No one saw that coming did they?
The Inflation Reduction Act, often dubbed the Democrats’ “Green New Deal” law signed by Biden in 2022, has become a double subsidy for the China rivals the legislation sought to counter. Assuming the law was designed to support an American industrial base for the new post-fossil fuels economy the Biden administration and the Democrats want so desperately to build, then it is worth noting that of all the countries whose companies have announced new investments here in order to benefit from the IRA tax breaks, China leads the pack.
This is most obvious in solar.
American companies like First Solar of Ohio are expanding because of the IRA. But China solar powerhouses Trina, JA Solar, Longi and Canadian Solar – which is not Canadian other than maybe having an office in Ontario – are also investing in Arizona, Texas and Ohio. That’s four Chinese solar companies to one.
Chinese companies could gain up to $125 billion of U.S. funding for their plans to extend their domination of that industry. That is on top of the funding the Chinese government already gives them.
Originally, the idea was to give American companies a chance to becoming solar players again. Instead, the IRA treats foreigners no differently than domestic. If the company was on some Commerce, Treasury or State Department blacklist, or sanctioned, then it would be banned from IRA subsidies as a “foreign entity of concern.” But this is not the case with any of these companies. Congress rejected calls to exclude China companies from these subsidies. They think the planet is going to melt in 12 years, so they need all the help they can get.
Still, during a Senate Energy Committee hearing on Jan. 11, Sen. Joe Manchin (D-WV) said that China was not supposed to be on the receiving end of all of these production perks. He has had a rude awakening. Manchin complained about EV batteries and the minerals that go into them. Two China EV battery makers – Gotion High Tech (with offices in Silicon Valley) and Contemporary Amperex Technology, best known as CATL, a portfolio company of BHR Partners, the Chinese private equity firm that Hunter Biden once worked for, both have plans to build factories here because of the IRA. CATL is already the battery of choice for Ford. Tesla uses CATL, too.
Li Zhen, Gotion’s Chairman, said at a Bloomberg conference in Singapore in November that he was “very confident” Gotion would not be banned from IRA funds, as some in the Senate like Marco Rubio are trying to do now.
We all know Virginia governor Glenn Youngkin banned CATL from setting up shop there because of its ties to the CCP. The problem is, every major company in China has ties to the CCP. It is like saying Raytheon has ties to the Defense Department. Clearly, “ties to the CCP” are not grounds for IRA restrictions.
And so at that, Sen. Josh Hawley (R-MO) has it right. “We are subsidizing our rivals,” he told Treasury and Energy Department officials in charge of the IRA at the hearing.
The IRA led to billions of dollars being invested in the United States from companies both foreign and domestic. That is true. But the one country other than the U.S. that benefits most from the IRA is China. That is also true.
Chinese companies in solar, wind, and EV batteries are in the position to remain the dominant force in this market and the Inflation Reduction Act helps keep it that way. Arguably, no one wanted this to be the case, but China’s benefits from the IRA could end up damaging the law.
Kenneth Rapoza covered Brazil for the Wall Street Journal in the early 2000s and later wrote about the BRICS for Forbes between 2011 and 2023. He is an industry analyst at the Coalition for a Prosperous America.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.
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