(Bloomberg) -- Secretary of State Michael Pompeo delivered a tough warning about China in a speech to U.S. governors, urging caution in business dealings as Beijing looks for ways to exploit U.S. vulnerabilities and expands repression at home.
He also had a pointed message for certain U.S. state pension funds that may be investing in ways that fund a Chinese government crackdown on its Muslim minority in Xinjiang province, or even put U.S. military personnel at risk.
“As of its latest public filings, the Florida retirement system has invested in a company that in turn has invested in surveillance gear that the Chinese Communist Party uses to track more than 1 million Muslim minorities,” Pompeo said at the National Governors Association’s winter meeting in Washington.
China’s ambassador to the U.S., Cui Tiankai, said in a Sunday television interview that Pompeo’s comments about surveillance were “totally wrong.”
Pompeo also said California’s pension fund, the country’s largest, “is invested in companies that supply the People’s Liberation Army,” without offering details. “That puts our soldiers, sailors, airmen and Marines at risk,” he said.
The world’s second-largest economy is further embracing repression under President Xi Jinping, Pompeo said in a continuation of the harsh commentary about Beijing that was a feature of his recent trip to Europe and Central Asia.
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“Competition with China is happening inside of your state and it affects our capacity to perform America’s vital national-security functions,” the top U.S. diplomat told the governors. “Competition with China is not just a federal issue.”
Pompeo said U.S. engagement with China at the end of the Cold War was based on the assumption that it would pivot toward becoming a liberal democracy.
“It didn’t happen,” Pompeo said. “Under Xi Jinping the country is moving exactly in the opposite direction: more repression, more unfair competition, more predatory economic practices, and indeed a more aggressive military posture as well.”
Those trends don’t mean the countries can’t do business, said Pompeo, citing the recent “Phase One” trade deal between China and the U.S. and prospects for a second round of trade talks.
Chinese officials in the past have pushed back aggressively on U.S. criticism -- including by Pompeo -- as meddling in the country’s domestic affairs.
“I always believed the real foundation of China-U.S. relations is the friendship and mutual understanding between our people,” Ambassador Cui said Sunday on CBS News’ “Face the Nation.” Referring to the surveillance of Muslims referenced by Pompeo, Cui said “the core issue in Xinjiang is how to combat terrorism.”
Pompeo also said China’s government aims to exploit U.S. freedoms to gain advantage at the federal, state and local levels.
“I’m asking you to adopt a cautious mindset,” Pompeo said. “In the words of President Reagan, when you are approached for introduction or a connection to a deal, ‘trust but verify.’”
As an example, Pompeo said there’d been concerns that the District of Colombia had considered buying railcars from a Chinese state-owned company for its Metro transit system. The move, while still in the bidding phase, was scuttled after Congress passed a law prohibiting such purchases on cybersecurity grounds.
A government-backed think tank in China has assessed governors of all U.S. states as friendly, hard-line or ambiguous toward it, Pompeo said.
“I would be surprised if most of you in the audience have not been lobbied by the Chinese Communist Party directly,” he added.
In London on Jan. 30, Pompeo, a former U.S. Central Intelligence Agency chief, said China’s Communist Party “presents the central threat of our times.” And in Kazakhstan on Feb. 2, he denounced China’s human rights abuses.
Pompeo’s comments align him with Vice President Mike Pence but contrast with President Donald Trump’s recent conciliatory language toward China.
Trump on Friday tweeted that he’d had a “long and very good conversation by phone” with Xi about China’s response to the coronavirus. “President Xi strongly leads what will be a very successful operation.”
Beyond posing a security risk, Pompeo said the lack of transparency was an issue for U.S. investments in China.
“Their books are not wide open, so it’s difficult to know if the transaction that’s being engaged in is transparent and fair and follows the rule of law,” he said. “All of these things may well be legal, but the question is do they demonstrate good judgment and preserve America’s national security.”
(Updates with Chinese ambassador from fourth paragraph.)
--With assistance from Steve Geimann.
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