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**NOVEMBER 29, 2021**

Kuttner on TAP

Time to Limit U.S. Investment in China

And kudos once again to the U.S.-China Commission

The U.S.-China Economic and Security Review Commission is a small gem of
an independent government body that has functioned as the loyal
opposition to the corporate conventional wisdom regarding China trade
ever since the commission was created by Congress in 2000. The
bipartisan commission holds hearings and produces deep investigative
reports on how Chinese Leninist capitalism actually works, and the
threat to the U.S. national interest.

Their latest annual report
points
out that President Xi Jinping has tightened controls over China's
nominally private sector, and as a consequence U.S. investment in China
operates on terms even more expressly dictated by the Chinese Communist
Party.

Among its 15 priority recommendations, the report calls for controls on
U.S. private investment in China, as well as creation of a new
government authority that could review and block investments harmful to
the national security. It faulted the Commerce Department for failing to
perform this function as required under existing law.

China policy is one of the few areas of bipartisan concern and
collaboration. The commission's recommendation for outbound investment
review closely tracks legislation co-sponsored by Senators Bob Casey, a
Pennsylvania Democrat, and John Cornyn, Republican of Texas. They are
trying to attach their bill to the must-pass National Defense
Authorization Act.

That maneuver was tried by Sen. Chuck Schumer, to get the bipartisan
U.S. Innovation and Competition Act through Congress. The bill passed
the Senate but is bottled up in the House, where Speaker Nancy Pelosi,
as an alternative to tacking it on to the Defense Authorization Act, has
now agreed to put the measure to a separate vote.

The one thing missing from Schumer's bill is controls on U.S. private
investment in China, whether direct or via stock purchases. Delisting
stocks or banning investment outright in a variety of vehicles
controlled directly or indirectly by the Chinese state and Communist
Party would be a sign that the U.S. is getting both serious and
strategic.

The mainstream press is of little help. It is about 20 years behind the
curve in comprehending how China's system actually works, and persists
in conflating Biden's targeted industrial policy with Trump's
blunderbuss jingoism. In this piece
,

**Times** economics writer Binyamin Appelbaum looks at the short term
cost of tariffs rather than seeing them as part of a long-term strategic
policy to alter China's behavior.

Writers like this are mired in the unreal assumptions of Econ 101. They
should stay after class and read reports of the U.S. China Commission.

~ ROBERT KUTTNER

Follow Robert Kuttner on Twitter

Robert Kuttner's latest book is
The Stakes: 2020 and the Survival of American Democracy
.

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