Can U.S. High-Tech Restrictions on China Succeed?
The following is an excerpt from an op-ed by Bates Gill, Executive Director of the Asia Society Policy Institute's Center for China Analysis, and Konrad Lee, Intern, Summer 2023, originally published in The Diplomat.
U.S. Treasury Secretary Janet Yellen’s recent visit to Beijing aimed to help stabilize strategic relations between the United States and China, but it also cast into high relief their growing high-tech rivalry, especially in the area of semiconductor manufacturing. In the days prior to her arrival, reports surfaced of Washington’s intention to seek further controls on transfers to China of know-how and technologies involved in semiconductor manufacturing, while Beijing announced new restrictions on the export of rare earths critical for the production of semiconductors.
But the United States and China are not the only ones engaged in this geo-technological tussle. Other major high-tech powers in Europe and Asia are also rethinking their trade and investment relationship with China, often at Washington’s prompting. What is behind these developments, how will they affect China-U.S. ties and the United States relations with key allies in Europe and Asia? And what are the prospects for the U.S.-led effort to slow China’s access to sensitive technologies?
An Ongoing Process, With More to Come
In recent years, the United States has accelerated its efforts intended to blunt China’s access to militarily relevant technologies, through measures including the passage of the Export Control Reform Act of 2018, the expansion of the controlled entities list, increasing scrutiny of Chinese investment in the United States, and the ending of Hong Kong’s preferential trade treatment.
Under President Joe Biden, the United States has continued this effort, with a particular focus on the semiconductor sector. Originally, some hoped that Biden would review and reverse many aspects of the former Trump administration’s export control policies. Instead, with the modernization goals of the People’s Liberation Army (PLA) shifting toward “intelligentized” warfare (智能化战争) — that is, the operationalization of artificial intelligence (AI) and its enabling technologies for military purposes — the Biden administration has intensified its efforts to restrict and control China’s access to dual-use technologies with potential military applications. This is especially true regarding semiconductor technology and equipment, which are crucial to the future development of China’s AI sector and its associated military applications.
Last year saw the entry into law of the CHIPS and Science Act and the introduction by the U.S. Commerce Department of sweeping new export controls on advanced computing and semiconductor manufacturing items to China. These measures aim to prevent the sale of high-end semiconductors and their related design and manufacturing technologies and systems to any entity in China, including U.S. entities based there. More recently, reports indicate that the Biden administration will act to further curb semiconductor-related transfer to China, including by preventing U.S. firms from leasing cloud services with AI capabilities to Chinese companies.
Moreover, as of this month, the U.S. Department of Commerce had some 600 Chinese organizations and individuals on the “Entity List,” with more than 110 of these added since the start of the Biden administration. Exports of specified technologies to these entities requires licensing approval from Commerce, with the intention of restricting and preventing their access to such U.S. technologies. These Chinese entities include companies, research institutions, and individuals supporting the PLA’s modernization efforts, participating in China’s military-civil fusion strategy, and involved in military technology and advanced dual-use technologies.
The list includes China’s Minister of Defense, Li Shangfu, who was sanctioned in 2018 — prior to his current appointment — for his involvement in arms imports from Russia.