U.S. acts targeting China threaten to destabilize global competition

Editor's note: Daryl Guppy, a special commentator for CGTN, is an international financial technical analysis expert. He has provided weekly Shanghai Index analyses for mainland Chinese media for more than a decade. Guppy appears regularly on CNBC Asia and is known as "The Chart Man." He is a former national board member of the Australia China Business Council. The article reflects the author's opinions and not necessarily the views of CGTN.

More Chinese companies have come under attack from the mafia capitalism approach used by the United States to stifle and destroy Chinese business competitors. The latest measure is the Biosecure Act, aimed initially at five Chinese companies. The U.S. House of Representatives on Monday overwhelmingly passed the bipartisan bill – one of a series of bills aimed at China, following which the bills will need to be passed by the Senate before President Joe Biden signs them into law.

The cover for this attack on competition is the all-encompassing "national security." This is a loophole in the rules of the World Trade Organization (WTO) that has been shamelessly exploited by the Joe Biden and Donald Trump administrations. It is part of a pattern that has seen U.S. lawmakers requiring Chinese-based parent company Bytedance to divest from TikTok or face a U.S. ban on the popular social media site.

In reality, it is a fig leaf covering the use of government powers to eliminate competition in favor of U.S. companies which are often unable to deliver products or services of similar quality. It is the American consumer who pays a hefty price for tariffs, and sanctions which block their access to better and cheaper products.

Several other bills targeting China are set for votes in coming weeks, including legislation targeting the Chinese supply chains for electric vehicles as well as other industries. These measures are designed to weaken the Chinese economy by attacking Chinese businesses.

This is the full bloom of mafia capitalism. The mafia used stand-over tactics to extort money from successful businesses, or to burn them down and destroy business competitors. The methods used by the United States policy makers are different, but they have the same impact.

The grip of the mafia was broken by the 1970 Racketeer Influenced and Corrupt Organizations (RICO) Act, which gave the FBI unprecedented powers.

In the current context, it would require the WTO to exercise similar powers to take on these unilateral protectionist policies that bend and break the rules of global trade. Unfortunately, the United States has also embarked on a campaign to weaken the WTO. The campaign includes continued refusal to appoint new appellate judges, which has delayed the resolution of trade disputes, including the mis-use of sanctions.

One prominent Democrat, Jim McGovern, asked his colleagues to reject the Biosecure Act, arguing it picks companies to punish with no clear standards to follow. His is a lone voice of reason in the wilderness. Unlike the RICO Act, there is no legal support for a challenge to the ethics or rationality of the Biosecure Act.

The legislation has significant implications for the global pharmaceutical industry. Much of the world's drug supply chain includes active ingredients produced by Chinese biotechnology companies.

The targeted companies deny they are a national security threat and say they are focused on health innovation. One of the companies, Complete Genomics, said the bill would bolster the already dominant market share of U.S. rival Illumina. This observation goes to the heart of the string of policies designed to undermine the competitive success of Chinese companies.

Mafia capitalism comes armed not only with discriminatory policies, but also with outright lies promulgated by the national security apparatus. The U.S. initiated a propaganda campaign against Chinese COVID-19 vaccines which led to thousands of unnecessary deaths in the Global South. "We weren't looking at this from a public health perspective," said a senior military officer involved in the program. "We were looking at how we could drag China through the mud."

Today, the military continues to employ a sprawling ecosystem of social media influencers, front groups and covertly placed digital advertisements to influence overseas audiences, according to current and former military officials. They are assisted in this with the America Competes Act 2022, which allocates more than $500 million a year for media outlets to produce journalism critical of China.

The drivers of this mafia capitalism are both complex and contradictory. On the one hand, the response reflects a basic U.S. racist belief that China cannot innovate. On the other hand, it reflects the U.S. fear that China can innovate in artificial intelligence, quantum computing, etc. which is what drives the CHIPS and Science Act and the recent company black listings.

Stripping away the aspects of racism and hegemonic desires, the concerted U.S. policy attacks on China are driven by its inability to compete, which leads to a protectionist policy of tariffs and sanctions. Mafia capitalism is the preferred tool of a plutocracy, and the Biosecure Act is its latest iteration. The unilateral behavior causes huge damage to China-U.S. relations and we can expect more as the U.S. cuts itself off from the world and hunkers behind protectionist barriers.

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