese Communist Party exercises significant control over them through internal party committees and regulations. Those state ties raise the question of whether these tech companies are truly advocating for their own corporate interest or are lobbying on behalf of a foreign government.

"FARA certainly has a very Western interpretation of the lines between corporations and governments. It doesn't reflect how in some countries, those two are pretty synonymous," Smithberger said.

Klon Kitchen, a resident fellow at the American Enterprise Institute, said Huawei is a prime example of how the interests of the Chinese government and Chinese companies are closely intertwined. The Chinese state showers Huawei with state subsidies and stolen intellectual property to help it expand into foreign markets. Chinese hackers have used Huawei's overseas telecommunications infrastructure to infiltrate foreign web spaces. 

"The Chinese government requires that these companies deliberately pursue government interests," Kitchen said.

The use of the loophole is widespread among Chinese companies. ZTE, another Chinese telecom firm that pled guilty to illegally trading with Iran in 2017, has not registered more than two dozen Capitol Hill lobbyists as foreign agents. Hikvision—a state-controlled company that made surveillance equipment for Xinjiang, a region where the Chinese state is inflicting genocide on the Muslim Uyghur minority—has also failed to register lobbyists with FARA.

Ethics and transparency watchdogs say the disclosure system must be reformed. Smithberger said legislators should not only close loopholes but also give the Department of Justice stronger powers to investigate and levy fines on foreign actors that defy FARA provisions. Kitchen went a step further. He said the ubiquitous China lobby is a sign that the United States has become too closely intertwined with China. 

"A limited decoupling," Kitchen said, might be the only solution. "So long as the Chinese Communist Party insists on manipulating global free trade and creating massive economic and geopolitical distortions, the United States will be left with no choice."

None of the Chinese tech companies mentioned in this article responded to requests for comment.