Tag Archives: economics

Rules for Investing in the People’s Republic of China

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The Biden administration is starting to pay lip service to setting rules for American businesses’ investing in the People’s Republic of China. It’s

preparing a new program that could prohibit US investment in certain sectors in China, a new step to guard US technology advantages during a growing competition between the world’s two largest economies.

And, of course, the effort will need new taxpayer money.

Treasury and Commerce departments said they expected to finalize their policy on the issue in the near future. Both agencies said they expected to seek additional resources for the investment program in the White House budget, which will be released next week.

Naturally, the administration isn’t prepared to specify which sectors would be included, or how these departments propose to enforce their rules. Just give them money.

Since the Federal government is in the business of regulating American business’ investing in enemy nations, I have my own proposal for a rule for investing in the PRC: No. No investments in the PRC, and those businesses with investments there have two years in which to wind down those investments and withdraw from the PRC.

That won’t cost nearly as much. Just require public companies to report their investments in their quarterly SEC filings, and private companies to report same in their Federal tax filings—which would easily fall within the requirement, with only the smallest adjustment, to report on accounts held in foreign nations. Require those particular reporting subjects to be available to the public via FOIA requests. These requirements would come close to paying for themselves in the early years by assessing fines equal to the size of the investments not reported or inaccurately reported.

I have an alternative rule proposal: for every dollar an American business wishes to invest in the PRC, it must invest three dollars in the Republic of China. If the RoC can’t absorb all of the investment, then the business cannot invest at all in the PRC. This alternative would carry the same reporting requirements and penalties as my first proposal.

A final alternative: spread those three dollars among any number, greater than one, of the nations rimming the South China Sea in addition to the RoC. Again, with the same reporting requirements and penalties.

What He Said

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Rick Wallace has the right of it—and exactly so—in his Letter in The Wall Street Journal‘s Tuesday Letters section:

The Republicans should be sending one message to the American people loud and clear: The Democrats want to cut your Social Security benefits by 26% in 10 years. There is no other pertinent debating point. If the GOP is going to be vilified for trying to save the program with responsible alterations, the alternative should be made clear. Should the Democrats have their way, the program will collapse, and everyone will face major cuts to their benefits. That’s their Plan A. The GOP offers Plan B.

Those 26% are the size of the reduction in Social Security payouts to then-existing retirees when the Social Security Trust Fund runs out of money in those 10 years, and payouts after that come solely from incoming payroll tax collections.

The Progressive-Democratic Party politicians in both houses plainly don’t care about that damage to our retirees, preferring instead to keep the threat of reduction as an active cudgel with which to attack their political opponents. That’s why they react to loudly against any effort by Republicans and Conservatives to adjust Social Security in order to save it and avoid that 26% cut in benefits.

The Republicans and their Conservative allies, though, do need to stop cowering behind glittering generalities and instead be explicit in their solution, how it will work, and when/over what schedule it will be implemented.

Counterproductive

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The government of the People’s Republic of China now claims, at the end of its three-year Wuhan Virus shutdown, to be open for foreign business. A broad range of folks running American businesses actually are taking that government’s blandishments seriously.

Many companies that are increasing their commitments to China are consumer-facing. They still view China’s enormous market as a promising long-term bet, even if sales took a hit during the zero-Covid era.

This is, at best, counterproductive.

Any product’s technology, consumer-oriented or not, can be dual-used for military or intelligence collection purposes, and in the PRC, it will be—not only to the detriment of PRC citizens, but to our detriment and that of our friends and allies.

More than that, American investment, any sort of doing business, inside the PRC works to the benefit of the PRC’s economy.

No American company should be doing any sort of business with or within an enemy nation.

Full stop.

Yet Another Reason…

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…for State and local jurisdictions to stop taking government funds. This one is from HUD.

In proposed regulations that would touch any jurisdiction that accepts any sort of HUD funding, fair housing must mean a plan to “promote equity in their communities, decrease segregation, and increase access to opportunity and community assets for people of color and other underserved communities.”

Sounds reasonable.

However.

Those required to comply will include more than 1,200 cities and counties receiving HUD funding. All will be required to develop “equity plans.”
Such equity could mean anything from building low-income housing to redrawing school district lines for racial or socio-economic integration, all as assessed by the HUD bureaucracy.

Because folks moving from here to there still will be told, on arrival there, where they will be permitted to live and where their kids will be permitted to go to school and on and on—they’ll still be under government control. If they want, for good or bad reasons, to live with folks who look like them, or who share their values, or…, central government under these rules will not permit them that choice.

Racial discrimination in housing is pernicious, Husock concluded his piece (at the link). But he doesn’t go far enough in his conclusion. For Washington to invoke it to socially engineer neighborhoods across America is dangerous. No. For the Federal government itself to give special treatment to one group of Americans over other groups of Americans is especially pernicious racism.

This is another example of Federal government funds that are being transferred to State and local jurisdictions coming with strings attached, for good reasons or ill. Government strings only increase the central government’ ability to dictate terms to locals, to reduce our States to the same relationship to the central government as counties have relative to their States: merely convenient districts whose sole purpose is to enforce Federal law. That works for counties in States, but the structure of our system of federal government puts the States—individually as well as a group—on par with our central government on nationally domestic matters—and on higher authority on matters domestic to an individual State.

It is this federal republican structure, the role of our several States as [50] separate experiments in democracy, that string-loaded Federal funds transferred to States and locals so severely deprecates.

Should be Good for Us

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Russian President Vladimir Putin wants to start another arms race, which of necessity includes a technology race and a matching of economic strengths.

Russian President Vladimir Putin said Tuesday that Russia would suspend its participation in the last remaining nuclear-arms treaty between Moscow and Washington, a vestige of the security architecture that has helped keep the peace for decades.

Despite the outcomes of Progressive-Democrat Party policies, we still have the strongest economy in the world, with lots of potential for getting even stronger, and we still have the largest economy in the world, with lots of potential for getting even larger. That feeds into our ability to innovate more rapidly than our competitors or our enemies, and so more rapidly in technology arenas, including weapons and cyber tech. And both our economic and technical capabilities potentiate our ability to produce existing weapons and the ammunition and logistics systems needed for them faster than our competitors or our enemies, and to more quickly develop new weapons and get them deployed in useful numbers.

We dissolved the USSR with that nation’s initiation of its late-stage arms race. Russia’s economic and technological establishment is even more fragile.

The People’s Republic of China? That nation is stronger than Russia, but not as strong—still—as the USSR was.

There’s this, too:

An entente between the two would replicate their Cold War anti-Western partnership with one significant difference, that Beijing rather than Moscow would be the dominant partner.

That prior entente was one in which the two nations routinely exchanged gunfire across their border, especially along the Amur River. One factor leading to those exchanges is the PRC’s—and Kuomintang China, and emperor-ist China and on back—longstanding holding that Siberia belongs to China and that Russia stole it centuries ago. This time around, the PRC is not only the dominant partner, it’s much more dominant than was the USSR in that prior arrangement. And the PRC still insists that Siberia is Chinese. Gunfire exchanges would be much more dangerous for Russia, although it would bleed the PLA, also.

That’s a risk worth taking seriously, but this is the much more likely outcome:

The prospect of the two great autocratic powers that dominate the Eurasian landmass moving closer together carries risks for Beijing. It would probably force European countries that now are hoping to maintain close commercial ties with China to move more decisively toward Washington, on which they depend for security. If that happened, geopolitical competition between the West (along with Asian democracies such as Japan and South Korea) and the Moscow-Beijing axis would solidify.

And that also would redound to the benefit of the US and to the West in general, for all the reasons listed earlier.

Bring it.