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Biden Team to Counter Tech Espionage Unveils Cases Involving China and Russia

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A new division set up by the government to pursue sanctions evasion and technology espionage announced arrests of individuals with ties to foreign governments.The Biden administration announced arrests and criminal charges on Tuesday in five cases involving sanctions evasion and technology espionage efforts linked to Russia, China and Iran.Two Russian nationals were taken into custody last week under accusations of sending aircraft parts to Russia in violation of sanctions imposed after the invasion of Ukraine. In another case, a former Apple engineer is accused of stealing the company’s autonomous vehicle technology to provide it to a Chinese competitor.The announcements were the work of a recently established “technology strike force,” which aims to protect critical American technology or data from theft by hostile nations. The strike force was set up in February and brings together agents with the Commerce and Justice Departments, as well as the F.B.I. and local attorneys offices.Federal agents are working to trace the global movement of U.S. goods and data, as well as the funds used to pay for them. The effort seeks to crack down on the global networks that are channeling goods and technology through opaque jurisdictions and middlemen to try to circumvent sanctions and technology restrictions imposed by the United States.In another case unveiled Tuesday, a California-based engineer is accused of trying to steal source code for advanced machinery that can be used to make parts for military submarines and aircraft to sell it to several Chinese companies.Two other cases were announced, including charges against China-based agents who were accused of attempting to send materials used in weapons of mass destruction to Iran, according to U.S. officials, and charges involving the alleged provision of advanced technology to Russia that could be repurposed by the Russian military.Matthew G. Olsen, the assistant attorney general of the Justice Department’s national security division, told reporters that the cases showed the U.S. government’s ability “to accelerate investigations and surge our collective resources to defend against these threats.”“Foreign nation states are working hard to acquire our most sensitive technologies,” said Matthew Axelrod, the assistant secretary for export enforcement at the Commerce Department’s Bureau of Industry and Security. “We’re working even harder to stop them.”Oleg Patsulya and Vasilii Besedin, the two Russian nationals who were arrested last week under suspicion of trying to procure millions of dollars of prohibited parts for Russian airlines, were charged with conspiracy to violate the Export Control Reform Act and conspiracy to commit international money laundering. If convicted, they would face up to 20 years in prison for each charge.The Commerce Department issued a temporary denial order Tuesday against the men, which prohibits them from transactions involving any U.S. products for 180 days.The order also applies to a freight forwarder in the Maldives that the men had utilized to route shipments of prohibited products into Russia, as well as a Russian airline, Smartavia, that sought to purchase these products.On Thursday, federal officials seized luxury goods purchased with proceeds of their scheme, a U.S. official said. More

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    U.S. Solar Makers Criticize Biden’s Tax Credits as Too Lax on China

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    U.S.-based manufacturers of solar products say rules issued by the Biden administration on Friday will “cement China’s dominance” over the solar industryBiden administration rules released on Friday that will determine which companies and manufacturers can benefit from new solar industry tax credits are being criticized by U.S.-based makers of solar products, who say the guidelines do not go far enough to try to lure manufacturing back from China.The rules stem from President Biden’s sweeping clean energy bill, which offers a mix of tax credits and other incentives to try and spur the construction of more solar factories in the United States and reduce the country’s reliance on China for clean energy goods needed to mitigate climate change.The Treasury Department, in guidance issued on Friday, said it would offer a 10 percent additional tax credit for facilities assembling solar panels in the United States, even if they import the silicon wafers used to make those panels from foreign countries. Under the Biden administration’s new climate legislation, solar and wind farms can apply for a 30 percent tax credit on the costs of their facilities.Senior administration officials told reporters on Thursday that they were trying to take a balanced approach, one that leaned toward forcing supply chains to return to the United States. But China’s dominance of the global solar industry has created a tricky calculus for the Biden administration, which wants to promote U.S. manufacturing of solar products but also ensure a plentiful supply of low-cost solar panels to reduce carbon emissions.The officials said that the Biden administration would have the leeway to change the rules when American supply chains become stronger.“The domestic content bonus under the Inflation Reduction Act will boost American manufacturing, including in iron and steel, so America’s workers and companies continue to benefit from President Biden’s Investing in America agenda,” Treasury Secretary Janet L. Yellen said in a statement. “These tax credits are key to driving investment and ensuring all Americans share in the growth of the clean energy economy.”Critics said the new rules would not go far enough to give companies incentives to move the solar supply chain out of China.Mike Carr, the executive director of the Solar Energy Manufacturers for America Coalition, which includes solar companies with U.S. operations like Hemlock Semiconductor, Wacker Chemie, Qcells and First Solar, called the move “a missed opportunity to build a domestic solar manufacturing supply chain.”“The simple fact is today’s announcement will likely result in the scaling back of planned investments in the critical areas of solar wafer, ingot, and polysilicon production,” he said in a statement. “China is producing 97 percent of the world’s solar wafers — giving them substantial control over both polysilicon and cell production. We fear that this guidance will cement their dominance over these critical pieces of the solar supply chain.”A four-acre solar rooftop in Los Angeles. The Biden administration wants 100 percent of the nation’s electricity to come from carbon-free energy sources by 2035.Mario Tama/Getty ImagesThe Biden administration has set an ambitious goal of generating 100 percent of the nation’s electricity from carbon-free energy sources by 2035, a goal that may require more than doubling the annual pace of solar installations.The United States still relies heavily on Chinese manufacturers for low-cost solar modules, although many Chinese-owned factories now make these goods in Vietnam, Malaysia and Thailand.China also supplies many of the key components in solar panels, including more than 80 percent of the world’s polysilicon, which most solar panels use to absorb energy from sunlight. And a significant portion of Chinese polysilicon comes from the Xinjiang region, where the U.S. government has banned imports because of concerns over forced labor.Other companies in the solar supply chain, which rely on imported components, were more positive about the Treasury Department’s guidance.Abigail Ross Hopper, the chief executive of the Solar Energy Industries Association, said the guidance was an important step forward that would “spark a flood of investment in American-made clean energy equipment and components.”“The U.S. solar and storage industry strongly supports onshoring a domestic clean energy supply chain, and today’s guidance will supplement the manufacturing renaissance that began when the historic Inflation Reduction Act passed last summer,” she said.Congressional Republicans have already targeted the Biden administration’s climate legislation, saying that it fails to set tough guidelines against manufacturing in China and that it may funnel federal dollars to Chinese-owned companies that have set up in the United States.The Biden administration is also dispensing funding to build up the semiconductor and electric vehicle battery industries. Guidelines for that money include limits on access to so-called foreign entities of concern, like Chinese-owned companies. But the Inflation Reduction Act does not contain guardrails against federal dollars going to the U.S. operations of Chinese solar companies.In a congressional hearing on April 25, Representative Jason Smith, chairman of the House Ways and Means Committee, pointed to the Florida facilities of JinkoSolar, a Chinese-owned manufacturer, as being eligible for federal tax credits.“Work at the plant involves robots placing strings of solar cells — which are largely sourced from China — onto a solar panel base,” a fact sheet released by Mr. Smith said.Mr. Biden has also clashed with domestic solar manufacturers over a separate trade case that would see tariffs imposed on solar products imported from Chinese companies based in Southeast Asia.Mr. Biden’s decision to waive the tariffs for two years angered Republicans and some Democrats in Congress, who said U.S.-based manufacturers deserved more protection. In recent weeks, the House and Senate approved a measure to reverse the president’s decision, which Mr. Biden is expected to veto. More

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    Yellen to Call for ‘Constructive’ China Relationship

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    The Treasury secretary will strike a more conciliatory note in a speech Thursday, following months of escalated tensions between the world’s two largest economies.WASHINGTON — Treasury Secretary Janet L. Yellen on Thursday will call for a “constructive” and “healthy” economic relationship between the United States and China, one in which the two nations work together to confront challenges like climate change, according to excerpts from prepared remarks.Ms. Yellen’s comments, which she will deliver at Johns Hopkins University’s School of Advanced International Studies, will strike a notably positive tone about the U.S.-China relationship following months of heightened tensions between the two nations, which have the world’s largest economies.Ms. Yellen is expected to stress the importance of securing American national security interests, as well as of protecting human rights. She will also emphasize that targeted actions the United States has taken against China — like cutting it off from the world’s most advanced semiconductors — are aimed purely at protecting U.S. national security.China has criticized U.S. restrictions on its technological development, saying that they are unlawful and a blatant effort to try and weaken the Chinese economy. Ms. Yellen will seek to allay those concerns.The U.S. has imposed sweeping restrictions on selling semiconductors and chip-making equipment, such as that made by the Dutch company ASML, to China.Bryan Derballa for The New York Times“These national security actions are not designed for us to gain a competitive economic advantage, or stifle China’s economic and technological modernization,” Ms. Yellen is expected to say. “Even though these policies may have economic impacts, they are driven by straightforward national security considerations.”She also will emphasize the strength of the American economy, noting that the economic output of the United States remains far larger than China’s.Relations between the two nations have been tense recently, including a diplomatic blowup in February after a Chinese spy balloon traversed the United States before being shot down over the Atlantic Ocean. Republicans as well as Democrats continue to describe China as an obvious economic rival as well as a security threat.Tensions also remain high over the future of Taiwan, which China claims as its territory. And many American officials have lost patience with the idea of bringing China into the rules-based international system, arguing that efforts to do so in past decades had failed to adequately improve its trade practices.But Ms. Yellen will argue that competition between the United States and China can lead to mutual improvement, within certain parameters.“Sports teams perform at a higher level when they consistently face top rivals,” her prepared remarks say. “But this type of healthy competition is only sustainable if it is fair to both sides.” China has long used government support to help its firms at the expense of foreign competitors, and its industrial policy “has become more ambitious and complex,” Ms. Yellen will say. More

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    Why China’s Shrinking Population Is a Problem for Everyone

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    China struggled for years to curtail its rapid population growth. Now that its population is declining, economists and others fear serious implications for China and countries around the world.Despite the rollback of China’s one-child policy, and even after more recent incentives urging families to have more children, China’s population is steadily shrinking — a momentous shift that will soon leave India as the world’s most populous nation and have broad rippling effects both domestically and globally.The change puts China on the same course of both aging and shrinking as many of its neighbors in Asia, but its path will have outsize effects not just on the regional economy, but on the world at large as well.Here’s why economists and others are alarmed by the developments.China’s shrinking work force could hobble the global economy.For years, China’s massive working-age population powered the global economic engine, supplying the factory workers whose cheap labor produced goods that were exported around the world.In the long run, a shortage of factory workers in China — driven by a better-educated work force and a shrinking population of young people — could raise costs for consumers outside China, potentially exacerbating inflation in countries like the United States that rely heavily on imported Chinese products. Facing rising labor costs in China, many companies have already begun shifting their manufacturing operations to lower-paying countries like Vietnam and Mexico.A shrinking population could also mean a decline in spending by Chinese consumers, threatening global brands dependent on sales of products to China, from Apple smartphones to Nike sneakers.A factory in Guangzhou. In the long run, a shortage of factory workers could raise costs for consumers outside of China.Gilles Sabrie for The New York TimesThe data is bad news for China’s crucial housing market.In the short term, a plunging birthrate poses a major threat to China’s real estate sector, which accounts for roughly a quarter of the country’s economic output. Population growth is a key driver of housing demand, and homeownership is the most important asset for many Chinese people. During widespread pandemic lockdowns that dampened consumer spending and export growth, China’s economy became even more dependent on the ailing housing sector.The government recently intervened to help distressed real estate developers, in an attempt to stem the fallout from its housing crisis.A housing development in Shanghai. Population growth is a key driver of housing demand, and a plunging birthrate poses a major threat to China’s real estate sector.Qilai Shen for The New York TimesChina’s shrinking work force may not be able to support its growing, aging population.With fewer working-age people in the long run, the government could struggle to sustain an enormous population that is growing older and living longer. A 2019 report by the Chinese Academy of Social Sciences predicted that the country’s main pension fund would run out of money by 2035, in part because of the shrinking work force.Economists have compared China’s demographic crisis to the one that stalled Japan’s economic boom in the 1990s.But China does not have the same resources as a country like Japan to provide a safety net for its aging population. Its households live on much lower incomes on average than in the U.S. and elsewhere. Many older Chinese residents rely on state pension payments as a key source of income during retirement.China also has some of the lowest retirement ages in the world, with most workers retiring by 60. The situation has put a tremendous strain not only on state pension funds, but also on the country’s hospital system.Older Chinese citizens exercising at a park in Beijing. With fewer working-age people, the government could struggle to sustain an enormous population that is both growing older and living longer.Gilles Sabrie for The New York TimesThe crisis has been decades in the making.China introduced the one-child policy in the late 1970s, arguing that it was necessary to keep population growth from reaching unsustainable levels. The government imposed onerous fines on most couples who had more than one child, and compelled hundreds of millions of Chinese women to have abortions. Many families favored boys over girls, often aborting baby girls or abandoning them at birth, resulting in a huge surplus of single men in the Chinese population.China announced the relaxing of the family size restrictions in 2013, but many demographic experts said the change had come too late to change the country’s population trajectory.The government’s efforts to incentivize a baby boom to solve the demographic crisis have failed to stabilize falling birthrates.Gilles Sabrie for The New York TimesThere are no easy fixes.The government’s efforts to start a baby boom to solve the demographic crisis — including offering cash handouts and easing the one-child policy to allow for three — have failed to stabilize falling birthrates. Educated Chinese women are increasingly delaying marriage and choosing not to have children, deterred by the high costs of housing and education.China has also been unwilling to loosen immigration rules to boost the population, and has historically issued relatively few green cards to replenish its shrinking work force.To address the labor shortage, China has been outsourcing low-skilled production to other countries in Asia, and adding more automation to its factories, hoping to rely more on artificial intelligence and technology sectors for future growth. More

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    Pressure Mounts on China to Offer Debt Relief to Poor Countries Facing Default

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    There was optimism at the spring meetings of the I.M.F. and World Bank that China will make concessions over restructuring its loans.WASHINGTON — China, under growing pressure from top international policymakers, appeared to indicate this week that it is ready to make concessions that would unlock a global effort to restructure hundreds of billions of dollars of debt owed by poor countries.China has lent more than $500 billion to developing countries through its lending program, making it one of the world’s largest creditors. Many of those countries, including several in Africa, have struggled economically in the wake of the pandemic and face the possibility of defaulting on their debt payments. Their problems have been compounded by rising interest rates and disruptions to supplies of food and energy as a result of Russia’s war in Ukraine.The United States, along with other Western nations, has been pressing China to allow some of those countries to restructure their debt and reduce the amount that they owe. But for more than two years, China has insisted that other creditors and multilateral lenders absorb financial losses as part of any restructuring, bogging down a critical loan relief process and threatening to push millions of people in developing countries deeper into poverty.A breakthrough would offer an economic lifeline to vulnerable nations at a time of sluggish growth and uncertain financial stability, and it would signal a renewed interest from China in economic diplomacy.Economists and development experts are watching carefully to determine if China is serious about easing the loan forgiveness logjam and if its talk will be followed by action. By some calculations, the world’s poor countries owe around $200 billion to wealthy nations, multilateral development banks and private creditors. Leaders of the world’s advanced economies have been grappling in recent months with how to avert financial crises in teetering markets such as Zambia, Sri Lanka and Ghana.Africa’s private and public external debt has increased more than fivefold over the last two decades to about $700 billion and Chinese lenders account for 12 percent of that total, according to Chatham House, the London policy institute. Researchers for the Debt Relief for Green and Inclusive Recovery Project estimated in a recent report that 61 emerging market and developing economies were facing debt distress, and that more than $800 billion in debt must be restructured.Leaders of the world’s advanced economies have been grappling in recent months with how to avert financial crises in teetering markets such as Sri Lanka.Dinuka Liyanawatte/Reuters“China is facing increasing pressure from every quarter, including from other emerging market economies, to play a more constructive role in the negotiations over debt restructuring,” said Eswar Prasad, a former head of the International Monetary Fund’s China division, who said China’s intransigence had left it “increasingly isolated.”There were indications this week that China was prepared to end that isolation as top economic officials from around the world convened at the spring meetings of the I.M.F. and World Bank. Participants expressed optimism that representatives from Beijing appeared to be ready to back off its insistence that multilateral lenders such as the World Bank, which provides low-interest loans and grants to poor countries, accept losses in the debt restructuring.“My sense from the current context is we’re moving on to new steps,” David Malpass, the departing World Bank president, said at a news conference on Thursday, pointing to “progress on equal burden sharing.”Kristalina Georgieva, the I.M.F.’s managing director, said she was “very encouraged” that a “common understanding” had been reached that could accelerate relief for countries such as Zambia, Ghana, Ethiopia and Sri Lanka.“I always say the proof of the pudding is in the eating,” Ms. Georgieva said.To restructure a country’s debt, creditors generally must agree to a combination of lowering the interest rate on the loan, extending the duration of the loan or writing off some of what is owed. China, which has faced an array of domestic economic challenges over the last three years, has been reluctant to take losses on debt and has pushed for other lenders, such as the World Bank, to incur losses.The urgency for a resolution was palpable among countries that are most in need of relief. Zambia defaulted in 2020 and has been trying to restructure $8.4 billion that it owes through a program established by the Group of 20 nations. It owes about $6 billion to Chinese lenders, and its total debt to foreign lenders is approaching $20 billion.On Friday, Ghana’s finance minister, Ken Ofori-Atta, lamented that 33 African nations were saddled with interest payments that approached or exceeded what their governments spent on health and education.Yuri Gripas for The New York Times“Zambia urgently needs debt relief,” Situmbeko Musokotwane, Zambia’s finance minister, told The New York Times. “Delay on debt restructuring puts our currency under pressure, excludes Zambia from capital markets and makes it difficult to attract much-needed foreign direct investment.”Ghana appealed to the Group of 20 nations this year for debt relief through a fledgling program known as the Common Framework after securing preliminary approval for a $3 billion loan from the I.M.F. That money is contingent on Ghana’s receiving assurances that it can restructure the approximately $30 billion that it owes to foreign lenders. Officials from Ghana have been meeting with their Chinese counterparts about restructuring the $2 billion that it owes China.On Friday, Ghana’s finance minister, Ken Ofori-Atta, lamented that 33 African nations were saddled with interest payments that approached or exceeded what their governments spent on health and education and expressed disappointment that advanced economies had been slow to act.“Honestly, it is disheartening to watch Africa struggle in this way, especially considering the potential loss of productivity over the next decade should African economies buckle under the weight of suffocating debts,” Mr. Ofori-Atta said at an Atlantic Council event on Friday.But it remains uncertain how far China is willing to go.Brad Setser, a senior fellow at the Council on Foreign Relations, said that it was not clear what financial terms Beijing would accept when restructuring debt but that it appeared to be taking a “positive step” that would remove “a financially unwarranted roadblock to any progress.”Treasury Secretary Janet Yellen at a farm in Zambia in January. She said this week that she would continue to press her Chinese counterparts to make the restructuring process work better.Fatima Hussein/Associated PressBut given the grinding pace of the talks, big investors in emerging markets are not counting on quick resolutions.“We are starting to see tokens of flexibility from China on their stance in sovereign debt restructuring, but complexities abound,” said Yacov Arnopolin, emerging markets portfolio manager at PIMCO. “Near term, we don’t expect a clear-cut solution on China’s willingness to take losses.”China’s reluctance has been another source of tension with the United States, which has expressed concern that Beijing’s onerous lending terms and refusal to renegotiate have amplified the financial problems that developing countries are facing. Treasury Secretary Janet L. Yellen said this week that she would continue to press her Chinese counterparts to improve the restructuring process but that she was encouraged that China had recently expressed a willingness to help Sri Lanka restructure its debt.People familiar with Chinese economic policymaking said domestic politics had made it hard for China to make difficult decisions last autumn and over the winter about accepting possible losses on its loans.In October, the Communist Party held its once-in-five-years national congress and chose a new team of senior party officials to work with Xi Jinping, the country’s top leader. Maneuvering then began to reshuffle the government’s senior ranks, which had been expected during the annual session of the National People’s Congress in early March, although some changes of financial policymakers were unexpectedly delayed.China is now ready to focus on addressing a wide range of economic issues, including international debt, the people said. However, Beijing still faces other challenges that may limit its willingness to bargain, including a commercial banking system that faces very heavy losses on loans to real estate developers and does not want to accept large losses on loans to developing countries at the same time.Chinese officials offered support for the debt relief initiatives in broad terms this week.Wang Wenbin, a spokesman for the Chinese Foreign Ministry, said on Friday that China had put forward a three-point proposal that included calling for the I.M.F. to more quickly share its debt sustainability assessments for countries that need relief, and for creditors to detail how they will carry out the restructurings on “comparable terms.”After a meeting in Washington between Yi Gang, China’s central bank governor, and Mr. Musokotwane of Zambia, the Chinese central bank released a brief statement.“They exchanged views on issues of common concern including bilateral financial cooperation,” it said.Keith Bradsher More

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    How AI and DNA Are Unlocking the Mysteries of Global Supply Chains

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    At a cotton gin in the San Joaquin Valley, in California, a boxy machine helps to spray a fine mist containing billions of molecules of DNA onto freshly cleaned Pima cotton.That DNA will act as a kind of minuscule bar code, nestling amid the puffy fibers as they are shuttled to factories in India. There, the cotton will be spun into yarn and woven into bedsheets, before landing on the shelves of Costco stores in the United States. At any time, Costco can test for the DNA’s presence to ensure that its American-grown cotton hasn’t been replaced with cheaper materials — like cotton from the Xinjiang region of China, which is banned in the United States because of its ties to forced labor.Amid growing concern about opacity and abuses in global supply chains, companies and government officials are increasingly turning to technologies like DNA tracking, artificial intelligence and blockchains to try to trace raw materials from the source to the store.Companies in the United States are now subject to new rules that require firms to prove their goods are made without forced labor, or face having them seized at the border. U.S. customs officials said in March that they had already detained nearly a billion dollars’ worth of shipments coming into the United States that were suspected of having some ties to Xinjiang. Products from the region have been banned since last June.Customers are also demanding proof that expensive, high-end products — like conflict-free diamonds, organic cotton, sushi-grade tuna or Manuka honey — are genuine, and produced in ethically and environmentally sustainable ways.That has forced a new reality on companies that have long relied on a tangle of global factories to source their goods. More than ever before, companies must be able to explain where their products really come from.A technician at Applied DNA Sciences testing samples to trace the raw materials.Johnny Milano for The New York TimesCotton samples that are being processed at the lab.Johnny Milano for The New York TimesThe task may seem straightforward, but it can be surprisingly tricky. That’s because the international supply chains that companies have built in recent decades to cut costs and diversify their product offerings have grown astonishingly complex. Since 2000, the value of intermediate goods used to make products that are traded internationally has tripled, driven partly by China’s booming factories.A large, multinational company may buy parts, materials or services from thousands of suppliers around the world. One of the largest such companies, Procter & Gamble, which owns brands like Tide, Crest and Pampers, has nearly 50,000 direct suppliers. Each of those suppliers may, in turn, rely on hundreds of other companies for the parts used to make its product — and so on, for many levels up the supply chain.To make a pair of jeans, for example, various companies must farm and clean cotton, spin it into thread, dye it, weave it into fabric, cut the fabric into patterns and stitch the jeans together. Other webs of companies mine, smelt or process the brass, nickel or aluminum that is crafted into the zipper, or make the chemicals that are used to manufacture synthetic indigo dye.“Supply chains are like a bowl of spaghetti,” said James McGregor, the chairman of the greater China region for APCO Worldwide, an advisory firm. “They get mixed all over. You don’t know where that stuff comes from.”Harvesting cotton in Xinjiang. Cotton from the region in China is banned in the United States because of its ties to forced labor.Getty ImagesGiven these challenges, some companies are turning to alternative methods, not all proven, to try to inspect their supply chains.Some companies — like the one that sprays the DNA mist onto cotton, Applied DNA Sciences — are using scientific processes to tag or test a physical attribute of the good itself, to figure out where it has traveled on its path from factories to consumer.Applied DNA has used its synthetic DNA tags, each just a billionth of the size of a grain of sugar, to track microcircuits produced for the Department of Defense, trace cannabis supply chains to ensure the product’s purity and even to mist robbers in Sweden who attempted to steal cash from A.T.M.s, leading to multiple arrests.MeiLin Wan, the vice president for textiles at Applied DNA, said the new regulations were creating a “tipping point for real transparency.”“There definitely is a lot more interest,” she added.The cotton industry was one of the earliest adopters of tracing technologies, in part because of previous transgressions. In the mid-2010s, Target, Walmart and Bed Bath & Beyond faced expensive product recalls or lawsuits after the “Egyptian cotton” sheets they sold turned out to have been made with cotton from elsewhere. A New York Times investigation last year documented that the “organic cotton” industry was also rife with fraud.In addition to the DNA mist it applies as a marker, Applied DNA can figure out where cotton comes from by sequencing the DNA of the cotton itself, or analyzing its isotopes, which are variations in the carbon, oxygen and hydrogen atoms in the cotton. Differences in rainfall, latitude, temperature and soil conditions mean these atoms vary slightly across regions of the world, allowing researchers to map where the cotton in a pair of socks or bath towel has come from.Other companies are turning to digital technology to map supply chains, by creating and analyzing complex databases of corporate ownership and trade.Farmers in India auction their cotton.Saumya Khandelwal for The New York TimesSome firms, for example, are using blockchain technology to create a digital token for every product that a factory produces. As that product — a can of caviar, say, or a batch of coffee — moves through the supply chain, its digital twin gets encoded with information about how it has been transported and processed, providing a transparent log for companies and consumers.Other companies are using databases or artificial intelligence to comb through vast supplier networks for distant links to banned entities, or to detect unusual trade patterns that indicate fraud — investigations that could take years to carry out without computing power.Sayari, a corporate risk intelligence provider that has developed a platform combining data from billions of public records issued globally, is one of those companies. The service is now used by U.S. customs agents as well as private companies. On a recent Tuesday, Jessica Abell, the vice president of solutions at Sayari, ran the supplier list of a major U.S. retailer through the platform and watched as dozens of tiny red flags appeared next to the names of distant companies.“We’re flagging not only the Chinese companies that are in Xinjiang, but then we’re also automatically exploring their commercial networks and flagging the companies that are directly connected to it,” Ms. Abell said. It is up to the companies to decide what, if anything, to do about their exposure.Studies have found that most companies have surprisingly little visibility into the upper reaches of their supply chains, because they lack either the resources or the incentives to investigate. In a 2022 survey by McKinsey & Company, 45 percent of respondents said they had no visibility at all into their supply chain beyond their immediate suppliers.But staying in the dark is no longer feasible for companies, particularly those in the United States, after the congressionally imposed ban on importing products from Xinjiang — where 100,000 ethnic minorities are presumed by the U.S. government to be working in conditions of forced labor — went into effect last year.Uyghur workers at a garment factory in the Xinjiang region of China in 2019.Gilles Sabrie for The New York TimesXinjiang’s links to certain products are already well known. Experts have estimated that roughly one in five cotton garments sold globally contains cotton or yarn from Xinjiang. The region is also responsible for more than 40 percent of the world’s polysilicon, which is used in solar panels, and a quarter of its tomato paste.But other industries, like cars, vinyl flooring and aluminum, also appear to have connections to suppliers in the region and are coming under more scrutiny from regulators.Having a full picture of their supply chains can offer companies other benefits, like helping them recall faulty products or reduce costs. The information is increasingly needed to estimate how much carbon dioxide is actually emitted in the production of a good, or to satisfy other government rules that require products to be sourced from particular places — such as the Biden administration’s new rules on electric vehicle tax credits.Executives at these technology companies say they envision a future, perhaps within the next decade, in which most supply chains are fully traceable, an outgrowth of both tougher government regulations and the wider adoption of technologies.“It’s eminently doable,” said Leonardo Bonanni, the chief executive of Sourcemap, which has helped companies like the chocolate maker Mars map out their supply chains. “If you want access to the U.S. market for your goods, it’s a small price to pay, frankly.”Others express skepticism about the limitations of these technologies, including their cost. While Applied DNA’s technology, for example, adds only 5 to 7 cents to the price of a finished piece of apparel, that may be significant for retailers competing on thin margins.And some express concerns about accuracy, including, for example, databases that may flag companies incorrectly. Investigators still need to be on the ground locally, they say, speaking with workers and remaining alert for signs of forced or child labor that may not show up in digital records.Justin Dillon, the chief executive of FRDM, a nonprofit organization dedicated to ending forced labor, said there was “a lot of angst, a lot of confusion” among companies trying to satisfy the government’s new requirements.Importers are “looking for boxes to check,” he said. “And transparency in supply chains is as much an art as it is a science. It’s kind of never done.” More

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    What’s in the CHIPS Act, Aimed at Childcare Expansion and National Security

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    A sprawling new program for the semiconductor industry is foremost about national security, but it will try to advance other priorities as well.The Biden administration unveiled rules Tuesday for its “Chips for America” program to build up semiconductor research and manufacturing in the United States, beginning a new rush toward federal funding in the sector.The Commerce Department has $50 billion to hand out in the form of direct funding, federal loans and loan guarantees. It is one of the largest federal investments in a single industry in decades and highlights deepening concern in Washington about America’s dependence on foreign chips.Given the huge cost of building highly advanced semiconductor facilities, the funding could go fast, and competition for the money has been intense.Here’s a look at the CHIPS and Science Act, what it aims to do and how it will work.Funding chip production and researchThe largest portion of the money— $39 billion — will go to fund the construction of new and expanded manufacturing facilities. Another $11 billion will be distributed later this year to support research into new chip technologies.The bulk of the manufacturing money is likely to go to a few companies that produce the world’s most advanced semiconductors — including Taiwan Semiconductor Manufacturing Company, Samsung Electronics, Micron Technology and, perhaps in the future, Intel — to help them build U.S. facilities.Some will go to makers of older chips that are still essential for cars, appliances and weapons, as well as suppliers of raw materials for the industry and companies that package the chips into their final products.While some critics have questioned the wisdom of giving grants to a profitable industry, semiconductor executives argue that they have little incentive to invest in the United States, given the higher costs of workers and running a factory.The Global Race for Computer ChipsU.S. Industrial Policy: In return for vast subsidies, the Biden administration is asking chip manufacturers to make promises about their workers and finances, including providing affordable child care.Arizona Factory: Internal doubts are mounting at Taiwan Semiconductor Manufacturing Company, the world’s biggest maker of advanced chips, over its investment in a new factory in Phoenix.CHIPS Act: Semiconductor companies, which united to get the sprawling $280 billion bill approved last year, have set off a lobbying frenzy as they argue for more cash than their competitors.A Ramp-Up in Spending: Amid a tech cold war with China, U.S. companies have pledged nearly $200 billion for chip manufacturing projects since early 2020. But the investments have limits.The administration does not plan to fund entire projects: Biden administration officials say they plan to offer grants of between 5 to 15 percent of a company’s capital expenditures for a project, with funding not expected to exceed 35 percent of the cost. Companies can also apply for a tax credit reimbursing them for 25 percent of project construction.Limiting foreign dependenceGina Raimondo, the secretary of commerce, describes the program as foremost a national security initiative.While the United States is still a leader in designing chips, most manufacturing has been sent offshore. Today, more than 90 percent of the most technologically advanced chips, which are critical for the U.S. military and the economy, are produced in Taiwan. That has prompted concerns about the supply’s vulnerability, given China’s aggression toward Taiwan and the potential for a military invasion of the island.At the same time, China has increased its market share in less advanced chips that are still critical for cars, electronics and other products. The United States manufactures 12 percent of chips, though none of the world’s most advanced.Chip shortages during the pandemic forced factories to halt work and brought home in a tangible way how vulnerable the supply chain is to disruption. Workers at Ford Motor factories in Michigan and Indiana worked a full week just three times last year because of a chips shortage, Ms. Raimondo said in a speech at Georgetown University last week. That helped create a car shortage and raise the price of cars, stoking inflation.The Commerce Department says the program will also provide the Department of Defense and the national security community with a domestic source of the world’s most advanced chips.An Intel factory under construction in Arizona. The Biden administration unveiled the rules for its program to build up U.S. semiconductor research and manufacturing.Philip Cheung for The New York TimesBuilding chip hubsAccording to Ms. Raimondo, the goal is to build at least two U.S. manufacturing clusters to produce the most advanced types of logic chips, as well as facilities for other kinds of chips, and complex supply networks to support them.Commerce officials have declined to speculate where these facilities might be, saying they must review applications. But chip makers have already announced billions of dollars in plans for new investments around the United States.TSMC, which produces most of the world’s leading-edge chips, has been busy expanding in Arizona, while No. 2 Samsung is growing in Texas. Micron, which makes advanced memory chips, has announced big expansion plans in New York. And Intel, a U.S. technology giant that is investing heavily to try to capture a technological edge, has broken ground on a “megasite” in Ohio.Ms. Raimondo has said the vision is to restore the United States to a position of leadership in semiconductor technology, to the point where every major global chip company wants to have both research and manufacturing facilities in the United States.Still, there is skepticism about how much the program can do. One 2020 study, for example, found that a $50 billion investment in the industry would increase U.S. market share only to 14 percent.Protecting taxpayer fundsThe stakes are high for the Biden administration to prove this foray into industrial policy can work. Critics have argued that the federal government may not be the best judge of winners and losers. If the administration gets it wrong, it could face intense criticism.The Commerce Department said it would look closely at companies that applied for funding, to try to ensure that they were not being given more taxpayer dollars than they needed.In a decision that may irk some companies, the department said projects receiving grants would be required to share a portion of any unanticipated profits with the federal government, to ensure that companies gave accurate financial projections and didn’t exaggerate costs to get bigger awards.The Commerce Department also said it would dole out funding over time as companies hit project milestones, and give preference to those that pledged to refrain from stock buybacks, which tend to enrich shareholders and corporate executives by increasing a company’s share price.Companies are also barred from making new, high-tech investments in China or other “countries of concern” for at least a decade, to try to ensure that taxpayer money does not go to fund new operations in China.But analysts said it remained to be seen how difficult it would be to enforce these provisions. Company finances can be opaque, and when a company saves a dollar in the United States, it may then choose to invest it elsewhere.Helping workers by attaching big stringsThe program also includes some ambitious and unusual requirements aimed at benefiting the people who will staff semiconductor facilities.For one, the department will require companies seeking awards of $150 million or more to guarantee affordable, high-quality child care for plant construction workers and operators. This could include building company child care centers near construction sites or new plants, paying local child care providers to add capacity at an affordable cost or directly subsidizing workers’ care costs. Ms. Raimondo has said child care will draw more people into the work force, when many businesses are struggling in a tight labor market.Applicants are also required to detail their engagement with labor unions, schools and work force education programs, with preference given to projects that benefit communities and workers.Other provisions will encourage companies, universities and other parties to offer more training for workers, both in advanced sciences and in skills like welding. The department said it would give preference to projects for which state and local governments were providing incentives with “spillover” benefits for communities, like work force training, education investment or infrastructure construction.This is part of the Biden administration’s “worker-centered” approach to economic policy, which seeks to use the might of the federal government to benefit workers. But some critics say it could put the program’s goal of building the most advanced semiconductor factories at risk, if it adds excessive costs to new projects. More

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    China’s Economic Support for Russia Could Elicit More Sanctions

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    U.S. officials pledged to crack down on shipments to Russia that can be used for both civilian and military purposes, but that has proved hard to police.WASHINGTON — President Biden and his top officials vowed this week to introduce additional sanctions aimed at impeding Russia’s war efforts against Ukraine. But the administration’s focus is increasingly shifting to the role that China has played in supplying Russia with goods that have both civilian and military uses.As one of the world’s biggest manufacturers of products like electronics, drones and vehicle parts, China has proved to be a particularly crucial economic partner for Russia.Beijing has remained officially unaligned in the war. Yet China, along with countries like Turkey and some former Soviet republics, has stepped in to supply Russia with large volumes of products that either civilians or armed forces could use, including raw materials, smartphones, vehicles and computer chips, trade data shows.Administration officials are now expressing concern that China could further aid Russia’s incursion by providing Moscow with lethal weapons. While there is no clear evidence that China has given weapons and ammunition to Russia, Secretary of State Antony J. Blinken warned in recent days that China may be preparing to do so.President Biden, speaking in Kyiv on Monday, said the United States and its partners would announce new measures targeting sanctions evasion this week. He did not specify whether those actions would be directed at Moscow or its trading partners.“Together we have made sure that Russia is paying the price for its abuses,” he said the next day in Warsaw.And in a speech on Tuesday at the Council on Foreign Relations, Wally Adeyemo, the deputy Treasury secretary, said the United States would be working “to identify and shut down the specific channels through which Russia attempts to equip and fund its military.”“Our counterevasion efforts will deny Russia access to the dual-use goods being used for the war and cut off these repurposed manufacturing facilities from the inputs needed to fill Russia’s production gaps,” he said.The comments came on the same day that Wang Yi, China’s top diplomat, visited Moscow.The actions that the United States has taken against Russia in partnership with more than 30 countries constitute the broadest set of sanctions and export controls ever imposed against a major economy. But this regime still has its limits.One year into the war, the Russian economy is stagnant, but not crippled. The country has lost direct access to coveted Western consumer brands and imports of the most advanced technology, like semiconductors. But individuals and companies around the world have stepped in to provide Russia with black market versions of these same products, or cheaper alternatives made in China or other countries.Russia is unable to produce precision missiles today because the country no longer has access to leading-edge semiconductors, a U.S. official said.Maxim Shipenkov/EPA, via ShutterstockIn particular, the United States and its allies appear to have had limited success in stopping the trade of so-called dual-use technologies that can be used in both military equipment and consumer goods.The United States included many types of dual-use goods in the export controls it issued against Russia last February, because the goods can be repurposed for military uses. Aircraft parts that civilian airlines can use, for example, may be repurposed by the Russian Air Force, while semiconductors in washing machines and electronics might be used for tanks or other weaponry.The Chinese Spy Balloon ShowdownThe discovery of a Chinese surveillance balloon floating over the United States has added to the rising tensions between the two superpowers.Tensions Rise: In the aftermath of the U.S. downing of a Chinese spy balloon on Feb. 4 and three unidentified flying objects a week later, the nations have traded accusations over their spying programs.U.S.-China Meeting: Secretary of State Antony Blinken held a confrontational meeting with his Chinese counterpart on Feb. 18 in Munich, resuming diplomatic contact between Washington and Beijing.A ‘Military-Civil Fusion’: The international fracas over China’s spy balloon program has thrown a light on Beijing’s efforts to recruit commercial businesses to help strengthen the Chinese military.Unidentified Objects: As more objects were shot down after the balloon incident, experts warned that there was an “endless” array of potential targets crowding America’s skies. Here’s a look at some of them.Top U.S. officials warned their Chinese counterparts against supporting Russia’s war effort after the invasion of Ukraine last year, saying there would be firm consequences. While China has been careful not to cross that line, it has provided support for Russia in other ways, including through active trade in certain goods..css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-1hvpcve{font-size:17px;font-weight:300;line-height:25px;}.css-1hvpcve em{font-style:italic;}.css-1hvpcve strong{font-weight:bold;}.css-1hvpcve a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.The United States has cracked down on some of the companies and organizations providing goods and services to Russia. In January, it imposed sanctions on a Chinese company that had provided satellite imagery to the Wagner mercenary group, which has played a large role in the battle for eastern Ukraine. In December, it added two Chinese research institutes to a list of entities that supply the Russian military, which will restrict their access to U.S. technology.But tracking by research firms shows that trade in goods that the Russian military effort can use has flourished. According to the Observatory of Economic Complexity, an online data platform, shipments from China to Russia of aluminum oxide, a metal that can be used in armored vehicles, personal protective equipment and ballistic shields, soared by more than 25 times from 2021 to 2022.Shipments of minerals and chemicals used in the production of missile casings, bullets, explosives and propellants have also increased, according to the Observatory of Economic Complexity. And China shipped $23 million worth of drones and $33 million worth of certain aircraft and spacecraft parts to Russia last year, up from zero the prior year, according to the group’s data.Data from Silverado Policy Accelerator, a Washington nonprofit, shows that Russian imports of integrated circuits, or chips, which are crucial in rebuilding tanks, aircraft, communications devices and weaponry, plummeted immediately after the invasion but crept up over the past year.In December, Russia’s imports of chips had recovered to more than two-thirds of their value last February, just before the war began, according to Silverado. China and Hong Kong, in particular, together accounted for nearly 90 percent of global chip exports to Russia by value from March to December.Shipments from China to Russia of smart cards, light-emitting diodes, polysilicon, semiconductor manufacturing equipment and other goods have also risen, the firm said.Secretary of State Antony J. Blinken said he had shared concerns with Wang Yi, China’s top diplomat, that Beijing was considering providing weapons and ammunition to aid Russia’s campaign in Ukraine.Pool photo by Stefani ReynoldsRelations between the United States and China have soured in recent weeks after the flight of a Chinese surveillance balloon across the United States early this month. But divisions over Russia are further straining geopolitical ties. A meeting between Mr. Blinken and Mr. Wang, his Chinese counterpart, on the sidelines of the Munich Security Conference on Saturday night was particularly tense.U.S. officials have been sharing information on China’s activities with allies and partners in their meetings in Munich, a person familiar with the matter said.On “Face the Nation” on Sunday, Mr. Blinken said he had shared concerns with Mr. Wang that China was considering providing weapons and ammunition to aid Russia’s campaign in Ukraine, and that such an action would have “serious consequences” for the U.S.-Chinese relationship.“To date, we have seen Chinese companies — and, of course, in China, there’s really no distinction between private companies and the state — we have seen them provide nonlethal support to Russia for use in Ukraine,” Mr. Blinken said.“The concern that we have now is, based on information we have, that they’re considering providing lethal support,” he added. “And we’ve made very clear to them that that would cause a serious problem for us and in our relationship.”U.S. officials have emphasized that China by itself is limited in its ability to supply Russia with all the goods it needs. China does not produce the most advanced types of semiconductors, for example, and restrictions imposed by the United States in October will prevent Beijing from buying some of the most advanced types of chips, and the equipment used to make them, from other parts of the world.Russia is unable to produce precision missiles today because the country no longer has access to leading-edge semiconductors made by the United States, Taiwan, South Korea and other allied sources, a senior administration official said on Monday.“While we are concerned about Russia’s deepening ties with them, Beijing cannot give the Kremlin what it does not have, because China does not produce the advanced semiconductors Russia needs,” Mr. Adeyemo said during his remarks. “And nearly 40 percent of the less advanced microchips Russia is receiving from China are defective.”But Ivan Kanapathy, a former China director for the National Security Council, said that most of what Russia needed for its weapons were less advanced chips, which are manufactured in plenty in China.“The U.S. government is very well aware that our export control system is designed in a way that really relies on a cooperative host government, which we don’t have in this case,” Mr. Kanapathy said.He added that it was “quite easy” for parties to circumvent export control through the use of front companies, or by altering the names and addresses of entities. “China is quite adept at that.” More

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    U.S. Blacklists 6 Chinese Entities Involved in Spy Balloon Programs

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    The action to cut off five Chinese companies and a research institute from American parts and technologies is part of the Biden administration’s response to the balloon it shot down last week.WASHINGTON — The Biden administration clamped down on Friday on sales of some U.S. technology to several Chinese aviation and technology companies, as part of its response to a Chinese spy balloon that traversed U.S. airspace last week.The Commerce Department added five Chinese companies and one research institute to its so-called entity list, which will prevent companies from selling them American parts and technologies without a special license. Officials said the six entities had supported Chinese military programs related to airships and balloons used for intelligence and reconnaissance.Alan Estevez, the under secretary of commerce for industry and security, said the action was a direct response to the Chinese government’s use of high-altitude balloons for surveillance.“Today’s action makes clear that entities that seek to harm U.S. national security and sovereignty will be cut off from accessing U.S. technologies,” he said.The restrictions mark the Biden administration’s first economic retaliation over the balloon, which the United States shot down last Saturday off the coast of South Carolina after it had floated across much of the country. The administration has mostly registered its anger through diplomatic channels, including the cancellation of a trip by the secretary of state to Beijing.Republicans have condemned the administration for not responding more forcefully, including by not shooting the balloon down before it moved out to sea. The White House said it was following the advice of the Pentagon, which feared the debris could hurt people on the ground.The Chinese government has tried to downplay the incident, arguing that the balloon was a civilian device for monitoring weather.The entities that the United States targeted Friday were Beijing Nanjiang Aerospace Technology Company, Dongguan Lingkong Remote Sensing Technology Company, Eagles Men Aviation Science and Technology Group Company, Guangzhou Tian-Hai-Xiang Aviation Technology Company, Shanxi Eagles Men Aviation Science and Technology Group Company and China Electronics Technology Group Corporation 48th Research Institute.The Commerce Department did not specify whether the companies and the institute had played a direct role in developing or operating the balloon that flew across the United States. But the Biden administration said earlier this week that it would consider taking action against any entities that had aided the balloon’s flight.The government has not yet publicized information about parties involved in the balloon’s manufacture or voyage. But it has said the machine was part of a global surveillance fleet directed by China’s military and was capable of collecting electronic communications.The United States has steadily ramped up its use of the entity list over the last few years, using it to cut off the flow of advanced technologies to rivals like China and Russia. In October, it added a crop of Chinese companies involved in advanced semiconductors to the list, arguing that such technologies were aiding the Chinese military.On Friday, the U.S. government shot down another unidentified object near Alaska. It was not immediately clear which country or company was responsible for it. More