China surveillance: Gallagher demands Treasury block PRC companies involved in spy program

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Lawmakers briefed on the Chinese spy balloon program and the discoveries so far

Congressional Correspondent Aishah Hasnie reports on the discoveries of the Chinese spy balloon after a briefing for lawmakers and a tense Congressional hearing on 'Special Report.'

EXCLUSIVE: House China Select Committee Chairman Mike Gallagher is demanding the Treasury Department impose sanctions against six Chinese companies involved in China’s spy balloon program after the discovery of a balloon over U.S. territory that he called a "flagrant" violation of U.S. sovereignty.

Gallagher, R-Wis., wrote a letter to Treasury Secretary Janet Yellen late Monday, exclusively obtained by Fox News Digital, in which he urged the Treasury Department take "decisive" action against Chinese companies involved in its surveillance program.

"With the American homeland under the threat of surveillance from the PRC balloon program, it is vital to cut off U.S. technological and financial support to PRC companies that aid and abet its balloon surveillance program, especially given the history of U.S. technology aiding advanced PLA [People's Liberation Army] weapons systems," Gallagher wrote.

"The balloon featured extensive surveillance equipment to spy on Americans," Gallagher added. "Worse yet, the balloon was part of a vast surveillance system that repeatedly violated the sovereign airspace of the U.S. and our allies while targeting sensitive information on military installation."

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House China Select Committee Chairman Mike Gallagher, R-Wis., is pushing the Treasury Department to impose tougher sanctions against Chinese companies involved in China's surveillance programs. (AP Photo/J. Scott Applewhite)

The Commerce Department’s Bureau of Industry and Security reacted to the incident by placing six Chinese entities on the Entity List for supporting China's military modernization efforts, specifically those related to aerospace programs.

Companies or other entities added to that list are restricted from obtaining U.S. items and technologies without U.S. government authorization. Gallagher said he supports the Commerce Department's decision, but said more needs to be done because placement on the Entity List does not restrict financial support to those companies.

"In order to buttress these listings, the Treasury Department should also act against PRC companies that are found to support the surveillance balloon program by adding these entities on the Non-SDN Chinese Military Industrial Complex List [NS-CMIC]," Gallagher wrote.

The NS-CMIC list is designed to impose costs on and prevent U.S. persons from aiding companies that "operate or have operated in the defense and related material sector or the surveillance technology sector of the economy of the PRC" or are owned and controlled by such companies.

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Gallagher said the six companies recently placed on the Entity List "clearly" meet the threshold to be added to the NS-CMIC list. 

Treasury Secretary Janet Yellen and South Africa's Finance Minister Enoch Godongwana attend bilateral talks, at the treasury offices in Pretoria, South Africa, Jan. 26, 2023. (REUTERS/Siphiwe Sibeko)

The six entities are Beijing Nanjiang Aerospace Technology Co.; China Electronics Technology Group Corporation 48th Research Institute; Dongguan Lingkong Remote Sensing Technology Co.; Eagles Men Aviation Science and Technology Group Co.; Guangzhou Tian-Hai-Xiang Aviation Technology Co; and Shanxi Eagles Men Aviation Science and Technology Group Co.

Gallagher also urged the Treasury Department to "order all entities on the NS-CMIC List to be placed on the "Specially Designated Entity" (SDN) list and "subject them to full blocking sanctions."

"SDN-Listed companies’ assets are blocked, and U.S. persons are prohibited from transacting with them, effectively cutting them off from the U.S.-led global finance system," Gallagher wrote. "Only by placing the PRC companies involved in the balloon program on the SDN List can the Biden administration send a strong message to these entities and to ensure U.S. persons and technology do not aid the surveillance program."

Aside from those suggestions, Gallagher explained that the Department of Defense maintains its own list of Chinese military companies, which serve as "military-civil fusion contributors to the Chinese defense industrial base." But he said there are some companies on the Pentagon's list that are not on the NS-CMIC list, and suggested Treasury should add them.

US BLACKLISTS CHINESE COMPANIES, RESEARCH INSTITUTE OVER SUSPECTED SPY BALLOON

House China Select Committee Chairman Mike Gallagher said financial sanctions are needed to punish Chinese companies for their role in China's surveillance program. (AP Photo/J. Scott Applewhite)

One of those companies is China National Chemical Corporation, or ChemChina.

"This is notable, because a ChemChina subsidiary dominates the PRC high altitude ballon market, making 75% of the high-altitude balloons used by the China Meteorological Administration," Gallagher wrote. He said the U.S. "has not yet discovered whether ChemChina has contributed to the PRC’s surveillance balloon program."

"However, ChemChina is precisely the sort of company that the U.S. government should have sanctioned long ago and should do so now," he said. Gallagher said there are likely "hundreds or thousands of additional PRC companies that meet the threshold" to be included on the NS-CMIC List, but have not yet been added.

Gallagher also requested a briefing from Yellen for the House China Select Committee "as expeditiously as possible," to discuss companies that have ties to the PRC. He used his letter to press Yellen for answers on whether the U.S. government has any evidence about technology produced "in whole or in part" by U.S. entities used in the PRC spy balloon program, and whether that will "affect Treasury’s decision-making process."

The Chinese balloon flew near a U.S. Air Force installation near Harlowton, Montana. (AP Photo/Matthew Brown)

In the last two weeks, U.S. military fighter jets shot down at least four aerial objects, including a Chinese spy balloon that flew across country from Alaska to South Carolina over an eight-day stretch.

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President Biden addressed the situation for the first time on Thursday, more than two weeks after the initial Chinese spy flight that traveled across the continental United States for several days. Biden said the additional objects were "most likely balloons tied to private companies, recreation or research institutions studying weather or conducting other scientific research," and not Chinese spy aircraft.

The Chinese surveillance balloon was ultimately shot down off the coast of South Carolina, after traveling over the continental United States for nearly a week.