BIDEN KEEPS UP PRESSURE ON CHINA WITH $250B FOR TECH
When Joe Biden delivered his first address to the Senate, the state of U.S. politics appeared as divided as ever. Democrats gave the 78-year-old a standing ovation, while Republicans sat stony faced. Ted Cruz, the Republican senator for Texas, rolled his eyes in disgust.
But one area it seems the divided chamber will agree on is a Us$250-billion spending package designed to ramp up U.S. research and technology spending, including a Us$54-billion splurge on the semiconductor industry — the Chips for America Act — all in the name of challenging the emerging dominance of China.
Biden’s administration has withdrawn some of former president Donald Trump’s more punitive policies — such as banning video-sharing app Tiktok and blacklisting phone maker Xiaomi.
But more broadly, other policies follow a theme of bringing high-tech industry on to home soil and maintaining pressure on China over coronavirus.
“Trump changed the way people in the U.S. think about China,” says Matthew Lesh, head of research at the Adam Smith Institute.
“There has been a rebalancing that China is a strategic threat and a problematic power — and that is now the mainstream position.
“Biden is now reflecting that consensus that public opinion has shifted towards China.”
The upcoming package to take on Chinese tech is a rare piece of bipartisan action on Capitol Hill as Democrats and Republicans battle over Biden’s proposals for an investment boom.
The US$250 billion earmarked for tech is just a sliver of the president’s wider plans to ramp up spending on everything from clean energy and infrastructure to social security and COVID relief. Those big-spending plans have fuelled concerns about a rise in inflation as the stimulus feeds through to an economy strained by shortages of everything from key commodities to staff as demand surges on reopening.
The Federal Reserve is prepared to let the economy run hot to recover lost ground, but its nerves may have been jangled by the biggest annual jump in inflation for nearly three decades in April. Its preferred benchmark, stripping out volatile food and energy prices, soared to 3.1 per cent, the highest in 29 years. The Fed is betting inflation will return to its two-per-cent target next year, but the president has unveiled a Us$6-trillion annual budget that will keep the deficit at eye-watering levels.
He also hinted this week at how his economic plans and competing with China are intertwined. In echoes of the Trump presidency and speaking in the former industrial heartlands, he warned on Thursday about allowing Chinese strength in tech to take jobs away from Americans and harked back to when the U.S. was a “net exporter of major technologies.”
“We want to lead the world in exports of these new technologies instead of ceding the global market and job creation to the Chinese,” he said in Cleveland,
Ohio, as he prepared to unveil the budget plans.
“They’re building 20 times as many electric vehicles as we’re doing now, and the technology that goes with that. What are we doing? It’s millions of jobs in China instead of here.”
Biden’s desire to see technology jobs brought to the U.S. appears to follow on from the policies of Trump, perhaps not surprising due to his attempts to appeal to blue-collar workers. During his tenure, Trump touted investment in chips such as a Us$12-billion plant from Taiwanese firm TSMC in Arizona last year, and in 2017 Intel announced a Us$7-billion plant in the same state. Biden has not let up on China in the silicon space. He has kept bans on China’s leading chip maker SMIC and blacklisted Chinese supercomputer companies.
On the Senate floor, despite bitter divisions over recriminations for the Jan. 6 riot at the Capitol Building, U.S politicians appear to have found some common ground.
Mitch Mcconnell, the Republican Senate minority leader, said on Thursday: “Republicans don’t want some big fight of this. We’d like to see an outcome. A bipartisan outcome.”
However, Ben Barringer, an equity analyst at Quilter Cheviot, warns: “The US$54 billion provided under the Chips Act over five years is really just a drop in the ocean when compared with the incentives offered by the U.S.’S main competitors and the enormous cost of producing chips.”
Lesh is also skeptical of how effective a counter the bill will be to China. “It seems bizarre that Biden thinks America can compete by adopting the Chinese model of state-led R&D.”
Perhaps the most striking example of Biden’s toughening China rhetoric came this week when he ordered his intelligence services to “redouble” their investigation into whether coronavirus escaped from samples at the Wuhan Institute of Virology with 90 days to report.
What was last year a partisan dividing line, a Trumpian conspiracy theory about the “Chinese virus,” is now policy in Biden’s White House.
TRUMP CHANGED THE WAY PEOPLE IN THE U.S. THINK ABOUT CHINA.