After railing at Beijing for a decade about Chinese dominance in the solar panel sector, Washington now is complaining that China heavily subsidized its electric-vehicle (EV) and semiconductor makers to boost global market shares – in the process creating overcapacity that also helped knock prices below competitors’ costs.
At the beginning of this year, the US Commerce Department’s Bureau of Industry and Security (BIS) launched a new survey to identify how US firms are sourcing current-generation and legacy chips (28 nanometers or above).
On January 30, US Commerce Secretary Gina Raimondo warned that Chinese EVs can pose a national security threat to the US as they can collect huge amounts of personal information. It’s the first time that Washington raised the matter to national security level.
And, now, senior economic officials from the United States and China reportedly are scheduled to meet face-to-face in Beijing this week to discuss those and other bilateral trade issues.
A five-person delegation from the US Treasury, led by Undersecretary for International Affairs Jay Shambaugh, will have “frank conversations” with Chinese counterparts around issues including China’s industrial overcapacity, which the Americans fear could flood international markets with cheap products, the reports said.
US officials will use the chance to express concerns about China’s use of non-market economic practices such as government subsidies, an unnamed Treasury official told CNN and the New York Times.
Overcapacity
Some commentators said western countries are worried that they will have to pay the price one day for their over-reliance on cheap Chinese goods, just as Europe struggled to stop using Russian gas when the Ukraine war broke out in 2022.
Other commentators said the so-called oversupply situation in the EV sector was caused by slower-than-expected global demand, instead of China’s industrial policy. They said most consumers still prefer to use diesel and gas cars.
A Zhejiang-based columnist surnamed Jin says in an article published in November 2023 that the US should not blame China’s subsidy policy for the global overcapacity of legacy chips.
Instead, he says, the US should blame itself as its chip export ban forced China to shift to make legacy chips. He says all countries should encourage their chipmakers to add value to their products and increase cooperation with other nations.
Hard to compromise
This week’s meeting will not only pave the way for Yellen to visit China again this year but also help push forward a phone call between US President Joe Biden and Chinese President Xi Jinping.
After US National Security Adviser Jake Sullivan met with Chinese Foreign Minister Wang Yi in Bangkok on January 26-27, he told the media on January 31 that Xi and Biden will talk by phone “relatively soon.”
But Chinese columnists do not pin much hope on the outcome of this week’s meeting.
“For some time, the US has used groundless allegations to add Chinese companies to its Entity List and Chinese military enterprise list,” Wang Jin, an associate professor at the Northwest University’s Institute of Middle Eastern Studies, says in an article published on Tuesday.
“The US only wants to suppress China’s technological development and increase its own bargaining chips,” he says. “Although the US delegation’s coming visit to China showed that Sino-US relations are improving, we won’t rule out that Washington will then impose new sanctions on China.”
Wang points out that Russia is also planning to send a delegation to Beijing to celebrate the Chinese New Year, which will begin on February 10.
“China is having warmer relations with the US but will not leave Russia alone. China and Russia can see each other’s true heart after facing challenges together,” he says. “If the US continues to add economic pressures on other countries, these countries will only boost their ties and isolate the US.”
A Hunan-based columnist using the pen name “Xu Sanlang” says in an article published last month that the chance that Chinese or US economic officials will compromise on the other side’s demands in coming meetings is very slim.
“The US curbs had an unfavorable effect on our economy,” Xu says. “Due to extra tariffs, the share of Chinese products in the United States’s imports fell from 22% in 2017 to 16% in 2022.”
He says the US restrictions also have created a “chilling effect” on the Chinese economy as global firms think diversified their investments to other countries to reduce their risks in China.
“The Sino-US economic relations in technology, manufacturing and trade sectors will continue to deteriorate,” he says. “We have already responded to this trend by reducing our reliance on the West’s core technologies.”
He says, as Americans’ negative views on China have recorded high, it’s unlikely that the US will cancel its chip export ban against China, sanctions imposed on Chinese firms and extra tariffs imposed on Chinese goods.
Last November, a survey conducted by the Chicago Council on Global Affairs showed that 58% of Americans viewed China’s development as a world power as a critical threat to the vital interest of the United States, the highest level since 1990.
Working group
This week’s meeting will be the third round between economic officials from the two countries in an economic working group launched last September after US Treasury Secretary Janet Yellen’s trip to China.
Separately, a financial working group established at the same time held meetings in Beijing on January 17-18, focusing on anti-narcotics and anti-money laundering issues.
Read: US-China chip war may extend to legacy chips
Read: US calls Chinese EVs a posssible security threat
Follow Jeff Pao on Twitter at @jeffpao3