The Biggest Financial Scandal in History—And You May Be Part of It: Roger Robinson

[RUSH TRANSCRIPT BELOW] Tens of millions of Americans are unwittingly investing in Chinese companies involved in military weapon production, surveillance technologies, and egregious human rights abuses, says former Reagan adviser Roger Robinson.

Through a complex web of investment vehicles and regulatory loopholes, Americans are pouring trillions of dollars into companies that directly threaten American national security, including ones blacklisted by the U.S. government—often without even knowing. Chinese companies often make up the bulk of index funds like emerging markets funds that many Americans invest in.

“You have … companies that are responsible for manufacturing China’s most advanced weapon systems,” Robinson says. “We’re funding, in some ways, our own demise.”

During the Reagan administration, Robinson served as senior director of international economic affairs at the National Security Council, where he played a linchpin role in Reagan’s economic strategy against the Soviet Union. He’s the co-founder of the Prague Security Studies Institute and former Chairman of the Congressional U.S.-China Economic and Security Review Commission.

Views expressed in this video are opinions of the host and the guest, and do not necessarily reflect the views of The Epoch Times.

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RUSH TRANSCRIPT

Jan Jekielek:

Roger Robinson, such a pleasure to have you on American Thought Leaders. 

Roger Robinson:

Thank you, Jan. 

Mr. Jekielek:

Roger, you believe you’ve discovered what’s arguably the largest financial scandal in the history of the world. It sounds a bit melodramatic, but it’s big. What is it that you’re seeing?

Mr. Robinson:

Jan, it’s hard to know exactly where it fits in the pantheon of scandals precisely, but I can tell you this. You don’t, to my knowledge, have an occasion where there’s the multi-trillion dollar underwriting by a democracy of a totalitarian police state bent on its destruction and way of life that’s aided and abetted by, in our case, Wall Street firms, wittingly or unwittingly, and U.S. government regulators that are sadly conflicted because of the revolving door with Wall Street. So that would be the way I would describe the circumstance we find ourselves in now.

Mr. Jekielek:

You just painted a very big picture here with multiple moving parts. Let’s lay it out step by step. You’re saying, in a nutshell, that huge amounts of money are coming from the American people into communist China day after day, right now, to the tune of trillions of dollars.

Mr. Robinson:

Yes, that trillions of dollars, of course, is over time. This has been going on, Jan, sadly, for at least 25 years. And the Chinese have come into our capital markets with as many as 5,000 companies. The exact number isn’t known because the government hasn’t volunteered any data on this. But our best understanding from research is, again, some 5,000 Chinese companies. Now, the disturbing part, Jan, is that those companies came in without any particular screening, oversight, due diligence, and regulatory regime. They were not looked at carefully to see, for example, are they already sanctioned by the United States for egregious national security and human rights violations? 

The answer to that is no. And so we don’t have, as we do in the trade portfolio, for example, a committee on foreign investment in the United States that’s certainly imperfect, but at least it makes an effort to vet Chinese efforts to buy into the United States, whether it’s American companies, farmland, or whatever. There’s at least some mechanism to try to get a handle on that. It’s never had its parallel in the U.S. capital markets.

The same is true, sadly, of private equity funds. I can’t speak to exactly the process they go through, but certainly publicly traded companies are to be scrutinized. We have investor protection issues. The Securities and Exchange Commission, our Department of Treasury, even the White House National Economic Council should be caring about where the American people’s money is going and how it’s being used. What kind of companies are we talking about here? Well, we asked that question over the research of a number of years now, and the answer is troubling. There are companies that are equipping concentration camps, trafficking in slave labor, aiding and abetting genocide in Xinjiang, and building out the surveillance state of the country. 

On the national security side of the equation, you’ve got companies that are responsible for manufacturing China’s most advanced weapon systems. The last two aircraft carriers come to mind, hypersonic glide vehicles, new generations of ICBMs targeting American families, and new sixth-generation fighter aircraft. In other words, all of the areas that you’d be concerned about militarily are, in no small part, being underwritten and funded by how many? Perhaps 75 to 100 million of us are on the international side of our investment portfolios. 

Most people have diversified portfolios. They have some, perhaps, international exposure. For those of us that do, I can tell you that the chances of our being in possession in our portfolios of some of these bad actor Chinese companies is extremely high. It’s near a certainty. So think about the fact that this is not some esoteric issue here. This isn’t—we’re not talking about space-based missile defense here or something that is more distant from the American people. This is their money, and they have no clue as to the fact that it’s being sluiced into some of the most horrific abuses in the world today via Chinese state-controlled—they’re all state-controlled entities. 

The CCP has a lock on every Chinese commercial entity. We must know this by now. So the idea of a private sector is not happening in China. So the state can call on these companies to engage in strategic and even military activities, intelligence gathering, for example, at their whim. As we well know, Article 7 of their National Intelligence Law spells this out. In a number of other pieces of legislation, the Chinese are hiding it. So here we are. We’re not getting the protections we need. We’re not getting the transparency and disclosure we need. And certainly, we’re not learning that we’re funding, in some ways, our own demise.

Mr. Jekielek:

And that’s not even talking about the fact that, for example, these companies—Chinese companies that are listed on the U.S. market—are listed via this very spurious investment vehicle, VIE, right? And that they don’t even need to provide a reasonable audit. And this is something that really kind of blows my mind because there’s deep auditing by the big four that every listed company needs to be subjected to. Whereas, for some reason, Chinese companies get a pass.

Mr. Robinson:

Indeed, they receive preferential treatment. I mean, this took place in a May 2013 memorandum of understanding between the then Obama-Biden administration and the Chinese Securities Regulatory Commission, whereby we waived the requirement for a U.S. government audit of their auditing companies. Now, why is that important? If we go back to the beginning of the 2000s, we’ll remember Enron, we remember WorldCom and these financial scandals that were so costly to the American people. What did we learn? 

We learned that some of our auditors, the big four included, were part of a kind of conspiracy, a cover-up, if you will. They weren’t unveiling or unearthing the problem. They were part of the problem. And Dodd-Frank and other pieces of legislation created a legal circumstance where the U.S. government had a chance to audit the auditors to safeguard the American investor community. Some folks don’t like it, but that was the rationale underpinning it. 

Every country in the world is subject to this kind of an audit by the Public Company Accounting Oversight Board, the so-called PCAOB, which is under the Securities and Exchange Commission. They are obligated to be subject to such an audit. There’s only one country in the world that has ever received a waiver, an exemption, and that country, of all countries, is China. So just imagine the free lunch program that that represents from a regulatory point of view. That’s why we have so many sanctioned Chinese companies that are littering the portfolios of the investment products that the American people are holding: Emerging market exchange-traded funds. 

That sounds exotic, but these are just so-called index funds. An index is a list of companies. It might even be a thousand companies long. Index providers like MSCI, FTSE Russell, and S&P Dow build these lists, including on the international side.  Again, emerging markets come to mind because it’s quite popular. Guess who’s the bulk of the emerging market countries? China. 

So you have a circumstance here where the American people are holding these index funds as their preferred investment vehicle or their financial advisors, stockbrokers, fund managers put them into these things. And they are holding, in fact, a number of these Chinese bad actor companies that are, in a sense, hidden from view. These aren’t individual names that you can see on a list of your holdings, like you’ll see Microsoft, you’ll see NVIDIA, you’ll see all kinds of names, but you’re not going to find sanctioned Chinese bad actors there so much. It happens. 

But when you get into the index funds, into this kind of world, then you are lost because it is part of the scandal—the non-transparency of it that’s embodied here. And of course, you mentioned the variable interest entities. We can get to that when you want to. But I can tell you that that is a remarkable case of, in effect, a kind of fraud itself. Again, you have to call it scandalous.

Some 95% of the Chinese companies that are traded on the Nasdaq and New York Stock Exchange. What about if the American people understood that they don’t own one share of these Chinese companies? They’re all registered in the Cayman Islands. A front company is established. It has a contract that is supposedly infused with the value of Alibaba, for example. But do we own actual shares of Alibaba, which many Americans do? Tens of millions think they do. They think they own shares, but they own shares of a contract of a front company set up in the Cayman Islands that’s supposed to substitute for real shares.

Now, why did that happen? Because the Chinese came to the regulators in the United States and they said, it’s not okay for Americans to hold any piece, any real ownership in our companies. So we have to invent this vehicle, this one-off, if you will, this separator here in VIEs. Where’s the reciprocity in that? When the Chinese own shares of an American company, they own the shares. We own some facsimile of shares. 

So it is remarkable to me that the SEC chairman, in long succession over the past decades, has lived with this thing. ever since it was invented. I can’t tell you the year that it was invented, but it is an insidious device. And I hope that the incoming SEC chairman, Paul Atkins, who I think is sensitive to these issues, is going to put an end to this kind of thing. This isn’t something where you need enhanced disclosure to learn more about the VIEs. The VIEs themselves are a scandal and need to be terminated immediately.

We could spend a lot of time going through it case by case. What is wrong with this picture? How is it that we’re in this dearth of regulatory protection? How is it that the American people are funding China’s most egregious national security and human rights offenders? Aren’t we supposed to trust our fund managers and our pension system administrators and our financial advisors to be looking out for our interests in this regard? 

The American people don’t have these nefarious activities in mind with their hard-earned retirement and other dollars. Surely. And yet, here we are. So it gets back to your original question, arguably one of the largest, if not the largest scandal and financial scandal in world history. You tell me, look at this. And the more you look at it and the more categories you look at it, you’ll see the same kind of story with A-shares. 

Mr. Jekielek:

For the benefit of our audience, what are A-shares? 

Mr. Robinson:

It sounds exotic, and that’s Wall Street’s counting on it being exotic and inscrutable. This is how all of this goes down. You know, we just don’t hear in common, plain language, what’s afoot here? And I’m trying to perform that task. A-shares are Chinese companies that are only listed on domestic Chinese exchanges. And they are outside of the purview of U.S. regulators. Nobody’s looked at any of these. And they are scooped up by index providers. Again, MSCI, FTSE Russell, and S&P Dow. They come to the Chinese stock exchanges, those casinos. They’re not exchanges. They’ve been called casinos for a reason, rife with problems. And they scoop up hundreds of these companies. 

In one occasion that I know of with FTSE Russell, it was over a thousand companies in one shot. They take them and they put them on their emerging market and other index lists that we talked about, and then the asset managers, the BlackRocks, the Vanguards, the State Streets, the Fidelities, and others come in and they take that index, and you’d think they’d take a look at those names, each one individually, and scrutinize them and say is this, could this be a corporate bad guy? It doesn’t happen. 

They take the whole list and put it into an exchange-traded fund, which then is fobbed off on the American people as their investment vehicle. And that’s how we come to hold those hundreds, in some cases, of Chinese companies that have never again seen the light of day from a regulatory point of view in our country. Nobody asked if they were sanctioned already by the United States. Nobody cared if they were on black lists of the United States, because it’s legal.   

And Wall Street has made plain above all else that they have no particular conscience, and they don’t think it’s their job to have anything to do with protecting our national security and human rights policies. They think that’s somebody else’s job. If it’s legal, we’re doing it. That’s the message. And that’s how we’ve come to be in the situation we’re in now.

Mr. Jekielek:

We don’t know what the investment method is in those companies that are on the exchanges, because presumably China under the CCP won’t let people own the actual shares there either, correct? Do you know the answer to this?

Mr. Robinson:

Not with precision. We know a lot about the New York Stock Exchange and the Nasdaq, but when you move into A-shares, you’re in the netherworld of index funds, and that is the big problem here. And then the over-the-counter [OTC] market. I once looked at the over-the-counter market. Admittedly, it was a couple of years ago, and there were some 900 Chinese companies there.

Mr. Jekielek:

For the benefit of the viewer, what is the over-the-counter market?

Mr. Robinson:

The over-the-counter market is a much more informal exchange. It’s not quite like the New York Stock Exchange or Nasdaq. And it’s a complicated event, even for me to ascertain what’s going on in the OTC market, to be frank. But it is a murky area, and the Chinese like it very much to be in murky areas. And the bright lights of regulatory attention have not fallen on the OTC. Give me a list of those 900 companies. Tell me how many are already sanctioned. 

By the way, one thing I should have said about A-shares and the Chinese exchanges, they’re littered with Chinese military industrial companies. That’s where the PLA ties are. These are the cyber attackers. These are the IP theft artists. In other words, you have all manner of bad actors, because they didn’t think they were going to need to see the state of play. All of a sudden there was this alchemy where they could be snatched up, put into an index fund, then put into an exchange-traded fund and out they go to the American people, and the funding comes back. 

Mr. Jekielek:

These are like the structured products that led to the 2008 crash. Recently, President Trump signed the America First Investment Policy memorandum, and it goes after some of this. Can you lay that out for us? 

Mr. Robinson:

Yes, I think that this is one of the most important historic events in this period of the president’s new term in office. It is a remarkably important document because it’s the first time that the United States has committed to what’s called outbound investment screening, particularly of a security-minded variety. Now, outbound, we know what inbound investment is. It’s the Chinese trying to buy stuff here and secrete themselves into our system, steal our technology, buy that farmland near our military installations, that kind of thing. And it’s, of course, terribly important, technology theft being central to that mission. 

But outbound investment hasn’t seen the light of day from a national security perspective, whereby we’re focused on Chinese military companies operating in the United States, and they should be Chinese military companies period any Chinese company with ties to the PLA should be barred from the U.S. capital markets and our private equity markets. It should be illegal for Americans to hold their stocks and bonds or those of their subsidiaries. That’s what should be the case. 

And the president is moving in that direction. It states that we will use all means legally available to us to stop U.S. investors from funding Chinese military industrial companies or that sector. And it goes on. It’s not like we got a favorable sentence or two. It’s paragraphs. And I advise everyone who cares about this issue to look at the outbound investment portions of that presidential national security memorandum, the America First investment policy.

Is he going to scrupulously implement? Are we going to see teeth? Is it going to be real? And his statement, as I recall, was a little bit similar to mine. Do the American people want to be funding Chinese military activities?  Do they want to be involved in Uyghur repression or the architecture of the surveillance state? As I recall, he said, of course not, and we’re going to investigate it, and where needed, block it. 

Now, that is extraordinary. With President Trump’s first Treasury Secretary, Steve Mnuchin, it didn’t work out well on this score, and he’s not alone. Going back, I’ve been looking at these questions for, sadly, 45 years or so, and I can tell you that when it comes to a security-minded lens, looking at money flows from the United States to our principal adversaries,even the Soviet Union, and before that, before my time, Nazi Germany, where we were funding, we were buying the sovereign bonds of the Third Reich like crazy. We were investing in Krupp and IG Farben and the Nazi military machine. This is a matter of record. We played no small part in funding that war machine of the Third Reich. 

What did we learn there? Isn’t this eerily similar to what I’m talking about now? Do we buy Chinese sovereign bonds where the cash goes directly into the coffers of the Chinese Communist Party? Yes, every year. Are they led by American banks? Yes. We involved right now with four of our largest financial institutions, as I sit here, that are lead managing or in lead manager roles of an initial public offering of the Chinese battery giant CATL, out of the Hong Kong exchange, $7.7 billion, maybe more if it’s oversubscribed, as they say in the business, whereby you get two or three times that amount because the appetite of investors is so hot. 

We can’t derail an IPO in Hong Kong. But is it proper for BOA and JPMorgan Chase and Goldman Sachs and Morgan Stanley to be in lead manager positions in a first and second tier way? My position is no. Is that consistent with the America First investment policy of the president of the United States? I can read the answer is no. Is it consistent with the Treasury secretary’s remarks about Chinese military activities, remembering that CATL is on the Pentagon blacklist of Chinese military companies operating in the United States. You don’t have to believe me that they have People’s Liberation Army [PLA] ties. They’re on the Pentagon 1260H, listed as a Chinese military company. 

Please illuminate this for me. How is it okay that America’s largest financial institutions are trying to lead, or are lead managing such an offering that’s ultimately going to have the shares of cattle, which will then be eight shares, meaning Hong Kong shares, will move right into those index funds? And here we are, yet another Chinese PLA-tied company adding to the portfolio of the American people. So it’s an object lesson, in a way, of how the game really works.

You could say that Hong Kong is a long way away. It has nothing to do with us. This thing’s in dollars. Last time I checked, that’s an American currency, right? And yet it’s going to be sold into the United States. That’s what an IPO is. Those shares are out there, the H-shares. They’re traded here. CATL is already in the U.S. capital markets. As I remember, BlackRock owns about a billion dollars of CATL right now.

So it’s already here. This is a so-called secondary listing. They’re already listed on the domestic exchanges, the so-called A-shares. Now they’re building another category of stock called H-shares. It’s another chance to enhance their fundraising opportunities in the United States. The problem is this can get a little bit complicated. It’s easy for the eyes to glaze over and say, wait a minute, global finance is not my thing. I have a message for the American people and our allies elsewhere. It is your thing. And it’s your thing, because it’s your money. 

Mr. Jekielek:

This is just one dimension of an even bigger picture. 

Mr. Robinson:

It is. If we take a look at China writ large, what do we see? We see an economy that’s in a kind of slow-motion economic and financial implosion, in my view. The property crisis is so severe, it wiped $18 trillion off of the balance sheets, if you will, of the Chinese people. Eighty percent of their wealth, of the wealth of the Chinese people, is in real estate. So imagine what that 30% drop feels like to them.Then there’s been a similar drop in the stock market, not of late, but over the past three years on average it’s gone well down. And you have an economic model in China that has played out, is totally exhausted.

I don’t know any economists that wouldn’t argue the same. You’re building an economy on infrastructure, investment, debt, and exports. It’s over. It’s exhausted. You can’t get there anymore. It has to be a consumer-driven economy like ours and like the G7, the industrialized democracies. Consumer spending is what keeps countries like our own a going concern. It’s probably 75 to 80% of our growth. I could be wrong on those statistics, but it’s up there in that category. 

The Chinese, as I understand it, just fell below 50%. That’s not just a big gap statistically. That’s a night-and-day problem for them, because the consumer economy is not riding to the rescue of this problem. You have a 325% GDP-to-debt ratio. Debt is 325% of GDP, and some would say 300%. I think it’s higher, and I’ll confess mine is a little bit elevated.

Mr. Jekielek:

Where does that debt come from?

Mr. Robinson:

We’re talking about all in. We’re talking about central government debt, which a lot of economists will point out is more modest than a lot of countries. But look at the local government debt. That’s the key. Goldman Sachs, as I recall, within the last year or two, estimated that that debt is some $13 trillion. I’ve never seen less than $9 trillion. 

Wait a minute, $9 or $13 trillion, that’s an untenable amount. That’s not just some problem. That is a show-stopping amount. How much of that debt is non-repayable? Rough guess on my part, it’s a cool 40%. I think it might well be higher. So we’re talking about a financial crisis there that I think most folks would agree with. 

I’m trying to answer your question in a way that takes us back to what is the role of those scores of billions of dollars that are moving every year into the coffers of the CCP and the PLA and other parts of the Chinese economy. And remembering that the Chinese are also able to leverage our capital markets. Our capital markets are the deepest, most voluminous in the world. They’re roughly the size of the world’s capital markets combined.

So when you’re accepted in the U.S. capital markets, as they say, the prestige alone, the feeling of confidence that the globe’s other capital markets feel, and allied countries of ours, Germany, the UK, Singapore, France, the Italian exchange, everybody is comforted by the fact that they’re doing that much business with us. That means they’re okay. What we could call the good housekeeping seal of approval. So it’s not just the money they’re able to take out of our pockets. 

We’re providing a stamp of approval that allows them to do the same all over the world. That’s why the numbers get bigger. It’s not that we’re necessarily doing hundreds and hundreds of billions a year out of the capital markets and our private equity and certainly scores. But writ large, when you look at the whole picture, you have to factor in the fact that we’re responsible for unleashing the rest of the world’s capital markets to be in the same kind of mess that we’re in right now.

Europe is a good case in point. The Japanese have pulled back very dramatically to their credit, but Europe, no. So it’s just to say, again, how did the money elude our attention? Is it that we were asleep at the switch and we weren’t reading the daily papers or listening carefully enough to business news? No. This is by design. 

Mr. Jekielek:

Whose design?

Mr. Robinson:

Wall Street doesn’t want this kind of news to see the light of day. The regulators, largely from Wall Street at the top of the executive branch, also didn’t want to see the light of day. Now, I think that’s changing. That has changed with President Trump. And that’s why I’m so excited about what has happened with the America First investment policy. I’m so encouraged by Scott Bessant’s recent remarks. This is all happening right now. 

So we’re turning the corner, it seems. And we’re starting to get that security-minded lens put on this at long last, that human rights-minded lens. What about that? You know, all of this has been absent from the scene. And guess what? Even the fiduciary malfeasance is starting to come forward in stark relief. Because what have you been talking about yourself in our past conversations? You were talking about fiduciary malfeasance at the end of the day. 

What is a VIE? It’s malfeasance. What is picking up Chinese A-shares that you know nothing about and putting them in the portfolios of the American people? That’s fiduciary malfeasance. Now, Wall Street can say, well, we don’t give a damn about national security and human rights, but they are mandated to care about fiduciary responsibility and duty. They do. They’re supposed to care about that. And if they don’t, there’ll be class action lawsuits that see to it that they will. So this game has not even begun. I’ve been working on this thing for over 25 years, and I can tell you that this is just the beginning.

Mr. Jekielek:

In my conversations with experts, lawmakers, and so forth, it struck me that the very simple concept of reciprocity, you’ve alluded to this earlier in our conversation, but the very simple concept of reciprocity, whether it’s in terms of how our financial systems treat each other, or, you know, for example, access for journalists would be another example that’s more close to my particular interests, that that would be a great benchmark for evening the playing field, which seems to me to be part of what’s motivating the president in his economic approach with reciprocal tariffs, for example, and other things. What do you think about that?

Mr. Robinson:

I think it’s inspired. Reciprocity would go a long way toward not just resolving our trade problems and the unfairness and our having been taken to the cleaners by so many countries in the world. The president’s correct about that. But what about its application to the money? Absolutely. The Chinese can hold shares of our companies. Why can’t we own shares of theirs? We’re not able to, until very recently, even establish financial institutions over there. That’s a new phenomenon and it’s just beginning. 

We could go down a long list in the financial arena where there’s a glaring lack of reciprocity, like the PCAOB case. We talked about audits. Please, how do they get a waiver from the rest of the world? Why are they deserving of preferential treatment when they’re an existential threat to our way of life, the likes of which we’ve never known? With reciprocity, I’m all for the president coming out and saying, hey, this isn’t just a trade thing. This is a financial thing as well. And it would start to unearth many of the abuses we’ve talked about today. 

Mr. Jekielek:

You mentioned that it’s very difficult for you to see into some of the financial data, for anybody to see into financial data. What would be your wish list for gathering or being able to see? 

Mr. Robinson:

I would like someone to tell me authoritatively at the Treasury or the Securities and Exchange Commission or both, what is the total amount of risk exposure to China writ large by the American people today? When you think about all the different ways that the American people are being put at some material risk, as they say in the financial trade, holding these Chinese securities and bonds, let’s not forget about $800 billion to a trillion dollars in bonds. Let’s not forget about probably over a trillion more in equities right now. Who knows exactly what that number is? We should know, and we should have always known. 

The same is true with the question, what’s the A-share exposure? How many A-shares are there? Why should I have to guess that it’s 4,000? We looked. It was excruciatingly difficult. Yet, with all due respect, this isn’t my job. I’m not supposed to be volunteering to help with the investor protection of the United States. But for goodness sake, let’s get on the ball and let’s start to understand authoritatively what is the scale of the scandal that we’re looking at here. We’re giving our best estimate of the scale of this thing, but it’s knowable. 

Every time that we put a wish list into the Senate and the House, laying out all of the statistics, all of the data, all of the analytics that are straightforward, fall-off-a-log, and easy to guess, they are stripped out every time by Wall Street lobbying. Wall Street has had the run of the House Financial Services Committee. Patrick McHenry, the retired chairman, was proud of blocking every initiative to get their arms around the conversations we just had and make sure that they didn’t see the light of day. In the case of the Senate Senate Banking Committee, are these folks missing in action? 

I’ve been very concerned about Capitol Hill in this regard because they are our best remedy. Even the president’s executive orders and his memoranda giving directives and instructions to the cabinet and the subcabinet and the interagency community, all of this should be codified into law. Because I’ll give you a firm example. The president issued something called Executive Order 13959 on the very subject of Chinese military companies in November of 2020. 

It stated that the Pentagon was in charge. If they put you on a list of Chinese military companies, you automatically went on the OFAC list, the list of the Office of Foreign Asset Controls, which means you’re out of business in the U.S. capital markets. And it should also include private equity funds as well. What happened? Within six months, President Biden countermanded that executive order with his own 14032. What did that do?

It removed the Pentagon from the authority to make those decisions and substituted the Department of Treasury. Well, how many companies did the Department of Treasury put on the OFAC list after that day? None. And what about the companies that were already on the list that President Trump had done?Some 39 or even more. The day before they were supposed to divest all the holdings from U.S. investors, it was waived. So the point is, we need these activities and more to be illegal. Illegal. And that has to be done by bipartisan legislation. Do we have the bipartisanship on the Hill to do that? Yes, we do. 

Maria Bartiromo’s series, Underwriting the Enemy, season two, was all about the Democrats and Republicans in one place at one time with one voice screaming to the rooftops on the issues we just talked about, saying something’s got to give. This has got to stop.  So I’m very encouraged about the Hill, as they say, and having bipartisan legislation. And as I say, there have been two seasons of that documentary, the last one of which was in February, the so-called season two. 

Anyway, the Hill is looking much better. We turned to the executive branch, which was a big problem, because it was even more beholden to Wall Street than Capitol Hill because of the revolving door. What about now? Do we have a president who’s going to care about this from a national security, human rights, and investor protection perspective? Yes, we do. 

Do we have a Secretary of Treasury who’s not going to be unduly influenced by his Wall Street colleagues and is going to do the right thing by the American people and for our way of life, to protect our way of life and our national security and our fundamental values? I think we do. Do we have an SEC chairman coming in here that is going to be alert to these issues and care about them and do something about them, like the variable interest entities? I’m not sure, but I think we do. 

That’s why I said there’s a new beginning. I mean, we have seen so much of this problem unfold. Finally, at long last, we can see to the other side of the mountain. And so I’m hoping that those listening will participate and add their voice to that cavalcade of basically folks saying from the famous movie Network, which was a line that said, I’m as mad as hell and I’m not going to take this anymore. That’s the kind of sentiment that the American people should convey to their financial professionals that manage their money, including their pension system administrators.   

Where are the 50 states on this? Several states have divested from China. Not nearly enough. So why aren’t we going to our municipalities, our counties, our state legislators? Where is that? What about the corporations you work for and the retirement accounts set up by those corporations, rife with Chinese bad actors? Why is that okay? 

Why isn’t there pressure to say, I want out, I want ex-China, I want ex-Hong Kong, as they say in market speak, which are investment products that exclude them? And by the way, you have to take Hong Kong out of there too. Or at the very least, something like the National Security Index of my friend Justin Bernier and others that have at least removed the bad actors from these Chinese. 

Mr. Jekielek:

The worst of the bad actors. 

Mr. Robinson:

The worst of the bad actors, right. It’s pretty hard, as we’ve talked about, to differentiate here, but it can be done. 

Mr. Jekielek:

The military civil fusion doctrine is one of the top seven national priorities set by Xi Jinping. In essence, it’s very difficult to know what might not be a problem company.

Mr. Robinson:

Right. But if you really look into it on a very granular basis, like this National Security Index exchange-traded fund has, it can be done.

Mr. Jekielek:

You can get rid of the egregious actors. 

Mr. Robinson:

That’s right. And that’s the least that we should expect. I think that the better solution is ex-China, ex-Hong Kong, personally. But then again, if we have this interim solution, for those that feel, look, it’s the second-largest economy in the world. We’ve got to have some risk exposure there, particularly professional investors. It’s very hard to get them off of the notion of going cold turkey China. So if they’re not willing to go cold turkey, here’s the solution. 

For goodness sake, grab the nettle and do the right thing. You can substitute more benign Chinese companies. Somebody is making a bicycle or soap, I mean, or, you know, some more harmless video game or whatever it may be. I don’t know. But for goodness sake, let’s get rid of companies that are building their nuclear weapons. Let’s get rid of AVIC that is building their fighter aircraft. China General Nuclear is a big one. These are the kinds of folks that we know are in the bad actor category. They’re on blacklists. 

Speaking of blacklists, why don’t we have a consolidated blacklist? We have many. We have the Uyghur Force Labor Prevention Act entity list. We’ve got the Commerce Department entity list. We’ve got the military end user list of the Commerce Department. We’ve got the OFAC list of the Treasury Department. There are a number of these lists. So let’s combine all of these lists and have the following simple formula. If you are on an American blacklist, you’re out of the U.S. capital markets. You’re out of receiving private equity funds from American entities. You are not to be holding the stocks and bonds of those blacklisted companies or those of their subsidiaries. Put that into law and it’s a new day for America.

Mr. Jekielek:

You seem certain that President Trump is clear on the China threat. Some analysts are asking, has Trump changed his tune on China? They say, look at the gutting of the USAGM and USAID. China Is going to come right in there and pick up the slack. This seems like pro-China stuff. What is your response to that?

Mr. Robinson:

I would suspect the personal style of the president, as you know, is to try to keep bad guys on side, as best he can. But when it comes to the overriding national security interest of the United States, I think he’s going to be four square. That is, he’s going to come down hard on the right side. The Panama Canal is such an example. And he is not hesitating on the tariff side. 

He’s also just sanctioned a couple of Chinese companies that are responsible, publicly traded, that are responsible for keeping Iran a going concern. Of those 40 companies, every single one of them is somewhere in the investment products of the American people. All 40. And these are military, energy, infrastructure, surveillance. Not good. 

So the president is now finally picking up on the China dimension because China is responsible for keeping Iran a going concern. I mean, it’s the parent company, for goodness’ sake. So I’m encouraged by that kind of thing. Parent company because of the financial flows. And not to mention, again, the infrastructure development, the military supplies, taking 87 to 100% of their oil. I mean, you’ve got to have a customer if you’re Iran. And they stepped up just the way they have with Russia. This is insidious. It’s designed to keep our most virulent adversaries a going concern against us.

Let’s make no mistake about the Chinese agenda. Yes, they want the cheap oil, which they get on a discounted basis because Iran is more of a pariah. They love that, of course. It’s not to say that there aren’t real commercial underpinnings to this kind of thing, but what they love most is the fact that this ties us down in knots in the Middle East, or this ties us into knots on the continent of Europe. I mean, they want that Ukraine thing to continue to go on. They want Russia to prosper to the extent that it can and be insulated from the sanctions that have been put on it. 

You’re going to see what appears to be a mixed bag. It could well be calling President Xi a good friend. Sometimes, I wince a little, because he’s not a good friend of mankind. But on balance, this looks a lot more like Reagan country to me. I was close to the president and worked with him every day. I was there for three-and-a-half years at the National Security Council. I know something about the Reagan presidency. And I was senior director for international economic affairs. This was my portfolio under Reagan vis-a-vis the Soviets. 

Mr. Jekielek:

Let’s discuss what you did in the Reagan White House and your subsequent acumen, because you know these things at a deeper level.

Mr. Robinson:

I began as an international banker with Chase Manhattan in New York for some five years and served as a staff assistant to then-Chairman David Rockefeller of the greatest industrial empire in the history of our country and arguably the world, which was a special experience to say the very least. Then I went to the National Security Council where, after the first year, I was made Senior Director of International Economic Affairs. But my reason for being brought on board is because I knew where the money was on the Soviet side, and I knew what their hard currency cash flow looked like. I knew what their external sources of financing looked like. 

I thought I knew, and it turns out that I was right about what their Achilles’ heels look like here and how we could put them into economic and financial extremities by taking down that hard currency cash flow via opposing such mega projects as the Siberian gas pipeline at the time, a two-strand pipeline 3,600 miles long into the West European gas grid that would have doubled Soviet hard currency earnings, which were only $32 billion a year at the time, and would have led to West European dependence on Soviet gas to some 75 to 80%. 

You saw what happened in the Ukraine invasion when that percentage dependency was 40 to 50%. We couldn’t cut them off. That’s why Russia is making a billion dollars a day still out of Western Europe at the very time when we’re at maximum danger for the Ukrainians. But imagine if that percentage was 80%, which is where it would have been had there been no Reagan. Leave it to say that the Soviets were making $16 billion a year more than they were spending by our calculation. All of that money, all of that financing gap was picked up by Western governments and banks. So we were funding 100% of the Soviet hard currency deficit there. 

I was able to bring those numbers to President Reagan and work out a strategy that ultimately included the Saudis pumping 2 million barrels or more of oil a day, decontrolling prices at the wellhead, watching oil prices fall precipitously to what I think is even $10 a barrel, but knowing that for every dollar drop in the price of a barrel of oil, the Soviets were losing close to a billion dollars, $500 million to a billion. 

Again, they were only making $32 billion a year, which was roughly one-third of the revenues of one American company like Exxon or General Motors at the time. You could see the weakness, and it was about the money. The most secret elements to the Reagan strategy for the takedown of the Soviet Union, is expressed in what’s called the summary of conclusions of National Security Decision Directive 66 of November of ’82, and National Security Decision Directive 75, which took place at the beginning of ’83. It’s all there. And one of the most guarded elements of this highly secret strategy was the economic and financial piece that I used to look after. I tried to serve as an architect of that strategy, so I’ve been to this rodeo before.

Of course, China is a very different event than the Soviets. The Soviets never had a market presence like China. It never had a diversified economy. 80% of its hard currency income came from just four sources: oil, gas, arms, and gold. It is 66% oil and gas, so not a lot’s changed there. But one thing is the same. It’s not about Western governments and banks anymore the way it was with the Soviets. Now it’s about the securities markets, stocks, and bonds. That’s what fuels the Chinese empire, such as it is. 

It’s still about Western allied money underwriting this enemy, just like Western Europe in particular was doing vis-à-vis the Soviets, and which we had to cut off the hard way, including a major estranging event with our allies at the time over things like the Siberian gas pipeline dispute. It’s called the dispute for a reason. There was blood all over the floor on that deal because the exports and jobs were so delicious to Western Europe that they couldn’t bring themselves to this, not to mention Aus Politik, where they felt that the more commercial and financial transactions took place,the more that there was an incentive for geopolitical harmony and cooperation. Fraudulent and dead wrong. 

We did the same thing with China. It was an instant replay. Hey, let’s put them in the WTO. Let’s make them a stakeholder.Let’s have them be so part of us. Our economies will converge, and that is the path to peace. No, it was a path to their having the wherewithal to extinguish our way of life. That’s all that happened there.

Mr. Jekielek:

You mentioned U.S. funding of  Nazi Germany in the 30s, which was considerable. This may be analogous to the current situation with the massive military buildup going on in China that is also in this existential economic situation. A collapsing economy and massive military buildup doesn’t look good, as history would tell us. 

Mr. Robinson:

Russia is another case in point today. A militarized economy and a declining living standard and the consumer taking it in the neck. That’s where we sit with Russia right now, and it is a formula for failure. This is how you get into a downward spiral with a rigid semi-command economy like the Soviets had. But China still is a command economy at some level. It stifles innovation. It stifles individual entrepreneurship. You can witness Jack Ma and others that have been penalized for his success. It stifles the technology dynamism that allows you to skip one generation to the next.

The Soviets were relegated to reverse engineering to make things happen, but they couldn’t. Reagan understood that they didn’t have the wherewithal to make that leap themselves. It was all stealing from us, reverse engineering from us. And it’s not so different. If you look at DeepSeek and other examples that are more recent, you really look into it on a more granular basis, what did we find? It was built on the shoulders of American AI.

The long and short of it is that this is not going properly for China any more than it is for Russia under, albeit very, very different circumstances. And I think it gets down to the fundamentals you’re talking about, which is that if you have a militarized economy, that has to be fueled with something. And that something needs to be robust consumer spending. And we’ve already talked about the fact that that’s absent in China, and they can’t get those consumers to take that money from under the mattress and put it into the economy. And why? 

In part, it’s because Chinese people were so traumatized by the zero-Covid policies, the draconian, totalitarian nature of their quasi-incarceration in their buildings. You can remember those scenes; the Shanghai balconies of the pots and pans, the folks that needed medicine, and the folks that needed food. They don’t forget that. They don’t forget the fact that their real estate holdings have taken a tremendous bath and left them in catatonic shock. 

They can’t believe that they’ve been in China. And so they’re not willing to trust the CCP the same way they were. If they ever did, they’re not now, because they are not going to get out there, even though they’re being exhorted to do so, even though you see every week, it seems, a new package of incentives to get that money into circulation. 

Interestingly, the Chinese don’t have a social safety net the way we do. They’re being killed by medical expenses with an aging population. Everybody needs to save because they’re on their own to a remarkable extent. And nobody knows that better than them. And this, of course, creates a circumstance where China is going to look at adventurism. China is going to look to change the subject. China is going to look to have an incident in the South China Sea, to lean on the Philippines, perhaps to have some shooting, to embargo seemingly every month a practice rehearsal, as it’s called by the Pacific Command of the United States, of an embargo of Taiwan. 

The fact is that things are really heating up in Taiwan right now as we speak. So do they become more dangerous? My answer would be yes. Is there a possibility of a Taiwan event much sooner than most analysts predict? Oh, yes, because I think they’re missing a central point, which is how fast their economic and financial structure is cratering. It appears to be slow motion, but it’s fast enough to worry about. 

Mr. Jekielek:

It will depend on how those financial flows from the U.S. change over the next few years. 

Mr. Robinson:

It does. The United States has roughly two-thirds of the world’s investable capital. As we talked about, its capital markets are roughly speaking maybe 40 to 45% of the rest of the world’s combined. The dollar is the reserve currency of the world; it happens to be ours. We utterly dominate the global financial domain on this planet, period. Have we ever leveraged that on behalf of our national security and human rights policies? No, not really. Have we exercised capital market sanctions against China with all that leverage? No. Have we weaponized it, if needed, or would we, to ensure that we don’t get into a shooting war with these folks? Not in the mindset that’s prevailed over the past decades that I’ve been looking at this. 

Now, there’s something wrong with that picture. There’s no problem about stating openly that you want to bankrupt Iran. Folks have complained bitterly about the $90 billion that Joe Biden put in their coffers through non-enforcement of sanctions, and given the wherewithal to Iran to fund Houthis, Hamas, Hezbollah, Islamic Jihad, and also Syria before it went in our direction. 

All these proxies were fueled with our non-enforcement of oil and gas sanctions. And we believe in financial sanctions against Iran. This has to be a new era where we’re thinking about what it means that we dominate so utterly the global financial domain. How do we leverage this in the cause of peace and in the cause of our national security and the cause of our fundamental values? 

Mr. Jekielek:

The rhetoric is that if you upset the status quo, you’ll make the Chinese angry, and that will lead to war. What you’re describing here with cutting off the Chinese regime from the massive annual billions that it gets through U.S. capital flows would be war rhetoric. 

Mr. Robinson:

Aus Politik didn’t work out very well for the Europeans. They had the view, let’s keep the Soviets going. Let’s put as much money in there and as much technology as we need to keep the bear in the cage so that they won’t be inclined to lash out at us. That was the whole idea. There’s only one small problem with totalitarian police states. Appeasement comes to mind in this idea that it’s our job to keep them going in the cause of peace doesn’t happen to work. They pocket the money and just become more capable of taking us down. That’s what history has taught us. So I have to take some issue with the notion that this is warmongering on my part. 

The other thing is that there are ways to do business with China that are more benign than other ways. You’re not hearing me saying, you know, cut off 100% tomorrow. That’s not where we are. But let us do prudent, intelligent things. Let us stop blacklisted companies from taking advantage of the largesse of American retail investors, scores of millions of them unwittingly in this game. Let’s take out these unregulated A-shares. They shouldn’t be here. They didn’t pass muster to come here. 

Why are we funding Chinese sovereign bonds? I call them anti-liberty bonds. They’re the exact opposite of the purpose that we issued our bonds during the war, to fund our war effort. What are we funding here? Their war effort against us? Anti-liberty bonds. What about this murky over-the-counter market? Why can’t we penetrate and take a look at what’s there? 

Who are those 900 companies? What are they about? Are any of them sanctioned? I don’t know. Why don’t we know? And the list goes on. And what about the joint ventures between Americans’ leading asset managers and banks with Chinese state-owned banks? You know, Goldman has a joint venture with China’s largest bank to get their mitts on their branches to sell their wealth management products. I get that this is the holy grail for Wall Street, but it’s a merger of the CCP and some of our biggest houses. 

BlackRock has a similar joint venture with the third largest Chinese bank. Vanguard is on the Alipay platform. Great for them. Hundreds of millions of Chinese are on that payment platform. What are the Chinese asking for in return? I’ll give you a theory. My theory is that they told them to establish an A-share market in the United States. Vanguard goes on to Alipay. Question; when we looked, how many A-shares of these highly dubious companies, how many were in Vanguard’s investment products? 2,100.

Mr. Jekielek:

Some in our audience might be outraged knowing their money is being invested in these various Chinese companies. What can they do right now?

Mr. Robinson:

Call your stockbroker, call your fund manager, call your pension system administrator, call your financial advisor, whoever it is that manages your money, ask the following question: how many Chinese companies do I own shares in? And here’s the key. There are two types of holdings of these companies. One is called actively managed. 

That’s when you buy CATL, or buy AVIC, or buy China General Nuclear Company. There’s the name on your list. You buy this as an individual company, like Microsoft, like NVIDIA. You can get an answer to that, but where you’re going to be potentially deceived is if they’re going to come back and say, you don’t own any Chinese companies, or you own these three. 

Then your question is, you’re talking about actively managed, aren’t you? Individually purchased, right? They’ll say yes. You’ll say, how many Chinese companies are in my exchange-traded fund? How many are in my emerging market fund? In general, how many are in index funds that I own? The person you’re talking to is going to say, it beats me. I don’t know. Well, is it knowable? Yes, it’s just a lot of work, because there might be a thousand companies on that. He or she doesn’t want to go through that list to find out what you know. 

But if they say, look, we saw lots of Chinese companies in your index funds. You say, okay, I want an index fund that is ex-China and ex-Hong Kong. Or I want a national security index exchange-traded fund that excises the bad actors if you still want some China exposure. You say one of those two things. Either get me out of China or get me out of China bad guys. And don’t tell me that I don’t own Chinese companies when I do because you’re too lazy to look at the index funds or not knowledgeable enough to know the dirty little truth here, which is that’s where they reside. That’s where they are. And that’s what you’re not telling me. That’s what I would say to the American people. 

Mr. Jekielek:

Is there some sort of database out there where one could put in the indices, mutual funds, the ETFs that they’re involved with and discover what number of Chinese companies are in there? 

Mr. Robinson:

I’m laughing because I tried to build an app that you could use on your phone. You know how you go into the grocery store and you can see what’s in a product or something on your phone? I think this is a great idea, but I didn’t have the $750,000 to build it myself. and I couldn’t get the support, to be frank. But to my knowledge, there’s not such an opportunity. 

But after all, what your financial professionals who manage your money were hired to do. This is their job. This is not your job. You have to discipline them because I told you the exit door that they’re going to go to first, which is they’re not going to cover the index funds. And that’s where all the bad guys are for the most part. If you hold their feet to the fire there, you can get an answer because they can find out it’s on their Bloomberg terminals. You don’t have the 40K a year it costs to have a terminal in your home. That’s not your job, it is theirs. 

Mr. Jekielek:

Roger, it sounds like you want to start a movement here.    

Mr. Robinson:

I think it’s extraordinary that scores of millions of us unwittingly are funding some of the most egregious national security and human rights violations that we can conjure up that will surely lead to the death of our men and women in uniform, that will surely lead to the torture and destruction of human beings in Xinjiang and elsewhere, that will surely lead to a country that is in a permanent surveillance state and is suffocated in any hope of freedom. It is exceptional that we, the people, are participating in such horrific activities because we have been let down by our financial managers of all stripes. 

We have been let down by U.S. government regulators at the Treasury, the SEC, and the National Economic Council. We have been let down by the committees of jurisdiction on Capitol Hill that are supposed to provide this oversight: the House Financial Services Committee, the Senate Banking Committee. This is a tragedy. And this is the scandal that, going full circle to the beginning of our discussion, this is why the term scandal is used. We’ve talked about some of the dimensions of that scandal.

Mr. Jekielek:

Roger Robinson, it’s such a pleasure to have you on the show.

Mr. Robinson:

Thank you, Jan.