Save for later Print Download Share LinkedIn Twitter Political calls in the US to decouple from China’s economy and its energy sector were punctuated last week by a bipartisan bill that would prohibit oil from US strategic stocks from being delivered to China. At the same time, there are heightened concerns about overreliance on China for minerals and components key for the energy transition, sharpened by the energy fallout in Europe over Russia’s war in Ukraine and fears over China’s designs on Taiwan. While China's transition supply chain dominance is often used by Republicans to argue against aggressive low-carbon deployment, the administration of US President Joe Biden has taken a different tack, signing off on substantial tax credits aimed at bringing manufacturing for clean energy to the US.Lawmakers are again invoking the idea that oil and gas sales to China could be detrimental to the US. The focus last week was on sales of strategic oil stocks, part of a broader Republican effort to to take the Biden administration to task for how it has used the US Strategic Petroleum Reserve. But the House of Representatives bill blocking sales to China passed with a vote of 331-97, gaining substantial support from Democrats as well, underscoring the idea that political efforts aimed at constraining China have appeal on both sides of the aisle.Indeed, Democratic Representative Frank Pallone criticized the bill for not going far enough, saying that if Republicans were serious about preserving US-produced energy for American consumers, they would push to restrict all oil exports to China. But for now, the bill appears to be largely signalling: It’s not clear it would have traction in the Senate.US lawmakers who want to constrain exports to China argue exporting oil and relatively cheap gas serves as a subsidy to the Chinese economy at the expense of US manufacturers. That argument was visible in the debate around US strategic stocks, and lawmakers have used it in the past when speaking about LNG exports. So far there aren’t laws that require additional scrutiny of exports to China.Chinese imports of US oil fluctuate, with significant drops when trade tensions were very high during the administration of former US President Donald Trump. Generally, Chinese imports are higher than they were five years ago. Products imports from the US averaged 400,000 barrels per day in the year through October 2022, the most recent month for which data is available from the US Energy Information Administration. That compares to averaging nearly just over 200,000 b/d five years prior. Crude imports are more variable, but averaged 229,000 b/d in the year through October 2022, compared to 169,000 b/d five years prior.LNG exports to China tell a similar story. China began taking volumes in 2016, but those dried up in 2018 and 2019, as Trump levied tariffs and pursued a trade agreement with Beijing aimed at rebalancing the trade deficit. After the deal was signed in January 2020, imports picked up again. But flows fell dramatically in 2022, with European buyers willing to pay a premium for LNG after Russia’s invasion of Ukraine, and Chinese demand constrained by its zero-Covid-19 policy. Biden has kept up his predecessor’s focus on constraining imports from China when it comes to renewables, despite his plans to rapidly increase deployment. The Commerce Department last month indicated that manufacturers in China are running afoul of solar module tariffs by completing assembly in other southeast Asian nations — Cambodia, Thailand, Vietnam and Malaysia. The agency expects to make a decision on whether to levy fresh tariffs in May, although those would be suspended temporarily owing to a two-year holiday enacted by the Biden administration on any resulting tariffs — an effort to allow for more solar deployment and buy US project developers time to find other suppliers. Renewables industry representatives say it's still not enough time. And some Republicans argue that a policy focus on rapid deployment of renewables in the US amounts to a “pro-CCP [Chinese Communist Party] agenda,” owing to China’s domination of renewables manufacturing.The US is also trying to diversify the minerals supply chain away from China and Chinese-controlled firms. The Department of Energy last year released a national strategy aimed at increasing domestic availability of raw materials and expanding domestic manufacturing capabilities. Washington is also focusing on trying to bringing more countries to the table, standing up the Minerals Security Partnership aimed at creating “resilient, diverse and secure critical mineral supply chains by supporting more successful critical minerals projects,” as US Secretary of State Antony Blinken put it last year. US officials may not be singling out China in public speeches — especially with the Biden administration concerned about Beijing’s participation in international climate diplomacy — but China’s dominance of the sector is a subtext of any diversification push.Congress put some legal oomph behind the strategy with last year’s Inflation Reduction Act (IRA), housing tax incentives designed to bolster manufacturing and mining in the US. Incentives under the IRA for deploying renewables increase by 10% if the components used meet domestic content requirements. The bill also creates a new production tax credit for manufacturing solar and wind energy components, as well as battery and battery components, in the US. Already the White House is claiming some victories. Last week, South Korea-based solar manufacturer Hanwha QCells announced a $2.5 billion expansion of its solar manufacturing plant in Georgia. The company specifically cited the new tax incentives as underpinning the expansion. But that’s not the only policy driving Hanwha’s decision to enter the US market: It broke ground on its facility in Georgia after the Trump administration imposed a 30% tariff on imported solar panels.Still, there are also fears those same incentives could slow deployment in the near term. Tax breaks for electric vehicles (EVs), for example, largely depend on battery components and minerals being sourced in North America and free-trade agreement countries. Auto companies with a focus on deploying EVs worry the supply chain won’t be robust enough to support the policy. Here, the administration appears to be looking for some flexibility, possibly by defining a free-trade agreement broadly so that more countries qualify.