U.S.-China Policy Update, Aug. 10, 2023
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U.S.-China Policy Update, Aug. 10, 2023

Brownstein Newsletter, Aug. 10, 2023

 

What to Watch: Aug. 7 - 18


Biden Issues Outbound Investment Executive Order. On Aug. 9, President Joe Biden issued a long-awaited executive order (EO) that prohibits some U.S. investments in China. The EO will require reporting for certain transactions while prohibiting others that have the “potential to significantly advance the military, intelligence, surveillance or cyber-enabled capabilities of countries of concern.” Three categories of national security technologies are identified as falling under the EO: semiconductors and microelectronics, quantum information technologies and certain artificial intelligence systems. In an annex to the EO, President Biden identified China as a “country of concern.” Along with the EO, the Treasury Department issued an Advanced Notice of Proposed Rulemaking (ANPRM) to provide clarity on the scope of President Biden’s executive order and to allow for public input prior to the program going into effect. The ANPRM both provides an overview of the framework for implementation of the program and details technology sub-sets within the three national security technology categories identified in the EO. The EO follows the July 25 Senate vote to adopt the outbound investment-focused amendment to the National Defense Authorization Act (NDAA) filed by Sens. John Cornyn (R-TX) and Bob Casey (D-PA). While the amendment was adopted 91-6, it may face challenges during the conference process as some House Republicans will only support an outbound investment amendment that allows for investments to be blocked. Notably, the EO allows for the prohibition of transactions, a provision not included in the amendment. Additionally, the EO has a narrower scope in terms of targeted national security industries. The scope and implementation of the EO is not final, and the public will have 45 days from the publication of the ANPRM in the Federal Registrar to provide comments.
 
Biden Signs U.S.-Taiwan Trade Bill into Law. On Aug. 7, President Biden signed the U.S.-Taiwan Initiative on 21st Century Trade First Agreement Implementation Act into law. However, Biden said that certain areas of the act “impermissibly infringe” on his presidential authorities and are therefore “non-binding.” President Biden’s response to the act is likely due to the provision that solidifies Congress’ role in trade policy as it requires any additional agreements on the matter to receive congressional approval. President Biden’s statement has caused some tension to arise among members of Congress as they look to reaffirm their role in U.S. trade policy, despite President Biden’s statement. On Aug. 8, Senate Finance Committee Chair Ron Wyden (D-OR) said in a statement that Congress has the “sole authority … to regulate commerce with foreign nations.” Sen. Mike Crapo (R-ID) had a similar sentiment in stating that “the Constitution vests Congress—not the president—with authority over trade policy.” It is unclear how any future agreements would be handled by both branches at this time; however, the U.S. trade representative said they “remain committed to maintaining close consultations and cooperating with Congress across its negotiations and anticipates being able to follow the provisions set out in the Bill.”
 
Biden to Host Trilateral Leaders’ Summit. Last week, the White House announced that President Biden will host Prime Minister Fumio Kishida of Japan and South Korean leader Yoon Suk-yeol on Aug. 18. White House Press Secretary Karine Jean-Pierre said, “the summit will advance a shared tri-lateral vision for addressing global and regional security challenges, promoting a rules-based international order and bolstering economic prosperity.” Following this first-ever summit between the three countries, the leaders are expected to release a joint statement specifically focused on North Korea’s continued nuclear capabilities considering their relationship with Russia and China.
 
Secretary of Commerce Gina Raimondo to Travel to China. Following trips to Beijing by several senior U.S. officials this summer, sources close to the matter said U.S. Secretary of Commerce Gina Raimondo is planning a trip to China soon. While Secretary Raimondo’s plans are not yet official, reports say that she is planning to travel to Beijing the week of Aug. 21. The Department of Commerce has yet to officially confirm Secretary Raimondo’s plans; however, she said during an event that she plans to travel to China “later this summer” but is “still finalizing a date and plans.” It is unclear how President Biden’s forthcoming outbound investment-focused executive order could impact Secretary Raimondo’s travels.
 
U.S. Invites New Chinese Foreign Minister to Washington. On Aug. 1, Matthew Miller, spokesperson for the U.S. Department of State, said China’s newly appointed Minister of Foreign Affairs Wang Yi has been invited to the United States. Miller said Yi’s invitation “had previously been made to the former foreign minister, Qin Gang.” While Miller did not explicitly say whether the invitation was accepted or whether a timeline has been established for the trip, he did say that the United States “certainly expect[s] it is something they would accept.” Wang Yi was appointed to be China’s new foreign affairs minister on July 25 after his predecessor, Qin Gang, had not been seen in public for over a month.

 

 


 

Highlight Reel: July 25 - Aug. 7


House Select Committee on the CCP Investigates Blackrock and MSCI. On Aug. 1, the House Select Committee on the Chinese Communist Party (CCP) launched an investigation into Blackrock and Morgan Stanley Capital International (MSCI) over claims their investments aid the Chinese military. The investigation comes a day after Committee Chair Mike Gallagher (R-WI) and Ranking Member Raja Krishnamoorthi (D-IL) sent letters to the leaders of both firms over “unwittingly funding” companies that support the Chinese military. The letter said, “It is unconscionable for any U.S. company to profit from investments that fuel the military advancement of America’s foremost adversary and facilitate human rights abuses.” Last week’s letter and investigation announcement follow a “brief review” of the two companies that uncovered investments into “dozens of blacklisted Chinese companies that threaten U.S. national security or support the Chinese Communist Party’s human rights abuses.”
 
White House
 
President Biden Signed “Invent it Here, Make it Here” EO. On July 28, President Biden signed an executive order focused on bolstering domestic R&D and manufacturing. The “Invent it Here, Make it Here” executive order has four main objectives: (1) to “improve transparency, cut red tape and streamline reporting requirements in the Federal R&D process,” (2) to “boost the incentive to manufacture new inventions in the United States when those inventions are developed using Federal Funds,” (3) to “encourage the expansion of domestic production for critical industries while maintaining flexibility to build strong international R&D partnerships,” and (4) to “make the domestic manufacturing waiver process clearer, timelier and more consistent.” The executive order comes at a time when the Biden administration is looking to bolster American manufacturing amid complex relations with China.
 
Department of State
 
Department of State Leaders Meet with Senior PRC Foreign Affairs Official. On July 31, Assistant Secretary Daniel J. Kritenbrink and Senior Director Sarah Beran met with China’s Ministry of Foreign Affairs Director General of the North American and Oceanian Affairs Department Yang Tao. According to the State Department’s readout of the meeting, the leaders had “candid, substantive and productive discussion[s] as part of ongoing efforts to maintain open lines of communication and responsibly manage the bilateral relationship.” The State Department also said the talks included a discussion about Russia’s invasion of Ukraine. The meeting follows numerous State Department engagements with senior Chinese officials, including Secretary of State Anthony Blinken’s meeting with Foreign Affairs Minister Wang Yi.
 
Department of Treasury
 
Department of Treasury Releases 2022 CFIUS Report. On July 31, the Department of the Treasury Committee on Foreign Investment in the United States (CFIUS) released its annual report for 2022. According to the Treasury Department’s readout on the report, there were a “record number of filed transactions based on the expanded jurisdiction provided by the Foreign Investment Risk Review Modernization Act (FIRRMA), mandatory filings in certain instances and more sophisticated processes for identifying non-notified transactions.” The purpose of the annual CFIUS report is to provide information and statistics on foreign investment-related national security concerns. When speaking to the report, Assistant Secretary for Investment Security Paul Rosen said, “In 2022, the Committee continued to review record numbers of filings. We sharpened due diligence on investors, tackled sophisticated technologies and national security risks and launched a number of reviews to assess potential non-compliance with CFIUS regulations.” The report noted that the finance, information and services sector was No. 1 for non-real estate notices filed, followed by the manufacturing sector. The report also accounted for a decline in U.S. investment from China.
 
U.S. Trade Representative
 
Companies Added to UFLPA Entity List. On Aug. 1, the Forced Labor Enforcement Task Force (FLETF) updated the Uyghur Forced Labor Prevention Act (UFLPA) strategy by expanding the UFLPA Entity List. The new restrictions include goods produced by Xinjiang Zhongtai Chemical Co., Ltd., Ninestar Corporation, including eight of its Zhuhai-based subsidiaries, Camel Group Co., Ltd. and Chenguang Biotech Group Co., Ltd., including one of its subsidiaries. These companies together span a wide range of industries within the manufacturing sector, including chemicals and batteries. Ambassador Katherine Tai said, “The Forced Labor Enforcement Task Force represents a whole-of-government effort to implement the Uyghur Forced Labor Prevention Act. Today’s additions demonstrate the United States’ unwavering commitment to eliminating forced labor, including by ensuring that goods made by forced labor are not imported into our country.” The companies were added to the UFLPA Entity List due to their “work with the PRC government to recruit, transport, transfer, harbor or receive forced labor members of persecuted groups, including Uyghur minorities, out of the Xinjiang Uyghur region.”
 
Deputy Trade Representative Meets with Taiwan Trade Chief. On Aug. 3, Deputy U.S. Trade Representative Sarah Binachi met with Taiwan trade chief John Deng to discuss the U.S.-Taiwan Initiative on 21st Century Trade. An agreement already exists between the United States and Taiwan that focuses on regulatory practices and corruption, among other things. However, the agreement lacks the needed signature from President Biden to make it official and additional negotiations are expected later this year to further the two countries’ trade agreement. The meeting between the two leaders comes just a few days after the United States announced a $345 million military package for Taiwan.

 

 


 

On the Calendar: Aug. 7 - 14


Private Sector
 
The Hudson Institute
A Requiem for Dominance: New U.S. Strategies to Deter Aggression
Aug. 7, 10:00 a.m.
 
Russia, China and the Revisionist Assault on World Order: A Book Talk with Gerlinde Groitl
Aug. 10, 10:00 a.m.
 
The Atlantic Council
Leveraging Offshore Wind to Decarbonize East Asia
Aug. 7, 9:00 a.m.

 

 

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