Millions of PPP Dollars Meant to Support U.S. Jobs Went to Chinese Companies

By Daily Editorials

August 7, 2020 4 min read

A new study has found that potentially more than $400 million in U.S. federal pandemic assistance meant to prop up American small businesses went instead to large Chinese companies. Many of the companies have close ties to China's communist government, and some have previously been accused by the U.S. of intellectual-property theft.

As Congress cobbles together another round of pandemic relief, it's urgent that, this time, it include safeguards to pinpoint exactly where those tax dollars are going.

The series of unprecedented economic bailout programs earlier this year included the Paycheck Protection Program, a $660 billion attempt to help small businesses continue paying their employees as the pandemic shutdowns cut into their income. By and large it worked, keeping an estimated 50 million Americans on payrolls who might otherwise have ended up on the jobless rolls.

But there have been glitches. Previously, it was revealed that millions of taxpayer dollars meant for small businesses ended up going to large ones, including Ruth's Chris steak houses, Potbelly sandwich chain and the NBA's Los Angeles Lakers. Under public pressure, some of those entities returned the money.

The other dropping shoe comes courtesy of the consulting firm Horizon Advisory, which reviewed PPP data and discovered that among the non-mom-and-pop businesses enriched by the taxpayers were more than 125 Chinese companies that own or heavily invest in entities that got some of the money. In all, those companies — which, by the nature of China's authoritarian system, are often connected to the government — got between $192 million and $419 million. Fully $180 million of it went to at least 32 Chinese companies that got $1 million or more.

Just as big U.S. chains with local outlets were able to cash in, the relief legislation allowed American subsidiaries of foreign companies to apply for the forgivable loans. The difference is that, in the case of China, some of that money inevitably benefits an economic rival with which the U.S. has engaged in an expensive and counterproductive trade war.

The report's authors say that without "appropriate policy guardrails, U.S. tax dollars intended for relief, recovery and growth of the U.S. economy — and small businesses in particular — risk supporting foreign competitors, namely China."

This should be a cautionary tale as Congress builds the next relief package. With Chinese-owned subsidiaries, as with American franchises, the case can be made that the protection of U.S. jobs is the point, and that who is ultimately providing those jobs doesn't matter. But that argument only makes sense if regulators know ahead of time that large and/or foreign entities are behind the applications. Regulators can then structure the loans so the money is strictly saving ground-level jobs and not siphoned off by Wall Street — or Beijing.


Photo credit: AveCalvar at Pixabay

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