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

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The Biden administration is taking steps to curb China’s investments and trade to slow Beijing’s quest for dominance, but progress is slow with piecemeal and often uncoordinated legislation.

American money supports the Chinese Communist Party (CCP) juggernaut on both sides of the Pacific. China is buying up assets in the United States while American investors and consumers fund the CCP. Restructuring American factories can counteract this, as it would reduce US exposure to CCP-controlled supply chains and cut the CCP’s funding it needs for its global ambitions.

Global supply chains are still affected by two years of COVID-19 restrictions inside and outside of China. And the situation could get worse if the CCP claims sovereignty over the Taiwan Strait, which accounts for about a third of the world’s shipping. The United States claims the Strait of Taiwan is an international waterway. If the CCP restricts access to the straits, 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 struggling for influence and control. The Security Agreement signed between the CCP and the Solomon Islands could soon allow the People’s Liberation Army (PLA) to set up its next overseas base. Countries like the Federated States of Micronesia have long been allies of the US. Now they are being offered cash and other incentives to break their ties with the United States and join the CCP camp.

China’s Ambassador to Solomon Islands Li Ming (R) and Solomon Islands Prime Minister Manasseh Sogavare cut a ribbon during the opening ceremony of a China-funded national stadium complex in Honiara April 22, 2022. (Mavis Podokolo/AFP via Getty Images)

The CCP’s overseas expansion is being fueled by a state-level campaign using all of its assets: human capital, industrial production, propaganda, disinformation, soft power, military, trade and investment. Cutting off the CCP’s access to cash would hamper the country’s military build-up and reduce the influence it could buy through loans and investments in small developing countries.

Renée DiResta, the research manager at the Stanford Internet Observatory, has reported on the CCP’s propaganda dissemination efforts. Diresta confirmed that CCP-backed disinformation campaigns were active in the United States, using fake social media accounts and paid Wumao accounts to sway US public opinion.

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

The Committee on Foreign Investment in the United States (CFIUS) has the power to screen and block foreign investments on national security grounds. These restrictions apply to critical technology, US Personal Information, or infrastructure. In 2018, then-President Donald Trump strengthened the powers of CFIUS. Now US federal agencies are barred from using certain Chinese telecommunications equipment and buying certain Xinjiang-made products on grounds of human rights support.

Lawmakers are working on a bipartisan bill that would give the government broader powers to investigate and restrict US investments that could threaten national security in China. The bill will deal a major blow to Beijing’s Made in China 2025 plan and encourage US factories in China to exit. Meanwhile, more than 100 business leaders have asked Washington to pass a Chinese competition law to improve US competitiveness.

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

The US Export Control Reform Act of 2018 included provisions to assess and control exports of emerging and enabling technologies. This prevents US sales of fintech, batteries and artificial intelligence to China. Export controls are expected to become stricter in 2022. And since the United States has lifted Hong Kong’s special status, trade and investment in Hong Kong are largely governed by the same rules as China.

The US-Hong Kong sanctions program bars Americans from doing business with several Chinese and Hong Kong officials. A law banning most imports from Xinjiang came into effect last month. In addition, there are bans on investing in securities and derivatives related to Chinese military-industrial companies. In addition, US companies are prohibited from doing business with Chinese companies that undermine democracy or are accused of violating human rights.

Despite the crackdown on investment and trade, the Biden administration is considering cutting some of China’s tariffs in a bid to stem inflation caused by the administration’s disastrous economic policies over the past 18 months. The elimination of tariffs will make some Chinese goods cheaper in the United States. To combat inflation, however, the Federal Reserve will need to raise interest rates, as it has, and potentially raise bank reserve requirements. In the meantime, the White House must stop spending and, most importantly, borrowing.

The Chinese regime still poses a political and economic threat to the United States, so eliminating tariffs would not be justified. US Trade Representative Katherine Tai suggested on April 22 that the tariffs should remain in place because they are “a significant leverage” with the CCP.

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

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

Antonio Graceffo

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Antonio Graceffo, Ph.D., has spent more than 20 years in Asia. He is a graduate of Shanghai University of Sport and holds a China MBA from Shanghai Jiaotong University. Graceffo works as an economics professor and China economic analyst and writes for various international media. Some of his books on China are Beyond the Belt and Road: China’s Global Economic Expansion and A Short Course on the Chinese Economy.

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