China’s leadership already faces a long list of economic and fiscal problems. The US Congress is preparing two more. The US government is advancing legislation that would prevent it from doing any business with Chinese biotech companies. At the same time, the House of Representatives took steps to more strictly enforce rules prohibiting the import of Chinese products related to forced labor.
These two measures fall short of the full effect of President Joe Biden’s ban on U.S. investment in Chinese technology or the ban on sales of advanced semiconductors and semiconductor manufacturing equipment to China. These do not extend to the current administration’s decision to maintain the harsh tariffs that President Trump first imposed on Chinese imports in 2018 and 2019. But for an already beleaguered China, these latest measures are a few more straws on the proverbial camel’s back.
Banning biotechnology has bipartisan support in Congress. It will likely be signed into law by President Biden. Although the restrictions should have a modest impact on overall Chinese trade, the measures target areas of the Chinese economy of special interest to President Xi Jinping and his colleagues in the Forbidden City.
The broader issue of banning products related to forced labor came from the US House Select Committee on China. It also has bipartisan support, backed by Committee Chairman Mike Gallagher (R-Wis.) and the committee’s top Democrat, Raja Krishnamoorthi of Illinois. The committee calls for stricter enforcement of the Uyghur Forced Labor Prevention Law of 2022. The law aims to bring Chinese-origin goods transshipped through third countries under the law and close an existing loophole that currently exempts goods valued at $800 or less sent directly to the United States from customs inspection. ing. This may seem like a small problem, but it involves over 1 billion packages per year.
Neither measure would affect trade between China and the United States, except in a marginal way. Nevertheless, these are significant signs of Washington’s increasing hostility toward China. Their bipartisan nature is particularly notable, with widespread rivalry and significant support from the Legislature, likely to change regardless of the outcome of November’s presidential and parliamentary elections. This suggests that the These two measures come in response to the hostile attitude the US government already has towards China, with hopes of suspending tough tariffs on Chinese goods first introduced by Donald Trump, regardless of the November vote. This is yet another statement to the Chinese government that it should not do so. The next president, whoever he is, is also likely to keep in place some of President Biden’s executive orders banning U.S. investment in Chinese technology and the sale of advanced computer chips and chip manufacturing equipment to China. It was announced that it was expensive. These measures further suggest that such orders and similar restrictions go beyond executive orders and become law.
On the other hand, China’s economy cannot tolerate further negative pressure, even if only marginally. The country’s exports rose slightly in December but have been declining for most of the past 12 months, according to Beijing’s National Bureau of Statistics. These latest measures add to the significant pressures imposed by the slowing of the US economy, nearing recession in Europe, and efforts by these buyers in both countries and Japan to diversify their supply chains away from China. . Although the Chinese government has frequently talked about reorienting the Chinese economy away from export dependence, that has not yet happened, leaving the entire economy highly vulnerable to such foreign events.
Even more serious than the lack of exports is the legacy of failed real estate development. The Chinese government’s failure to take action when the problem first arose in 2021 has exacerbated financial difficulties, including massive indebtedness of local governments. As a result, China’s finance can no longer support growth as easily as it once did. The collapse of the real estate sector has also caused a decline in home buying and construction, once a key pillar of China’s economy.
Chinese consumers and domestic businesses will also not be able to compensate for the decline in housing construction and exports. The failure of real estate developers has led to a decline in real estate values, which in turn has reduced household net worth and suppressed personal consumption. So too is the legacy of the now-abandoned zero-corona policy, which periodically shut down economic activity, making household heads generally less insecure about their incomes than before. Similar policies and the Chinese Communist Party’s hostility toward private companies have made business owners less eager to invest in expansion and jobs.
While this new US law on China-based biotech and stricter rules for products related to forced labor will not depress China’s economy, the two measures will already・It will pose a new challenge, albeit a small one, to an economy already facing fiscal problems. The Chinese government faces the tough task of getting China’s finances back on track and the economy back on track at an acceptable pace. These new developments will make that job even more difficult.
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