Prof. ST Hsieh
Director, US-China Energy Industry Forum
March 7, 2022
The following news coverage details the background of Biden’s China trade policy is stuck for now. So is Biden’s China Strategy. However, it can be argued that if Biden had already set his China Strategy, then trade policy would follow. It appears that Biden administration is still engulfed by internal divisions. Quote: “The disagreement is just the latest for an administration unable to agree on a policy on China and economic engagement in Asia.”
Trade policy debates are normal in any administration, but Biden as the President of USA should define the goal and approach of any policy. Biden’s China trade policy is essential for competing with China. A clear trade policy still takes manpower and time to implement. But it will also enable China to better manage the US-China bilateral relations, which are very complex.
“The second industry official with knowledge of White House talks said the Ukraine invasion has taken much of the time of national security officials such as Sullivan and those at the State and Defense departments.” This is a clear test of Biden administration’s bandwidth of “we can talk and chew at the same tome!”
Unilateral actions may be a show of strength and political willingness. But unilateral actions also draw stern responses that further damage the bilateral relation. If the US trade policy is genuinely intended for resolving bilateral trade issues, rather than grandstanding for domestic consumptions, sincere dialogue and consultation with China could be much more productive.
Anyway, a re-set of US-China relation is due.
White House split delays plans for investment controls on China
Gavin Bade Mon, March 7, 2022, 9:00 AM
Disagreements between key White House national security and economic officials are delaying the Biden administration’s plans for new rules on American banks that invest in Chinese technology firms and startups.
National security officials, led by national security adviser Jake Sullivan, have been advocating for months for President Joe Biden to issue an executive order that would prohibit many American investments in Chinese technology firms and startups, arguing it is needed to ensure U.S. banks aren’t helping Chinese firms develop software or devices later used by the People’s Liberation Army.
But the Treasury and Commerce departments are pushing back, said two industry officials with knowledge of the talks, arguing that new rules would dramatically reduce new U.S. business in China and put American firms at a competitive disadvantage to European and Asian banks that will continue to access the world’s second largest economy.
Treasury and Commerce declined to comment but a senior administration official said that any claims of an impasse are “inaccurate” because no final policy decisions have been made. “There are concerns across the board about the impact of outbound U.S. investment flows and this is a focus for us, from Treasury to Commerce to the White House,” the official said.
The disagreement is just the latest for an administration unable to agree on a policy on China and economic engagement in Asia. Those disputes have persisted for months, and risk halting administration action against an increasingly aggressive Chinese government just as global economic and diplomatic tensions rise.
“The average American investor has no idea that their own money is financing the [Chinese government’s] military machine and genocide-enabling surveillance state through a deceptive web of hundreds of malign Chinese companies and thousands of their subsidiaries,” said Keith Krach, a former undersecretary of State who pushed for government restrictions on investments in China during the Trump administration.
Though some mutual funds and investors have started boycotting select Chinese firms, “further government action is critical to accelerate this momentum,” he added.
Krach and others following the investment issue say the dispute dates back to the Trump White House, when Treasury Secretary Steven Mnuchin pumped the brakes on similar plans to clamp down on capital flows into Chinese firms.
“NSC wanting something [on China] and Treasury and Commerce opposing it is standard,” said Derek Scissors, a fellow at the American Enterprise Institute and a member of the U.S.-China Economic and Security Review Commission, a federal panel created by Congress to monitor the China relationship. “The whole Trump administration consisted of NSC flailing around because Treasury and Commerce wouldn’t do anything.”
The Biden administration has considered actions since at least last summer, when Sullivan said the administration was considering ways to crack down on companies that “circumvent” export rules or help fund China’s “technological capacity.”
The White House says those discussions are ongoing, but the delay has frustrated China hawks on the Review Commission, which has typically advocated a hard line on Beijing, and on Capitol Hill, where lawmakers are considering similar legislation to review U.S. supply chains in China as part of a broad economic competitiveness package. Now, lawmakers are concerned Russia’s invasion of Ukraine will further distract congressional efforts and White House deliberations alike.
“We should have acted on this earlier anyway, but now something else has intervened,” said Sen. John Cornyn (R-Texas), who authored legislation to increase oversight of supply chains in China with Sen. Bob Casey (D-Penn.). “And something else will intervene [again] if we don’t get to it.”
Part of the delay, the lawmakers and industry officials say, may be due to the White House waiting to see how Congress handles Cornyn and Casey’s legislation, which would set up a federal commission to review supply chains that run through China. The bill has been delayed for more than a year amid opposition from corporate groups, who have argued it is overly broad, but it is now under consideration as part of Congress’ broad China economic competitiveness legislation, slated to be finalized this spring.
“The administration has probably been watching the chances of congressional passage of an outbound investment review provision,” said David Thomas, senior vice president at the US-China Business Council, which opposes the provision included in the House’s version of the legislation. “More broadly, there’s a lot more political momentum this time behind the [China competitiveness bills] and it’s my sense that the administration has been pushing more in recent months for passage.”
Since last year, the White House has pressured lawmakers to approve the broad China competitiveness legislation which is anchored by a $52 billion semiconductor manufacturing fund prioritized by Biden and congressional leaders. But the administration has not taken a position on whether the Casey-Cornyn legislation should be a part of that package or considered separately.
Even if Casey and Cornyn’s bill is approved, trade veterans say that executive action from Biden may still be necessary to address concerns about American banks funding Chinese tech development.
As written, the bill would focus more on supply-chain security, such as U.S. firms building factories or entering joint ventures in the medical, defense or energy industries. But it would do little to monitor the financial flows into Chinese technology firms that the White House would likely target with executive action.
Though no executive orders have been finalized, one of the industry officials with knowledge of administration discussions said that eventual action will likely cover American banks, mutual funds and other financial institutions investing in Chinese semiconductors, artificial intelligence, facial recognition and other surveillance areas. It would likely derive its authority from the International Emergency Economic Powers Act, which gives the president broad authority to limit trade in economic emergencies, and could also include export controls to limit the shipment of the technologies themselves, in addition to funding flows.
But the timing of any action remains unclear. The second industry official with knowledge of White House talks said the Ukraine invasion has taken much of the time of national security officials such as Sullivan and those at the State and Defense departments, which would also have a role in any eventual executive order. Even when the issue returns to the front burner, Treasury and Commerce’s opposition may be tough to overrule, given that they are likely to have leading roles in carrying out new export or investment controls.
“The problem here, and the problem in the previous administration … is that I doubt NSC has the knowledge to fight with Treasury over this,” Scissors said. “Treasury is the implementing agency, they have the expertise and how to do this. They have the data — such that we have on this — which is very poor. And NSC doesn’t have any of those things. So we’ve been down this road before.”
China has long expressed its displeasure with what it calls the US’s “financial hegemony” and its corresponding ability to slap sanctions on foreign countries.
Now, as the US and Europe hit Russia with unprecedented sanctions over its invasion of Ukraine, Chinese officials, academics, and experts are grappling with the implications of the unfolding full-scale global economic and financial war.