Chinese Companies Scheme End-Around To Cash In On Green Energy Dollars Meant For American Firms

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Chinese battery suppliers are reportedly moving to exploit potential loopholes to access green energy subsidies intended for American companies, The Wall Street Journal reported Thursday.

Numerous Chinese firms that source the minerals to produce electric vehicle (EV) batteries are entering into joint ventures with South Korean and Moroccan partners worth billions of dollars, according to the WSJ. The Chinese firms appear to be maneuvering to become eligible to access some of the hundreds of billions of dollars of subsidies provided by the Inflation Reduction Act (IRA), funds which are meant only to assist American companies or firms based in allied countries build out green energy supply chains.

Four Chinese companies have unveiled plans to build facilities in Morocco to manufacture battery-related products and components, according to the WSJ. Morocco presides over about 70% of the world’s discovered phosphate, which is a material crucial to building EV batteries. (RELATED: GOP Rep Introduces Bill To Counter Chinese Use Of ‘Forced Labor’ In Critical Minerals)

The law boxes out battery components and other critical materials for the next two years from designated “foreign entities of concern,” a provision that experts say is designed to maximally reduce China’s role in the U.S. EV supply chain, according to the WSJ. Chinese battery firms have wanted to break into the U.S. automobile market, which stands as the world’s second-largest behind China, and the subsidies made available via the IRA reportedly sped up their timelines for doing so.

China dominates the global supply chains for the raw minerals and several aspects of the upstream supply chain and battery manufacturing process, which has prompted numerous GOP officials on the state and federal levels to contest the Biden administration’s EV push. The White House has established a goal to have 50% of all new vehicle sales in the U.S. be EVs by 2030. 

Industry experts and analysts assert that one key issue is that U.S. authorities have not yet explicitly established the definition for “foreign entity of concern” in the IRA, according to the WSJ. In effect, this means that the Biden administration has not clarified the levels of Chinese involvement or the points in the EV battery supply chain that will dictate whether EV and battery companies to qualify for IRA subsidies

“We won’t give up on the U.S. market,” Pan Hua, deputy general manager at GEM, an EV company, told the WSJ. “The U.S. can’t completely shut out Chinese suppliers from its market either, as much of the upstream supply chain is concentrated in China.”

The White House, the Treasury Department and the Department of Energy all did not respond immediately to requests for comment.

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