legal-document-to-plain-english-translator/”>Try Free Now: Legalese tool without registration

Find a LOCAL lawyer

Rising Tensions: US Legislation Targets Chinese Biotech Companies

Introduction

By Steven T. Dennis and Alexander Ruoff

US lawmakers are currently indicating to China that its companies will face significant challenges in navigating the American market for the foreseeable future, irrespective of the political control in Washington following the November election.

Bipartisan Legislative Actions

In an extraordinary display of bipartisan efforts amidst a highly divisive political climate, House members successfully voted to blacklist several Chinese biotech companies from participating in lucrative US-funded research last week. This overwhelming decision has effectively neutralized the lobbying efforts that China had exerted in Washington, marking a rare moment of unity in Congress.

Market analysts from Bloomberg Intelligence have characterized the Biosecure Act, which initially targets five specific companies, as having a “high likelihood” of becoming law as it transitions to the US Senate. The companies under scrutiny include BGI Group, MGI Technology Co., Complete Genomics Inc. (MGI’s US subsidiary), WuXi AppTec Co., and WuXi Biologics.

Anticipation of Future Legislation

Looking ahead, more stringent legislation is expected to follow. Prominent figures, such as Senate Intelligence Chairman Mark Warner, have hinted at broader initiatives aimed at imposing regulations on Chinese technology companies instead of the “Whac-a-Mole” tactic of targeting individual firms. Areas such as artificial intelligence and advanced computing could be next on the legislative agenda. Additionally, Chinese online shopping giant Temu, and other exporters, face bipartisan initiatives that could potentially eliminate a tariff exemption, which has significantly bolstered their business operations within the US.

The House has already moved forward with numerous bills addressing Chinese interests, focusing not only on biotech but also targeting Chinese drones and the country’s stronghold on the supply chain for electric vehicles.

The Economic Rivalry of the 2020s

The current decade has become a battleground for economic supremacy between the US and China, with the US recently claiming a lead over China in nominal gross domestic product measures. This rivalry is a cornerstone of the economic discourse in the presidential campaigns of both Vice President Kamala Harris and former President Donald Trump, who famously initiated a trade war with Beijing.

According to Representative James Comer, a Republican from Kentucky and an essential figure behind the passage of the Biosecure Act, the incoming Congress will likely see a proliferation of similar legislation regardless of which party holds the majority.

Uncertainty for Chinese Businesses

There is an immediate and direct impact from these legislative actions on both American and Chinese businesses—an effect articulated by Lily McElwee, deputy director of the China studies program at the Center for Strategic and International Studies. She points out that the creation of new laws, even if they ultimately do not come into effect, contributes to an increasingly unpredictable environment for Chinese enterprises that wish to sustain or expand collaborative efforts with American firms.

The ‘TikTok Playbook’ Strategy

The recent vote on the Biosecure Act follows a highly controversial piece of legislation passed in April, which is currently undergoing legal scrutiny. This previous legislation mandates Bytedance Ltd. to divest its TikTok operations or face an outright ban in the US.

In both instances, Chinese companies and their lobbyists have maintained that their US branches pose no threats to national security and are being unfairly targeted. With over 150 million users in the US, TikTok’s future remains precarious amid Trump’s promises to preserve the app’s presence.

Raja Krishnamoorthi, the top Democrat on the House’s China committee, commented that the companies impacted by the Biosecure Act seem to have employed tactics similar to those seen in the “TikTok playbook" without garnering substantial support from lawmakers.

Complicated Ownership Structures

Representatives have raised concerns regarding the ownership structures of companies like BGI Group, one of the entities facing scrutiny. Krishnamoorthi articulated that these firms engage in complex business practices to safeguard their US operations while maintaining affiliations with Beijing.

He illustrates this point with an analogy: “They operate under one company, get sanctioned; they establish another company, and it faces sanctions too.”

From the perspective of the Chinese government, there is a belief that its firms are subject to unwarranted discrimination, suggesting that the US is manipulating national security definitions to stifle foreign competition. Chinese Foreign Ministry spokesperson Mao Ning emphasized that China would resolutely defend the legitimate rights of its companies.

Case Study: Complete Genomics

The narrative surrounding Complete Genomics, a company located in San Jose, has become emblematic of the rapid deterioration in US-China relations. Back in 2013, the Obama administration sanctioned BGI’s acquisition of Complete Genomics, a key player in high-end DNA sequencing. However, as concerns about China surged, BGI spun off MGI Tech and consequently Complete Genomics.

While the Department of Defense imposed sanctions on BGI, MGI has remained unscathed. Complete Genomics has consistently asserted that it is detached from BGI, does not harvest sensitive genetic information from Americans, and is dedicated to contributing to “American innovation.” Despite these assurances, critics have highlighted the deep-rooted connections that remain.

Scrutiny of Ownership and Shareholding

The scrutiny continues, not just from US lawmakers but also from analysts like those at Georgetown University’s Center for Security and Emerging Technology, which released findings indicating that MGI employees often cite BGI as their employer. The House’s China panel has recently called attention to these developments, urging the Pentagon to consider sanctioning MGI as well.

In response to concerns, a BGI spokesman refuted the notion that their ownership structure implicates them as a unified entity, insisting that BGI operates independently from the Chinese government and serves only civilian scientific purposes.

The Call for Due Process

Amid the backlash, some lawmakers, such as Massachusetts Democrat Jim McGovern, have expressed reservations about rushing to blacklist these companies without thorough investigations. McGovern argues that the bill lacks due process and bears resemblance to actions commonly associated with China, prompting concern among some of his legislative peers. Despite this opposition, 81 lawmakers ultimately voted against the measure.

For McGovern, the issue hits close to home, as WuXi Biologics—one of the targeted companies—plays a crucial role in the global pharmaceutical supply chain and is expanding its operations, projected to create 200 jobs in his district. He contends that while he supports strong oversight, he wishes to see a full investigation before enactment.

Conclusion

The dialogue continues to evolve around these legislative adjustments and actions, emphasizing a need for clarity and process amid rising tensions. As companies maneuver through this volatile landscape, tools like the AI legalese decoder can play an essential role in helping businesses interpret complex legal language and navigate the regulations effectively. This innovative technology can demystify legal jargon, ensure compliance with applicable laws, and provide businesses with the insights they need to develop strategic initiatives to mitigate risks associated with ongoing legislative changes. By leveraging AI-driven insights, companies can better position themselves to adapt to the shifting legal framework while maintaining fruitful partnerships in challenging environments.

legal-document-to-plain-english-translator/”>Try Free Now: Legalese tool without registration

Find a LOCAL lawyer

Reference link