The Biden administration is working to reduce investment and trade in China, but it is moving slowly

Comment

The Biden administration has been taking steps to curb Chinese investment and trade to slow Beijing’s bid for dominance, but has been slow with piecemeal and often uncoordinated legislation.

American money supports the Chinese Communist Party (CCP) on both sides of the Pacific. China buys up assets in the United States while American investors and consumers fund the CCP. Restoring US factories can be countered because it would reduce US exposure to CCP-controlled supply chains and cut off the funding the CCP needs for its global ambitions.

Global supply chains are still struggling with two years of COVID-19 restrictions in and outside of China. And the situation could worsen as the CCP claims sovereignty over the Taiwan Strait, which accounts for about a third of the world’s shipping. The United States claims the Taiwan Strait is an international waterway. If the CCP restricts access to the strait, it will deal a severe blow to international trade.

Relations between Washington and Beijing are strained not only in the waters around Taiwan, but also in the Indo-Pacific, where the CCP is fighting for influence and control. The security agreement signed between the CCP and the Solomon Islands may soon allow the People’s Liberation Army (PLA) to build its next overseas base. Countries like the Federated States of Micronesia have long been allies of the US. They are now being offered money and other incentives to break their ties with the United States and join the CCP camp.

Chinese Ambassador to the Solomon Islands Li Ming (right) and Solomon Islands Prime Minister Manasseh Sogavare cut a ribbon during the opening ceremony of a Chinese-funded national stadium complex in Honiara on April 22, 2022. (MAVIS PODOKOLO/AFP via Getty images)

The CCP’s overseas expansion is driven by a state-level campaign involving all of its assets: human capital, industrial production, propaganda, disinformation, soft power, military, trade, and investment. Ending the CCP’s access to cash would hamper the country’s military buildup and reduce the influence it can buy in small developing countries through loans and investments.

The CCP’s propaganda efforts were reported by RenĂ©e DiResta, research manager at the Stanford Internet Observatory. Diresta confirmed that CCP-backed disinformation campaigns are active in the United States by using fake social media accounts and paid wumao accounts to influence public opinion in the US.

For this reason, the Trump administration has imposed restrictions on the CCP’s soft power initiatives in America. As a result, most of the Confucius Institutes in the United States have been closed and CCP state media officials have been required to register as agents.

The Committee on Foreign Investment in the United States (CFIUS) has the authority to review and block foreign investment on national security grounds. These restrictions apply to critical technology, personal data of US citizens or infrastructure. In 2018, then-President Donald Trump strengthened the powers of CFIUS. US federal agencies are now barred from using certain Chinese telecommunications equipment and buying certain Xinjiang-made products on the grounds of supporting human rights.

Lawmakers are working on a bipartisan bill that would give the government broader powers to investigate and restrict American investments that could threaten national security in China. The bill would be a huge blow to Beijing’s Made in China 2025 plan and encourage American factories in China to leave. Meanwhile, more than 100 business leaders have called on Washington to pass a China Competition Bill to improve US competitiveness.

Photo by Epoch Times
People walk past a billboard advertising Chinese technology company Huawei at the PT Expo in Beijing, China, on October 14, 2020. (Mark Schiefelbein/AP Photo)

The US Export Control Reform Act of 2018 included provisions to evaluate and control exports of emerging and foundational technologies. This prevents the US from selling fintech, batteries and artificial intelligence to China. Export controls are expected to become tighter in 2022. And since the United States revoked Hong Kong’s special status, the same rules that apply to China will largely apply to trade and investment in Hong Kong.

The US Hong Kong sanctions program prohibits Americans from doing business with numerous Chinese and Hong Kong employees. A law banning most imports from Xinjiang went into effect last month. In addition, there are bans on investing in securities and derivatives related to Chinese military-industrial companies. In addition, US organizations are prohibited from doing business with Chinese organizations that subvert democracy or have been accused of human rights abuses.

Despite a crackdown on investment and trade, the Biden administration is considering reducing some of China’s tariffs to reduce inflation caused by the administration’s disastrous economic policies over the past 18 months. Removing the tariffs will make some Chinese goods cheaper in the United States. Still, to fight inflation, the Federal Reserve must raise interest rates, as it did, and possibly increase bank reserve requirements. Meanwhile, the White House will have to stop spending and, above all, stop borrowing.

The Chinese regime is still a political and economic threat to the United States, so removing tariffs would not be justified. U.S. Trade Representative Catherine Tye proposed on April 22 that the tariffs be maintained because they are “a significant piece of leverage” against the CCP.

Maintaining tariffs is one way to hit the CCP in the wallet. Another is to encourage American companies to relocate. In 2020, reshoring exceeded foreign direct investment by nearly 100 percent. US restrictions on China’s trade and investment will accelerate the reloading trend.

The views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.

Antonio Grachefo

I follow

Antonio Grazefo, PhD, has spent more than 20 years in Asia. He is a graduate of Shanghai Sports University and holds a Master of Business Administration degree in China from Shanghai Jiaotong University. Gracefo works as an economics professor and economic analyst in China, writing for various international media outlets. Some of his books on China include Beyond the Belt One Road: China’s Global Economic Expansion and A Short Course in the Chinese Economy.

Leave a Comment

Your email address will not be published.