China remains a long-term strategic threat to the United States and policy towards it should reflect the US government understands the nature of that threat. Unilateral trade concessions do not do that. (Photo by Alex Wong/Getty Images)
Recently the Biden administration issued new answers for Americans invested in Chinese companies with direct ties to Beijing's military. Previously, U.S. policy was that Americans were forbidden to invest in companies included in a "blacklist" of Chinese companies directly involved in China's military, and in producing applications used by the Communist regime to oppress its own people and threaten its neighbors. The new "answers" amount to a wholesale abandonment of a policy Americans of all political stripes supported.
Just ahead of a deadline last Friday for U.S. investors to cease trading in the stocks and bonds of companies officially linked to the Chinese military, the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) quietly notified investors that they would not be punished for holding onto such securities.
The back-pedaling might be the result of successful lobbying by American financial firms unsure whether the rules would allow them to continue to trade these stocks on behalf of their non-U.S. clients and distribute dividends from those stocks to American clients. But it can also be seen as part of a long easing of economic sanctions imposed by the Trump administration, without obtaining any benefit for American prestige or negotiating leverage with China in return.
The 48 companies included on the initial Trump administration blacklist all work directly with the People's Liberation Army, Chinese intelligence, or otherwise provide artificial-intelligence products and services used by Beijing to deny the human rights of its Uighur minority. They include China's three main network operators, China Telecom, China Unicom, and China Mobile. Others include surveillance camera maker Hangzhou Hikvision Digital Technology, and energy and chemical conglomerate Sinochem. While Hikvision and Sinochem's listed subsidiaries are not traded on major U.S. exchanges, they have been included in index funds carried by such giants as Vanguard and BlackRock.
Trump's national security advisor, Robert O'Brien, explained the executive order "serves to protect American investors from unintentionally providing capital that goes to enhancing the capabilities of the People's Liberation Army and People's Republic of China intelligence services." Before leaving office Trump added a second order that banned holding securities in these companies after a one-year grace period.
In June of last year, the Biden administration upped the number of companies on the blacklist to 59, dropping a few companies but adding several others. If anything, the order's justification was even more expansive. "This ... allows the United States to prohibit – in a targeted and scoped manner – U.S. investments in Chinese companies that undermine the security or democratic values of the United States and our allies," the White House said in a press release.
Yet, thanks to the FAQ updated by the Treasury Department, that "targeted and scoped manner" now means essentially nothing. There is no penalty for investors who continue to hold these stocks after the grace period, which ended in June 2022. All the order says is they may not buy any more shares, nor can they (after the grace period) sell what they have, without OFAC approval.
Just prior to this announcement, the Chinese communist government had committed large sums to buying stock in the blacklisted companies through the Shanghai Stock Exchange in advance of the American investment ban.
The problem is, of course, that moves like this should be offered only in negotiation with the Chinese over things important to American national security, and the peace and freedom of our allies. Giving up on it because it was "confusing" to international financial institutions is a sad excuse.
And it comes at a time when the Biden administration has also announced a tariff waiver on solar panels coming from Cambodia, Malaysia, Thailand, and Vietnam. This action, explained as a "bridge" while domestic solar panel manufacturing ramps up, re-opens a previously closed door to China's dumping solar panels into the U.S. market.
The Commerce Department was asked to investigate exactly that after a complaint from Auxin, a small domestic solar panel provider, that the imports coming from those southeast Asian nations were China's attempt to get around the sanctions already in place against it. Auxin's CEO, Mamun Rashid, criticized the most recent White House move as having "opened the door wide for Chinese-funded special interests to defeat the fair application of U.S. trade law." Top U.S. panel manufacturer First Solar said the administration's move "undermines American solar manufacturing."
The seeming pattern of the Biden administration is some tough talk and fortissimo announcements of actions they will take against China's predatory trade strategy and puppet master capitalism, followed by quiet walk-backs and carved out exemptions, delivered at pianissimo on government agency websites.
At the same time, China is these days more belligerent, more aggressive, and more of a problem than ever. What exactly is the Biden administration getting for its quiet retreat from the tougher trade policies of the Trump administration?
Not a more conciliatory stance on Taiwan. China will "definitely not hesitate to start a war" over a Taiwan split, Chinese Defense Minister General Wei Fenghe warned the U.S recently.
Not help for American business. U.S. Deputy Treasury Secretary Wally Adeyemo said this week that the Biden administration is considering whether to cut some tariffs on Chinese goods, but needs to balance short-term price reduction goals against the longer-term need to address unfair competition from China.
China remains a long-term strategic threat to the United States and policy towards it should reflect the US government understands the nature of that threat. Unilateral trade concessions do not do that.
Peter Schweizer, President of the Governmental Accountability Institute, is a Gatestone Institute Distinguished Senior Fellow and author of the new book, Red Handed: How American Elites are Helping China Win.