China Not Retaliating on U.S. Export Policy Out of Fear of Further Restrictions: Experts
China recognizes that it cannot produce all tech on its own, one expert said.
WASHINGTON, February 27, 2023 – China has no reason to retaliate against U.S. export controls because it might lead to more restrictions on products which would not be in the Chinese Communist Party’s interests, said the president of US-China Business Council at a web conference on Wednesday.
In October, the Commerce Department prohibited the exportation to China of certain high-functioning chips necessary for supercomputers and moved to prevent other countries from providing China with certain semiconductors made with American technology.
The Commerce Department also limited American citizens’ ability to work with Chinese chip facilities. The restrictions were billed as a national security imperative and designed to limit the development of next-generation, chip-dependent Chinese military technology.
At the same time, the U.S. raised concerns that China would retaliate.
“China has a good number of tools or legal tools, which they could retaliate, but that’s hard,” said Craig Allen, president of US-China Business Council, a non-profit that promotes trade between the two countries. “If they do retaliate, for example, against a chip company or manufacturing equipment company, a tool company, or another type of company, then that will lead to further restrictions on the inflow of technology and a product into China. And so, they have not found a way to retaliate, that suits their interest and I hope it stays that way.”
However, China also has remarkable speed and scale, Allen said. He considers China’s manufacturing speed and scale of accessing the market as “quite formidable.”
“Their dominance in the processing of rare earths, for example, is something that we should be concerned about,” according to Allen.
Other experts on the panel had similar opinions as well.
The most advanced artificial intelligence chips go into supercomputing and equipment for the production of semiconductors, according to Jimmy Goodrich, vice president of global policy at the Semiconductor Industry Association. The export control policy is limited to the “most cutting edge technology,” Goodrich said.
“The vast majority of chips don’t depend on and applications don’t depend on those advanced technologies,” said Goodrich. “Many of those are still unrestricted, because they’re ubiquitous, China has a lot more stronger domestic capability to produce them.”
But China may already be cognizant that development of chips is a globally integrated endeavor.
“It’s too complex, too global, too interdependent for one country to be able to produce all these technologies on their own,” Goodrich said, emphasizing the importance of multilateral approach. And that could be why, Goodrich added, China is hesitant to retaliate.
