American Compass Calls for a Hard Break from China

The dream of a liberal, democratic China is decidedly dead, and American policymakers are finally beginning to confront the reality of the Chinese Communist Party’s (CCP) threat to the American market and institutions. In a new policy paper, A Hard Break from China: Protecting the American Market from Subversion by the CCP, American Compass presents the case for severing the U.S.- China economic relationship across three key dimensions—investment, supply chains, and institutions—and provides a comprehensive policy agenda in each.

The hard break proposed by American Compass contrasts sharply with the accommodating posture adopted in recent months by the Biden administration, which has sought to downplay the notion of conflict or even competition with China. This “perplexingly anachronistic” approach is “underdeveloped and naïve,” the paper argues:

 The fundamental problem is that America’s free market economy is incompatible with China’s state-controlled one, and American liberty and democracy are incompatible with Chinese communism. America must sever its economic relationship with China to protect is market from subversion by the CCP. Disentangling our economies will be costly, but the alternative of accepting CCP control of our assets and investments, dominance in our supply chains, and influence over our institutions will cost far more.

The paper’s proposed actions include:

Investment

1. Prohibit PRC-based entities from acquiring and operating in the American market, participating in American funds, and holding American real estate;
2. Prohibit American firms from forming joint ventures in or transferring technology to China and American investors from providing capital to PRC-based firms; and
3. Reject the premise of a bilateral investment treaty with China or any request for assistance to American firms in the Chinese legal system.

Supply Chains

1. Revoke China’s Most-Favored-Nation status and impose tariffs to disfavor Chinese supply chains in the American market;
2. Develop the state capacity to monitor supply chain resilience and create industrial policies that rebuild American capabilities in critical sectors; and
3. Foster economic conditions that channel capital toward the major long-term investments necessary to support domestic industry.

Institutions

1. Ensure research integrity and security by prohibiting flows of funds between American institutions and PRC-based ones;
2. Limit PRC-based tuition revenue to universities and access of Chinese nationals to American graduate programs in sensitive fields of study; and
3. Renormalize free speech through cultural export controls that eliminate incentives for placating the CCP and public forums that reward honest discussion of its true nature.

Click here to read the full paper.