Bundles of steel tubing at a trading market last month in Jinan, China. China's steel exports have swelled, prompting a backlash overseas as some economies impose higher tariffs. MUST CREDIT: Qilai Shen/Bloomberg (Qilai Shen)
The Chinese government is subsidizing a wide range of industries in a bid to dominate global markets and develop the ability to coerce the United States in a crisis, according to the new chairman of the House Select Committee on the Chinese Communist Party.
Chinese companies produce 90% of commercial drones used in the United States and 77% of those flown by hobbyists, according to committee data. And the Pentagon has been eyeing battlefields in Ukraine for lessons on the combat value of unmanned aerial vehicles.
“We shouldn’t be dependent on the CCP for technology,” said Rep. John Moolenaar (R-Mich.), the panel chairman, referring to the Chinese Communist Party. “I believe it’s all hands on deck [for] winning this strategic competition and addressing the threats that the CCP has towards our way of life.”
On Wednesday, the committee is scheduled to hear testimony on Chinese practices in the drone, semiconductor, shipbuilding and steel industries, “areas where the Chinese Communist Party seeks dominance and wants to exploit vulnerabilities we have in our supply chain,” Moolenaar said in a telephone interview.
Among those scheduled to appear is Adam Bry, chief executive of drone maker Skydio. The San Mateo, Calif.-based company produces drones for both commercial and military use. Ukrainian officials use Skydio drones, which can conduct three-dimensional scans of surface terrain, to investigate potential war crimes, according to Bry’s LinkedIn page.
In March, Moolenaar’s panel, formally known as the House Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party, called for “immediate action,” including new tariffs, to counter China’s drone dominance. The committee later this year may propose legislative remedies.
“We’ve seen the Chinese economic playbook repeatedly in steel, aluminum, glass, paper, consumer electronics and other industries. And that playbook has created great damage to our U.S. industrial base. And so, we don’t want to stand idle as they utilize that same playbook, especially with regard to strategic sectors that could affect our economic and national security,” said Rep. Raja Krishnamoorthi (D-Ill.), the panel’s senior Democrat.
China provides lavish subsidies to companies in a range of industries. Total support for favored businesses amounts to almost 2 percent of output, according to a study by the Center for Strategic and International Studies. The $248 billion that China devoted to subsidies in 2019 exceeded its defense spending and was roughly twice what the United States spent, CSIS said.
Chinese steel mills, electric vehicle producers, semiconductor developers, solar panel manufacturers, shipbuilders and oil producers all benefit from a vast web of state backing. The central government doles out low-cost loans from state banks, free or inexpensive land, discounted electricity, and cash support from state investment funds.
The United States has complained about China’s industrial subsidies for years to little effect. World Trade Organization rules limit subsidies but do not prohibit them.
The Trump administration planned to press Beijing to overhaul its use of subsidies in negotiations intended to follow the “phase one” U.S.-China trade deal in 2020. But that never happened. President Biden recently imposed 100 percent tariffs on Chinese electric vehicles, seeking to prevent subsidized auto imports from swamping the American market.
U.S. dependence on China for an array of goods and materials is the outgrowth of several decades of bipartisan trade policy.
“I believe there was a misunderstanding on the part of our country thinking that China would become more like the United States and that they would become more freedom loving, more free-market oriented, more based on the rule of law. And as the Chinese middle class grew, people would have expectations for their government to be more open,” Moolenaar said. “And unfortunately, the opposite is what happened.”
