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    Biden Orders Ban on New Investments in China’s Sensitive High-Tech Industries

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    The new limits, aimed at preventing American help to Beijing as it modernizes its military, escalate a conflict between the world’s two largest economies.President Biden escalated his confrontation with China on Wednesday by signing an executive order banning new American investment in key technology industries that could be used to enhance Beijing’s military capabilities, the latest in a series of moves putting more distance between the world’s two largest economies.The order will prohibit venture capital and private equity firms from pumping more money into Chinese efforts to develop semiconductors and other microelectronics, quantum computers and certain artificial intelligence applications. Administration officials stressed that the move was tailored to guard national security, but China is likely to see it as part of a wider campaign to contain its rise.“The Biden administration is committed to keeping America safe and defending America’s national security through appropriately protecting technologies that are critical to the next generation of military innovation,” the Treasury Department said in a statement. The statement emphasized that the executive order was a “narrowly targeted action” complementing existing export controls and that the administration maintained its “longstanding commitment to open investment.”Narrow or not, the new order comes at perhaps the most fraught moment in the U.S.-China relationship since President Richard M. Nixon and Secretary of State Henry A. Kissinger opened a dialogue with Beijing in the early 1970s. A series of expanding export controls on key technologies to China has already triggered retaliation from Beijing, which recently announced the cutoff of metals like gallium that are critical for the Pentagon’s own supply chain.Mr. Biden has stressed that he wants to stabilize relations with China following a Cold War-style standoff over a spy balloon shot down after crossing through American airspace and the discovery of a broad Chinese effort to put malware into power grids and communications systems. He has sent Secretary of State Antony J. Blinken, Treasury Secretary Janet L. Yellen and other officials to renew talks with Chinese officials in recent months. Gina Raimondo, the commerce secretary, is expected to go to China in coming weeks.Indeed, the president seemed intent on not antagonizing Beijing with Wednesday’s order, making no comment about his action and leaving it to be announced through written material and background briefings by aides who declined to be identified.Still, China declared that it was “very disappointed” by the order, which it said was designed to “politicize and weaponize trade,” and it hinted at retaliation.“The latest investment restrictions will seriously undermine the interests of Chinese and American companies and investors, hinder the normal business cooperation between the two countries and lower the confidence of the international community in the U.S. business environment,” Liu Pengyu, a spokesman for the Chinese embassy, said in a statement.Administration officials said the president’s order is part of their effort to “de-risk” the relationship with China but not to “decouple” from it. Wednesday’s announcement, though, takes that effort to a new level. While export bans and concerns about Chinese investment in the United States have a long history, the United States has never before attempted such limits on the flow of investment into China.In fact, for the past few decades, the United States has encouraged American investors to deepen their ties in the Chinese economy, viewing that as a way to expand the web of interdependencies between the two countries that would gradually integrate Beijing into the Western economy and force it to play by Western rules.U.S. government reviews in recent years, however, concluded that investments in new technologies and joint ventures were fueling China’s military and its intelligence-collection capabilities, even if indirectly. American officials have been actively sharing intelligence reports with allies to make the case that Western investment is key to China’s military modernization plans — especially in space, cyberspace and the kind of computer power that would be needed to break Western encryption of critical communications.Administration officials cast the effort as one motivated entirely by national security concerns, not an attempt to gain economic advantage. But the order itself describes how difficult it is to separate the two, referring to China’s moves to “eliminate barriers between civilian and commercial sectors and military and defense industrial sectors.’’ It describes China’s focus on “acquiring and diverting the world’s cutting-edge technologies, for the purpose of achieving military dominance.”(The text of Mr. Biden’s order refers only to “countries of concern,” though an annex limits those to “the People’s Republic of China” and its two special administrative areas, Hong Kong and Macau.)Mr. Biden and his aides discussed joint efforts to limit high-tech investment with their counterparts at the recent Group of 7 summit meeting in Hiroshima, Japan. Several allies, including Britain and the European Union, have publicly indicated that they may follow suit. The outreach to other powers underscores that a U.S. ban may not be that effective by itself and would work only in conjunction with other major nations, including Japan and South Korea.The executive order, which also requires firms to notify the government of certain investments, coincides with a bipartisan effort in Congress to impose similar limits. An amendment along those lines by Senators Bob Casey, Democrat of Pennsylvania, and John Cornyn, Republican of Texas, was added to the Senate version of the annual defense authorization bill.Several Republicans criticized the president’s order as too little, too late and “riddled with loopholes,” as Senator Marco Rubio, Republican of Florida and vice chairman of the Senate Intelligence Committee, put it.“It is long overdue, but the Biden administration finally recognized there is a serious problem with U.S. dollars funding China’s rise at our expense,” Mr. Rubio said. “However, this narrowly tailored proposal is almost laughable.”Representative Michael McCaul, Republican of Texas and chairman of the House Foreign Relations Committee, said the new order should go after existing investments as well as sectors like biotechnology and energy.“We need to stop the flow of American dollars and know-how supporting” China’s military and surveillance apparatus “rather than solely pursuing half measures that are taking too long to develop and go into effect,” Mr. McCaul said.The United States already prohibits or restricts the export of certain technologies and products to China. The new order effectively means that American money, expertise and prestige cannot be used to help China to develop its own versions of what it cannot buy from American companies.It was unclear how much money would be affected. American investors have already pulled back dramatically over the past two years. Venture capital investment in China has plummeted from a high of $43.8 billion in the last quarter of 2021 to $10.5 billion in the second quarter of this year, according to PitchBook, which tracks such trends. But the latest order could have a chilling effect on investment beyond the specific industries at stake.In a capital where the goal of opposing China is one of the few areas of bipartisan agreement, the only sounds of caution in Washington came from the business community. While trade groups praised the administration for consulting them, there was concern that the downward spiral in relations could speed a broader break between the world’s two largest economies.“We hope the final rules allow U.S. chip firms to compete on a level playing field and access key global markets, including China, to promote the long-term strength of the U.S. semiconductor industry and our ability to out-innovate global competitors,” the Semiconductor Industry Association said in a statement.Gabriel Wildau, a managing director at the consulting firm Teneo who focuses on political risk in China, said the direct effect of the executive order would be modest, given its limited scope, but that disclosure requirements embedded in the order could have a chilling effect.“Politicians increasingly regard corporate investments in China as a form of collusion with a foreign enemy, even when there is no allegation of illegality,” he said.The Treasury Department, which has already consulted with American executives about the forthcoming order, will begin formally taking comments before drafting rules to be put in place next year. But American firms may alter their investment strategies even before the rules take effect, knowing that they are coming.A series of expanding export controls on key technologies to China has already triggered retaliation from Beijing.Florence Lo/ReutersChina’s own investment restrictions are broader than the new American rules — they apply to all outbound investments, not just those in the United States. And they reflect a technology policy that in some ways is the opposite of the new American restrictions.China discouraged or halted most low-tech outbound investments, like purchases of real estate or even European soccer clubs. But China allowed and even encouraged further acquisitions of businesses with technologies that could offer geopolitical advantages, including investments in overseas businesses involved in aircraft production, robotics, artificial intelligence and heavy manufacturing.The latest move from Washington comes at a rare moment of vulnerability for the Chinese economy. Consumer prices in China, after barely rising for the previous several months, fell in July for the first time in more than two years, the country’s National Bureau of Statistics announced on Wednesday.While Chinese cities and some businesses have declared 2023 a “Year ›of Investing in China” in hopes of a post-Covid revival of their local economies, President Xi Jinping has created an environment that has made many American venture capital firms and other investors more cautious.Western companies that assess investment risk, like the Mintz Group, have been investigated and in some cases their offices have been raided. A Japanese executive was accused of espionage, and a new anti-espionage law has raised fears that ordinary business activities would be viewed by China as spying.The Biden administration’s previous moves to restrain sensitive economic relationships have taken a toll. China’s telecommunications champion, Huawei, has been almost completely blocked from the U.S. market, and American allies, starting with Australia, are ripping Huawei equipment out of their networks. China Telecom was banned by the Federal Communications Commission, which said it “is subject to exploitation, influence and control by the Chinese government.”At the same time, the United States — with the somewhat reluctant help of the Dutch government, Japan and South Korea — has gone to extraordinary lengths to prevent China from building up its own domestic capability to manufacture the most high-end microelectronics by itself.Washington has banned the export of the multimillion-dollar lithography equipment used to produce chips in hopes of limiting China’s progress while the United States tries to restore its own semiconductor industry. Taken together, it is an unprecedented effort to slow an adversary’s capabilities while speeding America’s own investment.Keith Bradsher More

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    Biden to Restrict Investments in China, Citing National Security Threats

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    The measure to clamp down on investments in certain industries deemed to pose security risks, set to be issued Wednesday, appears likely to open a new front in the U.S.-China economic conflict.The Biden administration plans on Wednesday to issue new restrictions on American investments in certain advanced industries in China, according to people familiar with the deliberations, a move that supporters have described as necessary to protect national security but that will undoubtedly rankle Beijing.The measure would be one of the first significant steps the United States has taken amid an economic clash with China to clamp down on outgoing financial flows. It could set the stage for more restrictions on investments between the two countries in the years to come.The restrictions would bar private equity and venture capital firms from making investments in certain high-tech sectors, like quantum computing, artificial intelligence and advanced semiconductors, the people said, in a bid to stop the transfer of American dollars and expertise to China.It would also require firms making investments in a broader range of Chinese industries to report that activity, giving the government better visibility into financial exchanges between the United States and China.The White House declined to comment. But Biden officials have emphasized that outright restrictions on investment would narrowly target a few sectors that could aid the Chinese military or surveillance state as they seek to combat security threats but not disrupt legitimate business with China.“There is mounting evidence that U.S. capital is being used to advance Chinese military capabilities and that the U.S. lacks a sufficient means of combating this activity,” said Emily Benson, the director of project on trade and technology at the Center for Strategic and International Studies, a Washington think tank.The Biden administration has recently sought to calm relations with China, dispatching Treasury Secretary Janet L. Yellen and other top officials to talk with Chinese counterparts. In recent speeches, Biden officials have argued that targeted actions taken against China are aimed purely at protecting U.S. national security, not at damaging the Chinese economy.At the same time, the Biden administration has continued to push to “de-risk” critical supply chains by developing suppliers outside China, and it has steadily ramped up its restrictions on selling certain technologies to China, including semiconductors for advanced computing.The Chinese government has long restricted certain foreign investments by individuals and firms. Other governments, such as those of Taiwan and South Korea, also have restrictions on outgoing investments.But beyond screening Chinese investment into the United States for security risks, the U.S. government has left financial flows between the world’s two largest economies largely untouched. Just a few years ago, American policymakers were working to open up Chinese financial markets for U.S. firms.In the past few years, investments between the United States and China have fallen sharply as the countries severed other economic ties. But venture capital and private equity firms have continued to seek out lucrative opportunities for partnerships, as a way to gain access to China’s vibrant tech industry.The planned measure has already faced criticism from some congressional Republicans and others who say it has taken too long and does not go far enough to limit U.S. funding of Chinese technology. In July, a House committee on China sent letters to four U.S. venture capital firms expressing “serious concern” about their investments in Chinese companies in areas including artificial intelligence and semiconductors.Others have argued that the restriction would mainly put the U.S. economy at a disadvantage, because other countries continue to forge technology partnerships with China, and China has no shortage of capital.Nicholas R. Lardy, a nonresident senior fellow at the Peterson Institute for International Economics, said the United States was the source of less than 5 percent of China’s inbound direct investment in 2021 and 2022.“Unless other major investors in China adopt similar restrictions, I think this is a waste of time,” Mr. Lardy said. “Pushing this policy now simply plays into the hands of those in Beijing who believe that the U.S. seeks to contain China and are not interested in renewed dialogue or a ‘thaw.’”Biden officials have talked with allies in recent months to explain the measure and encourage other governments to adopt similar restrictions, including at the Group of 7 meetings in Japan in May. Since then, Ursula von der Leyen, the president of the European Commission, has urged the European Union to introduce its own measure.The administration is expected to give businesses and other organizations a chance to comment on the new rules before they are finalized in the months to come.Claire Chu, a senior China analyst at Janes, a defense intelligence company, said that communicating and enforcing the measure would be difficult, and that officials would need to engage closely with Silicon Valley and Wall Street.“For a long time, the U.S. national security community has been reticent to recognize the international financial system as a potential warfighting domain,” she said. “And the business community has pushed back against what it considers to be the politicization of private markets. And so this is not only an interagency effort, but an exercise in intersectoral coordination.” More

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    Solar Supply Chain Grows More Opaque Amid Human Rights Concerns

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    The global industry is cutting some ties to China, but its exposure to forced labor remains high and companies are less transparent, a new report found.Global supply chains for solar panels have begun shifting away from a heavy reliance on China, in part because of a recent ban on products from Xinjiang, a region where the U.S. government and United Nations accuse the Chinese government of committing human rights violations.But a new report by experts in human rights and the solar industry found that the vast majority of solar panels made globally continue to have significant exposure to China and Xinjiang.The report, released Tuesday, also faulted the solar industry for becoming less transparent about the origin of its products. That has made it more difficult for buyers to determine whether solar panels purchased to power homes and electricity grids were made without forced labor.The analysis was done by Alan Crawford, a solar industry analyst, and Laura T. Murphy, a professor of human rights and contemporary slavery at Sheffield Hallam University in England, along with researchers who chose to remain anonymous for fear of retribution from the Chinese government. The London-based Modern Slavery and Human Rights Policy and Evidence Center provided funding.The solar industry has come under stiff criticism in recent years for its ties to Xinjiang, which is a key provider of polysilicon, the material from which solar panels are made. The region produces roughly a third of both the world’s polysilicon and its metallurgical-grade silicon, the material from which polysilicon is made.As a result, many firms have promised to scrutinize their supply chains, and several have set up factories in the United States or Southeast Asia to supply Western markets.The Solar Energy Industries Association, the industry’s biggest trade association, has been calling on companies to shift their supply chains and cut ties with Xinjiang. More than 340 companies have signed a pledge to keep their supply chains free of forced labor.But the report found that major global companies remain likely to have extensive exposure to Xinjiang, and potentially to forced labor, calling into question the progress. The report rated the world’s five biggest solar manufacturers — all with headquarters in China — as having “high” or “very high” potential exposure to Xinjiang.Some Chinese companies, like LONGi Solar and JA Solar, have clear ties to suppliers operating in Xinjiang, the report said. But even within “clean” supply chains set up to serve the United States or Europe, many companies still appear to be getting raw materials from suppliers that have exposure to Xinjiang, Ms. Murphy said.In many cases, according to the information they issue publicly, companies aren’t buying enough materials from outside Xinjiang to meet their production goals, indicating that they may be using undisclosed suppliers. In other cases, companies sent Ms. Murphy information about their supply chains that was directly contradictory.“At every stage, there’s missing information,” she said.China’s dominance over the solar industry has presented a challenge for the United States and other countries, which are rushing to deploy solar panels to mitigate the impact of climate change. China controls at least 80 percent of global manufacturing for each stage of the supply chain.The Chinese government denies the presence of forced labor in the work programs it runs in Xinjiang, which transfer groups of locals to mines and factories. But human rights experts say those who refuse such programs can face detention or other punishments. A U.S. law that went into effect in June last year, the Uyghur Force Labor Prevention Act, assumes that any product with materials from Xinjiang is made with forced labor until proved otherwise.Since then, U.S. customs officials have detained $1.64 billion of imported products, including an unspecified volume of solar panels, to check them for compliance. Solar companies say the detentions have caused widespread delays in solar installations in the United States, putting the country’s energy transition at risk.As solar projects continue to ramp up for the energy transition, the concern is that materials and equipment with ties to forced labor could grow.Over the next decade or so, the solar industry projects it will regularly install double the amount it has in past years, with annual growth expected to average 11 percent. In the near term, the manufacturing capacity in the United States is sufficient to meet less than a third of national demand, according to Wood McKenzie, an energy research and consulting firm.In June, Walk Free, an international human rights group, released a report estimating that 50 million people globally lived under forced labor conditions in 2021, an increase of 10 million from 2016.The organization attributed part of that growth to the much-needed but rapid increase in renewable energy to address climate change. The organization said it supported the energy transition but wanted to stop forced labor as a source of products.“Find it, fix it and prevent it,” said Grace Forrest, founding director of Walk Free.One example in the new report is JinkoSolar, a Chinese-owned company that has done some of the most extensive work to establish a supply chain outside China, including factories in Vietnam, Malaysia and the United States. But the report found that the company’s apparent use of unidentified raw materials from China kept its potential exposure to Xinjiang high.In May, Homeland Security Investigations, an arm of the Department of Homeland Security, raided JinkoSolar’s factory in Jacksonville, Fla., and an office in San Francisco. The inquiry appears to be linked to multiple concerns, among them that JinkoSolar misrepresented the source of some imports containing materials from Xinjiang and incorrectly classified products, resulting in an incorrect duty rate, a person with knowledge of the investigation said.The solar industry has begun publishing less information about the origins of its supplies, making it more difficult for buyers to determine whether solar panels are made without forced labor.Tony Cenicola/The New York TimesA spokesperson for Homeland Security Investigations declined to comment, citing a continuing investigation.JinkoSolar said in a statement that, based on the information available to the company, any speculation that the investigation was tied to forced labor was “unfounded,” and that it had a longstanding commitment to transparency and compliance with U.S. law.The company has also called claims that it had high exposure to Xinjiang “baseless.” It said that it was confident in its supply chain traceability, that products for the U.S. market were made only with U.S. and German polysilicon and that U.S. customs officials have reviewed and released JinkoSolar products.The new report also raised questions about the supply chain for Hanwha Qcells, a South Korean company that has become one of the largest producers of solar panels made in the United States. In January, Qcells announced a $2.5 billion expansion of its Georgia operations that would make it the sole company producing all of its components — ingots, wafers, cells and finished panels — in the United States.Despite Qcells’ growing U.S. presence, the report concluded that the company’s potential exposure to Xinjiang was very high, since the company uses undisclosed suppliers in China for the vast majority of its products.The report also said a Chinese company, Meike Solar Technology, which gets raw material from Xinjiang, reported Qcells as one of its largest customers in the first half of 2022, though Qcells said it had cut off the supplier relationship in 2021.“Qcells has adopted a code of conduct that prohibits forced labor made products in our supply chain, and we terminate agreements if suppliers fail to comply,” the company said in a statement. As part of its strategy to guard against products from forced labor, Qcells said, it uses maps to trace product origins and verification audits to ensure its suppliers follow its code of conduct. The company said none of its North America products had been detained by customs officials.In a statement to the researchers, LONGi said that it always complied with the applicable laws and ethics in jurisdictions where it operated, and that polysilicon from Xinjiang was used in modules that were sold in China.JA Solar did not respond to a request for comment from the researchers or from The New York Times. Both LONGi and JA Solar have been planning to set up factories in the United States.Tax credits and other incentives for clean energy offered under the Inflation Reduction Act of 2022 have been unleashing new investments in the United States. On Friday, First Solar, a U.S.-based manufacturer, announced plans to invest up to $1.1 billion for a new U.S. factory at a location yet to be determined.But Michael Carr, executive director of Solar Energy Manufacturers for America, which represents U.S.-based solar manufacturers, said the United States had fallen so far behind China in solar manufacturing that an enormous amount of work, capital and technical knowledge would be needed to catch up.“It’s hard to have certainty — and some might say impossible to know — the sourcing of the polysilicon until you have a domestic supply of wafers and an alternative to China,” Mr. Carr said.Zolan Kanno-Youngs More

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    Lawmakers Challenge Ford and Chinese Battery Partner Over Forced Labor

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    Republicans are raising fresh concerns about CATL, the battery maker Ford is working with to bring new technology to the U.S., and its connections to Xinjiang.A partnership between Ford Motor and a major Chinese battery maker is facing scrutiny by Republican lawmakers, who say it could make an American automaker reliant on a company with links to forced labor in China’s Xinjiang region.In a letter sent to Ford on Thursday, the chairs of the House Select Committee on the Chinese Communist Party and the House Ways and Means Committee demanded more information about the partnership, including what they said was a plan by Ford to employ several hundred workers from China at a new battery factory in Michigan.Ford announced in February that it planned to set up the $3.5 billion factory using technology from Contemporary Amperex Technology Ltd., known as CATL, the world’s largest maker of batteries for electric vehicles. CATL produces about a third of electric vehicle batteries globally and supplies General Motors, Volkswagen, BMW, Tesla and other major automakers.Ford has defended the partnership, saying it will help diversify Ford’s supply chain and allow a battery that is less expensive and more durable than current alternatives to be made in the United States for the first time, rather than imported.But lawmakers, who previously criticized the partnership, cited evidence that CATL had not relinquished its ownership of a company it helped set up in Xinjiang, where the United Nations has identified systemic human rights violations.CATL publicly divested its share of the company, Xinjiang Zhicun Lithium Industry Company, in March, after its deal with Ford was announced. But the shares were bought by an investment partnership in which CATL owned a partial stake and a former CATL manager who holds leadership roles in other companies owned by the battery maker, corporate records show.The circumstances of the sale raise “serious questions about whether CATL is attempting to obscure links to forced labor,” wrote Representatives Mike Gallagher of Wisconsin, the chairman of the select committee, and Jason Smith of Missouri, the chairman of the Ways and Means Committee. The lawmakers, citing details of Ford’s licensing agreement that are on file with the select committee, also criticized the automaker’s commitment to employ several hundred Chinese workers. Employees from China would set up and maintain CATL’s equipment at the Michigan factory until about 2038, the lawmakers said. The factory is expected to employ 2,500 U.S. workers, Ford has said.“Ford has argued that the deal will create thousands of American jobs, further Ford’s ‘commitments to sustainability and human rights’ and lead to American battery technology advancements,” they wrote. “But newly discovered information raises serious questions about each claim.”T.R. Reid, a spokesman for Ford, said the company was going through the letter and would respond in good faith. He said that human rights were fundamental to how Ford did business, and that the automaker was thorough in assessing such issues.“There has been an awful lot said and implied about this project that is incorrect,” Mr. Reid said. “At the end of the day, we think creating 2,500 good-paying jobs with a new multibillion investment in the U.S. for great technology that we’ll bring to bear in great electric vehicles is good all the way around.”CATL’s collaboration with Ford could be a bellwether for the electric vehicle industry in the United States. Critics have labeled the agreement a “Trojan horse” for Chinese interests and called for scuttling the partnership. If it succeeds, they say, reliance on Chinese technology could become the norm for the U.S. electric vehicle industry.Ultimately, China’s control over key technologies like batteries could leave the United States “in a far weaker position,” said Erik Gordon, a clinical assistant professor at the University of Michigan’s Ross School of Business.“The profit margins go to the innovators who provide the advanced technology, not the people with screwdrivers that assemble the advanced technology,” he said.But CATL and other Chinese companies have battery technology not readily available from suppliers in the United States or Europe. The Michigan plant would be the first in the United States to produce so-called LFP batteries that use lithium, iron and phosphate as their main active materials.They are heavier than the lithium, nickel and manganese batteries currently used by Ford and other automakers but less expensive to make and more durable, able to withstand numerous charges without degrading. They also do not use nickel or cobalt, another battery material, which are often mined in environmentally damaging ways, and sometimes with child labor.Without the most advanced or least expensive batteries, U.S. carmakers could fall behind Chinese rivals like BYD that are pushing into Europe and other markets outside China. Americans may also have to pay more for electric cars and trucks, which would slow sales of vehicles that do not emit greenhouse gases.A battery unveiled by CATL last year delivers hundreds of miles of driving range after a charge of just 10 minutes.“The hard truth is that the Chinese took a huge gamble on electric vehicles and plopped down over a trillion Chinese dollars and subsidies on this industry, and it just so happens that gamble came up all aces,” said Scott Kennedy, a China expert at the Center for Strategic and International Studies.“If you decide not to partner with a very large battery maker, then you’re essentially committing to delaying the U.S. energy transition,” he added.Ford plans to use batteries made with CATL technology in lower-priced versions of vehicles like the Mustang Mach-E and F-150 Lightning pickup. The least expensive version of Tesla’s Model 3 sedan comes with an LFP battery that CATL is widely reported to have supplied.For decades, Western companies have had a monopoly on the world’s most advanced technologies, and have sought access to the Chinese market while also safeguarding their intellectual property.But China’s dominance in electric vehicle batteries, as well as in the production of solar panels and wind turbines, has flipped that dynamic. It has created a particularly tricky dilemma for the Biden administration and other Democrats, who want to reduce the country’s reliance on China but also argue that the United States must quickly make a transition to cleaner energy sources to try to mitigate climate change.The solar and electric vehicle battery industry’s exposure to Xinjiang further complicates the situation. The Biden administration has condemned the Chinese government for carrying out genocide and crimes against humanity in the region.The United States last year barred imports of products made in whole or in part in Xinjiang, saying companies operating in the region are not able to ensure that their facilities are free of forced labor.In 2022, CATL and a partner registered a lithium processing company in the region called Xinjiang Zhicun Lithium Industry Company, which promoted plans to become the world’s largest producer of lithium carbonate, a key battery component.Through a series of subsidiaries and shareholder relationships, that Xinjiang lithium company has financial ties to a Chinese electricity company, Tebian Electric Apparatus Stock Company, or TBEA, according to records that The New York Times reviewed through Sayari Graph, a mapping tool for corporate ownership. TBEA has participated extensively in so-called poverty alleviation and labor transfer programs in Xinjiang that the United States considers a form of forced labor.A CATL battery plant under construction in Ningde, China, in 2021. The company has said it prohibits any form of forced labor in its supply chain.Qilai Shen for The New York TimesWhile the Chinese government argues that labor transfer and poverty alleviation programs are aimed at improving living standards in the region, human rights experts say that they are also directed at pacifying and indoctrinating the population, and that Uyghurs and other minority groups there cannot say no to these programs without fear of detention or punishment.CATL did not respond to a request for comment. In December, it told The Times that it was a minority shareholder in the Xinjiang company and strictly prohibited any form of forced labor in its supply chain.The Republican lawmakers also raised concerns about whether batteries made at Ford’s Michigan plant would qualify for tax credits that the Biden administration was offering consumers who bought electric vehicles as part of the Inflation Reduction Act.The law prohibits “foreign entities of concern” — like companies in China, Russia, Iran or North Korea — from benefiting from government tax credits. But because Ford is licensing CATL technology for the plant — rather than forming a joint venture, as has often been the case with automakers and battery suppliers — the batteries made in Michigan may still qualify for those incentives.The Biden administration has not yet clarified exactly how the restriction on foreign entities will be applied. But Ford officials said they had been in conversation with the administration about the Michigan plant, and were confident that the partnership would qualify for all of the law’s benefits.“We think batteries built by American workers in an American plant run by the wholly owned subsidiary of an American company will and should qualify,” Mr. Reid, the Ford spokesman, said. More

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    House Committee Targets U.C. Berkeley Program for China Ties

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    A House select committee is requesting more information about a university collaboration that it said could help China gain access to cutting-edge research.A congressional committee focused on national security threats from China said it had “grave concerns” about a research partnership between the University of California, Berkeley, and several Chinese entities, claiming that the collaboration’s advanced research could help the Chinese government gain an economic, technological or military advantage.In a letter sent last week to Berkeley’s president and chancellor, the House Select Committee on the Chinese Communist Party requested extensive information about the Tsinghua-Berkeley Shenzhen Institute, a collaboration set up in 2014 with China’s prestigious Tsinghua University and the Chinese city of Shenzhen.The letter pointed to the institute’s research into certain “dual-use technologies” that are employed by both civilian and military institutions, like advanced semiconductors and imaging technology used for mapping terrain or driving autonomous cars.The committee also questioned whether Berkeley had properly disclosed Chinese funding for the institute, and cited its collaborations with Chinese universities and companies that have been the subjects of sanctions by the United States in recent years, like the National University of Defense Technology, the telecom firm Huawei and the Chinese drone maker DJI.It also said that Berkeley faculty serving at the institute had received funding from the Defense Advanced Research Projects Agency and other U.S. funding for the development of military applications, raising concerns about Chinese access to those experts.In April, for example, a team from a Shenzhen-based lab that describes itself as being supported by the Tsinghua-Berkeley Shenzhen Institute said it had won a contest in China to optimize a type of advanced chip technology that the U.S. government is now trying to prevent Chinese companies from acquiring, the letter said.It is not clear what role the university had in that project, or if the partnership, or the institute’s other activities, would violate U.S. restrictions on China’s access to technology. In October, the United States set significant limits on the type of advanced semiconductor technology that could be shared with Chinese entities, saying that the activity posed a national security threat.“Berkeley’s P.R.C.-backed collaboration with Tsinghua University raises many red flags,” the letter said, referring to the People’s Republic of China. It was signed by Representative Mike Gallagher, a Wisconsin Republican who chairs the committee, and Representative Virginia Foxx, a Republican of North Carolina who is the committee chair on education and the work force.In a statement to The New York Times, U.C. Berkeley said it takes concerns about national security “very seriously” and was committed to comprehensive compliance with laws governing international academic engagement. “The campus is reviewing past agreements and actions involving or connected to Tsinghua-Berkeley Shenzhen Institute” and would “fully and transparently cooperate with any federal inquiries,” it said.The university also said it had responded to inquiries from the Department of Education with detailed information about gifts and contracts related to the institute, that it was committed to full compliance with laws governing such arrangements, and that it “follows the lead of Congress and federal regulators when evaluating proposed research relationships with foreign entities.”Universities have also emphasized that foreign governments might have little to gain from infiltrating such partnerships, since academic researchers are focused on fundamental research that, while potentially valuable, is promptly published in academic journals for all to see.“As a matter of principle, Berkeley conducts research that is openly published for the entire global scientific community,” the university said in its statement.The letter, and other accusations from members of Congress about U.S. universities with partners in China, underscores how a rapid evolution in U.S.-China relations is putting new pressure on academic partnerships that were set up to share information and break down barriers between the countries.The Chinese government has sought to improve the country’s technological capacity through legitimate commercial partnerships, but also espionage, cybertheft and coercion. Those efforts — along with a program to meld military and civilian innovation — has led to a backlash in the United States against ties with Chinese academic institutions and private companies that might have seemed relatively innocuous a decade ago.The select committee, which was set up earlier this year, describes its mission as building consensus on the threat posed by the Chinese Communist Party and developing a plan to defend the United States. The bipartisan committee, which is led by Republicans, can provide legislative recommendations but cannot legislate on its own. It has been busily naming and shaming major companies and others over ties to China in congressional hearings, investigations and letters.Tensions between the United States and China are high, and some lawmakers have called for decoupling the two economies. But severing academic ties is a tricky prospect. American universities are geared toward open and collaborative research and count many Chinese scholars among their work force. China’s significant technology industry and huge population of science and technology doctorates make it a natural magnet for many research collaborations.Still, the rapid expansion of export controls in the United States is putting more restrictions on the type of information and data related to advanced technologies that can be legally shared with individuals and organizations in China. Under the new rules, even carrying a laptop to China with certain chip designs on it, or giving a Chinese national a tour of an advanced U.S. chip lab, can violate the law.The House committee has requested that the university provide extensive documents and information by July 27 about the partnership, including its funding, structure and technological work, its alumni’s current and past affiliations, and its compliance with U.S. export controls. More

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    China’s Second-Quarter G.D.P. Shows Post-Covid Rebound Faltered

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    The NewsChina’s economy slowed markedly in the spring from earlier in the year, official numbers released on Monday showed, as exports tumbled, a real estate slump deepened and some debt-ridden local governments had to cut spending after running low on money.The new gross domestic product data for the second quarter — from April through June — underlined what has been apparent for weeks: China’s recovery after abandoning its extensive “zero Covid” measures will be harder to achieve than Beijing and many analysts had hoped.The NumbersCovid not only still hangs over China’s economy; it also skews some of its official data. The main G.D.P. number reported by Beijing on Monday, comparing this year with the same quarter last year, showed that the economy expanded 6.3 percent. But that reflected improvement from a sharp slowdown in 2022’s second quarter, a period when China’s largest city, Shanghai, was in a two-month lockdown. More

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    Chips Make It Tough for the U.S. to Quit China

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    Chipmakers are finding it increasingly hard to operate in China but say doing business in the country is still key to their survival.In May, Micron Technologies, the Idaho chipmaker, suffered a serious blow as part of the U.S.-China technology war. The Chinese government barred companies that handle crucial information from buying Micron’s chips, saying the company had failed a cybersecurity review.Micron said the change could destroy roughly an eighth of its global revenue. Yet in June, the chipmaker announced that it would increase its investments in China — adding $600 million to expand a chip packaging facility in the Chinese city of Xian.“This investment project demonstrates Micron’s unwavering commitment to its China business and team,” an announcement posted on the company’s Chinese social media account said.Global semiconductor companies are finding themselves in an extremely tricky position as they try to straddle a growing rift between the United States and China. The semiconductor industry has become ground zero for the technology rivalry between Washington and Beijing, with new restrictions and punitive measures imposed by both sides.U.S. officials say American products have fed into Chinese military and surveillance programs that run counter to the national security interest of the United States. They have imposed increasingly tough restrictions on the kind of chips and chip-making equipment that can be sent to China, and are offering new incentives, including grants and tax credits, for chipmakers who choose to build new operations in the United States.But factories can take years to construct, and corporate ties between the countries remain strong. China is a major market for chips, since it is home to many factories that make chip-rich products, including smartphones, dishwashers, cars and computers, that are both exported around the world and purchased by consumers in China.Overall, China accounts for roughly a third of global semiconductor sales. But for some chipmakers, the country accounts for 60 percent or 70 percent of their revenue. Even when chips are manufactured in the United States, they are often sent to China for assembly and testing.“We can’t just flip a switch and say all of sudden you have to take everything out of China,” said Emily S. Weinstein, a research fellow at Georgetown’s Center for Security and Emerging Technology.The industry’s reliance on China highlights how a close — but extremely contentious — economic relationship between Washington and Beijing is posing challenges for both sides.Those tensions were reflected during Treasury Secretary Janet L. Yellen’s visit to Beijing this week, where she tried to walk a fine line by faulting some of China’s practices while insisting the United States was not looking to sever ties with the country.Ms. Yellen criticized punitive measures China has recently taken against foreign firms, including limiting the export of some minerals used in chip making, and suggested that such actions were why the Biden administration was trying to make U.S. manufacturers less reliant on China. But she also affirmed the U.S.-China relationship as strategic and important.“I have made clear that the United States does not seek a wholesale separation of our economies,” Ms. Yellen said during a roundtable with U.S. companies operating in China. “We seek to diversify, not to decouple. A decoupling of the world’s two largest economies would be destabilizing for the global economy, and it would be virtually impossible to undertake.”The Biden administration is poised to begin investing heavily in American semiconductor manufacturing to lure factories out of China. Later this year, the Commerce Department is expected to begin handing out funds to help companies build U.S. chip facilities. That money will come with strings: Firms that take funding must refrain from expanding high-tech manufacturing facilities in China.The administration is also weighing further curbs on the chips that can be sent to China, as part of a push to expand and finalize sweeping restrictions it issued last October.These measures could include potential limits on sales to China of advanced chips used for artificial intelligence, new restrictions for Chinese companies’ access to U.S. cloud computing services, and restrictions on U.S. venture capital investments in the Chinese chip sector, according to people familiar with the plans.The administration has also been considering halting the licenses it has extended to some U.S. chipmakers that have allowed them to continue selling products to Huawei, the Chinese telecom firm.Japan and the Netherlands, which are home to companies that make advanced chip manufacturing equipment, have also put new restrictions on their sales to China, in part because of urging from the United States.China has issued restrictions of its own, including new export controls on minerals used in chip manufacturing.Amid tighter regulations and new incentive programs from the United States and Europe, global chip companies are increasingly looking outside China as they choose the locations for their next major investments. But these facilities will likely take years to construct, meaning any changes to the global semiconductor market will unfold gradually.John Neuffer, the president of the Semiconductor Industry Association, which represents the chip industry, said in a statement that the ongoing escalation of controls posed a significant risk to the global competitiveness of the U.S. industry.“China is the world’s largest market for semiconductors, and our companies simply need to do business there to continue to grow, innovate and stay ahead of global competitors,” he said. “We urge solutions that protect national security, avoid inadvertent and lasting damage to the chip industry, and avert future escalations.” More

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    U.S. and China, by the Numbers

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    From movie theaters to military spending, here’s how one of the world’s most important economic relationships stacks up.China and the United States are locked in an increasingly intense rivalry when it comes to national security and economic competition, with American leaders frequently identifying China as their greatest long-term challenger.Yet the world’s two largest economies, which together represent 40 percent of the global output, remain integral partners in many ways. They sell and buy important products from each other, finance each other’s businesses, provide a home to millions of each other’s people, and create apps and movies for audiences in both countries.As Treasury Secretary Janet L. Yellen meets with top Chinese officials in Beijing this week, her challenge will be to navigate this multifaceted relationship, which ranges from conflict to cooperation. Here are some figures that illustrate the links between the two nations.Economic and military powerThe U.S. economy continues to outstrip China’s by dollar value: In 2022, Chinese gross domestic product was $18 trillion, compared with $25.5 trillion for the United States.But China’s population is more than four times America’s. And the economic picture looks different when adjusted for local prices: Based on purchasing power parity, China’s share of world G.D.P. is 18.9 percent, according to the International Monetary Fund, surpassing the United States at 15.4 percent.China has provided more than a trillion dollars for global infrastructure through its Belt and Road Initiative, which analysts see as an effort to project power around the world.The rapid growth and modernization of China’s military have sparked concerns in the United States. China has more naval vessels than the United States and more military personnel, with 2.5 million in 2019.But American armed forces are far better equipped, and the United States still spends more on defense than the next 10 countries combined — $877 billion in 2022, compared with $292 billion in reported spending by China.Trade relationsDespite the rising tensions, trade between the countries remains extremely strong. China is America’s third-largest trading partner, after Canada and Mexico.U.S. imports of goods and services from China hit a record $563.6 billion last year. But the share of U.S. imports that come from China has been falling, a sign of how some businesses are breaking off ties with China.China is also a major export market, with half of all soybeans that the United States sends abroad going to China. The U.S.-China Business Council estimated that U.S. exports to China supported nearly 1.1 million jobs in the United States in 2021.China dominates supply chains for both critical and everyday goods. It is the world’s largest producer of steel, solar panels, electronics, coal, plastics, buttons and car batteries, and it has quadrupled its car exports in just two years, becoming the world’s largest auto exporter through its growing clout in electric vehicles.The United States has steadily expanded sanctions against Chinese companies and organizations because of national security and human rights concerns, placing 721 Chinese companies, organizations and people on an “entity list” that restricts their ability to buy products from the United States, according to the Commerce Department.Financial and corporate tiesChina is one of America’s largest lenders and holds nearly $1 trillion of U.S. debt.Members of the S&P 500 index, which tracks the largest public companies in the United States, generate 7.6 percent of their revenue in mainland China, the biggest source of international sales by far, according to FactSet. The revenue that large U.S. firms derive from China is more than their revenue from the next three countries — Japan, Britain and Germany — combined.But the outlook for American companies doing business in China has turned grimmer. In the American Chamber of Commerce in China’s most recent survey of U.S. companies in China, 56 percent described their business as unprofitable in 2022, with some blaming China’s strict Covid-19 lockdown measures.Also in the survey, 46 percent of American companies thought that U.S.-China relations would deteriorate in 2023, while only 13 percent thought they would improve.Personal and cultural connectionsThe United States is home to nearly 2.4 million Chinese immigrants, making it the top destination for Chinese immigrants worldwide. Chinese immigrants in the United States are more than twice as likely as U.S.-born adults to have a graduate or professional degree.In the 2021-22 school year, 296,000 students from China attended U.S. institutions of higher learning, nearly a third of all international students in the United States.Roughly three in four Chinese Americans experienced racial discrimination in the previous 12 months, and 9 percent were physically intimidated or assaulted, according to a survey by Columbia University and the Committee of 100, a Chinese American leadership organization.Long considered a low-end manufacturer, China has become more of a source for innovation and cultural creation. TikTok, the popular social media app whose parent company is China’s ByteDance, says it has more than 150 million users in the United States.Last year, 20 American movies opened in China, and their box office total was roughly $673 million, according to Comscore. China had more than 80,000 movie screens by late 2021, compared with roughly 39,000 in the United States.Pandemic restrictions have made it much harder to travel between the countries. Air carriers are running only 24 flights a week between the United States and China, compared with about 350 before the pandemic.Sapna Maheshwari and Nicole Sperling contributed reporting. More