There was plenty of China talk in February – Republican-run Congressional hearings, Democratic-run hearings, and new information from the Biden administration. Of course it takes time to turn talk into actions. But it’s unlikely the actions will be meaningful. The famous bipartisan China consensus is to rant and rave, and not do anything that might actually come at a price.
The People’s Republic of China has the world’s 2nd largest economy, 2nd most powerful military, and is led by a dictator-for-life who intentionally hearkens back to a man who caused mass starvation. Winning even a peaceful contest would require sacrifices. Preparing for conflict to try to deter Xi Jinping requires more. Sacrifice is not what most American politicians have in mind. Instead, they spout anti-China rhetoric, while angling for a contest of convenience.
The Department of Commerce called for tens of billions of dollars to vastly boost domestic semiconductor production, as a vital national interest. Given China’s intent to globally dominate at least low-end chips, they may have been right. But it turns out that’s not enough of a goal, challenging as it will be. Commerce also wants better daycare as part of the package. This, of course, will reduce willingness to produce here, undermining what was supposed to be the point.
The administration has treated supply chains similarly, combining necessary and difficult steps to secure chains with political priorities that make doing so even more difficult. While using China as cover for standard policies is no surprise, it means far less gets done. Export controls on semiconductors were announced to great fanfare last October, with promises of more to come. Five months later, we don’t have final rules just for chips.
In licensing, Commerce has gone from terrible to perhaps mediocre. Last year, it accepted 70 percent of applications to export controlled items to the PRC. Not exactly tight restrictions but this still appears to be a substantial improvement over the Trump Commerce Department performance, where the number may have been over 90 percent. “Trade war.”
In the past, at least, part of the blame has been with the Congress. Being placed on the Entity List just requires a license application, but many Members of Congress have for years pretended it’s a “blacklist” blocking business with designated firms. Instead, tens of billions worth in licenses were granted to these firms, with most also eligible for American investment. The Entity List has always been fraudulent, and Congress has to now willingly accepted that.
Will the House Select Committee on China mean the US gets more serious? Doubtful. The Select Committee has members intensely concerned about competing with the PRC. And they have allies elsewhere in Congress. But the Select Committee also has no jurisdiction – it can only talk, not act. This is the ideal outcome for those who want to milk China politically while having no obligation at all to back up their words.
Possibly the most important House committee, Financial Services, held a China hearing in early February. According to the Republican chairman and Republican-called witnesses, the top China threat is actually the US responding in any serious way to China. The US should face up to the military buildup, domestic and international repression, and economic predation by, for example, continuing to invest freely in the PRC.
With this from some Republicans, the Biden administration feels no pressure to genuinely compete. An executive order is many months overdue to address the $1+ trillion of money the US has invested in the PRC. It may prove almost entirely empty. Mass subsidies by Beijing – can we pretend we never brought those up? No political consequences from doing nearly nothing means nearly nothing gets done.
Other consequences are coming. China will steal IP, subsidize production using that IP and drive advanced American companies out of business. It will spread repression. It will more intensely target Taiwan. Policy-makers who take this seriously must propose responses that involve some pain, because that’s what’s required for the US to win. Policy-makers who don’t take China seriously are easy to spot. They’ll be pushing some domestic agenda, tilting at windmills, and, above all, talking.
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