U.S. lawmakers are signaling to China that the world’s second-largest economy and its companies face a tough slog in America for the foreseeable future, regardless of who controls Washington after the November election.

At a divisive point in the country’s campaign cycle, House members overcame partisan tensions to vote resoundingly last week to blacklist several Chinese biotech firms from lucrative U.S.-funded research. It was a rare moment of accord that roundly neutralized Chinese lobbying efforts.

Bloomberg Intelligence says that the Biosecure Act, affecting five companies to start, has a “high likelihood” of becoming law as it now moves to the U.S. Senate. BGI Group, BGI spinoffs MGI Tech Co. and MGI’s U.S. subsidiary Complete Genomics Inc., WuXi AppTec Co., and WuXi Biologics are the companies that would be impacted.

More bills are likely to follow.

One influential Democratic senator, Intelligence Chairman Mark Warner, opened the door to broader legislation setting rules for Chinese technology companies rather what he calls a “Whac-a-Mole” approach targeting specific firms.

Strategic industries like artificial intelligence and advanced computing may be next, other lawmakers in both parties said. Temu, the online shopping giant, and other Chinese exporters face bipartisan efforts to eliminate a tariff exemption that has helped fuel their U.S. business.

The House has also passed numerous other bills aimed at China, including ones targeting Chinese drones and the country’s dominance of the supply chain for electric vehicles.

The current decade has been marked by the economic race between the world’s two largest economies, with the U.S. recently pulling further ahead than China in terms of nominal gross domestic product. The competition between the two powers is a major component of the economic platforms of both U.S. presidential candidates, Vice President Kamala Harris and former President Donald Trump, who waged a tit-for-tat trade war with Beijing.

“You’re going to see a lot more legislation like this in the next Congress regardless of who wins the majority,” said Representative James Comer, a Kentucky Republican who was key to the Biosecure Act’s passage.

There’s a direct and immediate effect on businesses in both the U.S. and China — even if much of that legislation never becomes law, said Lily McElwee, deputy director of the China studies program at the Washington-based Center for Strategic and International Studies.

“This creates, of course, a pretty uncertain environment for Chinese businesses seeking to sustain or expand partnerships with American firms,” McElwee said.

‘TikTok playbook’

The Biosecure vote comes on the heels of another legislative success: April’s passage of legislation - now being contested in court - forcing Bytedance Ltd. to divest TikTok or face a U.S. ban.

In both cases, Chinese firms and their lobbyists in Washington asserted that their U.S. outposts posed no threat to U.S. citizens or security and were unnecessarily and unfairly targeted. TikTok has more than 150 million users in the U.S., and Trump has vowed to save the app.

Representative Raja Krishnamoorthi, the top Democrat on the House’s China panel, said the firms affected by the Biosecure Act took a page out of the “TikTok playbook” of influence campaigns - and, like Bytedance, failed to persuade the vast majority of lawmakers.

Krishnamoorthi said companies like China’s BGI Group — one of the targets in the House-passed bill — also use a complicated ownership structure to protect their U.S. operations while maintaining ties to Beijing.

“They operate in one company, it gets sanctioned; they set up another company, it gets sanctioned,” Krishnamoorthi said. China argues its companies are being unfairly targeted, saying the U.S. is using a broad definition of national security to suppress foreign businesses and undermine fair competition..

Chinese Foreign Ministry spokeswoman Mao Ning said China “will continue to firmly safeguard the legitimate rights and interests of its own companies.”

Tangled web

The saga of Complete Genomics, a San Jose-based company, shows just how much — and how quickly — relations with China have shifted.

The Obama administration in 2013 approved BGI’s purchase of the maker of high-end DNA sequencing machines. As the U.S. became increasingly concerned about China, BGI spun off MGI Tech, and with it Complete Genomics.

The Department of Defense later put BGI, but not MGI, on its official list of Chinese military companies.

Complete Genomics has insisted it’s no longer part of BGI, does not collect sensitive genetic data on Americans, and was committed to “American innovation.” The company dismissed concerns about data collection as a bogus “sci-fi narrative.”

But while the companies are separate entities, the connections run deep.

BGI Group’s co-founder and chairman, geneticist Wang Jian, also serves as chairman of MGI and owns 52% of MGI’s stock through affiliated groups, according to a report published by Georgetown University’s Center for Security and Emerging Technology in May.

“Observing the growth of BGI Genomics and MGI Tech is watching China’s industrial policies unfold in real time,” wrote analysts Anna Puglisi and Chryssa Rask. Most of the companies’ other shareholders, they said, have direct or indirect ties to the Chinese government.

The House’s China panel recently pointed to a new study indicating MGI employees listed BGI as their employer and urged the Pentagon to add MGI to its list of Chinese military companies.

A BGI spokesman said Wang Jian’s shares in both companies don’t indicate they are the same company. The company’s spokesman also said BGI is not government controlled and its work is for civilian and scientific use only.

BGI and MGI both contested the study’s conclusions via their lawyers. Puglisi, meanwhile, is testifying before the House China Committee Thursday on Beijing’s efforts “to silence critics.”

Puglisi in her prepared remarks accused the companies of “threatening to bring the weight of our own legal system down on me” in what she called lawfare.

The committee chairman, Republican John Moolenaar, said Puglisi’s story is part of a pattern the committee has seen of Chinese companies exploiting the U.S. legal system with frivolous complaints to intimidate American critics, and said the committee would look for ways to stop it.

Complete Genomics, which has called the House-passed bill unconstitutional, warned that it would create a monopoly for the market leader for DNA sequencing equipment in the U.S., San Diego-based Illumina Inc. That, the company warned, would lead to higher prices, slow research and put the U.S. at a disadvantage.

Due process

Massachusetts Democrat Jim McGovern, who typically is a China hawk and has been sanctioned by the country, pushed to hold off on blacklisting the firms targeted in the House bill until the U.S. government investigates the companies.

The bill, McGovern argued, lacked due process and was more reminiscent of how China acts than the U.S. government. His argument worked with some colleagues, like fellow Democrat Jamie Raskin of Maryland, but only 81 lawmakers ultimately opposed the measure.

For McGovern, there was a hometown connection. WuXi Biologics, whose products are an important part of the global supply chain for prescription drugs, would be blacklisted just as it expands a factory in McGovern’s district that would add an estimated 200 jobs.

McGovern said he’d be prepared to shut down companies, even the one in his district, if there was evidence of bad behavior. But first, he wants a probe.

The bill’s backers, however, said there was already ample evidence. Wuxi Biologics’ executives, according to the China committee, participated in a 2023 event to “build and strengthen” the Chinese Communist Party’s control over supply chains.

The company, meanwhile, is connected to another on the bill’s blacklist, WuXi AppTec. Like BGI and MGI, they purport to be separate companies but share a chairman, Li Ge, an American citizen and billionaire founder of Wuxi Apptec.

A Wuxi Apptec spokesperson said Li Ge, its chairman and CEO, is the non-executive chairman of Wuxi Biologics but has no role in its day-to-day workings.

With assistance from Gerry Smith, Dong Lyu, Mackenzie Hawkins, Michelle Fay Cortez and Michelle Jamrisko.

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