IN FOCUS
By Dincy Adlakha 

The America Competes Act of 2022: What, Why and How

On 4 February, the House of Representatives passed the America Competes Act of 2022. The bill is aimed at increasing the economic competitive spirit and mechanisms of the US vis-a-vis China. The bill is an improvisation of earlier legislation passed by the Senate - the US Innovation and Competition Act of 2021. The bill will now move to Congress before being signed by the President.

What does the bill propose?
The bill provides multiple mechanisms to strengthen the economic capabilities of the US, especially in the sectors that will help the US compete with China. The bill proposes 52 billion USD to subsidize semiconductor manufacturing within the US. Approximately 250 billion USD will also be allocated for research on AI, quantum computing, biotechnology and other crucial technologies. Additionally, the legislation provides 45 billion USD over six years for supply chain smoothing mechanisms and resolving shortages.  Another 600 million USD is allotted to enable the manufacturing of components of solar panels within the US.

The bill also proposes funds amounting to eight billion USD as contributions to the Green Climate Fund. This is in line with the US pledges at the Paris Agreement to help combat climate change. The bill strengthens recent announcements made by the Biden administration regarding revamping policies to grant more visas for students and professionals who qualify in STEM (Science, Technology, Engineering and Mathematics).

Why has the bill been passed?
Nancy Pelosi, the House Speaker described the essence of the bill as: “It is about making America self-sufficient when it comes to the supply chain, so that we’re not depending on other countries.”

The bill repeatedly refers to PRC policies and CPC support to industrial firms. The subsidies and clearances to semiconductor firms allow for a more profitable supply chain system. Hence, the bill intends to vitalize the economy of the US and move away from the dependence on Chinese supply chains.

The provisions for semiconductor manufacturing and AI research allow more scope for the field to grow within the US rather than importing these technologies and components from China. Additionally, the bill intends to reduce US reliance on products from Xinjiang, like solar panels, to display solidarity with the fight against human rights violations in Xinjiang. By easing the formalities for skilled students and professionals, the US intends to create an intelligent workforce for the country. This will help the US in nurturing and incentivising an intellectual ecosystem dedicated to American progress and self-dependence.

How are US-China trade relations?
China is the biggest trading partner of the US. The two-way goods trade reached upto 560 billion USD in 2020. The trade deficit bore by US amounted to 310 billion USD. Although the trade between China and US has grown over the years, there is also an increased mistrust between the two. The Chinese state attempting to block semiconductor deals between Taiwan and the US has gruntled the US. Trump administration’s decisions to sanction goods and officials from Xinjiang and banning the imports of important commodities have also hurt Chinese pride. China’s state control of information and technologies also does not bond well with the open system of US firms. Despite these hurdles and asymmetric trade practices, China and US serve as important markets for each other. Increased efforts from the trade representative offices of the two countries have helped narrow the trade war. However, blocked chains and insecurity due to dependence on China has led the US to release such a bill.

References:
“Text of H.R. 4521, The America Competes Act of 2022,” Rules Committee Print 117-31, 4 February 2022
“U.S. House passes China competition bill, backs closer ties with Taiwan,” Focus Taiwan, 5 February 2022
Raquel Leslie and Brian Liu, “House of Representatives Passes China Competition Bill,” Lawfare, 7 February 2022
Yaling Jiang, “US-China tech war: Beijing calls the America Competes Act a product of Cold War mentality,” South China Morning Post, 8 February 2022
“U.S.-China Trade Facts,” Office of the United States Trade Representative, n.d.

IN BRIEF
By Dincy Adlakha and Avishka Ashok

INTERNAL
Hong Kong tightens COVID-19 restrictions to unprecedented levels
On 8 February, the daily COVID-19 infections in Hong Kong reached a new record as the city observed more than 600 cases in a day. Additionally, the city also recorded the first pandemic related death in five months. Noting the developments, Hong Kong leader Carrie Lam has announced most invasive measures yet to curb the spread of the pandemic. The authorities have also banned gatherings in private premises for the first time. The size of public gatherings has been reduced to two people from earlier four people. Chief Executive Carrie Lam called the situation “dire” and announced no entry of unvaccinated citizens in malls, supermarkets, religious venues and other places. (Chalire Huang, “Hong Kong imposes toughest Covid-19 rules yet as cases soar,” The Straits Times, 8 February 2022)

ECONOMY
Investors around the world invest in Winter Olympics related shares
On 8 February, Reuters reported that the Winter Olympics had caused a frenzy in the Chinese stock exchange as investors hurried to buy shares connected to the event. The investors even got involved in some shares that were not entirely connected to the games. Some investors bought shares in Invengo Information Technology as its Chinese name was misinterpreted to be “look out for Eileen Gu”, one of the winners of the Olympic games. Individuals have been investing in companies that are related to the Olympic games in hopes that the international competition would lead to a rise in revenues. (“Olympic fever spreads to China’s stock market,” Reuters, 8 February 2022)

INTERNATIONAL
China firmly opposes latest US arms sale plan to Taiwan
On 8 February, Foreign Ministry Spokesperson Zhao Lijian vowed strong countermeasures against the latest arms sale plans made by the US and Taiwan. The arms sale amounts up to 100 million USD and is the second sale since Biden came to power. China views the sale as a violation of the one-China principle and a tactic by the US to extract money from Taiwan. The spokesperson also pointed out that the sale contradicts the three Joint Communiques between China and the US. (Gao Yuandan and Liu Xuanzun, “China vows to take powerful measures against US' latest arms sale to Taiwan island,” Global Times, 8 February 2022)

China shuns “coercion” allegations by Lithuania as latter ignites regional links
On 9 February, the Chinese Ministry Spokesperson Zhao Lijian urged Lithuania to drop inaccurate accusations of “coercion” and to return to the sensible path of one-China principle. He also said that China always adheres to the rules and regulations of the WTO and the Lithuanian accusations of “coercion” are hyped. Foreign Ministry Spokesperson Zhao said this in response to the tour the Lithuanian foreign minister is making in Singapore and Australia. In his meeting with Singaporean and Australian counterparts, he intends to discuss the provocations China has been pushing against Lithuania. (Li Qiaoyi and Liu Xin, “China rejects 'coercion' accusation as Lithuanian FM hypes it in Australia,” Global Times, 9 February 2022)

Indonesian capital shift delays profits of China-funded railway link
On 8 February, the South China Morning Post published an article that reported a consortium’s expectations on the profit returns of Chinese-funded railway link in Indonesia. The consortium said that it will now take 40 years, instead of initially expected 20 years, for the high-speed rail link to return profits. The investment by China has been hit by the state’s decision to relocate the capital of Indonesia from Jakarta to Nusantara. The estimated cost of the BRI project has also jumped from six billion USD to eight billion USD. Hence, the project linking Jakarta to Bandung will be profitable only after 40 years. (“China-funded Indonesian rail link may take 40 years to become profitable,” South China Morning Post, 8 February 2022)

The US, the UK, Japan and 18 countries publish a joint statement on press freedom in Hong Kong 
On 8 February, the US, the UK, Japan and 18 other countries issued a joint statement and addressed the restrictions on press freedom. The group of countries objected to the government of Hong Kong city and the Communist Party of China for restricting press activities in the city. The statement referred to the recent termination of the Stand News and Citizen News and said that the government’s decisions and actions were “attacks on freedom of the press”and “suppressed independent local media.” (“US, Japan, Britain, 18 other countries condemn loss of press freedoms in Hong Kong, South China Morning Post, 9 February 2022)

The US adds 33 Chinese entities in the “unverified list”
On 8 February, Reuters reported that the US Commerce Department had included 33 Chinese entities to its ‘unverified list’. According to the regulations of the department, exporters in the US will have to engage in multiple procedures before trading with the companies in this list. The list included companies, universities and aerospace and electronics suppliers. The 33 entities have been added to the list as the department was unable to certify the legitimacy and reliability of the involved institutions. The Chinese Commerce Ministry responded to the actions and urged the US to rectify its wrongful actions and work towards a global economic recovery by participating in fair and equal trade. (“U.S. adds Chinese entities to red-flag export list, WuXi Bio shares plunge, Reuters, 8 February 2022)

The US rejects China’s complaint against SpaceX satellites close encounters with Tiankong 
On 8 February, South China Morning Post reported that the US rejected China’s claims of the Starlink satellites passing by the Chinese space station Tiankong in December. The US also accused China of not communicating the concerns properly. The US claimed that China sent an unsigned, informal and verbale note to the UN and complained that the US satellites had endangered the life of its space station and the astronauts in the station. The US also responded to the accusations and warned that there had been close encounters but none were related to the Tiankong. (“SpaceX satellites’ encounters with Chinese space station were not emergencies, US says, South China Morning Post, 8 February 2022)