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Economy

Takeaways on Anti-China Laws

Jun 24, 2021
  • Wu Zhenglong

    Senior Research Fellow, China Foundation for Int'l Studies

Recently, the U.S. Senate passed the United States Innovation and Competition Act of 2021, a compilation of anti-China laws that runs more than 1,400 pages. It includes the CHIPS and ORAN 5G Emergency Appropriation; the Endless Frontier Act; the Strategic Competition Act; Securing America’s Future Act; Meeting the China Challenge Act; and other provisions. In a word, the bill aims to harness all areas of national power, including science and technology, diplomacy, military and trade to engage in an all-around, systematic competition with China in an effort to contain China’s development and consolidate the U.S. position as the world’s sole superpower. It marks the advent of comprehensive containment against China through legislation.

The bill will be submitted to the House of Representatives for consideration, where further disputes, additions, deletions and back and forth are expected. Yet the main body of the bill will remain intact. There is a good chance it will pass.

The bill has two main parts.

First, it features more input in innovation and comprehensive enhancement of the competitiveness of U.S. science and technology. The bill allocates more than $50 billion to increase the production of semiconductors and communications equipment. It requires the National Science Foundation to strengthen research in 10 key technological fields, including artificial intelligence, machine learning, semiconductors and quantum science.

It also suggests the allocation of $29 billion in fiscal 2022 to 2026 for the newly formed NSF Division of Technology and Innovation for research in key technology focus areas at university technology centers, along with scholarships and academic awards, promoting technology transfer among academic institutions, establishing and operating the cooperation platform and technology research and development. Also, the NSF's traditional arms would receive a total of $52 billion over the next five years.

These provisions are intended to ensure the U.S. occupies the world’s commanding heights in key technology fields, maintaining a decisive lead over China’s R&D, and continuing to impose a blockade on China’s vital technologies.   

To prevent high-tech leaks, the bill calls for the creation of an Office of Research Security and Policy at the NSF to coordinate all research security policies, and to specify sanctions against intellectual property theft and cybersecurity breaches. The bill also prohibits federal employees who take part in China's talent recruitment program from applying for federal research money and calls for identifying whether optical transmission equipment manufactured in China poses a risk to national security.

Second, U.S. competition with China is all-dimensional. The bill aims to harness every diplomatic, economic, military and value-based tool at its disposal to curb or delay China’s growth momentum based on a comprehensive effort to improve U.S. competitiveness.

On the diplomatic front, the bill reaffirms the strengthening of the Indo-Pacific security partnership, especially the quadrilateral mechanism comprising the United States, Japan, India and Australia; increases military assistance to the Indo-Pacific region by transferring equipment and ships; and rises to challenges posed by China in the Western Hemisphere, Europe, Asia, Africa, the Middle East, the Arctic and Oceania.

Economically, the bill requires the Department of Commerce to establish a list of Chinese intellectual property violations and government subsidies, review the list of items under export control and determine whether additional export control measures are necessary.  The bill requires a comprehensive review of weak links in the U.S. supply chain to wean the U.S. off dependence on China. It also includes an alternative plan to the Belt and Road Initiative.

Militarily, the bill strengthens coordination and cooperation with U.S. allies in the field of arms control; provides for monitoring China’s overseas military installations; and regularly reports on China’s development in ballistic missiles, hypersonic aircraft, cruise missiles, conventional forces, nuclear forces, space forces, cyber forces and other strategic fields.

On the ideological front, the bill allocates $300 million a year from 2022 to 2026 to counter the “malign” influence of the Communist Party of China.

The bill blatantly interferes with China’s internal affairs by declaring Taiwan to be “a vital part of the U.S. Indo-Pacific strategy,” stating that the U.S. should "place no restrictions on the routine and direct engagement with Taiwan" and that the U.S. government should communicate with Taiwan in the same way as it does with the governments of other countries. The bill allocates $10 million in fiscal 2022 to support “democracy” in Hong Kong and impose sanctions on China over the so-called Xinjiang issue.

Here is my take:

First, whole-government thinking underpins this piece of legislation. The bill touches on all executive branches of the U.S. government and sets out their missions in order to bolster U.S. innovation and competition. The main idea is that the U.S. must prevent China from achieving regional hegemony in the Indo-Pacific in the coming decades and ensure that federal budgets sustain a competitive U.S. strategy against China.

Second, technology is another key battlefield of competition. The bill holds increased investment in U.S. science and technology as the key to outcompeting China. According to Senate Majority Leader Chuck Schumer, who is the sponsor of the bill, it “will rapidly improve American competitiveness and represent one of the most significant government investments in American innovation and manufacturing in generations.”

In addition, the bill curbs and weakens China’s ability to develop science and technology through the restructuring of the industrial chain, heightening sanctions on Chinese technology companies and cutting off the supply of sensitive high-tech products to China. Fundamentally, the bill intends to keep China’s industrial chain at a medium-low level and slow China’s industrial upgrading. If trade is the main battleground in its rivalry with China under the Trump administration, technology could well be the second frontier under the Biden administration. 

Third, the bill is a compendium of U.S. strategies to contain China. It not only contains statements of principle but also sets out specific measures, including interagency coordination, funding needs, supervision and inspection requirements and work schedules. It is therefore highly operational.

Fourth, a backlash is expected. In order to clear the legislative floor, the bill goes to great lengths to demonize China and play up the “China threat.” Replete with Cold War-style zero-sum thinking, it stokes fear and anxiety about the Chinese government and the CPC, as well as Chinese businesses. Such shortsighted and irresponsible actions by U.S. politicians will cause a backlash by further fueling racism, tearing apart the U.S. social fabric and stoking hate crimes targeting Chinese and Asian Americans, which will cause more turbulence in U.S. society.

Fifth, the bill violates the principle of fair competition by adopting double standards. On one hand, it accuses China of subsidizing its enterprises and requires the U.S. Department of Commerce to produce a list of Chinese government subsidies. On the other, it allocates funds generously to support American semiconductor enterprises. In addition, the bill also proposes that “Buy America” concept applies to construction materials used in infrastructure projects, which clearly discriminates against foreign products. The bill's “America first” approach is utter protectionism that distorts global markets, aggravates unfair competition and disrupts global supply chains.

Sixth, China should by no means be led astray by the U.S.. Since taking office, Biden has largely inherited the Trump administration’s hard-line policy toward China, even going further in some cases. Biden talked about extreme competition with China, and some actions by his administration echo the bill. For example, Biden directed the intelligence community to conduct an investigation into the source of COVID-19, and he signed an executive order to expand the number of blacklisted Chinese companies from 44 to 59. These are barred from trading or otherwise doing business with U.S. companies. Also, on his watch, three U.S. senators visited Taipei on a military transport plane.

Although the U.S. side claimed that it will be “competitive where it should, cooperative where it can and adversarial where it must,” it seems the only game in town is competition and rivalry. The rationale is that should Biden walk away from a hard-line position on China, he would risk losing support from the centrist and right wings, and his budget proposal and infrastructure bill may fall by the wayside. This may ultimately jeopardize his party’s chance of winning in the midterm election.

We should cast aside unrealistic expectations, maintain strategic focus and put our own house in order. When the conditions are right, both sides can sit down and talk through the rules and parameters for bilateral engagement to ensure fair and constructive competition and forestall a freefall in China-U.S. relations. 

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