“Defending Main Street: Combating CCP Threats to America’s Small Businesses.”
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House Small Business U.S. House of Representatives
Follow its sittingsSpeaker 2
Furthermore, multiple programs exist at the SBA and elsewhere in the federal government to bolster small businesses through capital access and technical assistance, which I have been pleased to support and strengthen throughout my tenure in Congress. That is also why I vehemently oppose the Trump administration's action to undermine this farsighted investment and substitute them with broad untargeted tariffs, mass deportation, doge cuts, and racism against immigrants and minority. Not only are these actions morally bankrupt, but they are also unnecessary and undermine our national security and economy. It is entirely possible for the federal government to protect our national security without stepping into the slippery slope that is ethnic profiling. That means tackling complicated problems with nuanced solutions and examining policies based on their merits, not engaging in inflammatory messaging and fearmongering against Americans and other people of Chinese ancestry.
I sincerely hope that today's conversation stays within those bounds. With that, I thank the witnesses for being here, and I yield back.
Speaker 1
Gentle lady, yield back, and I will now introduce our witnesses. The first witness today is Mr. Poholski. Mr. Poholski is the Vice President and Fellow of Economic Security and Systems Planning and Analysis Inc. He is a former senior executive member of the U.
S. Department of Defense with nearly three decades of experience in policy, acquisition, intelligence, and operations. Throughout his career, Mr. Poholski has led major defense modernization initiatives and advised senior leaders on strengthening supply chains and emerging technologies. Mister Poholski holds a bachelor's degree in international economics from Salisbury University, home of the Fighting Seagulls.
Right? And has completed advanced technologies at Defense Acquisition University, the Naval Postgraduate School, and the US Army for college. Appreciate having you here today. Our next witness is Mr. Sean Murphy.
Mr. Murphy was the founder of the Bison Blockchain, a long-scale bitcoin mining company in Cheyenne, Wyoming. Bison Blockchain faced a takeover attempt by the CCP and notably secured a Cipheus Invest divestment order. He is also the founder of Compassion. Earlier in the career, he has been a researcher and a speaker on hemp, finance, and health care policy, making appearances at the White House, Congress, and major media outlets.
Mr. Murphy's volunteers in the VA hospice care, is a palliative care father to a child with a rare terminal disease, and is a US State Department professional fellow, and we will pray for your family. He earned a bachelor's degree from the University of Notre Dame. I don't know what their mascot is. Oh, is it?
Okay. I knew you'd remember that. Our next witness, Mr. Tom Lyons. Mister Lyons is the cofounder of 24 30 Group, a nonpartisan, nonprofit organization focused on helping the US private sector defend against foreign espionage. He works with business leaders to protect intellectual property and address threats from foreign adversaries.
Previously served for fifteen years as national security executive in the US federal government, advancing US interests in complex global environments. Mr. Lyon holds a Juris Doctor from the Catholic University of America and a degree in international finance in German from Auburn University, home of the Tigers. I now recognize the ranking member from New York, Mr. Velasquez, to briefly introduce our last witness.
Speaker 2
Thank you, Mr. Chairman. I would like to welcome the Doctor. Raj Dashi, who is an assistant professor at Georgetown University, Walsh School of Foreign Service, and the ZV Stars Senior Fellow for Asia and the Director of the China Strategy Initiative at the Council on Foreign Relations. Previously, Doctor.
Served as the Deputy Senior Director for China and Taiwan on the last administration's National Security Council. In that role, Doctor. Du Xi helped manage the SNC's First China Directory, coordinated China and Taiwan policy, drafted pressing Biden's China strategy, and served as a top negotiator in matters regarding the PRC, Taiwan, and the AUKUS Alliance. Doctor. Dashi holds a Bachelor's degree from Princeton and a PhD from Harvard.
Welcome. Thank you for being here. Thank you.
Speaker 1
You. We appreciate, again, all of you being here today. So before I recognize the witnesses, I'd like to remind them that their oral testimony is restricted to five minutes in length. You all have done that. We stick with that.
If you see the light turn red in front of you, it means your 5 minutes have concluded and you should wrap up your testimony. If you're still out there talking after five, you're going to hear this. That means shut it down. Okay? All right.
With that in mind, I now recognize Mister Pajolski for his five-minute opening remarks.
Speaker 3
Thank you, sir. The views expressed in this testimony are my own and do not necessarily reflect those of my employer. Chairman, ranking members, and members of the committee, thank you for the opportunity to testify today on the sophisticated and evolving actions of the Chinese Communist Party and the cascading impact those actions are having on America's small businesses, the industrial base, and the broader United States economy. This hearing reflects an important recognition. Small businesses are central to the United States' industrial capacity, innovation base, and long-term strategic advantage.
The bottom line is clear. Protecting America's small business is not simply an economic issue. It is a national security imperative. Every large business started small. Many firms that will shape America's future manufacturing base, technological advantages, and small businesses today often operate with fewer resources and fewer protections.
Protecting them means protecting America's long-term competitive advantage. In today's environment, economic security is national security. The United States' ability to innovate, produce secure supply chains, and scale trusted capacity is directly tied to our ability to project power globally. The defense industrial base is a useful point of reference, but the line between it and the broader American industrial base continues to shrink. Technologies converge, dual-use applications often manifest over time, and software and other less tangible technologies operate across multiple domains and environments simultaneously.
What appears purely commercial today may become critical to national security tomorrow. For that reason, these should be understood as codependent parts of the same national industrial ecosystem. The challenge is that the Communist Party of China links threats to small businesses rarely appear in only one form. They can emerge through investments, supply chain exposures, intellectual property theft, or commercial relationships that appear beneficial at first but create long term strategic vulnerabilities. For many small businesses, the threat does not present itself as coercion.
It presents itself as an opportunity. Small businesses are often among the most innovative actors in our economy. The examples are endless, but they are also among the least equipped to detect, deter, and counter national state threats. Many operate with limited capital, limited legal support, and little margin for error when promising opportunities carry hidden risks. When a small business is compromised, the loss is not confined to a single firm.
The spillover effects can be seen in reduced innovation, weakened resilience, and less trusted capacity for the whole economy. The greater concern is not simply the loss of any one single contract, company, or technology. It is the cumulative effect of allowing promising American firms to be weakened before they can fully scale, compete, and contribute to the nation's long-term economic and national security growth. That is how strategic erosion happens. That is how the CCP is doing it, quietly, incrementally, and often before the national security implications are fully understood.
The policy goal, my view, should be straightforward: trusted growth, American advantage. That means helping small businesses recognize risk earlier, and making it easier for them to choose trusted capital, trusted supply chains, and trusted partners. The central question is not whether we will respond after an American company has been compromised. It is whether we will act early enough to help the next generation of American innovators, manufacturers, and strategic suppliers grow on a trusted, secure, and competitive path from the start. I thank you for your time, and I look forward to your questions.
Speaker 1
Gentlemen, yields back. I now wanna recognize Mister Murphy for his five-minute opening remarks.
Speaker 4
Chairman Williams, ranking member, and distinguished members of the House Small Business Committee. I'm a former executive at Bison Blockchain. I'm here today as an entrepreneur and small business owner who survived a Chinese takeover that literally wiped out everything we had built. In 2022 and 2023, Bison Blockchain poured sweat and every last dollar into building the largest Bitcoin mine in Wyoming, near Cheyenne, and just one mile from the Warren Air Force Base and our nation's Minutemen III missiles. When our domestic capital fell through, we took a last-minute lead investor who claimed to be from Singapore and an international businessman.
After breaking ground, it became clear they were from Beijing and Hong Kong, a majority Chinese nationals backed by CCP-linked capital, who also ran IP transfer companies. Just before Bitcoin mining began, they brought in personnel from China to replace us as operators. They sued for breach of contract and interference, and then they countersued us, a small local business, for $110,000,000. It was unfair. It was hugely inflated, and it was lawful.
And, effectively, they were mocking us and our judicial system. They hired six law firms, two in New York, one in Los Angeles, and three locally in Cheyenne. And they exploited relationships between their Wyoming lawyers and Wyoming state legislators. Then came the presidential ciphers divestment order, but they saw it coming, and they sold the site to CleanSpark, a large US public company with hundreds of millions of dollars in contracts with Bitmain, one of the Chinese defendants. Bitmain is now under investigation in Operation Red Sunset by the Department of Homeland Security.
This wasn't a competition. This was the Chinese mocking us and working with Clean Spark to try to wipe out the small guys, the local guys, the main street guys. Their plan would have succeeded, but for the extraordinary work of my father, Patrick Murphy, Bison's attorney, my brother, Michael, Bison's cofounder, and two men who are here today, Andrew Astuno, our cipheus expert, and Cyrus Murietka, a national security consultant who helped us. I'd also like to acknowledge Beth Clay, who's not here, but all of these individuals really helped me in this process with the Chinese. They were gonna run off with the money, everyone, the sales money.
That was their plan, but we were able to secure landmark writs of prejudgment, attachment, and garnishment, where the Wyoming Federal District Court took control of the sales money. And once they took control of the sales money, we were then able to negotiate a settlement. So, effectively, we got money out and beat the Chinese. Who am I in all of this? I am a palliative father.
My son battles a terminal illness, and I fight for his life every day. For 16 years, I've been a VA hospice volunteer sitting at the bedside of dying warriors who've served this country, honoring the promise that no veteran dies alone. My advocacy for my son in veterans centers on palliative care and access to cannabinoids, rescheduling marijuana from schedule 1 to schedule 3 to unlock research and healing, especially for rare diseases. I'm also an advocate against child trafficking, and I implore you to stand against it at home and abroad. These realities made me something the Chinese did not anticipate in the lawfare, a father who had faced bigger, scarier dragons than them and their 16 lawyers.
Being with my son and veterans, I realized we are not chemical beings to be pumped full of pharmaceuticals. We are electrical beams that need to be filled with light. Our bodies run on bioelectric fields, energy pathways, and natural frequencies. This is biology, that every cell has an electrical charge. Every muscle movement, every heartbeat, is the result of an electrical charge or discharge.
The EKG and EEG medical tests are measuring electrical impulses in the heart and the brain. As a palliative father, I tried everything else to help my son. Only energetic medicine, including sound and light therapies, brought him relief when nothing else did. And this is the next wave of health care, and the intellectual property behind it is pure gold. As a hospice volunteer, I've seen how rampant fraud and abuse in health care devastate patients and small businesses, from massive durable medical equipment overbilling in Florida to ghost hospice facilities in California siphoning hundreds of millions, literally, from Medicare and Medicaid.
These scams inflate taxes for every family, erode trust in legitimate services, and risk bankrupting these programs. And our adversaries, like the CCP, can and do exploit to weaken us economically from within. Lawfare and IP theft are a direct threat to Main Street, and we cannot allow any foreign country, especially a CCP, to do these things against American entrepreneurs, parents, and veterans. I've included four recommendations in my written testimony, and I urge your good consideration and action. Thank you for this opportunity to testify and tell my story.
Speaker 1
Gentlemen, he is back. I now recognize Mister Lyons for his five-minute opening remarks.
Speaker 5
Chairman Williams. Chairman Williams, ranking member Velasquez, members of the committee, thank you for this hearing. My name is Tom Lyons. I am a former CIA officer and the cofounder of Twenty Four Thirty Group, a nonprofit, nonpartisan organization that educates and defends US innovation from nation-state economic espionage. I'm here because America's small businesses are under attack, and most of them do not know this.
We've long characterized the CCP as a strategic competitor, but we need to ask ourselves whether their behavior is that of a competitor or that of a nation at war. These are two different things, and they prompt two different policy responses. I would offer this. In the book Unrestricted Warfare from 1999, two PLA colonels wrote that the future of conflict would be waged through economic subversion, technology theft, and the destruction of a rival's competitive advantage. The CCP recognizes that this kind of nonkinetic gray zone warfare against our companies, our research institutes, and our small businesses can be more effective than a kinetic war.
In their own words, this is war, and we should take them at their word. When it comes to measuring the damage from this war, the numbers we hear about are dangerously incomplete. It's often cited from the IP commission that we lose between 225 and 600,000,000 annually to economic espionage. Those numbers do not capture incidents like Apple abandoning the autonomous vehicle industry in part because of PRC espionage, or one Google engineer walking out with the chip designs that power AI systems. It doesn't capture the metrics of the hundreds of companies that were never born because we lost the entire industry.
America pioneered the solar energy, lithium batteries, drones, wind turbine industries, and China dominates all of these today. We invented the world's pharmaceutical innovations, but China today controls the key starter materials in all of our drugs. Production grinds to a halt if China restricts our supply chain. The real costs are the entire sectors of the US economy that no longer exist. Stand back and look at the industries that China has targeted and currently dominates.
Energy, communication, logistics, medicine, advanced computing, steel. These are all foundational for winning any conflict. And it is not limited to critical technology. The same pattern plays out in agriculture, manufacturing, and consumer goods. If Apple, a $3,000,000,000,000 company, could not protect its AV program, what chance does a small startup have?
A third of our small businesses rely on free antivirus software, 60% shut down within months of a major cyber attack. We've.
Speaker 5
The big cases because those companies had cyber or counterintelligence measures in place, but most small companies do not. Small businesses make up 99% of the US firms, and they employ nearly half of the workforce. They're the hub of American innovation, the engine of our economy, and the foundation of our ability to project force in any conflict. In China's unified economy, one company steals technology, a second will manufacture it, and a third will export it. Our legal system treats each as acting alone, however, so we miss the opportunity to hold the system accountable.
As you know, American taxpayers have funded part of this effort through small business innovation grants or PPP loans going to PRC state-owned entities. We've subsidized our own long-term decline because we haven't had basic checks in place. American executives go to federal prison for price fixing, insider trading, anticompetitive behavior, yet the PRC does this at a nation-state scale. What the PRC is doing goes beyond trade, diplomatic, or regulatory issues. They are exploiting our system, which was designed for good-faith commercial actors.
The playing field is simply unequal. I wanna be clear. This fight is against the Chinese Communist Party. It is not against the Chinese people. Many Chinese nationals come here to escape the system.
They are victims of CCP coercion themselves. Our response must be precise, targeting conduct, not ethnicity. In my written testimony, we propose specific legislative initiatives, the centerpiece being the Foreign Economic Espionage Designation Act. In this case, the president would designate specific entities as foreign economic espionage organizations. It would then be a federal crime to knowingly accept compensation or a material benefit from such a designated organization.
This targets the so-called talent programs or the expert networks that incentivize theft across our industry. We also propose the Maligned Foreign Interest Disclosure Act requiring that any entity receiving material state support from a country of concern disclose that relationship publicly. American businesses deserve transparency in who they're doing business with. We do not ask American citizens to wage war against foreign nation-states. That's the government's job.
But that is exactly what we are asking 33,000,000 small businesses to do. If this is war, and it seems like the PLA has said as much, then the government must subsidize counterintelligence the same way we fund national defense. American industries face an existential threat from the CFCSP, and our small businesses are on the front lines with limited defenses, intelligence, and government support. The essential point is this: Main Street should not have to fight this alone. It's not an equal playing field.
Thank you for the opportunity.
Speaker 1
Jim, Niels is back. I now recognize Doctor Doshi for his five-minute opening remarks.
Speaker 6
Thank you, Chairman Williams, ranking member Velasquez, and distinguished members of the committee. Appreciate the opportunity to testify today. My argument is simple. Our small businesses are critical to America's future in manufacturing and technology. But today, China is mounting the most comprehensive industrial strategy any power has ever attempted, and is putting our small businesses at existential risk.
The urgent task for this committee is to consider how to help our small businesses meet this unprecedented challenge. I wanna divide my testimony into four questions. First, what are China's objectives? The Chinese Communist Party aims to catch up and surpass the West. It believes there have been 4 industrial revolutions that determine the fate of nations.
The first was steam power, which brought British dominance. The second was electrification, and the third was mass manufacturing, which brought American dominance. And now we're in the fourth. Quantum, biotech, AI, and robotics, which China is determined to win not just for prosperity, but for relative power. And Beijing sees manufacturing as the key to winning this revolution.
That brings me to a second question. How is China doing in manufacturing? China overtook the United States to become the world's dominant manufacturer in less than 25 years. Over that period, our share of manufacturing fell by half, from 30 to 15%, while China's share quintupled from 6% to 30%. It now exceeds that of the next nine countries combined, and it isn't standing still.
China is spending roughly $400,000,000,000 a year on industrial policy. By contrast, the US Chips and Science Act is 50,000,000,000 over multiple years. That leads to a third question. What is the role of small business in this story? Large firms have dominated American manufacturing for decades, but their supply chains are made up of smaller firms.
Today, business is the path to American reindustrialization. Small businesses are the keepers of specialized manufacturing knowledge. They are the producers of precision components, tooling, and specialty materials. Take aerospace and defense. Roughly 70% of Beijing's Dreamliner comes from its smaller suppliers.
Roughly 60% of all employment in that sector is small and mid-sized businesses, and the story is similar in other sectors too, like automotives. Now China sees the value of small and medium-sized enterprises. Ten years ago, when it launched its Made in China 2025 program to catch up and surpass the West in key sectors, it saw small business as part of the plan. So it launched the so-called little giants program to boost innovation, eliminate foreign suppliers, and create global competitors in high technology. That program is a competitive program.
But once firms get in, once they get that little giant's designation, they get access to an incredible package of loans, subsidies, state equity investments, expedited patent processing, university research support, streamlined stock market listings, and even offtake from SOEs and the government. Today, more than 17,000 Chinese firms have been designated little giants. 90% are in high-tech manufacturing, and some have grown into global titans like Unitree Robotics. That is what our system is up against, which leads to a fourth and final question. What do we do?
The SBA has some powerful tools. In FY '25, it guaranteed $45,000,000,000 in loans to more than 85,000 small businesses, the most in its history. But the truth is this is simply not enough to keep up with Beijing, and I'd like to offer a few proposals. First, China is going all in on research support, but we've let the programs that we use to support early-stage research lapse. Congress should immediately reauthorize the Small Business Innovation Research and the Small Business Technology Transfer programs.
Second, China packages its benefits together and ties them to a certification program, whereas we often launch uncoordinated individual initiatives. We can change that. Congress can launch a certification program that provides a coordinated package, demand side, supply side, and regulatory support for our high-tech small companies. Third, China's little giants raised about 125000000000 in the last few years from private sources, often with state support. Meanwhile, the first cohort of our SBIC critical tech program might raise a billion dollars. Congress should scale up that kind of program.
Fourth, Chinese manufacturers are able to access low cost capital, including loans. To keep up, Congress should raise the number of loans, the loan cap, and the total appropriation for the SBA's new manufacturing access to revolving credit program. And fifth, China's little giants can draw universities, state institutes and SOEs for technical assistance. Our equivalent program has lapsed. Congress should restore the Manufacturing Extension Partnership promptly.
These are just a few recommendations, but the common thread through all of them is integration. The SBA has loans, equity vehicles, R and D programs, and technical assistance programs. What it lacks is a mechanism to deploy them together in a coordinated way. China built that kind of program, it's working. This committee has the tools and the jurisdiction to build the American equivalent.
Thank you for your time, and I look forward to your questions.
Speaker 1
Gentleman yields back, and we will now move to the member questions under the five-minute rule. I recognize myself for 5 minutes. Mr. Murphy, as a small business owner, you were directly involved in a dispute with a Chinese control entity that ultimately forced your company out of its own project. You mentioned that.
Can you walk us through how that situation unfolded and what warning signs, if any, you now recognize maybe in hindsight?
Speaker 4
Yes. Thank you, Mr. Chairman, members of the committee. There were warning signs, but all of this was under a prevailing need for expediency. We had secured through an RFP process contracts to electrical power, and that's what you need to mine Bitcoin, is a lot of electrical power. And our lead investors fell through.
We had raised $3,000,000, but we needed a lot more to build out the project. So we had this quick need to secure the capital to execute the project. And we ultimately, for lack of a better term, got embedded financially with these Chinese partners. So the first one was diligence. We did not have time, and the nature of the capital need was expedient.
Like, we had to execute on this, or we would have lost the power contract. So there's the due diligence piece that could have, should have been better, but it wasn't, because things had to move quickly. And then second, as things devolved and that played itself out, was the nature of the lawfare. And they were mobilized. They were strategic, and they knew what they were doing in hiring all of these lawyers and law firms at national and local levels to crush us under legal fees.
So it was really those two. It was the upfront things that could have, should have been different, but it was so quick we couldn't do it differently. And then as things played out, there was nowhere to go as a small business when the lawfare was happening. There wasn't a congressional. There was no federal mechanism in that, or we were not aware of it.
We were just the small business left to duke it out. And I don't know how that would be solved. There's some possibilities, but that was the difficult spot once it came to that, Mr. Chairman.
Speaker 1
Mr. Paulski, capital is the lifeblood of small business, we all know that, and many rely on alternative investments to scale but may not have the resources to fully vet investors. So my question to you would be, how can we help small businesses identify and avoid the investments from entities which have ties to foreign adversaries, particularly those connected to the CCP?
Speaker 3
Thank you, chairman, for the question. Your question is spot on to a plan that I've devised with the acronym TRUST, meaning trusted resilient US tracks. And it's underpinned by 10 different items that are very simple and effective, and in place today. Launch small business-led trusted capital programs at each department and agencies embedded already in that fabric that exists, streamlined due diligence support with grants and affordable tools for small businesses, incentivize supply chain diversification through tax credits and subsidies, establish vetted suppliers lists that highlight secure approved partners, foster public-private partnerships to mentor small businesses into contracting vehicles, align with Section 1260H that Congress passed years ago that provides clear supply chain risk guidance, empower small businesses with advocacy and pathways for market access, build trusted and transparency tools to map supply chains and risk identifications early, coordinate with small business office administration offices to ensure national security while fostering innovation, and launch educational initiatives for small businesses so they know how to navigate these programs. It's not complicated.
Everything that I've identified there, as kind of mentioned in others' comments, are pieces across this chessboard that we haven't tied together. Implementing them is easy. We have to move from policy to action, and that's what's slowing us down. The United States is known for innovating, and China is known for duplicating. We have to cease that.
We have to get ahead of their actions.
Speaker 1
Thank you. Mister Lions. Closing here. As you know, Main Street is increasingly vulnerable to Chinese Communist Party efforts to target America's small businesses and steal intellectual property. So my question would be, based on your experience, what was the most common method used to obtain intellectual property from American small businesses?
Speaker 5
Mister chairman, thank you for the question. It's a great question that should be studied further. In my experience, the cyberattacks are the most prevalent. The second, I would say, is insiders, and it's leveraging programs such as the Thousand Talents. And following that, it is engagement through venture firms.
And even the process of doing due diligence from a venture firm when they're learning about a startup is a siphon of intellectual property theft. So small businesses today are it multivector. It comes through coercion at times on insiders as well. Under the 2017 Chinese intelligence law, PRC nationals have to cooperate when they are asked to. So that threatens American workers who happen to be PRC nationals.
Speaker 1
Okay. Thank you very much. And now recognize that my time is up and now recognize the ranking member for five minutes of questions.
Speaker 2
Thank you, Mr. Chairman. Doctor Doshi, how do differences in the US and PRC's political economies affect our bilateral tech competition?
Speaker 6
Thank you very much for the question. China is a non-market economy. It has enormous amounts of state support and coordination to support small companies and big companies alike. And that means that oftentimes, their companies can stay solvent longer. They're not targeting profit.
They're targeting market share. They're our companies, which either need to get loans or are disciplined by our capital markets. So they can just stay in the game longer and throw more money at the problem than we can, and they have the government as their ally in the competition with our companies.
Speaker 2
It is no secret that the PRCs dominate the supply chain for important items like pharmaceutical precursors, which we saw on full display during the COVID pandemic. Why is it in our national interest to ensure manufacturing for strategic techs and their parts?
Speaker 6
Well, thank you for the question. We did see that China weaponized its unique role in the rare earth minerals and magnet supply chain. The total amount and value of the rare earth minerals we import is less than the price of an F-35, and yet it supports more than 20% of American economic activity. If you take pharmaceuticals, 90% of fermentation-based API, that is, antibiotics, are made in China. If we don't bring some of that back or have it come from our allies and partners, China has a chokehold over our health-care system.
Speaker 2
And how do President Trump's tariff wars affect small businesses' ability to onshore and compete with the PRC competitors?
Speaker 6
On the one hand, the tariffs can create some protection from the PRC. But on the other hand, they also raise the input costs for many companies that require importation of all kinds of inputs for manufacturing. And as a direct result, they may be less competitive globally, and we are seeing a lot of strain among small and medium manufacturers as a direct result of higher costs.
Speaker 2
Our biggest strength is our ability to draw and keep the best minds in the world. This helps us drain the PRC's expertise and use it for our interests. Last year, committee staff released a report finding that President Trump's mass deportation campaign is hurting this strength. Mister chairman, I ask unanimous consent to put that report in the record. How does the Trump crackdown harm our tech leadership?
Speaker 6
I think there is a risk that some of the immigration crackdown will reduce the flow of high-skilled entrepreneurs from abroad into the United States. And a lot of our most innovative companies are a mixture of American homegrown talent and foreign talent. We are only 300000000 people. China is 1,400,000,000. Our superpower is the ability to attract the very best from around the world and have them enhance our tech ecosystem.
Speaker 2
Thank you. And the SBA, doctor. Daxin just made sweeping lending policy changes, banning small businesses from SBA loans if they have any foreign investor stakes. And the notice names PRC nationals without justification, bringing constitutional concerns under the Fourteenth Amendment. Mr.
Chairman, I ask unanimous consent to put in the record my letter to the SBA detailing these concerns. Do these unnecessary restrictions constrain capital access for American entrepreneurs?
Speaker 6
I think a lot of foreign nationals from a variety of countries can do a lot of good in the United States. PhD students from abroad, from India or China or Japan, when they're here, can launch innovative companies. We shouldn't deny them capital just because they are foreign citizens. And as for the China question, there are real concerns about security and espionage. We also have to implement this policy in a way that doesn't undercut our innovation advantages.
Speaker 6
I think it does because that foreign talent will often, as President Trump has himself said, actually help us reindustrialize the country, for example, in areas like batteries.
Speaker 6
I think that's an important point. If you can access capital from the SBA, you may end up trying to get capital from less trustworthy foreign sources, including China. Mister Lyon,
Speaker 2
The prime way to monitor for and address suspicious and fraudulent activity in our federal research programs is through their built-in watchdogs, the offices of inspector general, should they be fully funded so that they can be at their greatest strength. And in some cases, some of the agencies do not yet have an OIG.
Speaker 5
Here, Mike. Ranking member, thank you for the question. I see I'm out of time. However, I think that any initiative that provides more of a capability to allow us to do research and background on individuals, programs, companies to determine and detect their connectivity to the PRC is a program I would support.
Speaker 1
Gentle lady yields back. I now recognize Mister Mucer from the great state of Pennsylvania for 5 minutes.
Speaker 7
Thank you, chairman. Thank you all. Very compelling testimony. Just to start out, let's face it. The advantage that was provided over a 20 year period to China's products being shipped into The U.
S. Versus where we are today, very much thanks to the courage of president Trump to rethink tariffs and focus on fair trade, not just free trade, has more advantages and benefits than negatives. That being said, some real serious conversation is taking place here. I'm not new to it. I got a relatively extensive business background on the international front as well.
But what I'm interested in hearing from you all is what can Congress do? Many of you have outlined this in your testimony. I mean, in real terms, advice on recognizing the risk beforehand so we could hopefully share that in our promotion communications. And once you are under attack or being injured or harmed, who are you going to? Who in our federal government, state government?
Is it Vincent? Who's helping you? The DOJ, the SBA, the FBI? I mean, you know, we you're really under significant assault, miss mister Murphy, with your business and others. So, mister Bohotsky, let me just start with you.
Can you and you were outlining, and we really wanna get those 10 items that you had as well as the four that you included in your testimony. But what can congress do and perhaps advice on recognizing, if you would?
Speaker 3
So I think it starts with accountability. Right? The executive branch has the authority to execute the intent and everything that's been discussed here. But shifting away from offices that concentrate on small business as policymakers and shifting that to action doers. Right?
When instances occur like Mister Murphy's, they need advocacy at the point of the problem, and that's a long problem span. Right? Far left is, hey, where can I find trusted capital? Right? If you're working with the DOD or the DOE, potentially in his instance that would have an advocacy role, they should have a list of trusted providers, of capital providers, that he could have access to so he doesn't have to guess and blindly navigate that course.
That was a policy and an instrument that had started in the DoD that I was familiar with about eight years ago and has slowed. Right? That's something that needs to pick up pace. And it's not slowed down during the current administration. It's slowed over time because it's lost priority and focus to other things.
But having trusted capital programs do an amazing job to avoid what he did. The other part I'd advocate for is understanding the supply chains. Right? If you're not being bartered and traded through trusted capital to undermine your company, it's through the supply chains that make you less attractive to the DOD or other institutions that you'd work with. Right?
So illuminating those supply chains, not just identifying the bad ones, but providing lists of trusted vendors and sources is also a critical step for us.
Speaker 7
That's great. I have limited time. Miss Murphy, what would you say what sort of help would you have liked to have had from the federal government? And what else could Congress do?
Speaker 4
Yes. Thank you, Mister Chairman, and to you, representative. The big thing from the onset was we didn't know, we didn't even think about the SBA as an option for capital. It never.
Speaker 4
Why would we get a loan? So having hybrid and equity options that are meaningful. So for a business like ours, we needed $10,000,000 to $15,000,000 to secure the project. We'd already raised millions, but we needed more. So it's that hybrid and equity option at larger amounts.
And that was what really led to my recommendation thinking, we're doing this in critical technology, really primarily in defense right now. I think it's the SBIC Critical Technology Initiative. There's a good amount of capital there, but there's nothing in health care. Right? There's nothing in these parallel industries that helps us access it.
And then the other piece with the lawfare, I have a few notes here that things like debarment or sanctions, but tricky in the middle of the litigation or fast tracking relief in some way to DOJ or commerce or the trade representative. But once it got to the point of the lawfare, it was hard for congress or this body to really help us. We were in the judiciary.
Speaker 7
Yeah. Alright. Thank you. Mister Lyon, somewhat the same question if you could respond relatively quickly. And by the way, Mister Doshi, your testimony was outstanding.
All your testimonies, I wanna make sure, get to the right people at the SBA. Your information is really critical to our economy. But go ahead, mister, I could five seconds.
Speaker 5
I would commend congress for recently passing the cyber reauthorization, which includes due diligence standards in there. That's an immediate thing. SBA should have funding to provide threat briefings to small businesses. The biggest problem today is that most companies are simply unaware of this issue. Also, states like California prevent due diligence from occurring without providing that diligence.
Speaker 1
Gentleman yields back. I now recognize Mister McGarvey from the great state of Kentucky for five minutes.
Speaker 8
Thank you, mister chairman, and thank you for having this really important hearing today, and to our witnesses for joining us. I'll start with you, mister Pahootsky. Your business has been active in SBIR, STTR since 1988. And not just active, but, I mean, received tons of awards, I think, something like 30 awards or more through the program. And just how have you seen this vital program support small businesses and promote American innovation?
Speaker 3
I wanna be careful on my testimony because I'm not representing my company nor the awards that they have received through fair and competition. But systems planning analysis broadly is considered an expert in the industry, understanding exactly where threat vectors are coming from and how to provide that strategic counsel and advice back to the government to avoid things, left of launch, if you would, that Mister Murphy and other Americans have experienced.
Speaker 8
Yeah. No. I appreciate that. And this is an example of sometimes, you know, if you're watching this place from afar, you think the fights are between Democrats and Republicans oftentimes. And sometimes, in this place, fights come between the House and the Senate.
And this is an example of where the House, all of our colleagues here, took this incredibly important program, SBIR, STTR, passed it, and then it was, not just the Senate Republicans. Really, it was one Republican senator with a bone to pick that held up this entire process. And now it's effectively been shuttered for 6 months. So they finally came to their senses over there, on the other side of the capital, and reopened the program. But, of course, now that we've passed the bill out of both chambers, the president has said he is not going to sign any more legislation until the SAVE Act is passed.
So this important work remains on hold. And I just say it's important work because as we have this conversation, this really, really important conversation, mister Lions, I appreciate a lot of what you had to say about the threat that the PRC and the CCP is posing to Americans, to America, and, in particular, American business interests. We need to have programs like this funded that are helping our own small businesses continue to have an advantage, continue to grow, continue to invest in products and people across the United States. So we need the president to sign this. We need our small business to get help.
We all need to work on this. And I just wanna, you know, on a little point. Doctor Doshi, is it easier to address how China is harming our small businesses from IP theft, from coercion, from manipulation if we go it alone or if we go at it with our allies?
Speaker 6
Well, thank you, sir. It's a great question. And what I'd say is that right now, China outscales us in many dimensions. They're twice their manufacturing capacity, three times our power generation, 11 times our steel production, 20 times our cement production. But if you take the U.
S. And put its allies and partners together, we outscale China. Anytime we want to make progress, we are stronger if we do it with our friends, and the Chinese simply cannot match the scale that we have together.
Speaker 8
And that's why I think this hearing is so important. That's why it's so important in this committee where we still come together and do good work. We have some real threats we have to deal with. We are not going to be as successful if we continue to fight ourselves and fight our allies, when we should be taking on a common enemy. So I appreciate you guys bringing that point up, and Mr. Chairman, I yield back.
Speaker 1
Gentlemen, yield's back. I now recognize Mister Weed from the great state of Wisconsin for five minutes.
Speaker 9
Thank you, Mr. Chairman. Thank you to the witnesses for being here today. The Chinese Communist Party is no longer an emerging threat to our national security. They have a calculated and well-developed plan to infiltrate our educational institutions, Internet data, military installations, and our nation's economy. Many of these threats are more overt than others, but the CCP's infiltration of America's small businesses is a problem that is not always discussed.
The threat from the CCP to small businesses ranges from intellectual property theft to CCP-linked investments. However, small businesses often lack the resources to protect their company and the products they have poured their time into. I look forward to discussing these issues with all of you here today. Mister Pohutsky, what are the current gaps that small businesses face when seeking capital that allow CCP-linked investors to access this sensitive information?
Speaker 3
I don't know if it's a lack of access to capital, but it's a lack of awareness once they have access to it. And that really means the speed of relevance. In mister Murphy's case, I would dare say that he was under time pressure to make something happen because the deal, you know, would close in a certain period of time. Not having the ability to do due diligence, one because of the cost, the other because of the education. Do I really need to do that?
And, those two worlds intersect at the point of decision making. And that's not months or weeks. That's hours and days at most. Right? And so we're left across the spectrum of seeing these type of instances because we don't have advocacy within the government.
That's a clear path to solutions for these small businesses. We need to do better.
Speaker 9
Well, this would be well, mister Murphy, how about what are some ways that small businesses in your from your experience, having gone through this, that can protect themselves from CCP linked investors?
Speaker 4
Mr. Chairman and to you, representative, we talked about expediency. Right? So access to capital, these are, we've talked about these, but access to capital and then the nature of that capital, equity, hybrid, versus just debt only. And then the amount of that, and the ability to have due diligence as a part of that.
But working with funds and particularly funds that are leveraged with the SBA program that are trusted, that are safe. Many of these venture capital funds in Silicon Valley, they're not. They're not. They're gathering IP. They have relationships with attorneys and many law firms.
I'm using Silicon Valley as an example because that's one that everybody is aware of. But that's the nature of it. So it's having what I would call safe, protected, trusted funds and resources that are part of the diligence and that also have leverage to help entrepreneurs and businesses move quickly.
Speaker 9
So how do we do that? How do we help you? And I'm gonna just basically open this up to anybody. How can we help you in that regard here in Congress?
Speaker 4
I would say briefly improving, updating, upgrading the SBA program. I learned here from Mister Putsky that there are actual offices. Like, there's a Department of Energy SBA office. We didn't know that. That would have helped to know.
But working and moving capital and options to apply for that into the agencies to help it move quicker.
Speaker 5
Thank you, sir. I do think awareness is a big part of this. I also think that state laws create a discrepancy in being able to actually conduct things like due diligence.
Speaker 5
Brought up briefly, the California statute, not picking on California. It's just we come across a lot of companies based in California, and the statutes are currently favored towards privacy versus background research on people. And when you're running a critical technology like AI or Quantum where it makes a difference, it is a zero sum game. We need to be able to facilitate that. So I think federal preemption on that issue, but also federal tax credits to allow companies and small businesses to do this would be important.
Speaker 6
Thank you, Congressman. I'll just offer two quick points. First, we have to protect ourselves, which means that I think we need to strengthen due diligence. That in turn means that we basically should think about the Corporate Transparency Act, beneficial ownership, because knowing who ultimately owns some of these companies that are investing in the U. S.
It's critical, and that's the hard part of due diligence. We can fix that. And it also, by the way, will help combat fentanyl money laundering. The second thing we should do is promote access to more capital from the SBA for our high-tech companies. Promote and protect, together, are the way we do this.
Thank you, sir.
Speaker 1
Gentlemen, yield's back. I now recognize Miss Simon from the great state of California for five minutes.
Speaker 10
Thank you, and thank you all. Today has actually been extremely informative.
Speaker 10
A question for Doctor Doshi. So last week, the House sent a bipartisan Small Business Innovation and Economic Security Act. And the act, as you know, reauthorizes small business innovation and research and small business technology transfer programs to the president's desk for signature. I am curious what's the significance of these programs on tech leadership, our tech leadership?
Speaker 6
Thank you, Congresswoman. The SIBR program, as I recall, has done over 70,000,000,000 in loans over the last 40 years almost, including many iconic American companies that have benefited. Right now, the Chinese are putting billions and billions of billions of their small companies. The fact that we've had a six-month lag, and hopefully, that will be cleared up very soon, puts us at a significant competitive disadvantage when it comes to small businesses relative to China.
Speaker 6
Absolutely. I mean, right now, the Chinese small companies, the so-called little giants companies, are able to access tens, if not more, billions of dollars in low-cost capital. The fact that our program is paused means that every small company in China that wants to win in manufacturing has yet another advantage now over us, is access to cheaper funding.
Speaker 10
And just so the public understands, these small Chinese companies are able to access this capital from the party.
Speaker 6
Yes, ma'am. From the state, and as well from the private sector, with the state backing it. And so right now, we're pushing pause, and the Chinese are pushing go through multiple funding channels.
Speaker 10
So should this act be signed by the president? We have no idea what that implementation would look like. So what are tech companies and leaders and innovators doing in the whim while they wait?
Speaker 6
Well, for small companies, access to capital is a challenge, especially now with so much capital going to the data center build-out. That's crowding out capital for smaller companies. So as we hear, have to take capital from less trustworthy sources. They have to take it on less preferential terms. They may have to give up more equity, take more dilution.
That's not great. And one of the great things about the SBA program is it doesn't do any of that. It's not dilutive, for example. So we should get that program restored. Otherwise, companies may make poor choices for the long-term competitiveness.
Speaker 10
Now in lieu of, who knows what that calendar will be and when, the act will be signed by the president, we hope it will be. Any advice to this committee on how to push the conversation forward?
Speaker 6
Well, I think hearings like this one are useful because I do hear some bipartisan support for the idea that our small companies need low cost, non-dilutive capital to lead in high-tech. That's a view I think most Americans would support. And I think at the same time, when you understand the full scope of what China is up to, and that's why I focus that on my testimony. Right. What they're doing, it makes all this look a lot more urgent. It's a lot harder to say let's push pause when you see tens of billions of dollars flowing to small companies in China.
They are very serious about promoting these small companies. And let me be very clear. Their goal is to ultimately knock our companies out of business. They don't want them to be selling in China or selling around the world. They'd like their companies to win.
And so it really is an existential question. We've got a lot of small companies in manufacturing. They are the backbone of American manufacturing. A lot of them are run by people who are about to retire. If those companies go out, we lose not just the companies, but the knowledge that those companies held on to for decades.
It'll be much harder for America to reindustrialize, which is the president's priority, if we lose those companies.
Speaker 10
So it never happens to me. But I have a whole 1 minute and 39 seconds left. And I know a lot of my colleagues are in other hearings. This hearing, as our chair mentioned, is literally on top of a number of other hearings on the floor today. So if you could, doctor Docey, for the next, you know, 35 seconds, and I'll yield my time back to the ranking member.
I would love you to know, I know other members had other questions for you. So, Sarah, are there other thoughts that you would like to extend to the committee?
Speaker 6
Yes, ma'am. I think the last thing I'll say is that one of the things that China's done very well is it's packaged a lot of these benefits together: supply side benefits, demand side benefits, regulatory benefits. It makes it much easier for companies to have a one-stop shop. The Taiwan economic ministry does the same thing, by the way. So a lot of our competitors, a lot of our allies have programs that are very integrated.
Presenting a package of goods, a package of benefits to these companies, it's not all about spending money, it can make their lives easier and can make it so that they're more competitive. That's how the Chinese do it. It's, again, how our allies do it. It's how we can do it, too. And I think we should think about the SBA having a credentialing program for high-technology companies so we can better incentivize the flow of capital.
And think about this, a company that gets that designation as in China will be a much safer bet for the private capital markets, too. I think we can do that.
Speaker 10
Thank you, sir. I appreciate all of you. I'll yield my time, my third, hold 30 seconds back to the ranking member.
Speaker 1
General Neil is back. Ranking member has nothing. I now recognize Miss King Hines from the Northern Mariana Islands for five minutes.
Speaker 11
Thank you, mister chairman, and thank you to all the witnesses for your testimony today. So as the chairman has stated, I represent the CNMI, which literally sits on the frontline of a lot of these strategic geopolitical conversations. And, you know, for those who are not familiar with where this is, we are closer to China than we are the United States. And so, you know, my community is struggling economically. I'm concerned about any type of foreign investment coming into the CNMI.
As a matter of fact, we have been having conversations with the legislature as to how we provide the necessary support to the local government and connect them with an entity like Cepheus. Cepheus, for example, right? Because, you know, we ardently object to malign CCP influence, right? And I'm really glad, Mr. Lions, that you distinguish between, you know, regular folks and the regime.
Right? So I appreciated that comment. And I kind of, you know, in reading your testimony, mister Murphy, you know, I was sad for you. And I don't want something that has happened to you to happen to any small businesses, especially folks out in a remote region where we, you know, the government doesn't have the resources and just folks don't have the resources. Right?
And I kept hearing a common theme amongst all of you, and that is due diligence. And as I was preparing for this hearing, I reck I saw that there is no connection between the SBA who, you know, is in charge of lending capital, with Cepheus under the Department of Treasury. And so I kind of wanted to further flesh out, you know, that piece that you focused on with regards to due diligence, so that we prevent what happened to Mister Murphy. And I'll just open it up.
Speaker 3
Maybe I could take that. I used to be the DOD's lead representative for CFIUS, so I'm very familiar with the authorities that are granted to it. That is not, I would say, the appropriate tool at that part of the spectrum. CFIUS is typically reactionary to some degree because those transactions are being brought. The problem is well left at that.
It's when we talked about when small businesses are faced with capital decisions, partner relationships, equity decisions. That's really at the point of no return, where the decision making needs to happen. Cepheus is a great measure to protect things through the national security lens, but maybe this transaction didn't present a national security threat, and therefore, it might not necessarily be reviewed through those authorities.
Speaker 11
So I ask that question because any investment, right now in the CNMI is viewed as a national security threat. It's a foreign investment. And I want to be able to help my community given the fact that we're just going through an economic decline. As a matter of fact, I think it's an economic free-fall at this point. And so I think you're absolutely right that Cepheus is reactive.
How do we change it and, so that we ensure that what happened to mister Murphy doesn't happen because Cepheus is the arm of the federal government that's supposed to review foreign investments for national security risks. And so, how do we bridge that gap? And I see mister Lyons there nodding his head.
Speaker 5
Thank you, Congresswoman. I think that it's a complex problem, but one thing to address first is that there's nothing illegal about PRC investment into companies. And so that means that our law enforcement mechanisms have no tools here. It does require background checks, due diligence, and I don't think it's always appropriate for the government to be involved in that because the government simply doesn't collect on these issues. As a former intelligence officer, we focus on bigger things, I would say, on weapon systems, plans, and intentions.
We don't focus on mergers and acquisitions, or really much in the economic realm. So for that reason, there has to be partnerships on that front. I think SBA pushing out threat briefs could help. I think tax incentives, I think tax credits to allow companies to take advantage of that from a tax standpoint, so that they can build a CI program or a cyber program. There's a limited amount of funding available from the SBA today that goes towards funding cyber programs, and we do expand programs like that.
Speaker 11
Thank you. Mister Doshi, you can chime in for the rest of the term I have.
Speaker 6
Thank you, Congresswoman. Let me just offer one additional point because I agree with everything everyone else has said. I think there's some value in helping small companies recognize that if they take investment from Chinese sources and that they're in their cap table, it might make it a lot harder for them to get access to certain government benefits, for them to sell to the Department of Defense, etcetera. And I think getting people to understand that there's a risk, not just a legal risk, but a reputational risk, potentially, and having these investors is critical. And I'll end with this.
We need corporate transparency. We need to know the beneficial ownership of some of these vehicles. If we know that, we can do better due diligence in open source.
Speaker 1
Gentle lady yields back. I now recognize Miss Sculpton from the great state of Michigan for five minutes.
Speaker 12
Thank you, Mr. Chairman. Thank you, ranking member, and thank you so much to our witnesses for being here today. It seems like our questions this morning have kind of been going back and forth and questioning to a certain extent whether China actually is a problem or trying to point out how it is. I think we all agree China is a problem. Right?
You agree. You agree. Yes. All heads are nodding. The question is, what are we going to do about it?
Doctor. Doshi, in your questions, you talk about the rapid pace at which China is investing in its small businesses. At the same time, we have seen a major scaling back of our small business programs. Can we continue at the same pace and expect different results for our entire panel? I mean, yes or no?
Can we continue? No. We cannot. No. No.
We cannot. I think that this is the central question. You know? And the oversight of this committee, it is if we take nothing more away, if we are all in agreement that China is a threat, we cannot continue at the same pace of scaling back our programs. Yes.
There are multiple things that we need to do, but making sure that we are putting our money where our mouth is and addressing this problem head on is essential. I have a few other questions, in particular to West Michigan, but I really wanted to emphasize that point. So, West Michigan is home to world-class innovation. I've had the privilege of touring small businesses in my district who are at the forefront of research and development that will enhance everything from medical treatments to new defense technologies. Many of these businesses were SBIR, STTR award recipients.
We had 11 businesses receive awards in 2024. Four more recipients in '25. I was proud to vote in favor of the SBI, the Small Business Innovation Economic Security Act, last week, which passed the House and would reauthorize those programs. With specific reference to these programs, as we talk about the importance of investment, doctor Doshi, how will these programs specifically help our tech leadership?
Speaker 6
Thank you very much, Congresswoman. And as you know, of course, the Midwest is home to a disproportionately large number of our high-tech manufacturers, small businesses disproportionately. And so I think for these companies, access to low-cost capital is a challenge. Bigger companies can get better terms from the big banks. Our smaller companies struggle.
They may not be as well-known. They're not as credible, perhaps. They've got other challenges. The government can step in as they do in China, but it doesn't have to be a big cost for the government. That's the benefit of some of our programs.
And if you look at the track record, our programs tend to do quite well, and they're creating huge economic benefits. Sometimes even major companies emerge from SIBR and SIDR. So I think the question for us is, do we wanna support these companies in high-tech? Because if we don't want to support them, China's gonna support it, so we have to get even with them.
Speaker 12
That's exactly right. Thank you. Doctor Doshi, your testimony highlights I wanna talk about small manufacturers and exporters, specifically who rely on technical assistance to build up and keep an edge over their overseas competitors. The MEP program, my district has benefited significantly from the state's work there. The Michigan Manufacturing Technology Center, in addition.
In the past three years, MMTC has assisted 145 manufacturing companies just in my district alone. A 145, impacting over 16,000 employees. I mean, the impact is just so huge. And I know Michigan is, you know, a little outsized there with our, you know, our huge auto manufacturing sector, but this is a big deal to us. Moreover, MMTC is working to establish a new AI lab to help keep Michigan ahead of the AI curve.
Doctor Doshi, the Trump administration has withheld 19,000,000 in MEP funding, causing major staffing layoffs and hiring freezes within most MEP centers. How is this harmful to our domestic manufacturers? Almost goes without saying, but we're here to take the testimony today. So please do say it.
Speaker 6
Well, thank you, Congresswoman. I think it's disastrous. I mean, a lot of these programs are now seriously damaged. It'll take, you know, months, if not years, for them to scale back up again. I'm not really sure why.
The president is very committed to reindustrialization. His team believes in re-industrialization. I think probably somewhere there's been a disconnect, and the team that he has that cares about this should make sure that these programs have the money that they need because the Chinese are investing. Right? They do technical assistance, and we don't.
They do technical assistance from their SOEs, from the universities, and state research centers on an industrial scale. Yeah. And we shouldn't pause ours.
Speaker 12
As a state that is also home to some of the leading universities in the country, I worry about the brain drain, not from people leaving this country necessarily, but from not pursuing these advanced degrees in technology because they're not seeing, you know, the opportunity for themselves there as well. So, thank you. I'm out of time. Time. I thank you all for your testimony today.
It's been, you know, incredibly helpful. Mister Lyons especially appreciated some of your remarks. So thank you, Mr. Lyons. Excuse me. Yeah.
Thank you. Yield back.
Speaker 1
I'd like to thank our witnesses. This has been a great hearing, and it's a bipartisan subject we all agree with on 99%, I'm sure, maybe even better. But without objection, members have five legislative days to submit additional materials and written questions for the witnesses to the chair. And before I finish that, somebody from California just walked in.
Speaker 14
Thank you, Mr. Chairman. Sorry. I had a briefing that I had to pop into, and I just got out in time and couldn't have my watch or anything or my phone or anything to let me know what time it was. So I got I am here now. So, thank you all for being here today, and thanks for your time.
And I guess I'm the last one here before we can all go. But I'll be quick. Mr. Doshi, the 2026 national defense strategy and national security strategy have shifted our focus as it relates to China. The NDS places an implicit bet on outproducing China, hardly mentions technology as you laid it out in your testimony.
China is prioritizing its small businesses, particularly in manufacturing and technology. How should Congress scale and invest in programs that boost American small business in manufacturing and technology?
Speaker 6
Well, thank you very much, congressman, for the opportunity to talk a little bit about that. My view is that the SBA has a number of tools. Some of them have lapsed and can be reauthorized, and some of them can be expanded. In many cases, a lot of those instruments that the SBA has can be packaged together to give small companies a one-stop shop so they can get demand side support, supply side support, and regulatory support. But the key point I want to emphasize is this.
China takes its small businesses very seriously as manufacturing competitors. It gives them enormous amounts of resources. It gives them patent support, expedited access to stock market listings, and it even forces the state companies and the government to buy from them. We're not gonna replicate their system, but we have to put together a program that is not just individual projects and individual initiatives, but packaged together to make sure our companies are competitive.
Speaker 14
Alright. Thank you. You mentioned the SBA. So the SBA is creating barriers for many small businesses to access resources, such as changing eligibility for programs, threatening to pull offices from major metropolitan hubs, and withholding funds from programs and resources, partners that support small businesses. Are these counterproductive to the investments we need to be making in our small business for the resilience on the global stage?
Speaker 6
Congressman, I do worry that some of the current efforts are counterproductive. In particular, as we've discussed in this hearing, some of the key programs have lapsed or have been reauthorized, but that has not fully gone through the administration. That can change quickly. We know that the president has committed to reindustrialization, so there may be a disconnect within his team, but it should be possible to make progress. As for, you know, offices closing that are part of the MEP program, that is disastrous.
I mean, when those offices close, it can take a long time for them to staff back up. In the meantime, our companies lose important connections to the assistance that they need.
Speaker 14
Thank you for that response. Mister Lyons, you highlighted the lack of awareness and security of small businesses against cyber intrusion in your testimony. If a small business wanted to improve their cybersecurity, what federal education, legal, or technological resources are available to them?
Speaker 5
Thank you, Congressman, for the question. I think that the SBA has a cyber program that allows them to allow small businesses to take advantage of some subsidized offerings there. I think that should be expanded. I think that CISA also puts out routinely updated information regarding how small businesses can protect themselves. A lot of this is free.
Speaker 5
Of this, I think tax credits would help bolster defense and bolster awareness. But a lot of this is also out there on sites like CISA or the NCSC.
Speaker 14
Can I ask just one follow-up on that? I mean, the resources you said are free to be provided by CISA, SBA. But when it comes to the actual financial cost of having to fight this, how are small businesses able to keep it up, or can they?
Speaker 5
Sir, they're not. Yeah. They simply, in conversations that we've had with numerous small businesses, oftentimes, economic espionage is ignored because of the legal costs associated. I would point to my written testimony of a few examples, but also to some possible legislative initiatives that could change something like that.
Speaker 14
So, Doshi, you're shaking your head. Yes. I'll let you respond to that.
Speaker 6
As well. Thank you, Congressman. Just wanna add one additional factor. When our company is the victim of cyber espionage and they lose their IP that goes to a Chinese manufacturer who then makes the same thing and sells it back to us, it should be easier for us to stop the importation of that infringed-upon export. Right now, it's really hard.
Those small companies have to hire lawyers. They have to go through a process. We should make it easier for our companies to protect their IP from foreign manufacturers that have taken it, essentially illegally.
Speaker 1
Gentlemen, yields back. I now recognize Mister President Anne from the great state of Pennsylvania for five minutes.
Speaker 13
Thank you, mister chairman, to the ranking member, and thank you to our witnesses for being here today. The influence of the Chinese Communist Party is no longer something we can ignore or afford to underestimate. It is a real threat to our economy and everyday life happening right now, and our small businesses are on the front lines. The CCP knows exactly what kind of leverage it holds, and it is not afraid to use it, whether that means undercutting American businesses, stealing intellectual property, or flooding our markets with cheap and inferior products. COVID-19 made that crystal clear.
It exposed just how vulnerable we are and how reliant we have become on China to keep our economy and supply chains running. That should have been a wake-up call, but that dependence still exists today, and it remains a direct risk to both our economy and our national security. That is why this committee must continue working with the administration and the SBA to bring manufacturing back home, and prioritize American production over CCP entanglement. That starts with being clear about what the CCP's involvement means for our American entrepreneurs and their intellectual property. Starting a business is already a heavy lift.
It takes risk, capital, and long hours just to get off the ground. We've seen it happen too many times, and the American entrepreneur puts everything on the line to build something from the ground up, only to have a CCP-linked company steal that idea, copy it using cheap labor, and flood the markets with knockoffs that undercut them at home. That is unacceptable and a fundamental threat to the American dream. We have a duty to protect American innovation from that risk. Mister Murphy, you know this reality of the situation all too well, and what your company went through is something no American business should ever have to face.
So my first question for Mr. Murphy. Looking back now, what would you tell a small business owner who is considering taking on foreign investment, and what do you wish you had known before making that decision?
Speaker 4
Mister chairman and congressman, we've talked a little bit about this, obviously, due diligence, expedient access to capital, the type of capital. And the one theme that I've heard here from the panel that I think I just want to highlight is this. I and I don't know anything about the Little Giants program in China, but something similar. I mean, we're our model is free markets and competition. It's not outside of our SBA to have a packaged up competing program where an entrepreneur or business like mine can feel confident and empowered to go to the SBA and have this package of diligence, access to capital, trusted, vetted capital partners, and the like.
That seems like something we can and should do to compete.
Speaker 13
At what point in the process, Mister Murphy, did you start to feel that something was wrong, or what was the first indication that you had some kind of China influence taking over your business? Was there an antenna moment or a moment that caught your attention?
Speaker 4
Congressman, yes. There was. There was, as we were breaking ground, one day several individuals just arrived at the site. They showed up at the gate. They wanted to be seen, and they said that they had come over from Asia.
And then once we started putting the pieces together, we realized, no. They came from China. And who were they? And then it got back to and we heard this term from doctor Doshi. Who is the ultimate beneficial owner?
We did not know. And it turned out to be somebody different than the people that were on-site, and it turned out to be the person who had sent these individuals. So it was that when they showed up, that totally unannounced. Unannounced. And you had no reason said, and I said, stop.
Something's going on here. And that's when I, in my mind, started realizing there is something afoot, and then more came. And then when Bitcoin miners showed up, this, you know, millions of dollars of Bitcoin mining machines showed up just on a dime. You know, 30 trucks, boom, into Cheyenne. That's when I said, we're gonna start documenting, you know, every email, every conversation.
And then it was shortly after that they said, hey. We want to renegotiate our contract. Basically, you guys go from your operational role and our contract that was this to a very small role, and basically be our Wyoming guys to protect us in this state. And that was when we sued them.
Speaker 13
That is absolutely abhorrent and unacceptable. One more follow-up question. What could we be doing in Congress to prevent things like this from happening in the future to other entrepreneurs and other businesses?
Speaker 4
Yes, Congressman. We've heard a lot of those good ones, ideas today, and testimony, but I think it goes back to, and I think with this committee, it's the SBA. Right? That's where entrepreneurs right now, as an entrepreneur, I wouldn't even have thought to go to the SBA. To get a loan, to get a $10,000,000 debt loan doesn't make any sense.
But for that to be a resource that entrepreneurs and small businesses can turn to that actually helps with capital, diligence, and all these pieces, that I think makes the difference.
Speaker 1
Gentleman yields back. I now wanna repeat myself and say what a great hearing this has been. Thank you guys for taking the time to do that. Without objection, members have five legislative days to submit additional materials, written questions for the witnesses to the chair, which will be forwarded to the witness. I ask the witness to please respond promptly.
So if there's no further business, without objection, the committee is adjourned, and thank you again.
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