Chinese Firms' Central Role in IP, EVs, and Batteries
And how the election might determine whether anti-China means anti-decarbonization
The following is adapted from an article I published today in Forbes.
High-quality, low-cost batteries — used to power clean technologies such as electric vehicles and energy storage — are crucial for the green transition and the prosperity it has the potential to facilitate. They also happen to be made primarily by Chinese companies.
Photo credit: Pedro Pardo/AFP via Getty Images.
While the Biden administration attributes Chinese firms’ success in the space to “unfair, non-market practices,” the industry has also benefited from the fact that China has an underdeveloped traditional auto market compared to the United States. As a result, Chinese consumers have been more eager to shift from internal combustion engine cars to inexpensive, domestically-made electric vehicles.
Whatever its origin, China’s success in the sector is significant enough that, according to Bloomberg NEF, it currently makes enough lithium-ion batteries to meet all global demand. But to American lawmakers, that success story represents nothing more than an additional layer — which they plan to crack — in the comprehensive national security threat Chinese firms pose.
Firms like Ford Motors and Duke Energy have been subjected to U.S. government scrutiny for partnering with China-founded Contemporary Amperex Technology Co., Limited (CATL) or using its batteries. Ford scaled back a Michigan joint factory plan with the battery-maker and Duke is phasing out its use of CATL products for both military and civilian projects.
CATL is one of the companies named in the “Decoupling From Foreign Adversarial Battery Dependence Act,” which passed the House of Representatives earlier this month. The bill prohibits the Department of Homeland Security from procuring batteries or battery services (such as storage) from six listed companies, all of which are Chinese. It would go into effect in October 2027.
But three years is unlikely to be enough for the U.S. battery industry to come up with competitive domestically-made alternatives; a source told The Guardian that will take between five and ten years. Battery solutions that don’t rely on lithium-ion batteries will also take years of development before they’re ready to enter the market.
Possibly in acknowledgement of these realities, the bill includes a waiver provision in the event that “there is no available alternative to procure batteries that are of similar or better cost and quality.”
But even if Chinese firms could navigate Capitol Hill political opposition to their U.S. market presence, they would still have to handle ongoing intellectual property (IP) disputes. According to Hilary Preston, Vice Chair at Vinson & Elkins, Chinese companies’ efforts to commercialize their products within the U.S. has been met with litigation in both the U.S. and China.
The lawsuits Preston said, involve high profile Chinese battery manufacturers like COSMX, ATL, and CATL (which is particularly important for the EV market). That means Chinese companies are to a degree competing among themselves to attain the best market position in the U.S. — in part by defending their IP.
“Patent holders who justifiably feel they've invested in the R&D don’t want to forego royalties on that IP if they view competitors — from any country — as infringing,” Preston said.
While batteries have long been critical for products like phones and laptops, their relevance and value have grown alongside the expanding global renewable energy market. Yet there are only a couple of dominant lithium ion battery companies. Rising competition both in China and globally makes firms more willing to litigate who owns what IP, Preston said.
Batteries’ rising importance has therefore directly fueled two of the industry’s greatest growing obstacles: the politics of U.S.-China competition and the intellectual property battles being waged in both countries. In a statement issued last year addressing the security-related accusations made against it, CATL said the company “is committed to powering a green energy future” and “doing so with international partners from all over the world transparently.”
Concerns about made-in-China cleantech is also evidenced by President Biden’s 100% tariffs on Chinese EVs and 50% tariffs on relevant batteries, which were announced in May and finalized on September 13. The inclination to impose duties on Chinese competitors has permeated across the Atlantic; EU member states will vote later this week about whether to implement the continent’s own proposed tariffs on Chinese cleantech companies.
These punitive measures will come on top of ongoing IP-related lawsuits. “As the value of the battery market continues to increase, we’ll still see more litigation,” Preston said. But she also noted more litigation does not necessarily mean Chinese batteries will be prevented from coming to market. Instead, it’s more likely companies will shift around build expenses like paying out IP royalties into their business plans.
Plus, lithium-ion batteries and new EVs are not the only Chinese-made clean energy products the U.S. needs, at least if it wants to realize the decarbonization ambitions at least half the country holds. Older technologies, like solar panels, will also be critical. (The White House also imposed a 50% tariff on Chinese-made solar products.)
The Biden administration has, however, also put effort into expediting the patent approval process for key technologies. Initiatives like the Patent and Trademark Office’s Climate Change Mitigation Pilot Program and the Green Energy patent program seek to accelerate “the examination of patent applications for innovations that mitigate climate change.”
Those innovations are not always particularly new. Instead, they might represent areas that have been around for years but are insufficiently commercialized to meet demand. In the U.S., there has been a dramatic increase of patent applications in solar cells, clean hydrogen, and batteries over the last couple of years, according to Preston.
“Satisfying our goal to reduce carbon emissions means commercializing tech from 10 or 15 years ago,” she said.
For its part, Chinese authorities have been pushing for increased commercialization of existing patents, especially those related to “key core technologies.” In February, the country’s intellectual property administration released a work plan calling for, among other things, identifying and expediting existing patent applications.
The two superpowers’ progress (or lack thereof) on renewable energy and other important innovations is partly reflective of the state of each country’s intellectual property regimes. Ensuring America’s firms and individuals enjoy full and efficient IP protection will help spur domestic innovation, partly by attracting investment and partly by assuring Americans that their inventions, while possibly useful in the U.S.-China technological and economic competition, are entirely their own.
A Defective China Week
The House of Representatives just wrapped up a week dedicated to passing 25 China-themed bills, primarily centered on restricting Chinese companies’ presence in the U.S. market, which I also wrote about for Forbes.
The purpose of “China Week,” according to John Moolenaar, Chairman of the House Select Committee on China, is for Congress to “tell Xi Jinping, this far, and no further” using “one voice.”
Photo credit: Tom Williams/CQ-Roll Call, Inc via Getty Images
In practice, lawmakers did not manage to speak with such unity. Representative Raja Krishnamoorthi (D-Ill.), ranking member of the House Select Committee on Strategic Competition Between the United States and the Chinese Communist Party, told Politico he was unhappy with what was left out of the package of bills.
“Nothing to repair our industrial supply base, nothing on critical minerals and nothing to fix our legal immigration system to enhance our competitiveness,” he said, adding the bills brought to floor also lacked investments in science and innovation and efforts to upgrade the skills of the American workforce. “China week becomes a nothing-burger without those types of initiatives,” he said.
Those missing proposals would all require governance. Speaker Mike Johnson’s decision to exclude the domestic-oriented bills in favor of the targeted exclusionary ones is fueled by more than just pure hawkishness: his party has an aversion to governing. If they didn’t, they might be more likely to complement anti-China bills with ones that invest in America, which is more likely to boost the United States’ competitive advantage than restrictions alone.
But it is also more difficult. Strengthening domestic innovation takes stronger leadership than curbing access to Chinese-made batteries. The former could also necessitate government involvement in industry, which the GOP is technically allergic to, even if such involvement could help with its nefariously comprehensive goal of “beating China.”
Johnson’s choice to prioritize the bills that target China instead of—not in addition to—legislation aimed at strengthening the United States is reminiscent of Trump’s decision to sabotage the bipartisan immigration bill under consideration earlier this year. As long as the U.S. remains “behind” China in key industries, lawmakers can argue the threat persists, making bilateral rivalry an enduring campaign issue. Simultaneously, House Republicans can score short-term political points for flouting their “tough on China” chops.
Uni-pronged legislation that restricts Chinese companies without coming up with a plan to replace them also highlights the global sector Congress is targeting: green energy. The House passed bills aimed at electric vehicles and rechargeable batteries. Another bill seeks to weaken the U.S.-China Science and Technology Cooperation Agreement, which has a productive track record advancing clean energy and public health in both countries.
What voters think about these China-targeted moves, then, largely depends on the degree to which they value renewable energy. It also relates to what they think about something more foundational, science — and its basis, fact.
For only the second time in the magazine’s history, Scientific American endorsed a presidential candidate. In backing Vice President Kamala Harris, the editors frames the election as a choice between a future leader who values fact and one who is known for a particularly dangerous subgenre of fiction. They imagine a future President Trump who “endangers public health and safety and rejects evidence, preferring instead nonsensical conspiracy fantasies” and “fills positions in federal science and other agencies with unqualified ideologues.”
Those ideologues would have varying opinions on China. Trump has described Xi Jinping as a “very good friend” and has praised his leadership. He also launched a trade war and broke precedent by calling the president of Taiwan when he was President-elect.
The leader of the GOP has inconsistent views on China. The fact that lawmakers from both sides of the aisle have diagnosed some of the same conditions relating to the U.S.-China relationship does not mean they agree on how to treat them, as Democrats’ disappointment in China Week demonstrates.
But a future Harris administration should re-conceptualize the nature of the competition with China such that it does not favor perceived economic security threats over tangible transnational ones such as climate change.
Our next president by no means needs to be “very good friends” with Xi Jinping. She does, however, need to take seriously the tangible benefits firms and individuals from the world’s second largest economy offer the United States and the world. Doing so would give her enhanced bandwidth and credibility to get “tough” on China’s increasingly authoritarian leader, not its renewable energy companies.