In this week's edition:

• The Big Picture 
• State Dept. Warns Against China’s Misinformation Campaigns 
• Lawmakers Want White House to Restrict Chinese Trade Practices 
• Senators Urge Tracking/Restriction of Foreign Ownership of Farmland in Farm Bill 
• The U.S.-China Business Council Annual Members Survey Results 
• China Releases Statement on Development Policy Directed at U.S. 
• U.S.-Pacific Island Forum in Washington
• Unions Negotiate with TSMC
• U.S. to Extend Waiver to South Korean Chip Manufacturers
• U.S. Adds Firms to Export Blacklist

A visit by President Xi to the United States for the Asia-Pacific Economic Cooperation (APEC) in November and a meeting with President Trump is looking increasingly likely, at least based upon the continued high-level communication between the 2 governments. Presidents Biden and Xi are both balancing domestic priorities (notably the economy in both cases, as well as the 2024 Presidential elections for Biden) when considering whether or not to meet. For Xi, the deterioration of the real estate market (further implosion of Evergrande) is weighing on Chinese consumer sentiment and demand. We have laid out the rationale for both sides—keeping geopolitical tensions calm will support global growth and help both Presidents at home. For his part, it benefits Xi to project a sense of stability in his foreign policy when the economy is exhibiting weakness. At the same time, appearing to appease China (in Biden’s case) would undermine him in the 2024 elections with the Republicans.

Looking at the most recent and upcoming meetings, it is clear that the governments are trying to ease tensions. There are discussions of a possible visit by top economic policy official Vice Premier He Lifeng in the coming weeks. He would be the highest-level official to visit the U.S. under the Biden Administration. The U.S. is also planning for a visit in October by Foreign Minister Wang Yi. Beijing has also requested a Xi-Biden summit, separate from the APEC summit. Finally, the working groups that were recently established by Treasury Secretary Yellen in her trip to China also show a willingness to work together to avoid mistakes.

Meanwhile, Daniel Kritenbrink, the top State Department official for Asia, met with Vice Foreign Minister for Asia Sun Weidong in Washington, announcing that the 2 had a “constructive” discussion on regional issues and highlighted the significance of a free and open Indo-Pacific.

Of course, irritants remain to the bilateral relationship, and this is unlikely to change. We expect the United States to tighten export controls later this year and China’s relationship with Russia continues to be a problem for the United States and the West more broadly. Taiwan’s elections in early 2024 also could pose a challenge for the United States and have huge implications for the global semiconductor industry. However, the trajectory of the relationship appears to be positive, at least for the short-term when it is in in the interest of both Presidents.

The U.S. State Department’s Global Engagement Center issued a statement warning against China’s misinformation campaigns, saying that the country’s “information manipulation spans the use of propaganda, disinformation, and censorship. Unchecked, the PRC’s efforts will reshape the global information landscape, creating biases and gaps that could even lead nations to make decisions that subordinate their economic and security interests to Beijing’s.” The report warns against export technology created by China such as “smart” and “safe” cities to export surveillance and increase data gathering capabilities.

Already, China has used disinformation campaigns, with one suggesting that the wildfire in Maui was the product of a weather weapon and included AI-generated pictures. The Senate Select Intelligence Committee discussed the event during a hearing last week. One former FBI official testified, “if you're an adult in the United States, the Chinese government has collected your information…they can identify who your friends are, who your contacts are, who your business dealings are. And then, they can exert pressure on those individuals to then try and influence you in a decision that you're making.”

A group of bipartisan lawmakers has urged the White House to restrict China’s “aggressive and illegal practices of transshipment, undervaluation of cheap products, forced labor, [and] skirting tariffs and penalties” which they allege hurt the U.S. textile industry. The group, which includes Sens. Thom Tillis (R-NC) and Sherrod Brown (D-OH), have asked President Biden to hold an interagency meeting with the Departments of Commerce and Treasury, Homeland Security, U.S. Trade Representative, and the National Security Council.

A group of Senators including Agriculture Chairwoman Debbie Stabenow (D-MI) are calling for the inclusion of a provision in the upcoming Farm Bill to better track, and in some instances restrict, foreign ownership of farmland. The current Farm Bill expired at the end of September. Stabenow is a sponsor of “The Food Security is National Security Act” which would place the Secretaries of Agriculture and Health and Human Services on the Committee on Foreign Investment in the U.S. (CFIUS) and direct the Committee to include food systems in the consideration of national security. This issue has been raised frequently by both Republicans and Democrats who express concerns about Chinese ownership of farmland, especially near military bases.

According to the U.S.-China Business Council Annual Members Survey, a majority of American companies operating in China expect a worsening business environment and to lose market share in the near future due to domestic policies in China. American companies cited a variety of challenges to business in China, including U.S.-China relations, export controls, data security rules, investment restrictions, Chinese industrial policy, international travel, transparency, and unequal enforcement of laws. A survey from the American Chamber of Commerce in Shanghai concurred with the results. According to that survey, 34% reduced or paused investment in China this year, down 12% from last year.

China’s State Council Information Office released a paper entitled “A global community of shared future: China’s proposals and actions” which indirectly criticized the U.S. and offered an approach on international development for developed nations. It says “The law of the jungle, zero-sum game, and the ‘win-or-lose,’ ‘winner-takes-all’ mindset have exacerbated the divide between the rich and poor, as evidenced by the widening gap between developed and developing countries, and that within developed countries. Some countries blame their problems in domestic governance on economic globalization or other countries, and resort to unilateral, protectionist, and bullying actions. This has damaged global industrial, value, supply and consumption chains, and caused turbulence and even conflict in the current international trade order.” It criticizes the United States’ stated policy of de-risking from China, which President Biden reasserted as U.S. policy during his address to the United Nations last month.

During the U.S.-Pacific Island Forum in Washington, the U.S. and 18 Pacific Island nations agreed to deepen economic relations, emphasizing trade and investment. The U.S. pledged $8 million for trade opportunities, $50 million for a facility to increase access to financing for small businesses, and $3 million for a subsea cable project. The United States efforts to deepen economic ties with Pacific Island nations is part of its effort to combat Chinese influence in the region.

Arizona labor unions are in negotiations with Taiwan Semiconductor Manufacturing Company’s construction site in Arizona on a resolution for labor issues. Labor unions have raised concerns about safety and training for construction workers preparing the site for production.

These concerns have increased pressure on the Biden administration, as TSMC is expected to be a recipient of funding from the CHIPS Act. If the Administration awards CHIPS Act subsidies to TSMC, a decision will need to be made on how to ensure the company upholds its workforce pledges.

The U.S. is expected to indefinitely extend a waiver to South Korea chip manufacturers Samsung Electronics and SK Hynix, allowing them to bypass license requirements when importing U.S. chip equipment into China for use in their facilities. The Commerce Department has specified to the companies which equipment could be used in China and is expected to make a general announcement on this topic in the coming days.

The Commerce Department has placed export restrictions on 11 more companies from China, barring U.S. firms from selling to entities on the blacklist unless exporters are able to secure a license from the U.S. government. Commerce Secretary Gina Raimondo announced that there are now more than 700 Chinese companies on the export control list.

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