In This Week’s Edition:

• U.S. House Passes 25 Bills Relating to China
• U.S. House Passes Bill to Ban Chinese-Content EVs from Tax Credits
• China Files Complaint Citing Lack of U.S. Compliance with WTO Rules
• EU Rejects Chinese EV Maker’s Bid to Avoid Tariffs
• Huawei Presents New Smartphone Hours After Apple’s Unveiling of iPhone 16
• Russia and China will Hold Joint Military Drills in September

House Republicans are pushing a series of bills with hopes to highlight their hardline position on China and differentiate from Democrats ahead of the upcoming elections. Opposition to China has proven to be one of the most bipartisan policy stances in the 118^th Congress.

The House passed 25 bills, including:

• “The No WHO Pandemic Preparedness Treaty Without Senate Approval Act,” which requires Senate approval for any World Health Organization (WHO) agreement on pandemic preparedness.
• “The End Chinese Dominance of Electric Vehicles in America Act,” which blocks electric vehicle (EV) tax credits for vehicles containing parts made or assembled by entities from China, Russia, North Korea, and Iran.
• “The Protecting American Agriculture from Foreign Adversaries Act,” which restricts ownership of U.S. farmland by citizens of China, Russia, North Korea, and Iran.
• “The DHS Restrictions on Confucius Institutes and Chinese Entities of Concern Act,” which denies Federal funds to universities who work with Chinese-backed research institutes. Representative August Pfluger (R-TX) stated that Confucious Institutes effectively conduct “widespread military espionage inside the United States.”

Though most of the proposed measures were divided along party lines, there was broad bipartisan support for “The BIOSECURE Act.” The U.S. House of Representatives passed “The BIOSECURE Act” with a 306-81 vote. The bill aims to ban Federal contracts with Chinese biotechnology companies, including WuXi AppTec, WuXi Biologics, BGI Group, BGI-related MGI Tech, and MGI’s U.S. subsidiary Complete Genomics, citing national security concerns. The bill, which supporters argue is necessary to protect U.S. health and genetic data and secure pharmaceutical supply chains, must now pass the Senate before potentially becoming law.

Representative Jim McGovern (D-MA) opposed the bill, criticizing the lack of clarity on how companies were chosen. He stated, “In the United States of America, Congress does not just pick companies to punish at random with no clear criteria or due process.” The targeted companies expressed disappointment with the decision. BGI Group responded by saying, “We are disappointed that the U.S. legislative process is being used to pick winners and losers.” Complete Genomics added that the bill is driven by “geopolitics instead of facts” and warned it could harm U.S. leadership in biotech innovation and drug development. The Chinese Foreign Ministry criticized the U.S. move, with spokesperson Mao Ning stating, “China will continue to firmly safeguard the legitimate rights and interests of its companies.” The bill’s future in the Senate remains uncertain, as a similar measure passed the Senate Homeland Security Committee in March but has yet to reach the Senate Floor for a vote.

There was also bipartisan support for bills banning the use of Chinese-made surveillance drones and batteries, including “The Countering CCP Drones Act” and “The Decoupling From Foreign Adversarial Battery Dependence Act.” Some ambitious proposals, such as restricting outbound investments in sensitive Chinese sectors and changing import tax thresholds (de minimis rules), were not included, likely due to internal disagreements and pushback from industry groups. Additional information about the passed bills can be found in a press release published by the House Select Committee on Strategic Competition between the United States and the Chinese Communist Party which can be viewed here.

The U.S. House of Representatives narrowly passed “The End Chinese Dominance of Electric Vehicles in America Act,” mentioned above, by a vote of 217-192. This bill aims to tighten rules limiting Chinese content in vehicles eligible for U.S. EV tax credits. The Senate has yet to consider the bill.

The legislation, sponsored by Representative Carol Miller (R-WV), calls to redefine the “Foreign Entity of Concern” to prevent Chinese companies from benefiting from EV tax credits meant for U.S. manufacturers. Representative Miller stated, “China, or any adversary for that matter, should not have any access to American tax credits. Narrowing the definition of the Foreign Entity of Concern expands opportunities for American manufacturing while protecting our resources and our people... The End Chinese Dominance of Electric Vehicles in America Act will close key loopholes in Treasury’s EV credit guidance to ensure American tax dollars are kept here at home, and not in the pockets of our strategic adversaries.” This bill would also impact vehicles containing parts from Russia, North Korea, and Iran.

The Alliance for Automotive Innovation, representing major automakers like General Motors and Toyota, has raised concerns that stricter rules could reduce the number of vehicles eligible for credits, impacting vehicle emissions and EV targets.

On Thursday, September 12^th, China stated that the U.S. acts in ways that violate the rules and obligations set by the World Trade Organization (WTO) by engaging in “bullying” behaviors and “abusing” trade remedies and export controls. Following last year’s 1^st-ever report on the topic, the Chinese government issued the “2024 Report on WTO Compliance of the United States” on Thursday. According to the Chinese Ministry of Commerce, “Based on the previous report issued last August, this Report provides a comprehensive overview and general assessment of the U.S. compliance with the WTO rules, and continues to express concerns over the U.S. policies and measures that undermine the multilateral trading system, practice unilateralism and bullying behaviors, manipulate double standards on industrial policies, and disrupt global industrial and supply chains.”

The report focuses on several issues that China has raised about the U.S. in the past, including tariffs on Chinese goods under Section 301 of The 1974 Trade Act, The Inflation Reduction Act, and export controls and other miscellaneous measures.

This year’s report carries much of the same language as last year’s report, including its description of the U.S. as a “destroyer of the multilateral trading system.” However, there are some new criticisms too, such as a focus on “de-risking,” which is a term that the U.S. has used to describe its efforts to nearshore supply chains.

The European Union (EU) has rejected offers by Chinese electric vehicle manufacturers to adjust and lower their prices to avoid higher tariffs ahead of important talks between the 2 parties. The tariffs, which will be voted on by EU member states by October, are aimed at protecting European-based manufacturers from what the EU considers unfairly subsidized low-cost Chinese EVs. The EU has proposed imposing tariffs of up to 50% on Chinese EVs. This comes after the U.S. and Canada imposed 100% tariffs on Chinese EVs. The EU remains open to negotiation, despite the rejection. Therefore, it is up to China to propose a viable solution that the EU would accept. According to former Chinese Ambassador to the World Trade Organization Yi Xiaozhun, “In China, nobody wants to see a trade war. I think China is trying its best to avoid it and the US is even tougher for China to deal with. And we do hope that the EU will not join this kind of unilateral protectionism to push China to go through a trade war.”

On September 10^th, Huawei introduced Mate XT, a trifold smartphone, only hours after Apple’s iPhone 16 launch. Priced at $2,800, the Mate XT is part of Huawei’s strategy to regain dominance in China’s high-end smartphone market where Apple’s market share has been declining in recent years due to economic conditions and a push for consumers to choose domestic brands.

Despite U.S. sanctions aimed at restricting Huawei’s access to advanced chips, the Chinese company has managed to develop high-tech devices using domestically produced semiconductors from Semiconductor Manufacturing International Corporation (SMIC). However, SMIC faces challenges in mass-producing these chips due to high costs and production constraints, which could impact Huawei’s future releases, including the anticipated next-generation Mate 70.

Meanwhile, Apple’s reliance on new artificial intelligence (AI) features for the iPhone 16 could be hampered in China due to regulatory hurdles. Apple may need to partner with a Chinese company, such as search giant Baidu – Samsung’s local partner – to comply with local regulations on AI technology.

China’s Defense Ministry announced that it will conduct joint naval and air drills with Russia in the Sea of Japan and Sea of Okhotsk this month. These drills are titled “Northern United-2024,” and are part of a growing military partnership between the 2 countries who aim to “strengthen [their] ability to jointly deal with security threats.” Additionally, China’s navy has plans to cruise in the Pacific and participate in Russia’s “Great Ocean-24” exercises. This comes as the United States and China have restarted bilateral defense talks to prevent any potential miscommunication.

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