Raimondo Heads to China to Both Promote Trade, and Restrict It

Gina Raimondo, the secretary of commerce, is heading to China on Saturday with two seemingly contradictory responsibilities: a mandate to strengthen U.S. business relations with Beijing while also imposing some of the toughest Chinese trade restrictions in years.

The head of the Commerce Department is traditionally the government’s biggest champion for the business community both at home and abroad, promoting the kind of extensive ties U.S. firms have with China, the world’s second-largest economy.

But U.S.-China relations have turned chillier as China has become more aggressive in flexing its economic and military might. While China remains an important economic partner, American officials have increasingly viewed the country as a security threat and have imposed a raft of new restrictions aimed at crippling Beijing’s access to technology that could be used to strengthen the Chinese military or security services.

The bulk of those restrictions — which have stoked anger and irritation from the Chinese government — have been imposed by Ms. Raimondo’s agency.

The Commerce Department has issued extensive trade restrictions on sales of chips, software and machinery to China’s semiconductor industry and is mulling an expansion of those rules that could be issued soon after Ms. Raimondo returns to Washington.

Her visit could be the biggest test yet of whether the Biden administration can pull off the balancing act of promoting economic ties with China while clamping down on some trade in the interest of national security.

Ms. Raimondo will be the fourth administration official to travel to China in recent months, following John Kerry, the president’s special envoy for climate change; Treasury Secretary Janet L. Yellen; and Secretary of State Antony J. Blinken.

Ms. Raimondo is expected to reiterate what her counterparts have told Chinese officials: that there is no contradiction between the administration’s goals for encouraging commercial engagement with China and protecting U.S. national security. They argue that the United States can maintain economic ties with China that benefit both countries and encourage peace, while also setting narrow but tough restrictions on China’s access to advanced technology in the interest of national defense.

But the approach faces skepticism in both countries. In the United States, some Republicans argue that even more innocuous business ties with China could undercut U.S. industries and leave the nation vulnerable to influence from Beijing. And in China, many view what the U.S. government describes as narrow, national-security-related actions as a poorly disguised effort to hold back the Chinese economy.

“I think the Commerce Department has tried to be very targeted,” said Samm Sacks, a senior fellow at Yale Law School’s Paul Tsai China Center. “Now, the Chinese side won’t see it that way.”

For Chinese officials, Ms. Raimondo simultaneously represents some of their best opportunities for engagement with the United States and their biggest source of frustration.

Experts say her visit presents a chance for Chinese leaders to strengthen trade relations and signal that their country is still open to international business at a moment when the Chinese economy has stumbled, foreign investment has declined and a series of raids on companies with foreign ties have set executives on edge.

But Chinese officials have also harshly criticized the technology curbs issued by her department, a condemnation they are likely to repeat in the week ahead. Officials in Beijing have also been highly critical of the new restrictions on American investment in certain high-tech Chinese industries, which the Biden administration proposed earlier this month.

At a summit in South Africa this week, a Chinese official delivered a prepared statement from Chinese leader Xi Jinping that called for the world to avoid “the abyss of a new Cold War” and blamed “some country, obsessed with maintaining its hegemony” for working to cripple emerging markets and developing countries.

In addition to export controls, Ms. Raimondo is overseeing the distribution of $50 billion to chip companies that build facilities in the United States. Any company that accepts that funding must agree not to build new factories for making advanced chips in China for at least a decade.

“The Biden administration is probing for a way to engage the Chinese in a very difficult environment,” said Myron Brilliant, a senior counselor at Dentons Global Advisors-ASG who was formerly the executive vice president of the U.S. Chamber of Commerce. “It’s a balancing act for sure, between the national security agenda they are enforcing, while also recognizing that a lot of trade between the countries doesn’t touch on national security considerations and should therefore not be restricted.”

Ms. Raimondo is set to meet with high-level Chinese officials and representatives of American businesses in Beijing and Shanghai between Monday and Wednesday. People familiar with the government’s planning say those talks may result in the creation of working groups to discuss export controls and commercial issues that arise between China and the United States.

American businesses are also hoping that the Biden administration will push for additional intellectual property protections for pharmaceutical companies, more access to the Chinese market for Visa and Mastercard and the completion of a longstanding Chinese order of Boeing airplanes, among other goals, people familiar with the talks said.

But those gains, while important for American firms, would still seem trivial compared with the mounting pressures U.S. companies can now face in China.

China’s sputtering economy and harsh lockdowns during the pandemic are giving pause to businesses considering their presence in the country. The Chinese government has also restricted companies sending data from China abroad, making it more difficult for multinationals to do business.

Chinese authorities have responded to increasing technology restrictions from the United States by barring the U.S. chip-maker Micron from sales to companies that handle critical Chinese information and by scuttling a proposed merger between Intel and an Israeli chip-maker with operations in China. And companies exporting from China still face nearly the full suite of tariffs imposed by the Trump administration, in addition to the new export controls.

The Biden administration has acknowledged the tensions in the U.S.-China relationship, saying that China poses a threat to U.S. national security but that it is still one of the country’s most integral economic partners.

“This isn’t about, you know, holding China back or denying them commodity technology,” Ms. Raimondo said of the export controls at an event at the American Enterprise Institute in July. “Certainly not about denying U.S. companies revenue. It’s about being honest about the fact that China has a military civil fusion strategy, which includes getting our most sophisticated technology and using it to advance their military. And we’re not going to allow that.”

The United States has for decades imposed export controls on the types of technology that can be sent to China, including restricting sales of satellites and other technology following Beijing’s crackdown in Tiananmen Square in 1989.

But limits on technology trade with China have increased substantially in recent years, since the Trump administration imposed restrictions on the Chinese telecom firm Huawei. In October, the Biden administration expanded the limits to all firms using advanced chips in China.

Chip firms, which earn a third or more of their global revenue through sales to China, have also pushed back, saying that the new restrictions are resulting in less money to invest in new research and innovation.In July, the chief executives of Nvidia, Qualcomm and Intel met with Ms. Raimondo in Washington to make that case.

It’s not clear how much influence, if any, their lobbying will have on the rules. Ms. Raimondo, a former venture capitalist and governor of Rhode Island, has a long reputation as a business-friendly and pragmatic political actor. But as commerce secretary, she has repeatedly argued that the United States could not compromise on issues of national security.

“We are not seeking the decoupling of our economy from that of China’s,” Ms. Raimondo said in a speech at the Massachusetts Institute of Technology in November. “We want to continue to promote trade and investment in those areas that do not undermine our interests or values.”