Tightening the Tech Vise

Dec 16, 2022

While diplomatic talks have been restarted between the US and China — hardly surprising in light of US Secretary of State Blinken’s upcoming trip to Beijing in early 2023 — the main event on the conflict escalation watch continues to play out in the tech arena.  The Biden Administration has been unrelenting in its efforts to strangle Chinese technology companies, with the clear intent of arresting China’s progress on artificial intelligence and quantum computing.

Like the Trump Administration, which used the US Commerce Department’s “entity list” as the primary mechanism to wage the tech war through export licensing restrictions, the Biden Administration has dramatically widened the list of blacklisted Chinese technology companies.  In a December 17 action by the Bureau of Industry and Security (BIS) of the Commerce Department, 36 Chinese technology companies were added to the entity list for actions deemed “contrary to the foreign policy and national security interests of the United States.”

While this latest action boosts the total number of Chinese companies on the US entity list to well over 600, there can be no mistaking the surgical strike of the most recent effort. Significantly, it included Yangtze Memory Technology (China’s dominant semiconductor company), Cambricon, (a leading Chinese designer of core AI chips) and two key Chinese firms involved in the production of equipment to make advanced semiconductors — Shanghai Micro Electronics Equipment Group, along with Shanghai Integrated Circuit Research and Development Center.

This latest move complements the Biden Administration’s early October export sanctions on Chinese purchases of advanced semiconductor chips that many viewed as the most serious assault in the rapidly escalating US-China tech war that is now taking dead aim on breakthrough Chinese efforts in AI and quantum computing. Throw in the industrial policy Initiative of the recently enacted CHIPS and Science Act of 2022, aimed at bootstrapping America’s fading domestic semiconductor industry, and there can be no mistaking America’s aggressive counterattack on China as a rising tech superpower.

The subtext of America’s campaign against Chinese technology is that the US is no longer willing to let China finesse the distinction between commercial (i.e., civilian) and military applications of advanced technologies.  As I wrote recently in Foreign Affairs, “Indigenous innovation for economic prosperity is one thing.  Indigenous innovation for military power projection is another matter altogether.” China’s failure to clarify this murky distinction is a classic example of the relationship problem that continues to divide the two nations.

The Chinese response to US efforts to strangle its push for global dominance in advanced technologies has been surprisingly muted. On December 12, it filed a complaint with the World Trade Organization — setting in motion a process that, under the best of terms, will take years to adjudicate. Moreover, even if the WTO rules in favor of the Chinese complaint, there is good reason to believe that the US would ignore any such ruling on the grounds of national security. With US actions striking at the core of China’s stated intentions to lead the world in advanced technology and boost productivity-enhancing indigenous innovation, another counterattack in the ever-escalating US-China tech conflict seems far more likely than not.

You can follow me on Twitter @SRoach_econ

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