As China Tech Threat readers very well know, the Biden administration issued long-awaited export controls in October designed to restrict the People’s Republic of China’s (PRC) ability to purchase or manufacture high-end chips. Some have criticized the move as “a declaration of an economic cold war.” Daleep Singh, a former Biden administration Deputy National Security Adviser, is weighing in. Singh recently wrote in The Economist that “America is simply adapting to intensified competition for pre-eminence in the foundational technologies of our time.” We agree. From both national security and economic standpoints, Chinese dominance and superiority in the semiconductor space is dangerous, and the Biden administration has taken actions to prevent that from happening.
Singh also calls for the Biden administration to “establish and articulate a doctrine of economic statecraft at the highest levels of government,” in order to prevent an out of control “race to the bottom” and America’s use of economic tools of power in an “arbitrary and capricious way.” Who knows if and when any formal international economic strategy is coming, and what it might look like. But various events in recent days gives clues that the administration is focused on maintaining lines of communication with China, even as it expands the export control rules.
Earlier this week, the administration mitigated the risk that chipmaking equipment could be transferred from Macau (a nominally sovereign territory under Chinese control) to China by applying export controls on Macau. President Biden also raised export control issues in meetings with Japanese Prime Minister Fumio Kishida and Dutch Prime Minister Mark Rutte – both of whom lead nations where top chip toolmakers are domiciled. Biden’s Indo-Pacific Coordinator Kurt Campbell said Biden and Kishida had “very productive” discussions on the issue, and Kishida said he’d deal with the issue “appropriately.” For his part, Rutte commented after his visit to the White House, “I think that step by step we will be able to reach a good outcome in cooperation,” and stated that advanced chips should not be used for military purposes “in countries where you do not wish that to happen.”
At the same time, Biden has dispatched his top aides to try and maintain open lines of communication with China, likely to prevent the “race to the bottom” scenarios Singh fears. Treasury Secretary Janet Yellen met with China’s Liu He in Davos as part of “efforts to deepen communication and work together to address global challenges,” according to the Treasury Department press release, which also claimed Yellen “raised issues of concern in a frank exchange of views.” Similarly, the announcement that Secretary of State Antony Blinken will make a trip to China in February – the first for a Secretary of State since October 2018 – also gives reassurance that the U.S. and China have a shared interest in dialogue.
The trick now for the Biden administration is to make sure revived channels of communication (and China’s friendlier tone on the international diplomatic scene) don’t lead to the U.S. walking back from tough stances – whether they be export controls, economic sanctions on bad actors, or other economic and technological measures. Because whatever the Biden administration’s future strategy for competing with China economically is, kowtowing to the Chinese Communist Party isn’t a good foundation for it.
And especially as it relates to semiconductors, there’s no time for dithering. The CCP is on a mission for dominance, and it’s not going to quit. We saw this as YMTC hit notable advancements last year – both technologically and a now failed partnership with Apple – before it got Entity Listed in December. The U.S. government must keep a close eye on other national champions like CXMT before it’s too late.