The US has sharpened its assault on China’s technology industry with a flurry of export bans and stifling restrictions on companies, an escalation that leaves Beijing with few options for retaliation.
Washington’s moves are part of a strategy to prevent China from dominating the industries of the future and arming its military with advanced weaponry, while also securing its tech supply chain by enticing chipmakers to set up shop in the US.
US President Joe Biden’s administration this week escalated those efforts, blacklisting dozens of Chinese tech firms, while signs emerged Japan and the Netherlands are aligning with US restrictions on selling crucial chipmaking equipment to China, a major blow to Beijing’s ambitions to produce advanced semiconductors.
Photo: AP
China has accused the US of protectionism, lodged a complaint with the WTO and courted chipmaking powerhouse South Korea, a key US ally. Beijing is also reportedly preparing a multibillion-dollar aid package for its semiconductor industry, a crucial sector for the global economy.
However, China does not have many options, or incentives, to go further. Any moves to block US investment threatens an economy already reeling from China’s zero-tolerance COVID-19 policies, which are being rolled back.
“China’s lack of good options is precisely why the US is striking hard and fast now with export controls,” said Rhodium Group director Reva Goujon, who advises corporate clients on US-China relations and industrial policies.
Beijing’s response to the recent US moves on semiconductors has been “very reserved,” said Wang Huiyao (王輝耀), founder of the Center for China and Globalization, a policy research group in Beijing.
The new actions unveiled this week — which follow export controls announced in October aimed at preventing China’s access to machines and knowhow to make high-end chips — placed a number of Chinese companies on a so-called Entity List, requiring suppliers to get difficult-to-obtain US government licenses.
Among the most notable firms on that list is emerging chip equipment-maker Shanghai Micro Electronics Equipment Group Co (SMEE, 上海微電子), which could stifle Beijing’s efforts to create next-generation semiconductors. The machines that make the chips are among the most complicated devices produced by humans, and defy reverse engineering, making it difficult for China to develop its own domestic capabilities if it cannot get the equipment elsewhere.
“Having SMEE on the Entity List is a major blow for China’s chip sector,” said former CIA analyst Martijn Rasser, now a senior fellow at the Center for a New American Security.
“It’s the one company that Beijing saw as having potential to produce advanced chipmaking machines, which is essential for China to be a competitive force in the global semiconductor ecosystem,” he said. “Those hopes are now greatly diminished, if not dashed altogether.”
Even if China wins the WTO case, the US can veto any ruling by bringing it to the trade organization’s appellate body.
China’s best option might be to pour money into developing its own high-tech chips. Beijing is preparing to unleash a US$143 billion aid package for its chip industry, but it is not clear how much impact this might have.
“They can invest more, but the issues right now are not really a lack of resources,” Council on Foreign Relations technology analyst Adam Segal said. “It’s these technological chokepoints they are still vulnerable to.”
There is a risk that unilateral actions could alienate key US partners, Carnegie Endowment for International Peace senior fellow Jon Bateman said.
Beijing has not shown a willingness to leverage its dominance of rare earth minerals or its role as a manufacturing hub because it “has more to lose than to gain,” Bateman said.
“China has a lot of capability to retaliate, but very limited willingness to do so thus far,” he added.
MUSICAL INTERLUDE: During the altercations, KMT Legislator Hsu Chiao-hsin at one point pulled out a flute and started to play the national anthem A massive brawl erupted between governing and opposition lawmakers in the main chamber of the legislature in Taipei yesterday over legislative reforms. President-elect William Lai (賴清德) is to be inaugurated on Monday, but his Democratic Progressive Party (DPP) lost its majority in the legislature and the Chinese Nationalist Party (KMT) has been working with the Taiwan People’s Party (TPP) to promote their mutual ideas. The opposition parties said the legislative reforms would enable better oversight of the Executive Yuan, including a proposal to criminalize officials who are deemed to make false statements in the legislature. “The DPP does not want this to be
The International Industrial Talents Education Special (INTENSE) Program to attract foreigners to study and work in Taiwan will provide scholarships and a living allowance of up to NT$440,000 per person for two years beginning in August, Minister of Education Pan Wen-chung (潘文忠) told a meeting of the legislature’s Education and Culture Committee yesterday. Pan was giving an update on the program’s implementation, a review of universities’ efforts to recruit international students and promotion of the Taiwan Huayu Bilingual Exchanges of Selected Talent (BEST) program. Each INTENSE Program student would be awarded a scholarship of up to NT$100,000 per year for up to
Singapore yesterday swore in Lawrence Wong (黃循財) as the city-state’s new prime minister in a ceremony broadcast live on television after Lee Hsien Loong (李顯龍) stepped down following two decades in office. Wong, formerly deputy prime minister, was inaugurated at the Istana government office shortly after 8pm to become the second person outside the Lee family to lead the nation. “I ... do solemnly swear that I will at all times faithfully discharge my duties as prime minister according to law, and to the best of my knowledge and ability, without fear or favor, affection or ill-will. So help me God,” the
BASIC OPERATIONS: About half a dozen navy ships from both countries took part in the days-long exercise based on the Code for Unplanned Encounters at Sea An unpublicized joint military exercise between Taiwan and the US in the Pacific Ocean last month was carried out in accordance with an international code, the Ministry of National Defense (MND) said yesterday. According to a Reuters report citing four unnamed sources, the two nations’ navies last month conducted joint drills in the Western Pacific. The drills were not made public at the time, but “about half-a-dozen navy ships from both sides, including frigates and supply and support vessels, participated in the days-long exercises,” Reuters reported, citing the sources. The drills were designed to practice “basic” operations such as communications, refueling and resupplies,