It was a Republican President who inaugurated America’s openness to China 50 years ago, but it is Republicans in Congress who seem poised to begin closing the door. With the likelihood of a Republican takeover of the House and possibly the Senate in November, American businesses should prepare for a raft of anti-China measures that are likely to pass the House in the new Congress.
House Republican Leadership intends to include China decoupling legislation among its top 10 priorities in 2023. Unlike many foreign policy issues on which voters express little interest, this new decoupling fervor is being driven by Republicans’ most enthusiastic voters.
In one recent unpublished poll, almost half of Republican voters agreed that the U.S. government should prohibit American companies from doing business in China, and fewer than one-third disagreed. Three times as many Republican voters strongly agreed with this view than strongly disagreed, demonstrating that voter intensity for decoupling is high.
In a time of heightened partisanship leading into another divisive election, 26 Republican Senators sent a letter supporting Speaker Nancy Pelosi’s trip to Taiwan – despite the fact that Pelosi is anathema to Republican voters. The subtext to the letter was that Republicans’ eagerness for a muscular confrontation with China trumps even election-year partisanship in some circumstances.
The recently passed CHIPS-Plus legislation, which President Biden will sign into law today, was all about China, though it is not mentioned in the bill’s title. Bipartisan fears that China might invade Taiwan and capture Taiwan Semiconductor Manufacturing Corporation’s (TSMC) critical advanced chip manufacturing facility emboldened 16 Senate Republicans and 24 House Republicans to set aside their concerns about instituting industrial policy and vote for the bill. Notably, the bill included “guardrails” for funding recipients that will curtail some future expansion by US and allied chipmakers in China.
In 2020, after a lengthy project, the House Republicans issued a 141-page China Task Force Report full of aggressive proposals to decouple American business from China. The conservative House Republican Study Committee followed up with its own more aggressive legislative proposal (the “Countering Communist China Act”) that is likely to closely mirror the proposal that House Republicans will probably list among their top legislative bills in the 118th Congress.
But will such legislation pass a closely divided Senate (regardless of which Party is in control) and get signed by President Biden? Unlikely, but provisions of the bill may find a home in the must-pass National Defense Authorization Act. And going into a presidential election, the Biden Administration will feel the pressure to issue Executive Orders and take other administrative actions to address growing anti-China sentiment. It’s likely that a Republican House will use hearings, letters, and investigations to question companies that are perceived to be genuflecting to China. With Republicans increasingly moving away from the historically close relationship with corporate America, a perceived coziness with China will be one more strike against business. Already, some American tech companies are voluntarily decoupling from the lucrative Chinese market, and heightened congressional oversight may accelerate that exodus.