U.S. engages in frank talks amid warnings China has become ‘uninvestible’

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ommerce Secretary Gina Raimondo arrived in China this week with a challenging brief: Her department has implemented the United States’ tough export controls against China, and she had to stand firm on that position. At the same time, the former venture capitalist was seeking to advance a political thaw and improve American companies’ access to the lucrative Chinese market.

For all the public smiles on both sides — including a surprisingly long meeting with China’s premier — one word hung over Raimondo’s four-day trip: “Uninvestible.”

Speaking to reporters after her second day of meetings, Raimondo said Tuesday night that American businesses have complained to her that China has created an ever more difficult environment for them.

“Increasingly I hear from American business that China is uninvestible because it’s become too risky,” she said. “So businesses look for other opportunities; they look for other countries; they look for other places to go.”

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Three years of covid-related lockdowns snarled supply chains. Then came an unpredictable mix of raids on American businesses and opaque penalties — including the increasing use of exit bans against foreign business executives. Taken together, it has made foreign firms — not just U.S. ones — wary of continuing operations in China.

China badly needs foreign investment as its economy struggles to rebound from years of pandemic restrictions, amid a mounting real estate debt crisis, record youth unemployment and a consumer spending slowdown.

“China needs to recognize that they can no longer rely on the sheer mass of their market to attract that type of foreign investment,” said Naomi Wilson, vice president of policy, Asia and global trade at the Information Technology Industry Council. “Even among Chinese companies, there have been efforts to relocate outside of China.”

The Biden administration’s hawkish approach, a continuation from the Trump era, has ensured that Beijing and Washington have kept up their escalating tit-for-tat over the supply chains for technologies that both sides claim are critical to national security.

Last year the Biden administration tightened controls on exports of U.S. semiconductor chips to China, especially the advanced chips needed to power artificial intelligence systems. And just two weeks before Raimondo left for China, the White House issued an executive order banning U.S. companies from investing in Chinese tech that could have military or surveillance applications.

As if to make a point that American export controls couldn’t keep Chinese companies down, Huawei Technologies rolled out a new 5G phone that experts think relies entirely on Chinese-made chips.

“U.S. businesses want to do business here, but they need to have a predictable regulatory environment,” Raimondo said at Boeing’s hangar at Shanghai’s Pudong Airport on Wednesday.

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She has previously criticized China’s Aviation Authority for blocking Chinese airlines from completing purchases of Boeing’s 737 Max after two fatal crashes in 2019 led to its global grounding, which has since been lifted. No movement on the issue resulted from Raimondo’s visit.

Still, Raimondo met with American executives and an array of senior Chinese officials during the trip, including Premier Li Qiang and Vice Premier He Lifeng, in an effort to stabilize relations between the world’s two largest economies.

The secretary spent more than an hour with the premier, who oversees the economy.

She also met with dozens of American business people at a reception in Beijing and spoke to an economics class at New York University’s Shanghai campus, where she chatted with students from the United States, China and elsewhere about export controls, career growth and learning from each other’s differences.

Raimondo also took a spin through Shanghai Disneyland — where she was stopped for a hug by a chatty 7-year-old dressed as LinaBell, a smart pink Disney fox.

Both sides have described the visit as open and practical, a notable bright spot in an otherwise tense relationship plagued by disagreements over trade, technology and Taiwan.

Raimondo said she had a lot of “candid dialogue” on the trip. “We have a moment now in this relationship, and we will see if there is action,” she told reporters.

Raimondo and Chinese Minister of Commerce Wang Wentao agreed to establish a formal channel of communication on commercial issues, something U.S. Secretary of State Antony Blinken has proposed for military matters but which Beijing has rejected.

The two sides also had the first meeting of an “information exchange” on export controls, carefully named to convey a focus on transparency — but not negotiation — on the escalating steps Beijing and Washington are taking to protect an expanding set of technologies they consider important to national security.

Chinese state media said the visit represented “practical progress.”

Sun Xingjie, a professor at the School of International Relations at Sun Yat-sen University, said in a television interviewwith Shenzhen Direct News that relations between the United States and China have entered a new stage, and that the establishment of the working group would allow the two sides to separate topics of mutual interest from hostility.

“The deeply nested China-U.S. economic and trade relations are not a zero sum game,” Sun said.

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