A growing number of US lawmakers see the tax code as a way to shift corporate America’s reliance on Chinese technology, framing economic ties as a national security risk, seen most recently in a congressman’s comments on Thursday.
Representative Nathaniel Moran said on Thursday that business leaders must remember China is an “adversary”, arguing that the American business world remains trapped in a “toxic relationship” with Beijing.
Speaking at a Hudson Institute event, Moran highlighted lawmakers’ plans to deny certain tax incentives through the US tax code to discourage businesses from relying on technology from foreign adversaries.
Moran was promoting his own bill, the Deterring Adversarial Access to Americans’ Data Act, which would deny major tax breaks, such as bonus depreciation and R&D expensing, to US companies that use technology from “foreign entities of concern” that can access private American data.
“We want to incentivise people to make longer-term decisions,” Moran, a Republican from Texas, added.
This dovetails with broader concerns raised by bipartisan congressional panels, which argue that China uses data as a strategic resource and that Washington has failed to counter Beijing’s data-collection drive.
Moving away from outright regulatory bans, such as those seen with TikTok, Moran touted plans to leverage the tax code to pressure companies to shift their supply chains.
“We sat around the room and said, ‘What are we doing? Why would we allow Chinese companies to have another leg up?’” Moran said.
“We’re trying to incentivise growth in the United States and with our partners around the world that we know are true partners.”
Can US businesses realistically stop using Chinese supply chain?
Jason Hsu, a senior fellow at Hudson who was moderating the event, asked how businesses already embedded in the Chinese supply chain could realistically make a transition.
“How should they think about moving towards or pivoting away from that?” he added. “How do you balance both national security and then their business development requirements?”
While acknowledging that companies could not immediately decouple from China, Moran noted that, if enacted into law, tax changes would provide businesses with a one-year grace period to shift to domestic or allied supply chains before the tax provisions take effect.
It remains unclear how likely passage is for Moran’s bill. This Congress has been among the least productive in modern history in terms of bills it has passed.
Thursday’s event, titled “Securing American Data: A Conversation with Congressman Nathaniel Moran”, was hosted by the conservative Washington-based think tank.
The discussion focused on claims that foreign adversaries, in particular China, have exploited “technology to access American data at an unprecedented scale” by looking at examples ranging from surveillance-capable applications to data-harvesting platforms.
The Chinese embassy in Washington did not immediately respond to a request for comment, but China has repeatedly denied stealing American data or using private technology firms to gather intelligence, arguing the US exaggerates such claims to punish Chinese companies.
Beijing denies White House allegations of stealing US AI technology
In April, Beijing rejected White House allegations that Chinese entities were involved in an “industrial-scale” effort to steal US AI technology, calling the accusations “baseless”.
In May, the US-China Economic and Security Review Commission (USCC) accused Beijing of harvesting American data and exploiting it as a strategic asset.
The USCC and the Congressional-Executive Commission on China (CECC) are bipartisan congressional panels established in 2000 amid growing scrutiny of China’s accession to the World Trade Organization, although they have distinct statutory mandates.
They do not have lawmaking authority but are authorised by Congress and can be influential on legislation.
“China is not merely stealing data. It is doing so to build an AI-enabled intelligence and targeting architecture for economic competition, political coercion and wartime advantage,” Joseph Lin, CEO of Twenty, a cyber warfare company, told the commission.
“The United States is still treating this challenge far too defensively ... [China] treats data as a strategic resource.
“It treats commercial networks as intelligence collection platforms, civilian logistic systems as potential military targets, and persistent cyber access as a form of pre-conflict positioning.”
Separately, last week, the House Select Committee on China held a hearing examining decades of Chinese technology theft and subnational influence efforts that lawmakers said had strengthened Beijing.
“China has orchestrated a highly strategic, highly accelerated and multifaceted effort to steal commercial and technological secrets from the United States and other Western nations,” said David Shedd, former acting director of the Defence Intelligence Agency. -- SOUTH CHINA MORNING POST
