China has accused the United States of trying to hinder its development as President Joe Biden tightens controls on American investments that could support Beijing’s military. The Chinese Foreign Ministry criticized the Biden administration’s technology hegemony and demanded the immediate revocation of the decision. The latest restrictions, aimed at limiting US investment in industries that could benefit China’s military, have raised concerns about the impact on global supply chains.
President Biden’s order, signed on Wednesday, specifically targets advanced computer chips, quantum information technologies, microelectronics, and artificial intelligence. These restrictions come in addition to previous measures that restrict Chinese access to US processor chips used in smartphones and other high-tech products due to security concerns. Furthermore, numerous Chinese companies associated with military modernization have been barred from American financial markets.
The Chinese Foreign Ministry condemned Washington’s actions, stating that the true purpose of these restrictions was to deprive China of its development rights and maintain US hegemony. Meanwhile, China’s Ministry of Commerce issued a separate statement affirming that it would vigorously defend its own rights and interests but did not indicate any specific retaliatory actions. It is worth noting that in previous instances, China has often made similar comments without following through with concrete measures.
The Biden administration is attempting to revive strained US-China relations, which have deteriorated due to disputes over security, human rights, technology, Taiwan, and Hong Kong. Despite Treasury Secretary Janet Yellen‘s visit to Beijing in July to increase communication, no agreements were announced regarding these contentious issues. Chinese leaders have called for the US to change its policies on Taiwan and other matters, but they have not signaled any willingness to adjust trade or other policies that have raised concerns among Washington and other Asian nations.
China has responded to Western tech restrictions by cautiously retaliating, potentially to avoid disrupting its own multibillion-dollar campaign to develop domestic technology industries, including processor chips and artificial intelligence. The Chinese government recently introduced rules requiring exporters of gallium and germanium, metals used in computer chips and solar cells, to obtain government licenses. This move has caused unease among Japanese and South Korean electronics manufacturers.
The ongoing conflict between the US and China has fueled fears of a broader decoupling, where global industrial markets would split into separate entities with conflicting standards, potentially hindering innovation and economic growth. US officials have reiterated that they are not seeking decoupling but rather de-risking measures, which involve diversifying raw material sources, industrial components, and consumer goods to mitigate disruptions like those experienced during the COVID-19 pandemic.
China, on the other hand, has encouraged its industries to prioritize domestic suppliers for strategic reasons, even if it means higher costs. Chinese President Xi Jinping has emphasized the need for China to become a self-reliant technology power. Concerns about China’s military have intensified amid increased fighter plane activity near Taiwan, a self-governed island that Beijing considers part of its territory, as well as territorial claims in the South and East China Seas.
While the new limits imposed by the Biden administration are not intended to disrupt China’s economy, they will complement existing export controls on advanced computer chips. The order requires US investors to notify the government of certain transactions with China, with some transactions potentially being prohibited. The focus is primarily on areas such as private equity, venture capital, and joint partnerships that could provide countries like China with additional knowledge and military capabilities.
The Senate recently approved a requirement to monitor and limit investments in countries of concern, including China. It remains to be seen how tensions between the US and China will further escalate, particularly in relation to technological development and national security. Both countries are vital players in the global economy, and any significant disruptions could have far-reaching consequences. As the situation unfolds, it will be crucial for policymakers to strike a delicate balance between protecting national interests and maintaining international cooperation.
