Commerce Secretary Gina Raimondo on her working group with China: 'Hopefully the baby steps lead to bigger steps'

Speaking at Fortune‘s CEO Initiative conference on Tuesday, Raimondo touted the administration’s progress while assuring that it would not cede any areas of national security.

“It’s baby steps, I recognize that,” she said to Fortune editor-in-chief Alyson Shontell. “Hopefully the baby steps lead to bigger steps.”

Shifting interests

With relations between the U.S. and China chilling during the pandemic, Raimondo has taken a cautious stance from her perch at the Department of Commerce. With tensions growing over Taiwan and the critical semiconductor industry, Raimondo described China’s decision to ban chips produced by a U.S.-based company as “economic coercion” last May. Amid her trip to the country at the end of August, she said that authoritarian measures from China could cause U.S. businesses to view the country as “too risky” and “uninvestable.”

Despite the careful posturing, Raimondo expressed optimism over her visit, including the establishment of a commercial issues working group to identify concrete issues where the two countries could collaborate.

Speaking on Tuesday, Raimondo said that the group has already begun meeting on a working level and that she will meet with her Chinese counterpart in San Francisco in November. The two countries also created a technical group around trade secrets that has begun to meet.

“It’s in our interest to try,” she told Shontell. “It’s in our interest to not have this escalate.”

Raimondo took the stage an hour after Treasury Secretary Janet Yellen, who cautioned that the U.S. should “derisk” from China in key areas of national security, but not “decouple.”

Raimondo sounded a similar tune when she visited China in late August, insisting, “we do not seek to decouple or to hold China’s economy back.” And she was consistent on Tuesday, saying that the Biden administration wants to encourage investment between the two countries outside sectors that are critical to national security, including quantum, semiconductors, and A.I.

“They know we’re ahead in these areas of emerging tech,” she said, arguing that China wants to incorporate the technology into its military. “We would be a little bit crazy to allow that,” she added.

Raimondo reiterated President Biden’s stance on China, which she described as “small garden, high walls.”

When asked whether the U.S. can ensure that private investment into domestic companies by Chinese limited partners would not create risk, Raimondo said that the government has safeguards in place, including the Treasury Department’s Committee on Foreign Investment in the United States, or CFIUS. She noted that China has been screening investments for years, and the U.S. is still playing catchup.

“We’re new at this because we think it’s necessary,” she said.

‘Hiccups every day’

Listing her remit from semiconductors to chips to AI, Raimondo drew a laugh from the crowd as she pointed out what a broad “portfolio” she has.

Raimondo said that in the year since Biden signed the CHIPS and Science Act, sweeping legislation to kindle the country’s nascent semiconductor industry, the Department of Commerce has hired 150 people, with a large portion coming from private industry. Her department has also received over 500 statements of interest from companies to work on semiconductor manufacturing, as well as over 100 applications.

While domestic semiconductor manufacturing at scale is still likely several years away, Raimondo promised that the Department of Commerce would have announcements out the door by December. She also noted that since the bill’s passage, there has been $170 billion in investment in the semiconductor industry in the U.S.—a trend that she said was made possible by the legislation.

Despite the progress, Raimondo said that the major roadblock has been workforce-related, including finding the thousands of construction workers necessary to build out semiconductor facilities.

The U.S. still faces a steep uphill path to building out the industry, with experts citing challenges ranging from funding shortages to the availability of natural resources.

“We have hiccups every day,” Raimondo said.