China's Economic Influence Endangers US Small Business
China’s growing influence in our global economy might seem like just another phase of globalization. However, beneath the surface, the Chinese Communist Party (CCP) is using economic leverage to manipulate economies and businesses. And it’s having a devastating effect on American small businesses.
In my role advocating for our business community, I hear from small business owners who are feeling the effects of these tactics. Many are struggling to compete on an uneven playing field created by China’s state-run economy and businesses. For example, Chinese companies enjoy massive government subsidies, allowing them to undercut prices and flood the U.S. market with cheaper goods. Our small businesses can’t compete with these artificially low prices.
China’s notorious disregard for intellectual property rights is another issue. U.S. companies rely on their innovative products to stay competitive, meanwhile, CCP-funded businesses continue to steal intellectual property, costing American businesses hundreds of billions of dollars annually.
In fact, according to CNBC, 1 in 5 U.S. companies has reported having intellectual property stolen by Chinese entities in just the past year alone. Small business owners, who have invested their livelihoods in creating something new, are suddenly finding their ideas copied and sold at a fraction of the price. In addition to outright theft, American companies are suffering from a regulatory environment that stifles innovation.
For nearly 70 years, the United States had incentivized small business ingenuity and innovation via the tax code, by allowing full write-offs for R&D expenses within the same year. Unfortunately, Congress changed the tax code to require businesses to amortize their R&D expenses, resulting in our community writing off just 10-20% each year.
Adding fuel to the fire, China has positioned itself as a dominant player in the production of critical materials, from rare-earth minerals to technology components and basic finished goods. Our own government is partially at fault for this by creating an economic environment that encourages the outsourcing of many manufacturing jobs.
This has created a dangerous dependence on Chinese manufacturing - when disruptions occur, as we saw during the COVID-19 pandemic, small businesses are hit hardest, often unable to source the materials they need to keep operations running smoothly. The fact that China has positioned itself as the provider of critical materials is not necessarily a bad thing. However, the CCP has a history of weaponizing their monopoly on manufacturing.
Lastly, as a Hispanic-American, I am wary of Chinese influence in Latin America. For example, in El Salvador, the Chinese government has established itself as the administration’s partner of choice by supporting its authoritarian actions. Chinese investments and control in the region could induce a ripple effect on trade, migration and more that would ultimately weaken our hemisphere.
To be clear: Chinese businesses do not outperform American businesses. They out-manipulate them. In fact, according to a USHBC membership poll, a significant number of small business owners feel threatened by China when it comes to cybersecurity (69%), supply chain disruptions (59%), intellectual property theft (47%) and unfair trade practices (40%). The CCP’s strategy is to create dependency and then exploit it for political and economic gain. This doesn’t just harm big corporations—it strikes at the heart of America’s entrepreneurial community.
If we want to protect small businesses, we need to take action. Some in Congress are starting to understand this reality, as we saw the House pass 25 bills to combat the CCP in what was dubbed ‘China Week’.We can’t allow the CCP’s coercive tactics to continue unchecked at the expense of America's small business community, which creates 70% of new jobs and employs half of all Americans.
As we are riveted by the ongoing presidential campaigns, both candidates have taken a position on China. Former President Trump has consistently emphasized the need for strong tariffs and tougher trade policies to counter China's unfair practices.
Meanwhile, Vice President Harris has focused on strengthening alliances and diversifying supply chains to reduce reliance on China. Both candidates have offered solutions, each with their own advantages and disadvantages. This election will shape how we confront China's growing influence and protect the small businesses that drive the U.S. economy.