America’s political class emitted more than its usual quota of hot air in response to a spy balloon that the administration allowed to float leisurely across the United States allowing Peeping Toms in Beijing to have a good look at military installations. It cost an already stretched U.S. military $500,000 to shoot down the balloon, and an equal amount to eliminate each of the three bits of lower-flying floating stuff that it turns out were no threat. One group of pals is mourning the loss of its $12 hobby balloon.
Vice president Harris rushed to assure China and the world that such surveillance and violation of US sovereignty would not affect China-US relations, which Secretary of State later sternly warned China it would, while the President promised to talk to Xi Zinping about the affair. With his 2024 re-election campaign fully underway, Biden would like to get balloons off the front pages to make space for his talks about the jobs he has created, the success of his several spending programs, his greening of America and expansion of the welfare state. Those policies, not an annoying balloon that the military did not seem to notice until NBC reported it lolling over Montana, are what put the spring in the step of Joe Biden, last week declared by his doctors after his annual physical to be springy-footed indeed.
No Denying China Is A Threat
There is bipartisan agreement that China is the greatest threat to American security, and that ending American economic policies that boost China’s economy and its military capability are essential. Pursuant to that understanding, the administration has been banning the export of an increasing list of important technologies to China, a programme President Trump set in motion in 2009 by blacklisting Huawei. President Biden has also built into his spending bills protectionist, made-in-America provisions that will make life more difficult for China, with our European allies suffering collateral damage.
But Business Goes On
Last year the U.S. and China swapped almost a record $700 billion of stuff, with America helping out China’s faltering economy with $536.8 billion in purchases, a 6.3 per cent increase over 2021. Chad Brown, a senior fellow at the Peterson Institute for International Economics, reckons that imports of Chinese products subject to 25 per cent U.S. tariffs fell by 22 per cent in recent years, while products not subject to tariffs increased by 50 per cent.
Although some companies are diversifying their China-reliant supply chains, while others are “re-shoring,” there are early indications that major America companies retain an interest in revitalizing their activities in the People’s Republic now that covid-induced travel restrictions have been abandoned by Xi Jinping and the red carpet being rolled out for top U.S. executives. They hanker for the good old days when subsidies and regulations, rather than a virus, were their main worries as the deplaned in Hong Kong.
Honk Kong Here We Come
The Wall Street Journal reports that Apple CEO Tim Cook and Pfizer CEO Albert Bourla are expected to be among those welcomed back to Hong Kong by the Chinese regime, with many more soon to attend business conferences in various Chinese cities. Since these titans have easy access to the pleasure domes of the world, it is safe to assume their planned trips to China are for profit rather than pleasure, to increase commercial intercourse between capitalists and communists. There is money to be made by capitalists who sell IT to communists, some latter-day Lenin might say.
Meanwhile, Ford has decided to license the technology for its new $3.5 billion electric vehicle factory in Michigan from China’s CATL, avoiding restrictions on direct investment in the world’s largest producer of batteries for electric vehicles, and strengthening China’s position in the market for batteries. And Chinese companies benefit from tariff-free access to the American market by building plants on the Mexican side of the U.S.-Mexico border to benefit from the USMCA, the successor to Nafta.
Much is made of American restrictions of exports of certain technologies to China. But as the nonpartisan Congressional Research Service reports, the government “only controls or restricts a small percentage of U.S. technology exports to China in practice.” Some 97.9 per cent of technology exports on the so-called Commerce Control List of dual-use technologies went to China without a license, and the Commerce Department denied only three of 482 requests for licenses to release US-controlled technology and know-how to Chinese nationals.
Welcome To Our Capital Markets
Then there is the matter of the assistance America is giving the Chinese economy to fund its race for nuclear superiority over the US. Access to America’s deep, efficient capital markets is lowering the cost of raising capital for some 249 Chinese companies. Some deal directly with consumers, often competing with American companies, still others such as China Petroleum and PetroChina help the regime meet its voracious demand for energy.
Only recently have these companies agreed to allow auditors into China to determine whether their accounting standards are up to those required of listed US companies subject to SEC regulation. Why our exchanges should be available to make it easier and cheaper for companies from China to raise capital, while Xi Zinping places severe restrictions on Americans operating there, is not immediately evident.
Treating China as an enemy would have its costs, most notably in higher prices for tariffed stuff made in China and longer-term inefficiencies. Some groups, China-funded universities come to mind, would howl in pain. National security doesn’t come cheap.
None of this is to deny the administration credit for recently ramping up its effort to deny China access to American intellectual property. But there is an old story about a father who says, “Son, I don’t mind the F in readin’, the F in writin’, the F in ‘rithmetic. It’s the A for effort that worries me.”