US targets Chinese hi-tech and defense sectors in ‘deepening crackdown’

Amber Wang, South China Morning Post

Posted at Nov 26 2021 03:37 PM

Washington will continue to target China’s hi-tech and defence sectors and is taking steps that may lead to a technology decoupling, observers say after the US added more Chinese firms to its export blacklist.

A dozen Chinese firms – including quantum computing and semiconductor companies and businesses that have contributed “to Pakistan’s unsafeguarded nuclear activities” – were placed on the trade blacklist, known as the entity list, on Wednesday, with the US government citing national security concerns.

Some of those firms were blacklisted for their “support of the military modernisation of the People’s Liberation Army” and “acquiring and attempting to acquire US-origin items in support of military applications”, the US Commerce Department said.

The latest move comes as tensions simmer over issues from trade to Taiwan and human rights and after the US expressed concern over China’s rapid military developments, including the recent test of a nuclear-capable hypersonic missile.

“Global trade and commerce should support peace, prosperity and good-paying jobs, not national security risks,” US Secretary of Commerce Gina Raimondo said in a statement.

Eight technology entities based in China were added to the list, which the Commerce Department said aimed to prevent US emerging technologies from being used for Chinese quantum computing efforts that support military applications, such as counter-stealth and counter-submarine applications, and the ability to break encryption or develop unbreakable encryption.

American suppliers to companies on the entity list will need to apply for a licence before they can sell to them, which is likely to be denied.

Responding to the latest move on Thursday, Chinese commerce ministry spokeswoman Shu Jueteng said the new blacklist was not in line with a consensus reached at last week’s summit between the US and Chinese leaders. She said it did not support the global industrial supply chain or the world’s economic recovery.

“The US side has generalised the concept of national security and arbitrarily introduced sanction measures that seriously lack any basis in fact, and the process has been very opaque,” Shu said. China was strongly opposed to the move and would make “solemn representations” to the US, she added.

Foreign ministry spokesman Zhao Lijian said China would take countermeasures to protect the legitimate interests of its companies.

Washington’s latest move indicates that there is no let-up in the “strategic competition” between the two powers, particularly in the hi-tech and defence sectors, according to observers.
It follows last Tuesday’s virtual summit between Chinese President Xi Jinping and his US counterpart Joe Biden aimed at managing tensions, during which Xi said the US should “stop abusing and generalising the concept of national security to suppress Chinese companies”.

Wu Xinbo, director of the Centre for American Studies at Fudan University in Shanghai, said there had been signs of improvement in the relationship, but there would be no change in the US policy of strategic competition with China.

He said science and technology was the main focus of moves to block and even decouple from China, particularly in semiconductors, artificial intelligence, quantum technology and biopharmaceuticals.

“This is aimed at suppressing China, especially its military, and indicates that the United States will continue to do this to maintain economic and military superiority over China,” Wu said.

It comes after 14 Chinese firms and other entities were blacklisted in July over alleged human rights abuses and hi-tech surveillance in the western region of Xinjiang. In June, 59 Chinese companies with alleged ties to the military and surveillance efforts were prohibited from US investment.

Wu said the latest crackdown was more targeted. “Now it is narrowing the scope and moving towards technology decoupling, with more concentration on the hi-tech and defence-related sectors,” he said.

That view was echoed by a Chinese government adviser on trade with the US, who said Washington was ramping up efforts to block those sectors despite Xi and Biden agreeing on the need to avoid conflict during last week’s talks.

“The crackdown is deepening, and I’m afraid the two countries may eventually go down the path of decoupling,” said the adviser, who requested anonymity.

Additional reporting by Orange Wang and Catherine Wong

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