China Warns US of Economic Coercion in Response to Restrictions on Investments
China has strongly criticized the United States for imposing restrictions on investments in Chinese entities, viewing it as an act of economic coercion. The Ministry of Foreign Affairs and the Ministry of Commerce have lodged formal complaints to the US government, asserting that China reserves the right to take countermeasures.
The restrictions were imposed through an executive order signed by US President Joe Biden on August 9. The order grants authority to the US treasury secretary to block or regulate investments in Chinese entities operating in three sectors: semiconductors and microelectronics, quantum information technologies, and certain artificial intelligence systems.
China deems this move as economic coercion and hegemonic bullying, arguing that it violates the principles of market economy and fair competition. The Chinese Foreign Ministry has called on the US to honor President Biden’s promise of avoiding decoupling from China and obstructing its economic development.
The Ministry of Commerce has urged the US to respect the laws of the market economy, ensure fair competition, and avoid hindering global economic and trade exchanges. They also emphasized the importance of not setting obstacles to the recovery and growth of the world economy.
The Chinese embassy in Washington expressed concerns that these investment restrictions would significantly impact the interests of both Chinese and American companies and investors. They warned that such measures could disrupt normal business cooperation between the two countries and erode international confidence in the US business environment.
Industry leaders in the US are also apprehensive about the potential consequences of restricting the sale of semiconductors to China. Intel CEO Pat Gelsinger raised concerns that without orders from Chinese customers, projects like Intel’s planned factory complex in Ohio would be negatively affected. The factory, which is expected to be one of the world’s largest chipmaking sites, was announced in 2022 with a $20 billion investment.
Gelsinger, along with executives from Nvidia and Qualcomm, advised the Biden administration to carefully consider the impact of export restrictions on the chip industry and suggested a pause before implementing any new measures.
China is a significant contributor to Intel’s annual revenue, accounting for 36 percent in 2021. Restricting exports to China could jeopardize the Biden administration’s goal of reshoring chip production to the US, as Chinese orders play a crucial role in funding research and development efforts of chip firms.
Similarly, more than 60 percent of Qualcomm’s revenue comes from the China region through the supply of components to smartphone manufacturers such as Xiaomi Corp. Chip-equipment makers like Applied Materials have already experienced a substantial reduction in revenue due to these restrictions.
The Semiconductor Industry Association warned that unilateral restrictions on semiconductors could undermine the competitiveness of the US semiconductor industry, disrupt supply chains, create market uncertainty, and lead to retaliatory actions from China.
The ongoing tensions surrounding investment restrictions highlight the complexities of the economic relationship between China and the US. Both countries must carefully navigate these challenges to avoid further escalation and ensure a stable global economic environment.
