US Tax Reform Puts Pressure on China’s Authoritarian State

Warnings against 'tax war' reflect Communist Party’s fear of rising private sector

Senate Majority Leader Mitch McConnell (R-KY) addresses a tax reform news conference with Sen. Shelley Moore Capito (R-WV) and representatives from small business interest groups in the Dirksen Senate Office Building on Capitol Hill in Washington, DC on November 30, 2017. Chip Somodevilla/Getty Images

For years, Chinese companies leveraged favorable exchange rates, cheap labor, thin environmental regulations, and other advantages to attract U.S. capital and technology in exchange for huge profits.

Now, U.S. tax cuts—the biggest passed since those during the presidency of Ronald Reagan three decades ago—have Beijing in a bind.