The U S.-China Relationship amid Chinas Economic Woes Perspectives on Innovation

China’s Ministry of Commerce (MOFCOM) has announced it will launch an anti-dumping investigation into imported polyformaldehyde (POM) copolymer originating in the EU, the US, Taiwan, and Japan. The investigation has been launched upon the request of several Chinese chemical companies, according to the MOFCOM announcement. Companies wishing to export goods that fall under these categories will be required to undergo export licensing procedures, which include filling in an export application form for dual-use items and technologies. The two sides also discussed cooperation in reducing the flow of illicit synthetic drugs, the repatriation of undocumented migrants, and law enforcement, as well as steps to tackle the climate crisis.

• The US House of Representatives has passed the Uyghur Forced Labor Prevention Act to ban all imports from China’s Xinjiang region over concerns about alleged forced labor.
• It also said it would work with Mexico to prevent China and other countries from evading tariffs by importing products through Mexico.
• In June, the US House of Representatives passed the National Defense Authorization Act for the year 2025 (FY25 NDAA), which includes the Countering CCP Drones Act.
• Meanwhile, according to a readout from the White House, Biden “emphasized that both the United States and China need to manage competition in the relationship responsibly and maintain open lines of communication” and that “the United States and China must work together to address global challenges”.

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The US Department of Commerce’s Bureau of Industry and Security (BIS) has added 37 new entities to the “Entity List” for export restrictions, of which 28 are Chinese. According to the BIS’ press release, the companies were added to the Entity List because they are “contributing to Russia’s military and/or defense industrial base, supporting PRC military modernization, and facilitating or engaging in human rights abuses in Burma and in the People’s Republic of China”. The meeting is the latest in a concerted effort by the US and China to revive bilateral dialogue following the deterioration of relations in the past few months. Further meetings are expected to be held between Chinese and US officials in the coming months, including a possible visit by US Climate Envoy John Kerry to China, a reported meeting between China’s commerce minister Wang Wentao and US trade representative Katherine Tai, and a possible visit by Secretary of State Antony Blinken at some point this year. Meanwhile, the MOFCOM readout stated that the Chinese side expressed major concerns about the US’ economic and trade policy towards China, semiconductor policy, export control, and foreign investment review”, referring to the US’ semiconductor export ban, trade sanctions, as well as possible plans to limit US investment in China.

The Customs Tariff Commission of the State Council has announced it will extend the tariff exemption on a batch of goods that were due to expire on May 31, 2023. The tariffs on 95 goods included in the 11th batch of tariff-exempted US goods will continue to be waived until December 31, 2023. The tariffs on US goods were imposed as a countermeasure to the US Section 301 tariffs on Chinese goods. Meanwhile, highlights of the speech released by the Ministry of Defense state that “China stays committed to the path of peaceful development“ and that “China is ready to work with all other parties to build stronger security and confidence-building systems”. At the same time, it also stated that China “will never hesitate to defend our legitimate rights and interests, let alone sacrificing the nation’s core interests”. Blinken’s meetings in Beijing are undoubtedly a positive sign of a “thaw” in the relationship and marks an incremental step toward more stable ties.

These entities include Shanghai Aisinochip Electronics Technology Co., Ltd. (a leading manufacturer of security control chips), Changsha Jingjia Microelectronics Co., Ltd. (the first Chinese manufacturer of graphics processing units), and Shaanxi Reactor Microelectronics Co., Ltd. (a designer of high-speed power semiconductors). The US House of Representatives passed the America Competes Act, an extensive piece of legislation that aims to strengthen the US’s competitive edge over China. Among other issues, the bill outlines provisions for the US to strengthen ties with Taiwan, further implement sanctions on officials accused of committing atrocities in Xinjiang province, and increase scrutiny and review of Chinese companies that have “contributed to the repression of religious and ethnic minorities within the PRC”. On Saturday, February 20, 2022, Chinese Foreign Minister Wang Yi spoke via videolink at the 58th Munich Security Conference. On Taiwan, the White House readout stated that “The President reiterated that U.S. policy on Taiwan has not changed, and emphasized that the United States continues to oppose any unilateral changes to the status quo”.

Recent Issues

The Bureau of Industry and Security (BIS) of the US Department of Commerce announced that it has added 49 entities to the Entity List “for providing support to Russia’s military and/or defense industrial base”, of which 42 are Chinese. He also stated that the city “will continue to create a market-oriented, legal and international first-class business environment”. Xi Jinping has held a surprise meeting with Governor of California Gavin Newsom, during the latter’s trip to China, the first by a US governor in four years. During his trip, the Governor also met with Chinese Foreign Minister Wang Yi and Vice President Han Zheng, and signed a climate-focused Memorandum of Understanding (MOU) with the Chairman of the National Development and Reform Commission (NDRC) Zheng Shanjie. Chinese Foreign Minister Wang Yi met with US President Joe Biden and other high-level US officials during his trip to Washington DC, a preparatory visit ahead of the potential meeting between Biden and President Xi Jinping at the APEC Conference in San Francisco in November. The US and China have agreed to ramp up cooperation on climate action, following meetings last week between climate envoys Xie Zhenhua and John Kerry in California.

At a press conference in Tokyo on Monday, May 23, US President Joe Biden stated that he would be willing to defend Taiwan militarily when asked by media, but added that “My expectation is it will not happen, it will not be attempted”. In the response to the remarks, Foreign Ministry Spokesperson Wang Wenbin stated in a press briefing that “China expresses strong dissatisfaction and firm opposition to the remarks by the US side” and “We urge the US side to abide by the one-China principle and the stipulations in the three China-US joint communiqués”. On Tuesday, May 24, President Biden then stated at the “Quad Leaders’ Summit” between leaders from Japan, India, and Australia that his statement did not amount to a change in the US’ stance or policy with regard to Taiwan. The agreement has led to cautious optimism among investors, with shares of major Chinese tech stocks rising 6 percent after the announcement.

• The progress in improving US-China dialogue on climate change signals that the two countries have found common ground for cooperation and is a significant reversal of previous trends.
• And more specifically, how Canada can utilize its policy instruments to more effectively deal with the increasing influx of refugees from the Middle East.
• At about the same time, China released two imprisoned Canadians, Canadian diplomat Michael Kovrig and entrepreneur Michael Spavor, who had been held in China for over 1000 days.
• While the international community is concerned with Iran’s nuclear program, Saudi Arabia has moved forward with developing its own nuclear program, and independent studies show that Israel has longed possessed dozens of nuclear warheads.
• According to the unnamed Reuters source, the PCAOB will begin conducting on-site audits of “branches of EY, Deloitte, PricewaterhouseCoopers and some other audit firms in both Hong Kong and mainland China” as early as this week.

US-China Relations in the Biden Era: A Timeline

Chinese Vice Premier Liu He and US Treasury Secretary Janet Yellen held a video meeting over economic ties, the second between senior officials from both sides in the past week. The readouts of the meeting were similar to that of the last one between Liu He and US Trade Representative Katherine Tai. The new order expands on an earlier Trump-era blacklist and hits 59 Chinese firms, including the communications giant Huawei.

Some experts argue that these subsidies are wasteful, but they can be disruptive to other countries whose companies cannot compete against such levels of state support. The United States argues that many Chinese state-owned enterprises are effectively arms of the government and, unlike their private competitors, do not make decisions based on market forces. China is also the third-largest export market for the United States, behind Canada and Mexico, with U.S. exports exceeding $195 billion in 2024. That year’s $295 billion U.S. trade deficit with China is the lowest since 2009, but it’s still the United States’ largest trade deficit with any country. Many of these imported goods are technologies such as computers, electric batteries, and video displays. China also has a substantial holding in U.S. treasury bonds—roughly $760 billion—making it the second-largest foreign creditor to the United States, after Japan.

The End of Development

A total of 549 products were initially up for consideration for reinstatement of tariff exemptions, but only products that met certain criteria were ultimately chosen for the exclusions. Nonetheless, US media have reported that Blinken would postpone the trip as he “did not want the balloon to dominate his meetings with Chinese officials”. Amid fallout from a Chinese airship dubbed a “spy balloon” observed flying in US airspace (Montana), several media outlets have reported that the Biden administration has postponed Secretary of State Antony Blinken’s diplomatic visit to China, due to take place on February 5 and 6, citing a State Department official. A statement from a spokesperson from the Chinese Foreign Ministry confirmed that the airship was Chinese but that it is “a civilian airship used for research, mainly meteorological, purposes”. In a speech delivered at Johns Hopkins University’s School of Advanced International Studies on Thursday, US Treasury Secretary Janet Yellen struck a conciliatory tone with regard to the US’ increasingly fraught relationship with China, stating that the US seeks a “constructive and fair economic relationship with China”.

Some of the companies listed by the US Commerce Department are major manufacturers of monocrystalline silicon and convert currencies polysilicon that are used in solar panel production. These companies and entities added to the Entity List are required to apply for licenses from the Commerce Department and face tough scrutiny when they seek permission to receive items from American suppliers. The Uyghur Forced Labor Prevention Act would create a “rebuttable presumption” assuming that goods from Xinjiang are manufactured by forced labor, unless proven otherwise.

Of the 37 entities, 28 were Chinese, and were added “for acquiring and attempting to acquire US-origin items in support of the PRC’s military modernization efforts, and for supplying or attempting to supply a sanctioned entity in Iran”. The US Secretary of Defense Lloyd Austin met with the Chinese Minister of National Defense Admiral Dong Jun at the sidelines of the Shangri-La Dialogue defense summit in Singapore to discuss US-China defense relations and global security issues. This is the first face-to-face meeting between the countries’ military commanders since 2022 and follows a video conference call between the Secretary and the Admiral on April 16. The US Treasury has issued a proposed rule that would ban or screen American investments in China’s semiconductors and microelectronics, quantum information technologies, and artificial intelligence sectors. This is part of President Biden’s aim to “prevent the exploitation of U.S. outbound investments by China seeking to develop sensitive technologies or products that are critical to the next generation of military, intelligence, surveillance, or cyber-enabled capabilities that pose national security risks to the United States”.

Military, police, MILF join forces in friendly basketball match – GMA News

In addition, the readout said that “China stated its serious position on Taiwan and other major issues of principle. Blinken was supposed to visit China in February of this year, but the trip was canceled following the fallout of the so-called “balloon incident”. Meanwhile, the readout from the Department of State writes that Blinken “emphasized the importance of diplomacy and maintaining open channels of communication across the full range of issues to reduce the risk of misperception and miscalculation”. Blinken also met with Chinese Foreign Minister Qin Gang and senior diplomat Wang Yi on Sunday and Monday morning, with whom he held what was described as “candid and constructive” conversations.

The officials stressed they were not advocating for decoupling but wanted businesses and academics to understand that the Chinese government has a sweeping national plan to dominate in these fields. The US state department has imposed sanctions on four additional Chinese officials on the Human Rights Day for their involvement in China’s policies in Xinjiang. Both readouts stated that the presidents had each tasked their teams to “follow up” on the conversation, indicating more talks ahead.