Pacific Dialogue
Panic or pantomime?
By Liang Xiao  ·  2024-03-11  ·   Source: NO.11 MARCH 14, 2024

On February 29, the Joe Biden administration directed the U.S. Commerce Department to investigate what it claimed was a "potential national security threat" posed by Chinese-made smart cars. Almost concurrently, Gina Raimondo, U.S. Secretary of Commerce, introduced an alarmist hypothetical during an interview with MSNBC host Andrea Mitchell, asking Mitchell and viewers to "imagine if there were thousands or hundreds of thousands of Chinese-connected vehicles on American roads that could be immediately and simultaneously disabled by somebody in Beijing." She also likened Chinese cars to "iPhones on wheels," because "these vehicles are connected to the internet. They collect huge amounts of sensitive data on the drivers…"

Perhaps the U.S. media grasped the essence of the issue better than Raimondo did. In virtually all written reports, the "iPhones" from Raimondo's discourse were replaced with the more generic term "smartphones." If one were to adhere to her narrative, would it not admit that America-made iPhones are extensively compiling sensitive information from global users?

If such inferences can be made, is there a possibility that the engines of thousands of Boeing aircraft purchased by airlines of countries that are not a U.S. ally could be suddenly shut down mid-flight? Are there millions of Tesla electric vehicles (EVs) driving on roads throughout the world that have the potential to spontaneously and collectively combust on command? Could hundreds of millions of iPhones in the hands of overseas consumers suffer system paralysis at the same time?

What remains perplexing is that Chinese smart cars, as heralded by Washington politicians, have yet to become popular in the American market. In 2023, China exported a staggering 5.26 million cars overseas, becoming the world's largest car exporter, with over a million of these being EVs. Yet, the number of Chinese cars exported to the U.S. was a mere 74,800, less than 2 percent of China's total car exports. In stark contrast, within the Chinese market alone, the American company Tesla sold over 603,664 EVs in 2023, marking a year-on-year growth of 37.3 percent.

In 2023, Apple seized the crown with a hefty 17.9 percent share in China's smartphone market, also establishing itself as the brand with the highest profitability in the Chinese market. Both Tesla and Apple faced a fierce onslaught from local competitors in the Chinese market during the first quarter of 2024.

While politicians persistently assert the U.S. has no intention to decouple from China, their actions often contradict their words. From banning Chinese 5G infrastructure equipment and blocking exports of advanced microchips, trying to replacing Chinese cranes in American ports, the U.S.' policies to contain China in the hi-tech sector have remained steadfast, irrespective of governmental changes.

Beyond the continued demonization of Chinese companies under the guise of "national security threats," it has been reported in U.S. political newspaper The Hill, congressmen are proposing legislation to raise import tariffs on Chinese cars. They plan to escalate the basic tariff by a staggering 100 percent, signifying that the total tax rate on all vehicles imported from China will surge from the current 27.5 percent to 125 percent.

Will China respond in kind? This indeed is a subject garnering much attention. On March 5, during the Second Session of the 14th National People's Congress, Chinese Premier Li Qiang provided an answer: China will work proactively to conform to high-standard international economic and trade rules and advance high-standard opening up in key sectors. He notably mentioned that China intends to lift all foreign investment restrictions in the manufacturing sector and relax market access restrictions in service industries such as telecommunications and healthcare.

An increasingly conservative U.S. contrasted with an ever more open China is a profound shift in the global trade landscape. As expressed by William C. Kirby, a renowned U.S. scholar on Chinese studies, during an academic exchange event hosted by Harvard University in early February, China is more open to foreign investment while the United States has become remarkably less open. "Right now if you're looking at regulatory risks as an American multinational or a Chinese multinational, thinking to do business in both markets, your biggest risk comes from Washington. Because you don't know when the next set of regulations or public hearings are going to come down. China has become bizarrely but significantly more predictable in this regard than the United States," he stated.

Perhaps Professor Kirby should have added that, in addition to regulations and hearings, irresponsible remarks made by American politicians also do harm to these businesses. 

Copyedited by G.P. Wilson

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