China’s economy is in trouble. Beijing hopes Raimondo can lend a hand

Politico has published an article saying that the Commerce secretary is likely to get an earful about how US export and investment restrictions are kneecapping China’s economy. Caliber.Az reprints the article.

When Commerce Secretary Gina Raimondo lands in Beijing for an expected visit next week she’s likely to hear an unprecedented request from her hosts: Help us with our struggling economy.

Raimondo’s long-anticipated visit coincides with a worsening downturn in China’s financial health marked by plunging exports and foreign investment as well as soaring youth unemployment. The latest data suggest that the once-unstoppable economic juggernaut has finally hit a serious pothole.

That’s a diagnosis that both President Joe Biden and Chinese paramount leader Xi Jinping agree on. Xi warned his senior leadership last month in notably frank terms that “China‘s economy is facing new difficulties and challenges.” Biden piled on earlier this month, hinting that China’s economic woes could pose domestic stability risks for Xi.

“China is in trouble,” Biden told donors at a Democratic Party fundraiser in Utah. “They have got some problems — that’s not good, because when bad folks have problems, they do bad things.”

Commerce Department officials did not immediately respond to a request to confirm the timing of Raimondo’s trip, which administration officials have said for months she was hoping to take.

“The relevant information will be released in due course,” Chinese embassy spokesperson Liu Pengyu told POLITICO when asked to confirm Raimondo’s upcoming Beijing visit.

The trip puts Raimondo in an awkward position. Biden’s Commerce chief will be promoting US exports while likely being pressured by Chinese officials to ease up on long-standing trade restrictions and “de-risking” measures the administration has taken over the past year. They include export restrictions on high-end semiconductors rolled out in October and Biden’s executive order issued earlier this month curbing US investment in sectors of the Chinese economy including quantum computing and artificial intelligence.

The visit will also be closely watched on Capitol Hill. Lawmakers are questioning whether Raimondo’s trip is even worth it given the scant returns of recent visits by her cabinet colleagues. They’re also warning her not to signal any softening of export restrictions aimed at cutting China off from US technologies such as advanced microchips.

“We urge you, prior to your trip, to publicly clarify that US export controls are non-negotiable, and that the PRC should expect more, not less, US export controls moving forward,” Rep. Mike Gallagher (R-Wis.), chair of the House Select Committee on the CCP; House Foreign Affairs Chair Michael McCaul (R-Texas) and other lawmakers wrote in a letter to Raimondo on August 18.

Other lawmakers warn of the optics of Raimondo travelling to Beijing just weeks after revelations that Chinese hackers had broken into her email account.

That willingness to engage “sends a powerfully dangerous message not only to China, but also to adversaries like Iran and Russia,” said McCaul. “We cannot keep sending senior administration officials to Beijing when they continue to only respond with provocation and hostility.”

A dual role

Raimondo’s upcoming trip makes her the latest in a flurry of cabinet-level officials dispatched to Beijing in recent months in a bid to stabilize bilateral ties soured by the Chinese spy balloon incident in February, China’s sabre-rattling toward Taiwan and its increasingly rancorous territorial dispute with US ally the Philippines. But Secretary of State Antony Blinken, climate envoy John Kerry and Treasury Secretary Janet Yellen all returned from China with platitudes rather than pledges of better behaviour.

As Commerce secretary, Raimondo has a dual role that might seem confusing to Beijing. One is to promote exports of American goods, including to China, which is still the United States’ third-largest export market despite all the friction.

But her department’s Bureau of Industry and Security also administers the increasing number of export controls aimed at preventing Beijing from acquiring advanced US technology that could help its military modernization.

In the run-up to Raimondo’s visit, Commerce officials have raised the possibility of creating a bilateral export control working group, a development first reported by Bloomberg, that would provide a forum for the US to explain its decision and the Chinese to raise their concerns.

“It’s all honestly, it’s all kind of hokey” since export controls are not an area where there is much potential for collaboration, said one former government official who asked not to be identified in order to speak candidly.

Still, for Chinese officials, Raimondo’s trip may be the most consequential of the four high-level visits that US officials have made to Beijing, said Harold Furchtgott-Roth, former chief economist for the House Committee on Commerce.

What “the Chinese government would be very interested in is clarification and potentially some relaxation on the export limit on chips. Yellen kind of backpedalled a bit on that in her discussions [in Beijing], so the Chinese may be a little bit confused about where we are on that,” Furchtgott-Roth said.

But Beijing will make little progress in pressing Raimondo to soften Biden administration economic policies that national security adviser Jake Sullivan declared in April are essential for “ensuring that US and allied technology is not used against us” by China.

“The Chinese realize any US official going to China is going to deliver the consensus views of the Biden administration — you don’t negotiate your own internal differences with Chinese counterparts,” said Brad Setser, former deputy assistant secretary for international economic analysis at the Treasury Department during the Obama administration.

Challenging task list

Raimondo’s task list for her meetings with her Chinese counterparts will likely include the perennial issue of market access restrictions against US companies and the recent series of Chinese police raids on Chinese-based operations of US firms including Mintz and Bain & Company.

Raimondo has tried to prime the pump for productive meetings by praising Beijing for lifting restrictions on Chinese group travel to the US That decision marks “an important step forward to promote the type of people-to-people exchange that is crucial for our bilateral relationship,” she said in a statement last week.

On the promotion side, she has publicly talked about opening the Chinese market to more American movies and entertainment products, encouraging Starbucks to expand on the more than 6,500 coffee shops that it already has on the mainland and — her personal pet project — promoting the sale of cosmetic and personal care products made by small and medium-sized US companies.

“Given the situation in China’s economy right now, Beijing is trying to show everyone it’s open for business, so Raimondo would be a great audience if they can back that up with some actions,” said Wendy Cutler, former senior US trade negotiator.

It’s hard to identify a lot of areas where Raimondo could come back with a win, but they could discuss concerns that US medical device companies have raised about harmful Chinese policies or the possibility of Beijing opening up more sectors to foreign investment, even as the US is moving to restrict some outbound investment flows, said Scott Kennedy, chair of the Chinese Business and Economics unit at the Center for Strategic and International Studies.

Beijing could also signal plans to resume purchases of Boeing 737 MAX aircraft that were put on hold following the two crashes in 2018 and 2019 that killed hundreds of people. “Given the increase in air demand in China and the ageing of some of its fleet, that certainly would be a way to reassure the United States about access to the Chinese market,” Kennedy said.

However, Biden administration officials, who have maintained tariffs on $300 billion dollars worth of Chinese goods imposed by former President Donald Trump starting in 2018, talk very little about creating opportunities for China to export more goods to the United States, said Anna Ashton, a China analyst at the Eurasia Group.

US imports from China shrank 25 per cent in the first six months of 2023, an attention-grabbing drop after reaching the second-highest on record the prior year.

And when administration officials claim the US only wants to restrict exports to China of a narrow range of products for national security purposes, they often don’t mention that imports of an increasing number of Chinese goods are being restricted on human rights grounds because they are suspected of being made with forced labour, she said.

“There’s the national security effort, and then there’s the sort of human rights and democratic values effort [to manage US trade with China]. And both of them contribute to decoupling in pretty profound ways,” Ashton said.