Impact of US Legislation on Chip Manufacturing and Green Economy

The 2024 Tsinghua PBCSF Chief Economists Forum took place on September 28 in Beijing. Zhu Guangyao, the former Vice Minister of Finance, attended and spoke at the event.

Zhu discussed the U.S. government’s initiatives to promote the return of manufacturing to the United States, highlighting the “CHIPS and Science Act” and the “Inflation Reduction Act” passed in 2022.

The “CHIPS and Science Act” involves $280 billion, with $52 billion allocated to subsidize high-tech chip companies establishing factories in the U.S. However, companies receiving these subsidies cannot build factories in China or expand or update existing investments in China for ten years, replacing market rules with industrial policies.

The “Inflation Reduction Act” involves $740 billion, with $243.9 billion dedicated to supporting the green economy. This includes a $7,500 subsidy for each electric vehicle produced in the U.S. or the North American Free Trade Area, making it the largest industrial subsidy globally.

Zhu noted that while these acts may have some effect on bringing manufacturing back to the U.S., they fall short of achieving the country’s strategic goals. He attributed this to the constraints imposed by U.S. labor standards and the proficiency of skilled technical workers.

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