TechNet, a bipartisan group of innovation economy CEOs, and nine other industry groups are calling on Congress to fully fund the Regional Technology and Innovation Hubs (Tech Hubs) program established by the CHIPS and Science Act. The Tech Hubs program is an economic initiative intended to strengthen regional capacity to produce critical technologies.
In addition to TechNet, groups that signed the letter to Congressional leaders were America Achieves, American Affairs, Center for American Entrepreneurship, Engine, Federation of American Scientists, Information Technology Industry Council, National Talent Collaborative, State Science & Technology Institute and Technology Councils of North America. The organizations said in the letter that the U.S. is "losing ground in the development of key sectors to industrial rivals like China." Citing a 2023 report from the Australian Strategic Policy Institute, the letter states that China has become the global leader in 37 out of 44 "critical and emerging technologies."
In the letter, the groups asked Congress to fully fund the Tech Hubs to the levels authorized by the CHIPS and Science Act, saying that doing so will help the U.S. win "the next era of innovation" and "meaningfully compete with China's state-controlled economy." The letter said that the current appropriations bills for fiscal year 2024 allocate less than 20% of the funding that was authorized by the CHIPS and Science Act for the first two years of the Tech Hubs program.
"Given the urgency and dire implications for our national security, Congress should use every tool at its disposal to fully fund Tech Hubs at the authorized level," the letter said.
TechNet President and CEO Linda Moore said in a separate statement, "Investments authorized in the CHIPS and Science Act will help usher in a new era of innovation and opportunity across the U.S., including in regions that were once fueled by thriving industries and are ripe with potential. Regional tech hubs will inspire a new generation of innovators to launch potentially life-changing inventions, catalyze startup ecosystems and create jobs in communities across the country. By funding tech hubs and other historic investments in the CHIPS and Science Act at the authorized level, Congress can accelerate our global competitiveness in critical technologies like artificial intelligence, semiconductors and quantum computing and help ensure the U.S. wins the next era of innovation."
Scott Kennedy, senior advisor and Trustee Chair in Chinese Business and Economics of the Center for Strategic and International Studies (CSIS), wrote in a commentary on the CHIPS and Science Act last year that the initiative appears to avoid several key pitfalls of Chinese industrial policy spending, such as indiscriminately spending large amounts of money across dozens of different sectors "with the hope that something will pay off" and allocating funds based on political loyalties rather than rational economic analysis.
China spent a total of at least 1.71 trillion yuan (equivalent to $248 billion) in 2019 on industrial policy, according to a 2022 report from CSIS. The approximately 1.71 trillion yuan was around 1.73% of China's GDP in 2019. In comparison, the U.S. government spent $84 billion, or 0.39% of its GDP, on industrial policy in 2019. Industrial policy spending in China takes the form of several different instruments, according to CSIS. The Chinese government favors direct subsidies to certain firms and below-market credit to state-owned enterprises (SOEs). China provided an estimated $63 billion in direct subsidies in 2019, primarily to firms in priority sectors, such as software, technology hardware, automobiles and semiconductors. SOEs enjoy interest rates that are, on average, at least 1% lower than those of private firms, reflecting the CCP's preference for a strong state sector. China provided at least $74 billion in below-market credit to SOEs in 2019. The report notes that dealing effectively with China's state-capitalist system poses a challenge to U.S. policymakers.
