May 2, 2024 | Policy Brief

Safeguarding U.S. Interests in the Face of China’s ‘New Productive Forces’ Strategy

May 2, 2024 | Policy Brief

Safeguarding U.S. Interests in the Face of China’s ‘New Productive Forces’ Strategy

Amidst China’s economic downturn, Chinese leader Xi Jinping recently announced new industrial policies aimed at cementing China’s dominance in several emerging technology sectors, such as batteries, electric vehicles, biomanufacturing, and the commercial outer space industry. Xi’s strategy to revitalize China’s economic growth by supporting “new productive forces” (新质生产力) presents significant risks for the U.S. economy and American workers, putting America’s technological advantage at risk and undermining Washington’s ability to cultivate a skilled tech workforce.

Xi introduced the term “new productive forces” during a 2023 inspection tour in Heilongjiang Province. In March, the phrase gained major significance after it was featured in directives announced during China’s annual two-week legislative gathering, known as the Two Sessions.

For instance, Chinese Premier Li Qiang’s 2024 Government Work Report, which outlines China’s macroeconomic plans, listed the development of “new productive forces” as the Chinese Communist Party’s top policy priority. Li specifically cited plans to consolidate China’s position in “intelligent-connected new energy vehicles, hydrogen power, new materials, and innovative drugs,” among other sectors.

The emphasis on “new productive forces” mirrors previous initiatives led by the party-state, such as Made in China 2025, which aimed to enhance China’s manufacturing capabilities, reduce its reliance on foreign technology, and champion Chinese companies’ dominant role in emerging technology fields. Like Made in China 2025, Beijing’s latest push relies heavily on state-directed capital infusions and illegal subsidies that violate World Trade Organization rules. Chinese decision-makers likely view such measures as essential in stabilizing China’s economy without necessitating major structural changes that could undermine stability or social cohesion.

Little is known about specific efforts associated with the emphasis on “new productive forces.” So far, Beijing has announced only one designated “new productive forces” program, known as the AI Plus Initiative. The initiative’s goals are vague beyond its focus on expanding artificial intelligence (AI) research and integrating AI into more facets of Chinese society, albeit on the party-state’s terms. The initiative’s rollout coincided with a concerted push by Washington to convince its allies, including Japan and the Netherlands, to stop servicing certain chipmaking tools for Chinese customers because of fears Beijing is leveraging advanced AI chips to strengthen its military.

For her part, Secretary of Treasury Janet Yellen raised concerns about China’s plans while in Beijing in April. Meeting with Chinese officials, Yellen warned Washington would not “take anything off the table” when it comes to countering Chinese efforts to export its excess capacity. She specifically mentioned Beijing’s plans to dump cheap Chinese electrical vehicles on global markets at the expense of U.S. automobile manufacturers. Chinese officials largely dismissed Yellen’s concerns, decrying them as protectionist.

U.S. policymakers must adopt a multi-faceted approach to counter China’s emerging strategy or risk repeating China’s success in dominating today’s telecommunications and drone sectors.

First, the administration should proactively raise tariffs on select Chinese “new productive forces” products, such as electric vehicles and batteries, to protect domestic industries and workers from unfair Chinese competition. The U.S. Commerce Department should also close loopholes that allow Chinese universities and Chinese companies located outside of China to acquire advanced semiconductors, like Nvidia’s A100 and H100 chips, which are needed to support many “new productive forces” industries.

Congress should also require the administration to establish a robust outbound investment screening process that prioritizes sectoral bans on American investments in Chinese military-linked companies. The House Foreign Affairs Committee’s chairman and ranking member have proposed bipartisan legislation that would do exactly that.

Lastly, the White House should establish a task force to swiftly assess the risks posed by China’s new strategy and propose policy responses to China’s predatory moves. Doing so could safeguard U.S. economic interests in the short-term and enhance long-term competitiveness in the face of unfair Chinese industrial policies.

Craig Singleton is a senior fellow at the Foundation for Defense of Democracies (FDD) and Senior Director of FDD’s China Program, where Amaya Marion is an intern. For more analysis from Craig and the China Program, please subscribe HERE. Follow Craig on X @CraigMSingleton. Follow FDD on X @FDD. FDD is a Washington, DC-based, nonpartisan research institute focused on national security and foreign policy.


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