China has accused the United States of actively obstructing its progress, as President Joe Biden escalates tensions over technology and security by imposing stricter controls on U.S. investments that could aid Beijing’s military advancements.
The Foreign Ministry has labeled the Biden administration’s actions as pursuing “technology hegemony” and has demanded the immediate reversal of its perceived misguided decisions. China cautioned that these new constraints, adding to an expanding conflict over its industrial growth, could disrupt global supply chains.
Biden’s recent executive order, signed on Wednesday, specifically targets advanced computer chips, microelectronics, quantum information technologies, and artificial intelligence. The order seeks to curtail U.S. investment in sectors that might contribute to the military capabilities of the ruling Communist Party.
This order supplements existing limitations that restrict Chinese access to U.S. processor chips utilized in smartphones, artificial intelligence, and other technologies due to security concerns. Several Chinese companies associated with military modernization, as identified by Washington, are already prohibited from U.S. financial markets.
China’s Foreign Ministry asserted that Washington’s “true purpose is to deprive China of its development rights and maintain its own hegemony.”
The Ministry of Commerce affirmed China’s determination to safeguard its interests, but did not indicate potential retaliatory measures. China has previously made similar statements in response to U.S. trade restrictions, though such comments have rarely led to concrete actions.
While imposing these restrictions, the Biden administration is also working to mend strained U.S.-Chinese relations, currently at their lowest point in decades due to disputes spanning security, human rights, technology, Taiwan, and Hong Kong.
Although Treasury Secretary Janet Yellen’s visit to Beijing in July aimed to enhance communication, no agreements were reached regarding these disputes. Chinese leaders have called for changes in U.S. policies on various issues, but they have not signaled any intent to alter trade and other policies that trouble both Washington and China’s neighbors.
China’s response to Western tech restrictions has been relatively measured, possibly to avoid disrupting its ambitious campaign to develop its own processor chip and technology industries.
China’s recent regulations, effective since August 1, mandate that exporters of gallium and germanium, metals used in computer chips and solar cells, must obtain government licenses. This announcement has raised concerns among Japanese and South Korean electronics manufacturers.
The ongoing conflict has sparked fears of a potential “decoupling,” in which global industries could split into separate markets with conflicting standards, hampering innovation and economic growth.
U.S. officials, including Yellen, stress that they aim for “de-risking” rather than “decoupling.” This involves diversifying sources of raw materials, industrial components, and consumer goods to mitigate disruptions like those seen during the COVID-19 pandemic.
Meanwhile, China’s Ministry of Commerce has accused Washington of using “risk reduction” as a pretext for “decoupling and chain-breaking.”
Simultaneously, under Xi Jinping’s leadership, China has urged its industries to prioritize domestic suppliers to enhance self-reliance in the technology sector. China’s military activities, such as fighter planes intimidating Taiwan and territorial claims in the South and East China Seas, have amplified concerns globally.
U.S. officials claim that the new restrictions aim to complement export controls on advanced computer chips without severely impacting China’s economy.
Under the new rules, U.S. investors will need to inform the government about certain transactions with China, and some transactions may be prohibited. The executive order concentrates on areas like private equity, venture capital, and joint partnerships, where investments could potentially provide countries of concern like China with additional knowledge and military capabilities.
In July, the Senate approved a requirement to monitor and limit investments in countries of concern, including China.
