US Investment Restrictions on China Are Too Little, Too Late

US Investment Restrictions on China Are Too Little, Too Late
President Joe Biden listens to IBM CEO Arvind Krishna as he tours the IBM facility in Poughkeepsie, N.Y., on Oct. 6, 2022. (Mandel Ngan/AFP via Getty Images)
Anders Corr
President Joe Biden will reportedly restrict U.S. investment into certain technologies in China due to national security concerns.

The restrictions will only affect U.S. private equity and venture capital firms, not the broader stock market or our allies’ investments in China, according to sources cited by The New York Times.

U.S. investments in tech—such as quantum computing, advanced chips, and artificial intelligence—would be restricted. Other investments would require informing the U.S. government, which could use that information for additional bans in the future.

A few other countries, including Taiwan and South Korea, restrict investment in China. The European Union president supports a similar move. The Biden administration is asking all G7 countries to implement such restrictions.

But according to the NY Times, “Biden officials have emphasized that outright restrictions on investment would narrowly target a few sectors that could aid the Chinese military or surveillance state as they seek to combat security threats but not disrupt legitimate business with China.”

There is arguably no “legitimate business” with a totalitarian and genocidal state.

Confusion about the threat from China by the administration has meant that many mainstream media outlets and economists continue to attempt to improve China’s economy or conflate it with the “global economy”—a conflation that will only strengthen the Chinese Communist Party and hasten its goal of destroying global capitalism and free markets. It aids the CCP in its ultimate additional aim of global hegemony.

Such global control by the CCP would be particularly disastrous because of the Party’s totalitarian and genocidal history.

It is, therefore, appalling that economists from Cornell, Oxford, and Morgan Stanley have recently advised China on how to improve its economy. An alarmist Wall Street Journal headline blares, “China Slips Into Deflation in Warning Sign for World Economy.”

Actually, things that are bad for China’s economy are good for the world economy, which depends on the free markets that the CCP threatens.

“With export prices falling, China is set to pass on deflationary pressure to other countries via its massive goods trade,” according to Bloomberg reporting. The reporting writes this as if it were a bad thing, when passing on “deflationary pressure to other countries” should decrease inflation in the United States, for example, and provide more macroeconomic room for China tariffs.

A drone view of Yangluo Port in Wuhan, Hubei Province, China, on April 12, 2020. (Getty Images)
A drone view of Yangluo Port in Wuhan, Hubei Province, China, on April 12, 2020. (Getty Images)

Deflation in China is good for the United States.

Bloomberg noted that producers expected a post-COVID increase in demand, but the demand did not materialize. This resulted in a surfeit of goods on markets that drove down prices.

That’s good for the Chinese consumer, good for the world consumer, good for the world’s economic strength relative to China, and bad for Beijing’s ability to collect taxes.

Decreased tax revenue in China means less money for the People’s Liberation Army, which reduces the risk of a war over Taiwan. No war with Taiwan means a lower threat of escalation to direct military disputes between China on one side, and the United States, Japan, and Australia on the other.

Deflation in China improves the chances for world peace.

A weaker China economy also means less pollution from the world’s biggest emitter. That’s good for the environment, whether or not you believe in global warming.

Economists in the West, therefore, need to stop using their big brains to help China’s economy and start using them to figure out how to contain it before it engulfs the rest of the world’s free markets with its disastrously inefficient communist ideology and human-rights-destroying political hegemonism.

Rather than placate China by emphasizing that it does not seek to target China’s entire economy, the Biden administration should tell Xi Jinping that until he starts cooperating to end the global fentanyl trade that results in thousands of American fentanyl deaths annually, among many other bad things that the CCP does, Washington will definitely target China’s entire economy.

Money and technology are fungible and, when not invested in national security, can be invested elsewhere in China, where the CCP can ensure a high rate of return and move the foreign asset wherever it wants. For foreign investors, there are few Chinese legal protections and little business transparency. They can invest or transfer technology to a non-military business, for example, and have the investment diverted without their knowledge to China’s military and surveillance state. Without economy-wide investment restrictions, including Hong Kong and Macau, the current targeted investment restrictions are more of a warning shot than a real difficulty for the beneficiaries of trillions in U.S. investment in the country.

President Biden should immediately make clear to the world the full threat from the CCP, including its totalitarianism and genocide, so that investors, economists, and others realize that sending the country more American money and advice to boom its economy is self-defeating for free markets. It aids and abets the enemy of market democracy, not only in China but in the world.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
Anders Corr has a bachelor's/master's in political science from Yale University (2001) and a doctorate in government from Harvard University (2008). He is a principal at Corr Analytics Inc., publisher of the Journal of Political Risk, and has conducted extensive research in North America, Europe, and Asia. His latest books are “The Concentration of Power: Institutionalization, Hierarchy, and Hegemony” (2021) and “Great Powers, Grand Strategies: the New Game in the South China Sea)" (2018).
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