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Conflicting Economic Ideologies May Impact Future China Policy in the US

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Trans-Pacific View | Politics

Conflicting Economic Ideologies May Impact Future China Policy in the US

China policy has become a proxy for different economic strategies at home: more investment (and deficit spending) vs. budget cuts and a market-driven approach.

Conflicting Economic Ideologies May Impact Future China Policy in the US
Credit: Depositphotos

Nearly two months after its establishment, the newly-formed House Select Committee on China held its debut hearing on February 28. While both Democrats and Republicans agreed on the need to take a tough stance on China, there were partisan disagreements on how best to counter Beijing’s growing influence. And this time, conflicting economic ideologies are the main driving force of partisanship.

The House Select Committee on China, while not having the power to legislate, will draw attention to the competition between the United States and China on a wide range of fronts and make policy recommendations that could impact the decisions of Congress and the executive branch. The first hearing of the panel set a key tone, emphasizing a clear separation between the Chinese Communist Party (CCP) and the Chinese people. To highlight this point, the Republican leader of the China committee, Mike Gallagher, condemned an attack from another GOP lawmaker on Representative Judy Chu, the first Chinese American congresswoman. 

Along with Democratic Representative Raja Krishnamoorthi, Gallagher emphasized the “bipartisan center of gravity on China,” both within the committee and in Congress as a whole. Despite two protesters briefly disrupting the hearing to voice their opposition to anti-Asian hate that may be exacerbated by the panel, the bipartisan agreement on countering China is clear.

Nevertheless, a partisan divide emerged over how to counter China. Democrats on the panel advocated for a defensive, domestic-oriented strategy to offset challenges from China through government-led industrial policies. Essentially, Democrats want to subsidize U.S. manufacturers in a bid to counter China’s dominance of global supply chains, especially in the realm of semiconductors. They argued that this strategy could contribute to both national security and economic growth.

On the contrary, Republicans overwhelmingly pressed for an offensive approach to tackle the technological, ideological, military, and economic threat from China. Opposing more investment in research, GOP lawmakers doubled down on their determination to impose tighter economic and technological sanctions on China. 

On the same day, a similar partisan fault line was observed during another hearing held by the House Science Committee. While the majority of Democratic members favored increasing funding for research and development (R&D) and workforce cultivation to outpace China’s “technological great leap forward,” most Republicans criticized their counterpart’s proposals by equating increased funding for research with mimicking the Chinese command and control system. 

The joint efforts by Gallagher and Krishnamoorthi may have helped address the ideological differences over China issues on the cultural front, but partisan disagreements over economic ideologies have sparked debates over the best strategy for countering China. 

The Republican Party is traditionally known for being cautious about government spending and intervention in the economy. Whether due to a political agenda or genuine concerns over fiscal discipline and inflation, it is rare to see Republicans unanimously side with expansionary fiscal policies, even when those policies aim to counter foreign competition. 

For instance, the CHIPS and Science Act aimed to counter China by providing $280 billion to subsidize research and bolster the domestic chip manufacturing industry. Despite receiving alleged bipartisan support, the bill only passed with a 243-187 vote in the House, with the majority of GOP lawmakers voting against it. Their main reason for opposition to the bill was its possible negative impact on the already deteriorating inflation and deficit. With the looming debt default, Republicans seem to be gaining the upper hand in justifying their offensive approach to countering China. 

On the other hand, Democrats tend to support deficit spending to revive the economy and fund social programs. Their Inflation Reduction Act of 2022, despite being promoted as a measure to enhance competition with China in the area of clean energy technology supply chains, was actually another expansionary fiscal policy in disguise and would have little impact on inflation in the near future. As the Federal Reserve advances its contractionary monetary policies to curb inflation, more expansionary fiscal policies will likely be needed by the Democratic Party, especially the White House, to offset any negative impacts on economic growth and the job market. 

Incumbent politicians seeking reelection are unlikely to want to preside over a sluggish economy. Thus, Democrats are well aware of the importance of leveraging China issues – one of the few areas of political consensus both within Congress and among the U.S. public at large – to push their spending plans.

When it comes to the question of whether the Republican Party’s offensive strategy or the Democratic Party’s defensive strategy will ultimately prevail, the answer hinges on the votes of Congress members. It is important to note that lawmakers tend to vote not only along party lines, but also based on the interests of their constituencies. 

Notably, the 24 Republican “defectors” who voted for the CHIPS and Science Act represented a diverse set of states, including solidly red states such as Texas and West Virginia, deep blue states like California and New York, and swing states like Ohio and Pennsylvania. Despite their political differences, these states share a commonality: They all have growing semiconductor industries and are working to expand them on a larger scale, which make those states beneficiaries of the CHIPS and Science Act. 

Ohio is a prime example of this trend, with a “semiconductor fever” currently underway. The passage of the CHIPS and Science Act played a pivotal role in Intel’s decision to invest $20 billion in constructing a semiconductor manufacturing site in the state. Thus, it is no surprise that eight of the 24 Republicans who voted for the CHIPS Act came from Ohio. Similar reasoning can apply to the other GOP lawmakers who broke with their party’s stance when it comes to bills countering China through increased government spending.

As the 2024 presidential election approaches, the focus of debate over China policy is expected to shift from whether to compete with China to how best to compete with China. With their majority on key House committees, Republicans are likely to push for tougher actions against China, including banning TikTok, despite opposition from Democrats. Conflicting economic ideologies will drive partisan jostling, especially in light of inflation and the debt limit fight. However, some Republican lawmakers who represent districts that benefit from China-countering policies may emerge as key players in shaping the ultimate formation of either offensive or defensive strategies for the United States in its relationship with China.