U.S. Commerce Secretary Gina Raimondo said U.S. companies have complained to her that China has become “uninvestible,” pointing to fines, raids and other actions that have made it risky to do business in the world’s second-largest economy.
The comments, according to Reuters, was made to reporters aboard a high-speed train as her delegation of U.S. officials headed from Beijing to Shanghai, provided a bleak picture of how American firms view China and was the bluntest Raimondo has made on her trip.
“Increasingly I hear from American business that China is uninvestible because it’s become too risky,” she said. Raimondo said American firms are facing new challenges, among them “exorbitant fines without any explanation, revisions to the counterespionage law, which are unclear and sending shockwaves through the U.S. community; raids on businesses – a whole new level of challenge and we need that to be addressed.”
She said there was “no rationale given” for Chinese actions against chipmaker Micron Technology (MU.O), whose products were restricted by Beijing earlier this year and rejected any comparisons to U.S. export controls. “There has been limited due process, and that’s why I brought it up.”
The Chinese embassy in Washington did not immediately respond to a request for comment.
The commerce secretary is the latest Biden administration official to visit China in a bid to strengthen communications, particularly on economy and defense, amid concerns that friction between the two superpowers could spiral out of control.
Raimondo insists the United States does not want to decouple from China. “We can’t have all our eggs in one basket,” she added.
John Ramig, a partner at law firm Buchalter who has decades of expertise in international business transactions including the structuring of international sourcing and manufacturing operations, said before Raimondo’s remarks that many businesses are not looking to expand in China.
“I don’t have one client wanting to invest in China. Not a single client. Everyone is looking to either sell their Chinese operation, or if they’re sourcing products in China, they’re looking for an alternative place to do that. That’s dramatically different from what it was even five years ago.”
Earlier in the day, Raimondo told Chinese Premier Li Qiang at their meeting in the Great Hall of the People: “There are other areas of global concern, such as climate change, artificial intelligence, the fentanyl crisis, where we want to work with you as two global powers to do what’s right for all of humanity.”
Companies have been at the center of a power struggle between the two countries for several years. China has criticized U.S. efforts to block China’s access to advanced semiconductors through export controls, while the U.S. says curbs are needed to defend its national security.
The United States is also using electric vehicle tax policies to prod carmakers to shift supply chains out of China, investing billions in subsidies to boost American semiconductor production and taking other actions to move some U.S. investments away from China including a new executive order.
At the same time, Beijing is restricting shipments from prominent chip company Micron, failed to give timely approval to Intel Corp’s (INTC.O) deal to buy another chipmaker that effectively killed the acquisition, and raided and fined U.S. firm Mintz Group $1.5 million for doing “unapproved statistical work.” Boeing (BA.N) has also been unable to deliver, and get paid for, 85 737 MAX jets ordered by Chinese customers years ago, which she previously blamed on the Chinese government.
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The United States and China used to be each other’s largest trading partners but Washington now trades more with neighbors Canada and Mexico, while Beijing deals more with Southeast Asia.
“All of that creates uncertainty and unpredictability,” Raimondo said of recent Chinese actions. “So businesses look for other opportunities, they look for other countries, they look for other places to go.” Referring to both old and new business restrictions, Raimondo said, “The sum total of which is making China feel too risky for them to invest.”
The comments could rile Chinese officials. JP Morgan last year called Chinese internet companies “uninvestible” in a research note, a label which helped trigger a sharp fall in their stock prices, but later said the term had been used in error.
Raimondo said she did not receive any commitments on Boeing, Intel or Micron. “I was very firm in our expectations. I think I was heard,” Raimondo said. “We have to see if they take an action.”
