Since U.S. President Joe Biden entered the White House in 2021, sanctions have been at the center of the U.S. strategy to hold back China's technological ascent and industrial modernization. The sanctions aim to preserve America's economic dominance, as does adding Chinese businesses to the U.S. Entity List and imposing export controls. These tools are wielded frequently.Over the course of four years, the U.S. Department of Commerce has added hundreds of leading Chinese high-tech firms to this list — Huawei, ZTE, Hikvision, SMIC, DJI, Yangtze Memory Technologies, Cambricon Technologies, Shanghai Micro Electronics and others. These companies face stringent U.S. restrictions on access to material and technology, which leads to severe financial strains, a shrinking global market presence and irreversible harm to China's tech sector.
The Biden administration is doubling down on restrictive measures against the Chinese semiconductor and AI sectors in its last days in office. On Dec. 2, the U.S. Department of Commerce announced new chip export restrictions, adding more than 130 Chinese companies to the Entity List and banning shipments of advanced memory chips, software and semiconductor manufacturing equipment to China.This is the third bout of major actions against China's semiconductor industry under Biden, and dwarfs the previous ones in scale. Further, the South China Morning Post reported that the American administration is set to unveil a new rule to further restrict Chinese access to advanced AI chips through third parties. Reuters reported on U.S. plans to appoint companies such as Google and Microsoft as gatekeepers for global AI chip distribution, intensifying the U.S.-China economic and tech rivalry.
On Dec. 3, in response to America's weaponization of trade and technology, China's Ministry of Commerce announced stricter controls on the export of gallium, germanium, antimony, super-hard materials, graphite and other dual-use items to the U.S., with an outright ban on military exports. It warned that violations by any organization or individual would be pursued legally, setting a precedent for such restrictions.Bloomberg noted that the Chinese move sets a new precedent by restricting foreign companies from selling into the U.S., a domain previously dominated by Western sanctions. Until now, the “extraterritoriality” in sanctions control seemed to be the prerogative of Western countries, particularly the United States. China's swift and resolute countermeasures have indeed caught the U.S. off guard and sent economic ripples that resonate across American industries.The Financial Times reported on Jan. 5 that China's prompt response showed its intention to directly challenge U.S. efforts to impede its technological progress — a stance that could inflict significant distress on the U.S. economy and businesses. Stephen Roach, a Yale senior fellow, indicated that China's speedy response might constitute a surgical strike against key U.S. industries. He warned that an escalation of tit-for-tat measures could result if trade disputes continue, as China still holds many cards up its sleeve. The Guardian, referencing an analysis by Assistant Professor Luo Minghui of Nanyang Technological University in Singapore, described China's actions as a clear retaliatory move showing that China can play hardball with the U.S. in the chip sector and need not remain perpetually on the defensive.
The U.S. business and tech sectors are voicing increasing discontent with the Biden administration's intensified sanctions on China. Stephen Ezell, vice president for global innovation policy at the independent Information Technology and Innovation Foundation, warned that losing access to China's large domestic market will hurt U.S. chipmakers. As a matter of fact, such measures have long faced resistance from the U.S. semiconductor industry, which relies on China for about one-third of its annual revenue. It has been hit hard by the sanctions. U.S. export control measures have severely affected companies such as Qualcomm, AMD, Intel and Applied Materials.Tim Teter, NVIDIA's general counsel, told the New York Times last year that the risk of U.S. sanctions is found in stimulating the development of an ecosystem dominated by competitors, which could have a harsh negative impact on U.S. leadership in semiconductors, advanced technologies, and artificial intelligence. The stricter export controls have deepened apprehension among high-tech companies in the U.S. regarding the sector's future, especially after China's response, which leveraged its dominance in critical minerals.
China is a vital source of key minerals for advanced technology manufacturing, accounting since 1987 for 48 percent of the world's antimony, 59.2 percent of its refined germanium and 98.8 percent of its refined gallium. Historically, according to the New York Times, China has supplied 54 percent of the germanium sent to the U.S. and 53 percent of allium, inducing the U.S. to cease gallium mining for semiconductors.Economic experts are concerned that China's tightened export controls on these rare metals could significantly impact U.S. industries. There are also fears that the restriction list could expand to more widely used metals such as nickel or cobalt. The U.S. Geological Survey last month warned that a complete ban on the export of gallium and germanium by China could inflict a $3.4 billion direct loss on the U.S. economy and disrupt supply chains.Todd Malan of Talon Metals lamented China's clearly stated intent to take countermeasures and questioned whether or not the U.S. would ever learn a lesson. Jack Bedor of Project Blue, a consulting company, told Reuters that China's move would heighten supply chain tensions — in particular when access to raw materials was already strained. Amid the strategic competition between the U.S. and China, American semiconductor companies must prepare proactively to balance compliance with government sanctions and their own economic interests.
Donald Trump will take office in less than a month and has assembled a cabinet lineup that will pursue a fresh round of tech and economic rivalry with China. China's recent tightened export controls on rare earth minerals is a veiled warning to the incoming U.S. administration and to Trump personally.Despite Trump's public statements regarding extra tariffs on China and inheriting Biden's tech sanctions, his remark at a Mar-a-Lago news conference on Dec.16 —d “China and the U.S. can solve all the world's problems together, if you think about it, so it's very important”—sent a positive signal.Trump, having endured electoral defeat, familial betrayal and ongoing lawsuits, has become more experienced and politically savvy. He will embrace the new term with greater resilience and determination. We have reason to believe that the Trump 2.0 era will see significant changes. Trump should recognize that to create a great presidency, it is crucial that guardrails — and a floor — be set for U.S.-China relations; otherwise, all will go down the drain. It should dawn on him that Biden's “middle-class diplomacy” and “values diplomacy" are at odds with his own governance philosophy.Trump is very likely to seek a fresh start, which offers an opportunity to forge a healthy, stable and sustainable China-U.S. relationship — one that avoids veering into a vicious tech rivalry or even a new cold war. This is a sine qua non for a stable relationship, but the two countries must muster the wisdom and strategic vision to explore how to build a new model of major-power relations.The world is big enough for the two countries to grow and prosper together and find a path to harmonious coexistence amid competition. The world is holding its breath to see how the story unfolds.
