Time to limit US investment in China – Community News
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Time to limit US investment in China

The US-China Economic and Security Review Commission is a little gem of an independent government body that has functioned as the loyal opposition to conventional business wisdom regarding China’s trade since the commission was established by Congress in 2000. The bipartisan committee holds hearings and produces in-depth investigative reports on how China’s Leninist capitalism actually works, and the threat to US national interest.

Their latest annual report points out that President Xi Jinping has tightened control over China’s nominally private sector, and as a result, US investment in China is operating under conditions even more emphatically mandated by the Chinese Communist Party.

Among the 15 priority recommendations, the report calls for controls on US private investment in China, as well as the creation of a new government agency that could review and block investments harmful to national security. It blames the Department of Commerce for not fulfilling this function as required by existing law.

China policy is one of the few areas of dual concern and cooperation. The Committee on Outbound Investment Assessment’s recommendation closely follows legislation co-sponsored by Senators Bob Casey, a Pennsylvania Democrat, and John Cornyn, a Texas Republican. They are trying to tie their bill to the mandatory National Defense Authorization Act.

That maneuver was attempted by Senator Chuck Schumer, to get the bipartisan U.S. Innovation and Competition Act through Congress. The bill passed the Senate but has been bottled in the House, where Speaker Nancy Pelosi, as an alternative to transferring to the Defense Authorization Act, has now agreed to vote the measure separately.

The only thing missing from Schumer’s bill is control over US private investment in China, either directly or through stock purchases. Cutting stock or completely banning investment in a variety of vehicles directly or indirectly controlled by the Chinese state and the Communist Party would be a sign that the US is getting serious as well as strategic.

The mainstream press is of little help. It’s been about 20 years behind the curve to understand how the Chinese system actually works, and persists in mixing Biden’s targeted industrial policy with Trump’s blunderbuss jingoism. In this piece, Time economics writer Binyamin Appelbaum looks at the short-term costs of tariffs rather than seeing them as part of a long-term strategic policy to change China’s behavior.

Writers like these are trapped in the unreal assumptions of Econ 101. They should stay after class and read US China Commission reports.

November 29, 2021