Roger W. Robinson | China and Economic Warfare

HEIDI YACOUBIAN: My name is Heidi Yacoubian, and I am a junior art major here at Hillsdale College Tonight, I will be introducing our guest speaker, Roger W Robinson Junior Mr. Robinson is President and CEO of RWR Advisory Group, a risk management software and open-source intelligence firm He is also co-founder and chairman of the Prague Security Studies Institute in the Czech Republic Mr. Robinson earned a BA from Duke University and an MA from George Washington University He served as Senior Director of International Economic Affairs on Ronald Reagan’s National Security Council, where he was the principal architect of the secret economic and financial strategy that was a key component of efforts that led to the demise of the Soviet Union He later served as chairman of the Congressional US-China Economic and Security Review Commission Prior to his government service, he was a vice president in the international department of Chase Manhattan Bank with responsibility for loan portfolios in the USSR, Central and Eastern Europe, and Yugoslavia Everyone, please join me in welcoming Mr. Robinson to the stage [APPLAUSE] ROGER W. ROBINSON: Well, I want to start by thanking Larry Arnn and all of his colleagues at Hillsdale for this special opportunity to be with you tonight and address this esteemed CCA event I also want to give special thanks to Kim Ellsworth and Matt Bell I took the tour today, ably executed by Nathan Lehman It was an experience And I just couldn’t be more delighted to be with you tonight And I apologize in advance in the sense that I’m going to give you a fire hose of information, much of it new and original And time is a bit tight, so I’m going to be jumping right in, if I may And I apologize for a little bit of a cough, but we’ll try to push through that Before we turn to what is clearly China’s economic and financial warfare strategy being waged against us, and I’ll explain the components, many of which you know, some of which you won’t know until we’re done, I want to get into an earlier episode that was alluded to in the introduction Namely, the true story of the Soviet Union’s effort to almost succeed in continuing to keep itself a going concern by living off of the West, off of us, and muddling through to this very day, all of which was brought to a screeching halt by a president named Ronald Reagan and his National Security Advisor and best friend, William P. Clark, who I had the privilege of serving under And as mentioned, I had been with Chase Bank as vice president division executive for the US-USSR– sorry, the USSR-Eastern Europe division of the bank And in that capacity, you can imagine it was my job to know where the money was Because after all, as a banker, you’re trying to gauge credit-worthiness And so what I came to realize, something I brought to the White House, to the NSC, which was that these folks had no money Or what they did have was largely from us And let me give you some numbers When I went to the National Security Council in the beginning of 1982, Soviet total hard currency income was approximately $32 billion a year, which was one third of the annual revenues of General Motors and Exxon at the time So you have an empire stretching from Havana to Hanoi that is the equivalent of the revenues of one third of one American company And it was that kind of circumstance that we were looking at, and other what I would call life support tubes that were keeping them going, notably loan arrangements I mean, the Soviets were spending about $16 billion more

than they were making All of that $16 billion gap was being financed by Western governments and banks We weren’t funding 10% or something like that But when you think about $16 billion, coincidentally, that was the approximate cost in hard currency, remembering that the ruble is non-convertible, that was the cost of the external Soviet empire Everything outside of the Soviet Union itself was totaling about $16 billion So you can imagine President Reagan, who always believed that the Soviets were terribly vulnerable economically, to learn that we, the West, were financing 100% of the external empire It’s that kind of thing, those kind of numbers, that he was looking for all this time He knew that they had no entrepreneurship, that they had no technological dynamism, that they had none of the freedoms that you need to have a functioning free market economy This was all an administered command event, as all of you know, fraught with rigidities And so this really came as a surprise The Europeans, on the other hand, had a completely different philosophy They believed in Ostpolitik, as the Germans call it, which is that commercial bridge-building would lead, inevitably, to greater geopolitical cooperation Gee, I wonder where we’ve heard that before You know, China, right? We were supposed to buy into the notion that if we just gave them WTO, and we gave them our technology, and we gave them our money and access to our capital markets and trade markets, that they, too, would come around to a political accommodation and give their people more freedom and have a safer, more secure world with us Obviously didn’t happen The same was true with Soviet detente, the Nixon-Kissinger period What did they do with those credits? What did they do with that technology? Of course they used it all against us, and to make themselves stronger, to expand their empire, and to basically continue to engage in nefarious activities And so here we go again So basically, where we drew the line was on a project called the Siberian Gas Pipeline Project It was a two– a twin strand huge pipeline, 3,600 miles, from Siberia into the West European gas grid It was going to be the centerpiece of their future hard currency earnings structure For them, it was a magnificent twofer Dependency of Western Europe on natural gas would soar to over 70%, 75% minimum, and they would nearly double that anemic $32 billion figure with just one deal And this is in the midst of their massing troops on the Polish border to invade the moment that they learned that General Jaruzelski was not going to suppress Solidarity He was not going to silence John Paul II That he was going to declare martial law, or we would have yet another Soviet-style invasion, tanks and all So it’s in this window that the largest deal in East-West economic history was going down Not only was it going down, but it was going down on taxpayer subsidized terms The Soviets were viewed as a less developed country, worthy of below market interest rates And Germany, France, others were too happy to accommodate Because for the Germans, they had 19 million hostages on the other side of the wall I mean, for them, this was a protection racket They wanted to pay off the Soviets so that they would have better care of their people that keep the peace at all costs You know, throw steak in the cage of the bear and keep it mollified France was no better in this regard So the president had a decision to make We had a monopoly on oil and gas equipment and technology that could go through permafrost We got it from the North Slope Nobody else in the world had it at the time

So we used that monopoly to basically take the side of our Polish friends and try to penalize the Soviets for massing these troops and threatening yet another invasion Far from doing the biggest deal in East-West history, the president was dedicated to stopping it And appropriately so So basically, we declared oil and gas equipment sanctions Those contracts were picked up by the Europeans, who were selling the same equipment, but under our licenses Now, this is kind of a long story, too long for tonight, because I want to transition over to China as quickly as we can But we need to understand that this disconnect with Europe, then and now with Russia, was a blood on the floor estrangement at the time I mean, we had to, at one point, close the US market entirely to those European companies that continued to ship to the Soviet Siberian Gas Pipeline over our objections And we had to give them a choice You’re going to do business with the Soviet Union or the United States, but you’re not going to do business with both Well, four of the six companies that we imposed import controls against, as they’re called, went under within six months And about 250,000 people went into the street unemployed Europe got the picture And the epilogue of this story, in short, is that we put a cap on Soviet gas deliveries to Western Europe at 30% of total supplies period We ended the subsidized credits In fact, we helped dry up the provision of credits by Western governments and banks altogether We went to the Saudis secretly to have them pump two million barrels more oil a day, and [? decontrolled ?] prices at the wellhead here, knocking oil prices down to $10 a barrel Knowing that for every dollar drop in the price of a barrel of oil, the Soviets lost $500 million to a billion per dollar This is on that anemic number that I was talking about So the strategy for the takedown of the Soviet Union was a secret one, but nothing was more secret than the economic and financial piece There were maximum 13 people in the country that knew about this strategy, because our fear was that if the Soviet Union understood what we were about there, and they started to see their demise loom too large, it could be use it or lose it time, as we say in the nuclear trade Back up against the wall, the whole thing So ironically, you’d think that the political military is always the more secret components Wrong It’s about the money It’s about economics and finance, then and now So with that– oh, and you know we’re looking at Nord Stream 2 today The president’s calling Germany a captive nation to Russia today, when the dependency level’s about 35% How would we be feeling if that number was 80%? Which it would have been had there not been a Reagan and a Clark And to the extent that I was able to play a role in that, it’s been a privilege all my life So that’s a little bit of the epilogue that we’re looking at And it is relevant to the China story, because the Soviets, if you think about it, were doing something rather unique They were using natural gas as a weapon There was no such thing as pipeline politics like there is today They had never used natural gas as a weapon before to leverage NATO and cause those divisions in the alliance that are so debilitating We thought, and had to speculate, that if they had the power, they would use it Europe didn’t think so They thought that, my gosh, if the Soviet Union shows itself not to be a reliable supplier, that’s crazed I mean, that’s just not going to happen Of course they were wrong, as history

has proven, when they could use– ask Ukraine, ask the Baltic states Ask anybody who’s ever crossed the Soviets and the Russians today They’re using natural gas routinely as a weapon So who would have thought that, literally underground, on this subterranean basis, the tentacles of our demise were being delivered? Today, those tentacles are China in our capital markets Now, I’ll get to that story in a moment Let’s talk about China’s economic and financial warfare against us for just a moment here You know about Belt and Road, obviously a strategic, wildly ambitious undertaking, to wrap up huge segments of the world on their terms You know about China 2025, where they’re trying to dominate the key technology sectors– everything from artificial intelligence, quantum computing, you name it And they are trying to get there first 5G You read about these things The forced technology transfer we know about The predatory trade practices you know about The president brought these things to the forefront after countless presidents let it slide And he is to be given credit for that The tariff war is a good thing in the sense that we’ve got to take a stand But these are things you know Here’s something you don’t know China has something over 700 companies in our stock and bond markets, our so-called capital markets They’ve got about 86 companies in the New York Stock Exchange, about 62 in NASDAQ, and over 500 in the over-the-counter market, this very murky, poorly-regulated market Of course they gravitate to something that’s non-transparent and the most lax regulatory regime All good police states do that And among those 700 companies, we have some of the most egregious bad actors who’ve been committing national security abuses against our country The same with human rights abuses I mean companies like Hikvision that is responsible for the facial recognition technology and the surveillance cameras that are placed along the walls every few meters of the concentration camps holding one to two million Uyghurs, religious minorities, in Xinjiang Gee, I wonder if we had in mind helping finance concentration camps with our retirement dollars and our investment accounts Most of the people in this room are I know that that sounds wild, but that’s an empirical fact, in my view, if we take that statement as it is The majority of you Unwittingly, of course, because we have no screening mechanism in the United States Never have for our capital markets I don’t know how big they are Around $40 to $60 trillion of funds under management or so Look, it’s not the same It’s not true with trade We’ve got the Committee on Foreign Investment in the United States We just strengthened it further with the so-called FIRRMA legislation We’re worried about Chinese coming in there and trying to take our high technology companies, to try to position themselves right next to our military bases In other words, anything they can do We’ve got to be scrutinizing this, and we’ve belatedly woken up and are doing so now Belatedly Well, what about the money? Completely unprotected Do we really think the SEC is screening Chinese companies for a litany of their past national security abuses? If they are, they’re doing a pretty poor job, because there are repeat sanctions violators There are proliferators of weapons of mass destruction and ballistic missiles There are advanced weapons manufacturers for the People’s

Liberation Army There are South China Sea island builders and militarizers There are companies underwriting the North Korean threat There are known hackers We know who they are They’re here in our capital markets There are companies accused of espionage, that have been indicted or had their employees indicted Do you find any of this in the risk section of the prospectuses? Are any of you hearing about this from your financial planners and your fund managers? I mean, have you ever seen one risk communicated to you of who these folks really are, and who their network of subsidiaries are? No Not a word Not one of you, ever Have you ever heard this topic discussed before at a cocktail party, much less on television, a think tank session, a session like the one we’re having now? Guess what There’s not been one interagency meeting in the executive branch There’s not been one hearing in the Congress Ever Now, what does that tell you? What it should tell you is that China wants us to concentrate on this shiny object over here called trade They can do tariffs all day long I mean, they’re not– it’s hurting them, which is a good thing, but not that badly In other words, I’m talking tonight about what they never want you to see What they desperately need is the dollars I mean, they have practically a trillion dollars of exposure in our markets We don’t even know how much, because they’ve got dollar-denominated bonds, our currency, being issued in Hong Kong, Frankfurt, Singapore Well, guess where they’re ending up? In your bond portfolios, because our investment banks buy them from overseas to get around the loopholes of regulatory regimes, and in they come in the secondary market So we don’t even know what our exposure to China is, but I can tell you this In the next 36 months, it’ll be about $2 to $3 trillion more than it is today I mean, they are moving as fast as they can into your portfolios I don’t know how many people in America are in the capital markets Let me give you a rough guess 150 million, 180 million of us You know, older folks, babies The Gerber program I mean, this is all stocks and bonds, right? So what if we wake up one morning and we find out 14%, 17%, 22% of our retirement accounts are in Chinese securities? Now, that may seem far-fetched to you I suggest to you that’s what’s going to happen And that’s soon Now when that happens– if it does– I pray it doesn’t, but these are trends that are pretty clear I mean, Goldman Sachs and others are the ones that are predicting this, at least on the numbers, you know, on how much is coming in Well then the Chinese have figured out that all of these scores of millions of Americans have a vested financial interest in opposing any future sanctions against them, in opposing any penalties whatsoever against them, irrespective of the severity of the offenses That’s called checkmate, ladies and gentlemen That’s called an exponential increase in the scale of the so-called China lobby We think that the China lobby’s very formidable today Lord knows it is That’s kiddie cars next to where we’re headed And we’re– it’s not talked about We’re not seeing it any more than we saw the subterranean natural gas strangling our European allies, and undermining the structure of NATO So here we go again Another unseen villain in the economic and financial

portfolio I mean, let me give you a live, happening right now, event Well, first I should say that it’s even the case that China’s sovereign bonds are here That Russia has sovereign bonds here When I say sovereign bonds, I mean these are bonds initiated by the government Remember our Liberty bonds during World War II? I mean, we used to finance our war effort with bonds which the government, of course, can use at their sole discretion Well now, our countrymen are buying Chinese and Russian bonds to destroy our liberties I mean, do you know that CalPERS owns $460 million in Russian sovereign bonds by itself? Just do the math as to what the other 50 states have I mean, when we talk about the 50 states, we’ve looked at probably 20 of those states They’re littered with Chinese bad actors of the type that I’ve described When you look at university endowments and college endowments, same I mean, University of Michigan, for example, has 44% of its $12.2 billion in assets in private equity and venture capital That’s a new, big shift in that direction from University of Michigan Of the venture capital portion, one third are Chinese Now, I chose a local example And it’s not like I’m trying to excoriate University of Michigan I’m not This could be any of us That’s the problem I mean, I’m not here to point fingers at them, because again, where’s the disclosure? But also, I have to say they’re not blame-free Where’s their diligence? I mean, they have all kinds of rules, and standards, and governance that on paper say that they’re not going to be financing concentration camps And they’re not going to be funding and underwriting the People’s Liberation Army and folks like that, or folks engaged in espionage and US sanctions violations I mean, really But it’s happening So we have a problem in the 50 states Let me tell you State legislatures need to take this up ASAP So that’s where we sit Now, take your live example Now, this is private capital for the most part we’re talking about Let’s talk about our taxpayer money For the longest time, the federal Thrift Savings Plan in this country, which is the federal retirement system for all federal employees All members of the military, the cabinet, the Congress, the Joint Chiefs, our combatant commanders, our fighting men and women, are all relying on the Thrift Savings Plan $578 billion– the biggest in the country that I know of CalPERS is $370 That’s the biggest pension fund, but this is bigger 5.7 million people, not surprising, are covered So I was checking on them Well, for the longest time, they were doing the right thing They would– they have an international portfolio It’s $50 billion For the longest time, they were using an index The Morgan Stanley Capital investment has a whole range of indexes, but this one was developed countries, largely industrialized democracies Well, OK, international exposure, diversification, all that’s not a bad thing But guess what? In November or December of 2017, they had the bright idea of making a change They wanted to capture those yields of the emerging market, so they hired a consulting firm, an investment consultant from Wall Street, and said we want

to expand the universe of companies we can own internationally Well, they said fine Have we got a deal for you The Morgan Stanley, the MSCI, All Country World Index Well, that includes China And I know for a fact that it includes many of these egregious bad actors I could name them I mean, we’re talking about companies like AVIC That’s PLA They make fighter aircraft I mean, we’re talking about some of these indexes own China shipbuilding They make ballistic missile submarines targeting our cities And the list goes on Not to mention, again, the facial recognition and surveillance state This digital, totalitarian, police state innovation, in their minds Well, I don’t think we have a mind financing that kind of innovation for China, right? Not with our money So this is going to be implemented And by the way, that’s going to be all of the international portfolios It’s not like you’re going to have a choice If you have any international exposure, you’re in the MSCI All Country World Index And you own China automatically, and the bad actors there too This goes into effect in 2020 Right around the corner The decision’s already made, yet it’s not been implemented We’ve got to reverse that decision Either that, or Nancy Pelosi, who cares deeply about the Tibetans, with her money, is going to be financing, or is going to own a company, that is doing the facial recognition technology to be able to pick up the Tibetans at train stations and incarcerate them Again, the same with the Uyghurs Any champion of human rights is going to be violating their sacred values The Joint Chiefs of Staff, our combatant commanders, our Secretary of Defense, they’re going to be underwriting the militarization of the illegal islands in the South China Sea Not conceptually, with their retirement dollars The Secretary of State of the United States, if he has international exposure, he is going to be financing multiple US sanctions violators Gee, that’ll go down well politically So if we can’t stop this, ladies and gentlemen, we’re in a very, very bad way You know, we can lose this thing to China I mean, they have no cushion They’re a lot more frail and weak than we think But again, like the Soviets, if we keep these life support tubes pumping, we’re going to finance our way out of our freedoms, out of our way of life, and out of everything we hold dear It’s the money It was the money on the Soviets It’s the money on China That’s what they don’t want you to know If you go and ask your fund manager or your financial planner, gee, do I own China? I mean, do I own Chinese companies? They’re going to look at you quizzically and probably say, you know, I don’t really know And if you ask, well, what kind of Chinese companies? I mean, have you guys looked at the parent companies and their subsidiaries? And do they have a track record of national security and human rights abuses? You’re going to have a blank stare coming back No way you’re going to get that answer What does that tell you? I’m telling you, they’re not going to answer the question So you tell me what that says about the state of play in your own lives and the life of our nation So our detractors, of arguments like mine, are saying, well, this guy Robinson and people like him, I mean, they’re going to be– their views are detrimental to the free flow of global capital They’re trying to contract our investable universe They’re trying to narrow what we can own and what we can buy as we try to get a better yield They’re going to say we’re politicizing the markets What’s it going to be next? Tobacco, guns

You know, they’re comparing national security and human rights to socially responsible investing These aren’t preferences These are material risks They are undisclosed That’s legally actionable It’s called material risk omission You’re not allowed to do that That’s what class action lawsuits are made of And that’s, by the way, one of the directions we’re going to go Now, I could give you, maybe in the Qs and A, some ideas about what we can do, but let me give you– I’ve given you a lot of bad news Let me give you some good news [? Kind ?] of And it is good news We dominate the economic and financial domain on the planet Earth Our capital markets are roughly the size of the rest of the world’s combined One could say if we’re making it difficult for China, they’re just going to go to another exchange somewhere else And we’re just going to be the ones left out of those fees Of course, this is what Wall Street’s thinking There’s nowhere else to go Nobody has the depth and volume of our markets China’s needs for dollars are so voracious that they would use up the volume in a Frankfurt or a London months, maybe There’s only us You know, we had that oil and gas equipment and technology monopoly during the Soviet days because of North Slope Guess what our near monopoly is today? We have all the money They’re playing in our sandbox We’re not playing in theirs These guys are waging economic and financial warfare against us We’re not only not on the field, but we’re not even at the stadium Now, President Trump is trying to put us there on the field on trade But China is OK with that You can throw them into that briar-patch You don’t see– you won’t see any kind of gamesmanship on the money That’s what they don’t want us to know So it is within our power to take action here And all I can say is, and I want to leave time for questions, we just have to remember, both as taxpayers and individuals, this is our money, and we don’t have to play I mean, Article 7 of the National Intelligence Law of China allows every single entity, commercial entity, every enterprise, to be weaponized instantly if Beijing orders it so– to commit espionage, technology theft, anything they need That’s a matter of record That’s public OK? So for those that don’t want to try to differentiate good Chinese from bad Chinese, meaning seemingly commercial benign companies from bad actors who have a track record of doing egregious harm, one solution is to say no, China Well, that’s a fairly straightforward message that a fund manager or a financial planner can– that could penetrate Anyway, we’re playing the game here and trying to do this in a constructive way If you look at market principles, and when you’re talking to the Wall Street types, and when you’re talking to $40 to $60 trillion of funds under management, if we go with outrage in our hearts about these, you know, how could this be? And how could you do this? It’s unpatriotic It’s not the right thing You’re undermining our country, our values, our moral compass Do you know what you’re going to get from Wall Street? A big yawn But if we go to them and say, where’s the risk management? Where’s the disclosure? Where’s the transparency? Where’s the good governance? Where’s the preservation of share value, and corporate reputation, and brand? Well, that’s a lot more uncomfortable,

because that’s their lingo, and they can’t ignore that I mean, the SEC is again supposed to demand the disclosure of material risk They don’t consider national security abuses and human rights abuses of the scale I’m talking about as material risks And yet there is example after example of Chinese companies whose stock tanked as soon as this press became available For example, the surveillance cameras on the concentration camps Their stock fell I mean, that’s what a material risk is all about So it’s not as though I’m asking for the world here We can ask for enhanced disclosure, for goodness sake I mean, how minimist and how benign does that sound to you? It almost makes me seem like I’m not a serious guy Except there is one small kicker The Chinese aren’t disclosing anything They’re not going to acknowledge these risks They’re not going to acknowledge disputes They’re not going to acknowledge a history of wrongdoing Because if they do, literally or figuratively, they’re taken out and shot back in Beijing Again, figuratively, perhaps Lose your job I don’t know what it may be, but you’re not going to see folks volunteering to make such disclosures And I’ve got an example or two for people that want to hear about what disclosure can do So we have the tools And we’ve got the enforcement of market principles We don’t have to say, hey, we want all Chinese excised from our markets We want sanctions We want market closure, or select market closure We don’t have to do that Of course that’s when they argue Oh my gosh, the sky’s going to fall No, no, no Let’s just go for the enforcement of market principles and then see what they say Because when they say they’re not going to engage in enhanced disclosure, that tells you all you need to know What are they hiding? It’s that old refrain So I want to leave time for questions But again, this is our money, and these trillions are not going to be funneled for the demise of our country, the gutting of our values, the destruction of all we hold dear Not on my watch, and not on your watch Thank you [APPLAUSE] Please SPEAKER: Thank you, Mr. Robinson We now have time for a few questions Please make your way to the microphone if you have a question AUDIENCE: Thank you Morgan Stanley Capital Index ROGER W. ROBINSON: Investment, I think it is, but yes, it’s the Morgan Stanley Index AUDIENCE: That’s right Morgan Stanley we know Capital Group owns American funds Be careful ROGER W. ROBINSON: Right I’m not sure I quite deciphered that, but– AUDIENCE: Capital Group owns American funds ROGER W. ROBINSON: Oh OK Well, it might be a nice touch if they engage in some diligence and protect the American investor from material risks to share value and corporate reputation That’s my answer SPEAKER: We have a question to the speaker’s right AUDIENCE: Thank you for [INAUDIBLE] It’s the first actionable thing I’ve heard at this conference, and I’d like to do something So do you have a roadmap of what you just commented on that I can follow with my investment councilor to get– change, at least in my portfolio, relative what you’re talking about? ROGER W. ROBINSON: We are working on it This has been such an intense three years of research And if you can believe it, this little Prague Security Studies Institute of mine, and, to be frank, our private sector company as well, we’re the only think tank in the world that’s pursuing–

that I know of– that’s pursuing this issue I mean, think about that So you can imagine that our bandwidth is just stretched to the max So we want to be able to service just this kind of need We are developing a list on the private sector side of Chinese bad actors And we’re way down the road in successfully doing that A track record, a risk profile, for all of these guys, and what they and their subsidiaries have done in these two material risk categories of national security and human rights So that’s going to be something that would be available And we’re looking into, again, the 50 states, the university endowments Right now, we’re researching the official US sanctions list to find out how many sanctioned companies are in our markets We’re looking at the entity list of the Commerce Department Same purpose In other words, how widespread is this problem? It’s a little bit like trying to detect what level of metastasization do we have going on here, if you want to use the cancer analogy So the answer is we’re working hard now, and we can be in touch to be sure, as to helping you be better informed about the questions, specific questions that you want to be asking And also to search your own portfolio to find out where are going to be the problem areas? I mean, it’s not just MSCI The FTSE Russell Index, in June, they bought 1,097 Chinese companies right out of the mainland Xinjiang and Shanghai exchanges and added them to their Emerging Market Index How many of those are bad actors? We know several We’ve already done the research on that Bloomberg Barclays Aggregate Global Index, I think it’s called $54 trillion of funds under management They’re buying Chinese sovereign bonds, and Chinese bank and corporate bonds, and adding those to its index As I say S&P is following suit This is the new big thing So the index providers are the inscrutable, but most problematic, because when they buy, it’s viral I mean, they’re infecting every healthy cell of the American body politic overnight So when folks are buying Chinese companies left and right, in over 1,000 in a shot, you are picking up all kinds of egregious players So we’ll work with you best we can, and anybody else here, in trying to give you the tools that you need And we’re trying to develop those tools as quickly as we can I mean, we’ve been concentrating on trying to get the scope of the problem But now, it’s time to worry about the solution set, so thank you AUDIENCE: [INAUDIBLE] available and how can I get it? ROGER W. ROBINSON: OK Well, there’s two ways You can contact– I mean, this isn’t to be an advertisement, but is the corporate side, is the think tank side We’re trying to do some research, and we’re trying to do the activist piece on the think tank side So I would say that we’re good to go within the next 60 days And the folks here at Hillsdale can give you our contact info And we will answer these questions directly, even though I seem to be dodging them now I mean, you know We’re not– we’re trying to do this on our own, pretty much our own dime So it’s been a tough round, but we’re getting there And I hope– oh I mean, we’re not keen on being alone AUDIENCE: Thank you for coming here, sir I appreciate that you’re calling out the human rights violations that China is doing, especially to the Uyghurs and the Tibetans And I was curious if what you’re talking about, of how to deal with that and to stop their human rights

violations, if you would say you’re advocating for something similar to the Boycott, Divest, and Sanctions movement to free Palestinians but for China? Something like– is that what you’re talking about? Economic sanctions like that? ROGER W. ROBINSON: No, I wouldn’t say so I mean, we’re not calling for a boycott We’re actually not even calling, yet, for divestment I mean, clearly there are companies in these portfolios that shouldn’t be there And I can’t believe that the Indexes are hanging in there the way they are It’s been a callous performance, to say the least, on their part I mean, they should be dumping some of these companies, because they’ve gotten a tremendous amount of press And Hikvision, their parent company is on the entity list for national security abuses They’ve been banned from federal procurement They themselves are headed for the entity list Did MSCI drop them? Divest them? No So we’re leaving it to folks to pressure, including states, to pressure the index funds, but we’re not doing an instant replay of the Israeli thing And we certainly see no remote comparison there We’re trying to do this, as I say, through market principles so we can be as little– to have as little disruption to the competitiveness of our exchanges and the free flow of capital And we’re not trying to gratuitously politicize our markets I mean, this is a risk consideration And China and Russia, gee, where did we find those? I’ll tell you where we found them The national security strategy of the United States The national defense strategy of the United States What two countries have been identified explicitly by the Trump administration as the primary adversaries of the United States? Gee, I wonder what they are China and Russia China– Russia has 25 companies in our markets Seven of the 25 are under US sanctions You can’t do business with them with a 100-foot pole But you can invest in them You can fund them with impunity How does that work, ladies and gentlemen? You know? Where’s the consistency there? This is the disconnect I’m talking about AUDIENCE: Hi, sir Thank you for coming and speaking tonight Like you said earlier, this issue isn’t really getting any press, and I know I certainly haven’t heard of it anywhere Why is that? Especially with the attention that China is getting in this trade war and everything It would seem that this would come up So why is it so quiet? ROGER W. ROBINSON: There’s two reasons One, nobody seems to have thought to do the research Nobody saw a national security angle or a human rights angle to the cap markets prior to ourselves And it’s a skill mix problem I mean, when you think about it, it’s useful to have some Wall Street skills and some national security skills Well, the Wall Street types don’t really go for the national security types, because they think they’re gratuitous disruptors They’re sanctions people All they do is create problems for them On the other hand, the national security types don’t feel comfortable talking about global finance in the capital markets because their knowledge level might be a millimeter deep, and they’re frantic with concern that some Master of the Universe type from Goldman or Morgan Stanley is going to come on CNBC and call them a neanderthal Really So it’s very rare that you have a Wall Street-national security skill mix I’ve been in this business for over 40 years And I can count the number of folks with that skill mix that I’ve met basically on one hand In over 40 years So we need a cadre I mean, you know, we need trained national security professionals who are conversant and steeped in global finance and our markets I’m not myself an investment banker You know, stocks and bonds weren’t my trade I’m an international banker with a commercial bank In other words, I had to learn this kind of stuff But it’s not rocket science It’s all common sense I mean, this is not– doesn’t require a Wall Street genius to do this I mean, it’s as straightforward as the conversation

we’re having now It’s a common sense thing It’s just that nobody focused on the money And in part, it’s true that that $40 to $60 trillion doesn’t want you to concentrate on it China certainly doesn’t I would argue that the Department of Treasury doesn’t And I wonder whether the SEC does Because remember, like the gentleman who asked the earlier question, you know, this is disruptive This is not welcome That’s for sure And that’s a big part of the problem as to why this thing never has seen the light of day Yes AUDIENCE: Would you address the reciprocal in terms of China’s investment in US government bonds? ROGER W. ROBINSON: I’ve got no problem with their ownership of T-Bills, and for those who think that their $1.1 trillion exposure in our T-Bills makes us hostage to them in some way, and that they could crater our economy, and lots of these things you hear, it’s just not so It would probably mean a half a point to 100 I mean, it would be a 1%, half a point to a point interest rate change It could raise our rates somewhat But the notion that a trillion dollars these days is going to make that difference And of course China would lose their shirts, because obviously the value of their portfolio would go through the floor But we can handle it I mean, how much did we spend to get out of the 2007, 2009 financial crisis? It wasn’t $7 trillion I think it was more like $15 Now, mind you, we were hurt I mean, it halved my portfolio And we’ve taken a long time to recover, so it hurt us But a trillion is not what it used to be, and China doesn’t have any meaningful leverage over us SPEAKER: We have time for one more question AUDIENCE: Does President Trump know this information? ROGER W. ROBINSON: Sorry? AUDIENCE: Does President Trump know the information that we’re hearing tonight? ROGER W. ROBINSON: No AUDIENCE: [INAUDIBLE] President Arnn send him to [INAUDIBLE] [? Phoebe. ?] ROGER W. ROBINSON: I did a radio interview on this with Hillsdale today That 15 or 20 minutes is pretty incendiary, I can tell you But look, I think that the president is very steeped in the markets in his own way He’s got the picture on this Newt Gingrich did an– he’s very close to the president, he did an editorial on this that I worked with him on just recently on this Thrift Savings Plan That we have to reverse that decision and why I mean, on Wednesday in the Post, there’s a guy named Josh [? Rogan ?] that’s going to do a piece that is just ruinous on this We’ve got CNBC interested in this We’ve already had two Financial Times pieces on this They’re going to go again Rubio and Shaheen, in a bipartisan letter, went after the Thrift Savings Plan board on this, so it’s already in the Congress So again, this thing only started to go public, with our research, in mid-March of this year So this is still a nascent issue It’s going to take some time But we don’t have a lot of time, as you can tell I mean, this is a race So we’ve got to get cracking And anybody that can make members of the administration, and the Congress, and even your state legislatures, and even your university endowments I mean, this is an awareness-raising time This is an educational time And we’ve got to step up, and we’ve got to step up fast, because these guys are predators, and they are coming after us Thank you [APPLAUSE]