Emerging Scandal: Why Are We Giving $8 Billion To Chinese Company With Communist Ties To Build A $2 Billion Battery Factory?

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by Tyler Durden
Friday, Sep 15, 2023 - 09:00 PM

By Mark Glennon of Wirepoints

Some politicians are taking notice of the absurdity of subsidizing a Chinese technology company, Gotion. The electric vehicle battery maker is linked to the Chinese Communist Party (CCP) and it recently inked a deal with the State of Illinois to build a $2 billion plant in Illinois.

However, the insane size of the subsidies being granted remains to be recognized.

On Wednesday, two members of the House Select Committee on the Chinese Communist Party wrote to Treasury Secretary Janet Yellen, imploring her and Congress to take immediate action to stop the CCP from exploiting U.S. taxpayer dollars.

The letter from committee Chairman Mike Gallagher (R-WI) and Rep. John Moolenaar (R-MI) specifically addressed a very similar Gotion battery production project in Michigan, and the same issues apply to the Illinois project.

The letter documents connections between Gotion and the CCP:

Gotion High-Tech Co. is a PRC company that has direct ties to the CCP and state-owned financial institutions. Gotion has been an active participant in the PRC-based version of the “Thousands Talent Program,” a program the FBI itself says encourages theft of trade secrets and economic espionage. Gotion has established multiple “Communist Party Units” within its operations and has publicly sought PRC provincial government support for its desire to expand its operations overseas. Even when courting major Western investment, Gotion has been adamant about retaining PRC-based control, including requiring that Volkswagen give up part of its voting rights, despite Volkswagen acquiring over 25 percent of the company. [Footnotes omitted.]

“It is perplexing,” says the letter, that the U.S. government would perpetuate China’s domination of key technology “by actively supporting CCP-backed companies expanding their foothold in the U.S. market, especially in a crucial sector such as lithium-ion battery manufacturing.”

Perplexing, indeed.

Equally perplexing is the sheer size of the subsidies, regardless of the recipient. Gotion is qualified to receive $7.5 billion of federal tax credits over five years, as we wrote Wednesday. That’s in addition to $536 million of incentives awarded by the State of Illinois for the Illinois plant, which is expected to employ 2,600 workers. So, Gotion will be gifted over $8 billion for a factory that will cost only $2 billion.

The Coalition for a Prosperous America (CPA) is a national non-profit organization representing exclusively domestic producers across many sectors and industries of the U.S. economy. They’ve been heavily criticizing the tax credit program, which is known as “45X.” CPA Chairman Zach Mottl told us this:

It’s unconscionable that the State of Illinois would contribute $500 million and the federal government an additional $7.5 billion to construct a project that will cost just a fraction of that. And to give that money to a Chinese company that is already subsidized by the Chinese government is a serious mistake. China‘s goal is to dominate the global battery industry, and forcing American taxpayers to unwittingly fund the CCP’s ambitions is a direct threat to U.S. economic and national security.

It’s very doubtful Treasury Secretary Yellen could do anything to halt the federal tax credits going to Gotion, as requested by the Gallagher-Moolenaar letter. The entity that has some power to veto some investments in the U.S. by national security threats like China is the Treasury Department Committee on Foreign Investments (CFIUS). However, CFIUS gave the green light to Gotion’s Michigan project, reportedly saying it had no jurisdiction over the matter, and there’s no reason to think other Gotion projects are different.

The problem, instead, is in the legislation for the 45X program. Congress must change that, as the Gallagher-Moolenaar letter says. Authorization for 45X was in the mislabeled Inflation Reduction Act of 2022, and the authorization does not contain the same prohibitions on foreign entities of concern that are in other parts of the Act and other laws, according to JD Supra.

The entire conception of 45X in that legislation was botched. It was initially estimated that it would cost the U.S. Treasury $31 billion, but it’s now estimated to cost as much as $200 billion. It was simply too generous, leading to a frenzy of new battery factory announcements by companies drawn to the handout.

Good Jobs First, a worker-oriented policy group in Washington, D.C., has documented the ridiculously oversized tax credits for recent battery plant announcements. Their July report includes this chart where you can see that the 45X tax credits far exceed the cost of many new battery plants, just as Gotion’s will in Illinois.

Where are Illinois politicians on this?  So far, we’ve seen no reaction from Democrats or Republicans.

Where is Illinois’ mainstream media? They’ve reported or criticized nothing whatsoever on the lavish tax credits coming to Gotion for its Illinois project. Even at the national level, Fox is the only major outlet that has been covering the story.

In Michigan, a firestorm of controversy continues over Gotion’s plant there.

In Illinois, nothing.