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11 Aug 2021

Econ Digest

U.S.-China Competition: Evolving from protectionist measures to legal tools in the race for global leadership in the new era


        The continuous accelerated growth of China’s economy has increased its bargaining power and raised concerns in the United States. President Biden’s repressive measures have shifted from conventional approaches to a struggle based on a long-term national strategy defined by the national law, in which the U.S. has passed legislation to deter and compete with China. The objectives can be divided as follows:

            (1) Laws to restrict Chinese companies’ imports and exports of products and technologies. President Biden has expanded the repression of human rights on cybersecurity grounds.
            (2) Laws that prevent Chinese companies from raising funds in the U.S. and prohibit U.S. companies and individuals from investing in Chinese companies that operate businesses that could pose security concerns or that have ties to the Chinese military.
            (3) Laws to boost U.S. competitiveness in strategic industries, which are considered the most important legal tools in this competition. The U.S. Senate has passed the “U.S. Innovation and Competition Act of 2021” (USICA) to boost the semiconductor industry, revolutionary innovation industry, modern technology-related energy supply chain industry and space industry.
        It is interesting to note that the U.S. and China use very similar legal tools, only differing in the timing of their uses. The U.S. has begun to learn and identify strategic industries through the Innovation and Competition Act, but China has long utilized the legal tools of the Five-Year Plan for National Economic and Social Development. Meanwhile, China has started to adopt legal tools by passing the “Anti-Foreign Sanctions Law” to enhance its legislative power in countering sanctions from Western countries.

        The ongoing mutual counterbalance between the United States and China is a competition for global leadership in the new era, and has turned into a battle over long-term national strategy with unpredictable results. Entrepreneurs and investors must take this risk into account, while the Thai authorities must implement a balanced policy between the two sides to maximize benefits.

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