Decoupling from China’s battery sector poses risk for US economy
Published: Jan 22, 2024 08:56 PM
Illustration: Chen Xia/Global Times

Illustration: Chen Xia/Global Times

US lawmakers have reportedly banned the Defense Department from purchasing batteries produced by China's largest manufacturers. Although this restriction has not yet been applied to commercial purchases, an economic decoupling of the Pentagon's supply chain from China has become a matter of concern. There are worries that this anti-market suppression against Chinese battery manufacturers may escalate, resulting in negative consequences for both sides.

According to Bloomberg, the rule was implemented as part of the latest National Defense Authorization Act (NDAA), which was passed in December. It will prevent the Pentagon procuring batteries from CATL, BYD and four other Chinese companies beginning in October 2027. If Bloomberg's report is true, this will be another indication of the broader US push for technology "decoupling" from China.

Chinese Foreign Ministry spokesperson Mao Ning said in December that China strongly deplores the NDAA for Fiscal Year 2024 that contains negative China-related content. The Act pictures China as a threat, suppresses Chinese companies and limits normal economic, trade and people-to-people exchanges between China and the US, which serves no one's interests, Mao said.

In recent years, the US has intensified its assault on China's technology industry. Its crackdown on Chinese firms has made it clear that the US government wants to slow China's economic rise, particularly in the field of technological development. However, politicians in Washington have underestimated China's resilience in this tech war. 

Subtle changes have occurred. Although the US seems to be increasingly hysterical and unscrupulous in its campaign to contain China's technological rise, the bargaining power of the US has decreased.

First, despite technological suppression by the US, China has gained relative competitive advantages in fields like 5G and electric vehicles. The country has established one of the world's largest battery manufacturing value chains, covering everything from material research and development to production, and from recycling to equipment support. 

In other fields, such as semiconductors, the technological gaps between China and the West are narrowing. Huawei's Mate 60 Pro smartphone, in particular, showcases a chip that appears to support 5G, highlighting the resilience of the Chinese semiconductor industry in the face of Western sanctions.

Second, instead of providing a favorable investment environment for Chinese companies, the US has been attempting to squeeze Chinese high-tech companies out of the supply chain. However, these efforts are counterproductive and create new obstacles for the development of US industries, such as the EV sector. 

Some industry insiders believe that Washington's attempts to reduce the US EV industry's dependence on China could cripple American companies' ability to take advantage of the most advanced battery technology in the world, consequently impeding their progress toward achieving the goal of making EV sales account for 50 percent of the market by the end of the decade.

There have been some positive signs of change. Mississippi Today published an article on Thursday saying that Mississippi Governor Tate Reeves in 2023 decried Chinese technology as "an existential threat" and signed bills limiting what business the state could do with China. 

But during a recent special session, he asked Mississippi lawmakers to "send millions in state taxpayer funds to a Chinese technology company to close an economic development deal." 

A China-based technology company is one of four companies that will be a partner - pending legislative approval of a state incentive package proposed by Reeves - in the construction of a plant to make an electric battery to power commercial trucks, the report said.

Hopefully more American politicians can realize that the US cannot contain China's development by controlling high-tech exports and pushing for technology "decoupling." Only technological cooperation is the best choice for both sides. If the US continues to hype so-called national security and suppress Chinese enterprises, these American policies will backfire by creating confrontation and disrupting global supply chains.

The author is a reporter with the Global Times.