The Chinese government has been going against the norm in democratic countries by giving Chinese enterprises highly political “special missions.”
In addition to creating unfair trade competition, it has also threatened the national security of other states.
This is the reason US President Donald Trump launched a trade dispute with China.
It will not matter how many US products China buys — unless the missions problem is resolved, trade issues will continue.
On April 11, the US Department of Commerce’s Bureau of Industry and Security released revisions to its Unverified List, which limits items a firm can import. Among the 50 entities on it, 37 are China-based companies, research institutes or schools, while six are firms based in Hong Kong.
US companies that want to export, re-export or transfer goods to parties on the list must first report related information, and are not allowed to apply for license exceptions.
Although it is not an embargo, many US companies no longer supply goods to entities on the list to avoid trouble, so in practice it is more effective than a legal restriction.
Applied Materials, a leading US semiconductor equipment supplier, for the whole of last week suspended supplies to China’s Sanan Optoelectronics Co, which is on the list.
The US government is perhaps not specifically targeting the LED industry. There could be a chain reaction extending to the semiconductor and communication technology sectors. More US companies might follow Applied Materials’ lead.
The US government has long considered this to be a national security issue. For example, in April last year, the US-China Economic and Security Review Commission released a research report titled Supply Chain Vulnerabilities from China in US Federal Information and Communication Technology.
According to the report’s summary: “The US government needs a national strategy for supply chain risk management of commercial supply chain vulnerabilities in US federal information and communications technology [ICT], including procurement linked to the People’s Republic of China,” because such procurement has already damaged US national security, economic competitiveness and the privacy of citizens.
“China did not emerge as a key node on the global ICT supply chain by chance. The Chinese government considers the ICT sector a ‘strategic sector’ in which it has invested significant state capital and influence on behalf of state-owned ICT enterprises,” the report said.
After attracting foreign companies to China, Beijing then tries to obtain key intellectual property and technology from them, it said.
“Since 2013, China has accelerated its efforts at indigenous production and independence. This shift has made for a more restrictive environment for companies doing business in China,” and that there are “new policies requiring companies to surrender source code, store data on servers based in China, invest in Chinese companies, and allow the Chinese government to conduct security audits on their products,” it said.
Table 2 of the report gives 15 examples of influential Chinese firms and research institutes that could affect the security of the US’ ICT supply chain, including China-based Huawei Technologies Co.
Taiwanese companies that do business with those Chinese firms should be careful to make sure they are not affected by these US measures.
Honda Chen is an associate research fellow at the Taiwan Academy of Banking and Finance.
Translated by Eddy Chang
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