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U.S. Distrust of China Evident in Widening State Regulations

States across the United States are increasingly enacting regulations aimed at severing economic ties with China. These measures are part of a larger political effort to reduce the country’s economic dependence on China and address concerns about national security risks. The Biden administration shares these concerns and has been working to increase domestic manufacturing and strengthen trade ties with allies as a way to reduce reliance on China. However, the state-level regulations may go further than what the federal government is doing, drawing criticism from business groups who worry about protectionism and diminishing foreign investment in the U.S.

Nearly two dozen states, including Florida, Texas, Utah, and South Dakota, have either proposed or enacted legislation that restricts Chinese purchases of land, buildings, and houses. Some of these laws could be more stringent than federal regulations, which focus on reviewing and blocking transactions where foreigners could gain control of American businesses or real estate near military installations.

These state-level efforts target not only China but also other countries of concern. The laws aim to prevent purchases of farmland and property near critical infrastructure. The resurgence of anti-China sentiment, fueled in part by recent events including a Chinese spy balloon crossing the U.S. and heated political rhetoric ahead of the 2024 election, has contributed to the momentum behind these restrictions.

The shift of regulatory focus to the states is a relatively new development but is growing stronger. While the federal government has been assertive in refining its China strategy, state and local officials are determined to reduce their economic ties with China, even if it means deviating from the traditional practice of welcoming foreign investment.

Some of the proposed legislation has faced pushback and scrutiny. Critics argue that the laws are too broad and risk causing discrimination or overreach. The Florida law, for example, has been challenged in federal court by Chinese citizens and a real estate brokerage firm who argue that it codifies and expands housing discrimination. The Justice Department has filed a statement of interest, asserting that Florida’s landownership policy is unlawful.

The state-level restrictions are creating uncertainty for investors and fund managers who now have to decide whether to proceed with their plans in the face of these regulations. There are concerns that these laws may have unintended consequences, leading to financial losses and failing to address the underlying national security concerns.

These state-level regulations also come at a time when Congress is looking to block businesses based in China from purchasing farmland in the U.S. and impose new mandates on Americans investing in national security industries of China. The combination of federal and state measures could complicate diplomacy with China and potentially elicit retaliatory actions.

The concerns around these regulations extend beyond economic implications. Officials in Beijing view them as a sign of rising antipathy toward China and are concerned that the restrictions may limit Chinese companies’ access to American markets and technology transfers.

Overall, the widening state regulations reflect a growing distrust of China in the United States. While efforts to address national security risks are important, careful consideration must be given to the potential consequences of these restrictions.

Unique Perspective: While it is understandable that the U.S. government and states are taking measures to safeguard national security and reduce economic dependence on China, it is crucial to find a balance that avoids unnecessary discrimination and unintended economic consequences. By working together with international partners and engaging in constructive dialogue, the U.S. can pursue a comprehensive approach to address concerns while maintaining global economic stability.

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