A “vast expansion” in US multinational business activity in China since 2000 might threaten US industrial competitiveness and long-term tech leadership, a report released on Wednesday by a congressional US-China advisory commission showed.
The US-China Economic and Security Review Commission warned that rapid moves by US companies away from manufacturing in China and into higher-value activities such as research and development could be “unwittingly enabling China to achieve its industrial policy objectives.”
The commission said its analysis of nearly two decades of US economic and trade data showed a 15-fold increase in US commercial assets in China.
The commission said that US companies employ 1.7 million people in China, an increase of nearly 600 percent since 2000, when US firms employed just 252,000 people there.
MEETING DEMAND
It said that US companies had leveraged China’s cheap labor force, large economies of scale, low transportation costs and concentration of global supply chains, with much of the activity focused on meeting demand from China’s growing consumer class.
US manufacturing in China was mainly focused on production of computers, electronic products and, increasingly, chemicals, but there was also increased investment in research and development, often at the insistence of China.
“These industries ... may indirectly erode the United States’ domestic industrial competitiveness and technological leadership relative to China,” it said, urging the US Congress to take steps to preserve US innovative capacity and leadership.
The report comes amid rising tensions between the US and China, the world’s two largest economies, despite the nations in January signing a “phase one” trade agreement.
US President Donald Trump’s administration has restricted visas and ended exports of defense equipment in response to Beijing imposing national security legislation on Hong Kong.
On Wednesday, it warned US companies about the risks they face from maintaining supply chains associated with human rights abuses in China’s western Xinjiang region.
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