China Criticizes U.S. Plan to Exclude Chinese Content from EV Battery Supply Chain

China Criticizes U.S. Plan to Exclude Chinese Content from EV Battery Supply Chain

China’s Response to U.S. EV Policy

China has voiced strong opposition to the Biden administration’s plans to limit Chinese content in batteries eligible for electric vehicle (EV) tax credits in the United States. These plans, slated to begin next year, are seen by China as a violation of international trade norms and a potential disruptor of global supply chains.

U.S. Tax Credit Restrictions

Under the new U.S. policy, EV supply chain investors would be ineligible for tax credits if their batteries contain more than a minimal amount of critical materials from China or other “Foreign Entities of Concern” (FEOC). The U.S. defines FEOCs as China, Russia, North Korea, and Iran. The rules will be enforced in 2024 for completed batteries and 2025 for critical minerals.

China’s Stance on Market Policies

He Yadong, a spokesperson for China’s commerce ministry, criticized the U.S. policy as non-market-oriented and discriminatory. According to He, the policy contradicts the basic principles of the World Trade Organization (WTO), with several WTO members, including China, expressing concern over this U.S. approach.

Global Battery Supply Chain Dynamics

China’s leading role in the global battery supply chain has prompted actions from the U.S. and European officials. The European Commission is investigating potential unfair state subsidies for Chinese manufacturers. Meanwhile, the U.S. has passed laws excluding investors from benefiting from tax credits and subsidies if they include FEOCs in their supply chains.

Analysts’ Views on Global Supply Chain Risks

Some analysts, like Dan Marks from the Royal United Services think tank, question whether the perceived risk from China’s position in the battery supply chain justifies the rhetoric and measures from the U.S. and EU. Marks suggests that the strategies in Europe and the U.S. appear more focused on fostering competitive domestic industries.

China’s Dominance in Battery Materials

China dominates the processing of lithium and cobalt, which are essential for battery manufacturing, accounting for almost two-thirds of the world’s lithium processing capacity and 75% of cobalt capacity.

Potential Impact on Trade and Industry

China warns that the U.S. policy could seriously disrupt international trade and investment and hinder the development of EV technologies and the broader industry. The move by the U.S. represents a significant strategic shift in the electric vehicle and battery manufacturing sectors, with potential global repercussions. icon

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