Just a few days before China’s new envoy arrived in the Washington Tuesday, embassy officials were visiting Georgia to test prospects for collaboration at the state level as the bilateral relationship continued to deteriorate.
“We are very focused on sub-national relationships; we believe and we hope there is more room for state, city and county levels to interact with each other,” said Xu Xueyuan, the deputy chief of mission who was acting as charge d’affaires in advance of Ambassador Xie Feng’s arrival this week.
“Every time we come and visit states, we feel more encouraged than we do dealing with Washington D.C.,” Ms. Xu told Global Atlanta in a wide-ranging in-person interview.
It could be tough going, though, as a raft of new laws aimed at limiting Chinese influence is being taken up in statehouses around the country, reflecting a bipartisan consensus that China is a strategic rival bent on shaping the world in its image.
The U.S. has also expressed reservations over what it sees as an authoritarian turn in China under President Xi Jinping, who started an unprecedented third term in power in March.
In Georgia, Ms. Xu and her team were received at the Port of Savannah for a tour that showcased how trade ties remain strong, even as elevated Trump-era tariffs remain on Chinese goods and a push for “de-coupling” the U.S. from China’s economy for national security reasons has gained traction.
China was by far the state’s largest source of imported goods at $24.8 billion. That’s nearly twice the closest rival — Mexico, at $13.6 billion. On the export side, Georgia’s $4 billion in exports to China put it behind only Canada and Mexico as a market for Georgia goods.
Ms. Xu said she was told that about a third of the port’s business — and a similar proportion of the more than 500,000 direct and indirect jobs the Georgia Ports Authority claims its movement of goods create — can be linked to trade with China.
“I think this is a very clear and strong message we received from our visit to the ports — that is, how China and the United States are interconnected, how our interests are intertwined,” Ms. Xu said.
Boosting ties amid a tech and trade war?
As Ms. Xu visited Georgia, G7 leaders including U.S. President Joe Biden met in Japan with the expressed goal of girding their countries economies against the threat of Chinese coercion and expansionism.
She also came as state legislatures continued to push restrictions on Chinese companies and nationals, and as a tit-for-tat conflict over access to crucial technologies like semiconductors (and the machines that make them) continued to simmer.
“(The Biden administration) is saying they’re not seeking ‘decoupling’ — they just want to ‘de-risk.’ But decoupling is happening, at least in areas like semiconductors. It has hurt China. It has also hurt companies like Intel, which have seen big losses of exports, and it disrupts our supply chain, violates WTO rules, etc.,” Ms. Xu said. “But let’s take a long-term look at what will be the end result of those kinds of decoupling: It will only force China to develop its own self reliance and indigenous technology. So it’s very likely the U.S. will create an even stronger tech competitor for itself.”
The semiconductor export bans echo prior concerns over Chinese telecom firms like Huawei and the more recent challenges to social media apps like TikTok and WeChat.
Montana last week issued a blanket ban on TikTok, the video-sharing app owned by China’s ByteDance, with lawmakers echoing congressional concerns that the company could be compelled to share Americans’ data with the Chinese Communist Party or manipulate content in its favor.
TikTok has denied that it would do either and has presented an extensive plan to store the data of its 150 million American users within the U.S. So far, TikTok has avoided a nationwide ban, but many states including Georgia have prohibited use of the app on government-issued devices.
Ms. Xu said China sees room for collaboration on biotechnology and clean energy, though she said the room for maneuver has been limited by what she described as the U.S.’s “high fence, small yard strategy” of subsidizing chips, solar panels and batteries through recent legislation championed by Georgia’s two U.S. senators. For their part, U.S. officials say they’re responding to China’s long-term pattern of heavily subsidizing state-owned companies and favoring domestic producers.
China remains by far the world’s largest electric car market with two-thirds of the world’s EV sales, and much of the investment that is powering Georgia’s growth as an electric mobility hub is driven by a move to reduce dependence on China in critical sectors. That trend accelerated during the pandemic, which laid bare the problems of putting too many supply chain eggs in one basket.
Still, China is continuing to court U.S. investors, despite rising pessimism reflected in the 2023 AmCham Business Climate Survey released in April. While many are still optimistic about their prospects within China and a majority plan to stay there, a greater proportion is also making plans to move production outside the country, some of them back to the U.S.
American firms are in part reacting to greater competition from domestic firms within China as the market matures and costs rise, Ms. Xu said.
“But I think their major concern comes from the political tension between our two countries. They are very, very worried about how they will be treated by the U.S. government. And at the same time they are very worried about if the Chinese government will use them as a tool of retaliation. I think this is the biggest concern on that side. Their costs of compliance have been pushed up. And they feel more uncertainty on what areas are safe for investment,” she said.
That is borne out by the AmCham report, in which “rising tensions in U.S. China relations” was cited by two-thirds of companies as one of their top-five business challenges, followed by COVID-19 prevention measures and “inconsistent regulatory interpretation and unclear laws and enforcement.”
To allay these fears, the Chinese government is embarking on a yearlong investment recruitment program complete with gatherings, policy briefings and other initiatives to showcase what she said is a growing openness to foreigners even as China keeps a tight rein on strategic sectors and ramps up the role of the state.
“I think we’re trying to make the cake of the Chinese economy bigger, so that everybody can have a larger portion.”
How Georgia and other states can court Chinese investors
Just as many American companies are turning to the provinces for help in China, many Chinese companies would like to work with states, but Ms. Xu said the environment is at risk of souring.
In Georgia, the State Senate advanced a bill this year’s session that would have kept citizens and companies from China and other designated “foreign adversary” countries like Russia, Cuba, Iran and North Korea from buying farmland or any land within 25 miles of the state’s 13 military installations.
The bill, similar to a raft of others floated in 10 states, including one that has prompted a lawsuit against Florida, reflected concerns fanned by some Republicans along with Democratic nominee Stacey Abrams in last year’s governor’s race. It did not pass the House before the session ended in March.
In addition to fostering xenophobia, Ms. Xu said after meeting with local Chinese-Americans, such moves threaten to dampen what is otherwise robust interest from Chinese investors looking at states like Georgia.
As evidence, she pointed to the Select USA Summit in Washington in early May. China brought the third largest delegation, with 54 companies in attendance. The group would have been larger, but many state-owned firms were screened out by the U.S. Commerce Department, and some private companies that were approved were not issued visas to come, she said.
Ms. Xu said this shows that while China is continuing to focus on boosting its domestic market as the next step on its own development, its so-called “dual circulation strategy” continues to leave room for Chinese companies to go abroad.
She cited the five Chinese flooring companies that have set up shop in Georgia in the last two years, showing that less sensitive sectors still have some room for growth.
But some Chinese firms still have concerns over land ownership prohibitions and how geopolitics will affect their operations, she said, noting that states in the Rust Belt are seeing Chinese investment wins, such as Ford’s partnership with Chinese battery maker Contemporary Amperex Technology Co., or CATL, in Michigan, because they are “very eager to attract foreign investors.”
She accused some U.S. governors of grandstanding, building their national profiles by getting tough on China, posturing she sees as all but inevitable given the current level of toxicity in the national discourse.
“It is very difficult for the local governments to take a course that is totally different from what the federal government has been doing. Unfortunately China has been regarded as the pacing challenger or threat of the United States and also the long-term geopolitical challenge,” Ms. Xu said. “To be frank, the U.S. policy toward China can be described in three words: one is containment, the second one is suppression; the third one is encirclement.”
Still, she said she hoped local and state officials would engage to further economic ties, even if it’s behind closed doors.
She recognized the situation is a far cry from a decade ago, when Georgia officials took frequent trade missions to China in hopes of drumming up business.
“It is difficult for them to pay a visit to China at this moment in time because they do not want to be seen as ‘panda huggers,’” she said. “But I don’t think many people here know China.”
The Chinese embassy, she said, has seen what it views as patterns in willingness to engage across a range of states.
“I see a very clear difference between those governors who have a national agenda and those who just focus on business. There are also differences between Republican governors and also Democratic governors. Democratic governors are more open-minded. Those who don’t have a national agenda are more realistic. It also depends on the personality or personal style of some governors. If they have a more internationalized vision, they are more willing and eager to reach out to China.”
This isn’t the first time that high-level embassy officials have courted Georgia. Former Ambassador Qin Gang visited the state last year, trying his hand at building an excavator at Sany America’s factory in Peachtree City. Ms. Xu said that the embassy would soon be back in the state.
China recently removed its PCR testing requirement in an effort to boost tourist arrivals, but Atlanta’s link to the country in the form of a Delta Air Lines nonstop flight to Shanghai has yet to resume after going on hiatus early in the pandemic.
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