Experts: China-bashing against US national interest

US government policies aiming to counter China's advancement and growth face challenges, and the current China-bashing rhetoric will only harm the US' own interests, said two experts on Asian issues.

"I think we need to remember China is not a monolith. Everything Chinese is not bad. There's a danger in demonizing everything Chinese," said Tami Overby, a senior adviser at the Albright Stonebridge Group, at a recent webinar hosted by the US-Asia Institute examining the impact of US policies on China.

The US government is leveraging industrial policy and other policies, including export controls, sanctions, tariffs, inbound investment restrictions and the likelihood of outbound investment and capital flow restrictions, to counter China's advancement.

"Let's remember the Chinese are buying. They're our largest agriculture buyer. We are the most productive agriculture nation in the world. We export tons of farm products, and a lot of them go to China. That's not a bad thing," said Overby.

She is worried that the Republican and Democratic parties will compete with each other over who can bash China more as the nation is heading into the 2024 presidential election cycle.

"Let's not lose our minds, and let's not act against our own national interests," she warned.

As to investment restrictions, Anna Ashton, director of China Corporate Affairs and US-China at Eurasia Group, said that the fears around Chinese investments are "overblown" when it comes to the US' ability to protect national security interests.

The new US congressional select committee on competition with China held its first hearing last week. What struck Ashton the most about the hearing was the criticism of US governors for courting Chinese investment or helping businesses in their states to do business in China.

"Foreign direct investment tends to be a much more efficient way of creating a concentration of new jobs. The criticism of state-level development agencies for their past efforts to court investment from China among many other places was unfair," she said.

She also noted that the Inflation Reduction Act (IRA), which US President Joe Biden signed into law last year, is part of the industrial policy approach to contain China's advancement and growth.

The IRA provides $370 billion in tax credits and funding that supports the sectors in which the US wants to be a leader, such as electric vehicles, renewable energy technologies, and critical minerals.

Those subsidies and tax credits have conditions for companies on the origin of the components.

For instance, the IRA requires EV batteries to be made with minerals and components produced in the US or countries with which the US has a free trade agreement, to be eligible for the subsidies and tax credits.

"It fails to really think through and take account of the fact that demand for things like critical minerals is going to exponentially increase in the coming years. And we don't currently have the capacity to fill that demand either domestically or in concert with our friends and allies," said Ashton. "And we don't have them aligned with us in this approach. In fact, we have them frustrated with us because of this approach."

South Korea has been taken by surprise by the approach, according to Overby, and other countries are concerned about the lack of certainty and predictability in doing business with the United States.

South Korea has expressed concerns to the US government over the IRA, saying that it will significantly undermine the competitiveness of South Korean carmakers and battery producers in the United States.

Overby said that the US faces "lots of challenges ahead", using the critical minerals as an example.

"Who's going to want to smelt these critical minerals? The smelting of most of this is being done in China, and it's not a clean industry," she said. "I can tell you; it's not coming to the US. It's not going into Canada, and probably there'll be a lot of resistance of even taking it to Mexico."