America’s tax dollars shouldn’t support the Chinese state’s ambitions.
Remember when the federal government almost shut down earlier this year?
It was like 10,000 crises ago, but Congress managed to piece together a spending compromise that kept the government open. During those negotiations, House Minority Leader Kevin McCarthy (R-Calif.) quietly blocked a bipartisan effort to stop Chinese companies from using taxpayer dollars to build U.S. transit.
There are widespread security and economic concerns about China’s role in building rail cars and buses, which was why Members on both sides of the aisle were supportive of legislation to address this threat. But McCarthy made sure that the language didn’t make it into the final bill, opting instead to stick his nose out for Build Your Dreams (BYD), a Chinese company that has made unreliable electric buses for cities like Los Angeles.
Now there’s new legislation moving forward in Congress. Language passed by the Senate would ban U.S. taxpayer dollars from being given to Chinese state-owned or controlled companies to build rail cars or buses, while similar language in the House would apply to only rail cars.
Once again, BYD is flexing its muscles, using its connections in Congress in an attempt to block this commonsense legislation – and if that doesn’t work, make sure it only applies to rail.
What is BYD so afraid of? Let’s dive a little deeper.
BYD promotes itself as a friendly player, a global automaker helping to grow the eco-friendly electric vehicle market. It even has a factory in California where it builds some of its buses (although a lot of the actual work is done in China, we’ll point out).
Above all, BYD insists it is an independent company and not a tool of China’s government. Warren Buffett even owns some shares!
Except BYD is totally dependent on China’s government and is a key part of China’s plan to dominate the global auto industry in the decades to come.
There’s a new long-read piece in Fortune on the electric vehicle market in China, where Shenzhen-based BYD is among the top players. BYD has been pretty dependent on the support of the Chinese government, the article notes:
BYD has benefited mightily from hometown government support. The agency that regulates Shenzhen’s taxis required that local taxi companies switch to EVs to maintain their permits to operate—and it doled out subsidies over the past few years totaling about $510 million to bring the price of each EV taxi down to that of a comparable combustion model, says Zeng Hao, deputy director at the agency. Today, all but about 100 of Shenzhen’s 21,000 taxis are electric cars—all built, naturally, by Shenzhen’s own BYD.
There's no doubt China has made electric vehicle production a priority. But it’s worth pointing out here that there wasn’t any kind of government procurement process for companies to bid to build all those taxis as there would be in the United States.
China’s market is closed to the world, but China wants its companies to dominate the world market.
BYD is one of those companies.
One of the features of China’s industrial policy is its support of “national champions” like BYD who can help China achieve its goals. These state-owned and controlled companies not only are given contracts in China without competition, they also receive government support like grants, subsidies, loans and other benefits to help bid for contracts around the world, including in the United States. Companies that operate in a free market simply cannot compete.
Given that it depends so heavily on China’s government, BYD’s fortunes also rise and fall with the priorities of China’s government. BYD saw a recent fall in sales of its electric vehicles after China cut subsidies to new energy vehicles, for example.
But BYD’s ties to China’s government go deeper still.
Several Chinese state-owned investment funds hold equity interests in BYD or its subsidiaries, an indicator that China’s central government sees BYD as a leader in a priority industry. This kind of financial support is one of the ways the Chinese government has been known to influence business decision and achieve its goals.
Many of BYD’s top leaders also have ties to the Chinese state. Chairman and CEO Wang Chuanfu was a delegate of the People’s Congress of Shenzhen from 2000 to 2010 and held a position in the city legislature from 2005 to 2015. Zou Fei, an expert of the “Thousand Talents Program” of the organizational department of the Central Committee of the Communist Party of China, is a supervisor on BYD’s board.
It’s pretty clear that the electric vehicle (EV) market is the future of the auto industry. General Motors and VW are among the automakers not even making hybrids anymore, as they are turning their full attention to the emerging EV market.
China knows this, and China is working hard to give its “champions” like BYD a litany of unfair advantages in global competition. China’s government isn’t playing fair, but it is playing to win.
Which brings us back to that legislation in Congress.
Giving Chinese state-owned or controlled companies like BYD taxpayer dollars to build transit like rail cars and buses is merely furthering the efforts of the Chinese state. It’s time to do something about it.