Ng Han Guan/AP Photo
Chinese President Xi Jinping sings with his cadres at the closing ceremony for the 19th Party Congress on October 24, 2017.
With congressional enactment of industrial policy legislation intended to help America to bring home production of semiconductors and other advanced products, where does this leave the Biden administration’s overall China policy? Above all, what’s the status on constructing comprehensive industrial policies to counteract China’s targeting of the entire range of economic production and predatory violation of trade laws?
Unfortunately, our government does not speak with one voice. For now, our China policy is something of a crazy quilt, with some genuine advances coupled with other areas of backsliding.
On the highest-visibility policy, the across-the-board tariffs on Chinese exports to compensate for China’s flagrant subsidies, dumping, and theft of intellectual property, the Biden administration has resisted industry pressure to cut the tariffs as a (bogus) anti-inflation measure. The tariffs mostly remain in place, partly to counteract China’s own mercantilism and partly as leverage for some kind of eventual grand bargain that never seems to come.
For the most part, the administration has also resisted solar-user industry pressure to find some way to circumvent the Uyghur Forced Labor Prevention Act. The Xinjiang region of China, home to Uyghurs, produces some 50 percent of the global supply of polysilicon. This past week, the U.N. Human Rights Commission published its long-delayed report on repression of human rights in Xinjiang, documenting extensive abuses including “patterns of torture.”
According to industry sources, U.S. customs has been complying with the law, and has stopped more than three gigawatts of solar panels at the border. That could quadruple by year-end, forcing users to find other sources of supply and increasing pressure on Beijing to cease its persecution of Uyghurs.
But other parts of the U.S. government, notably the Commerce Department, tend to side with industry’s wish to go easy on China. The Wall Street Journal recently published an investigative report documenting the feeble enforcement of export controls of sensitive products.
According to the Journal, of the United States’ total $125 billion in exports to China in 2020, officials required a license for less than half a percent. And of that fraction, the Commerce Department approved 94 percent, or 2,652, applications for technology exports to China. The result: “The U.S. continues to send to China an array of semiconductors, aerospace components, artificial-intelligence technology and other items that could be used to advance Beijing’s military interests.”
One other sweetheart deal recently concluded with Beijing allows very light audits on Chinese firms sold on U.S. stock exchanges. The China Securities Regulatory Commission and U.S. Public Company Accounting Oversight Board (PCAOB) signed an agreement for cooperation on inspecting the audit work papers of U.S.- listed Chinese companies.
The PCAOB is an industry-dominated body known for light-touch regulation. Under legislation enacted in 2020, Chinese companies that do not confirm to U.S. accounting standards are to be delisted from U.S. financial exchanges. When the recent deal was announced, Goldman Sachs put out a release calling it a “regulatory breakthrough” and crowing that the risk of Chinese companies being delisted and now been dramatically cut.
China policy crosses several agencies of government, each with its own agenda, often operating at cross-purposes.
Adding to the complications are recent congressional trips to Taiwan, which achieve no constructive purpose and serve only to rile Beijing. Our military containment of an increasingly aggressive China is operating in its own realm, largely disconnected from the economic issues.
And given China’s ongoing dependence on vast coal power and production—it now emits about 60 percent more carbon dioxide than America and the EU combined—common interests on climate remain a fantasy. The grand bargain sought by some China doves seems more distant and improbable than ever.
Meanwhile, the Chinese government has severe problems of its own. Its strategy of using province-wide lockdowns to contain COVID has had disastrous consequences both for China’s own economy and for China’s role as a global supplier. For reasons that remain somewhat mysterious it still has failed to properly vaccinate its senior population. As a result, supply chain bottlenecks continue.
One good idea has been proposed in testimony to the U.S.-China Commission by researcher Shehzad Qazi of China Beige Book International: Congress should require firms in critical industries to disclose their full list of suppliers to the Commerce Department, in order to create a China Supply Chain Dependency Tracker.
Bottom line: China policy crosses several agencies of government, each with its own agenda, often operating at cross-purposes. Beijing is very adept at playing off one against the other. It might not be a bad idea for the U.S. to have a more coherent and consistent China policy, with one senior official acting as coordinator.
