‘China is under siege’: US tech controls set stage for ‘aggressive’ response to protect economic growth

Shockwaves from Washington’s aggressive new containment efforts to cut China off from critical tech threaten far-reaching implications for supply-chain security

Beijing could respond by requiring Chinese tech companies to devote more resources to protecting China’s competitiveness and productivity, analysts predict

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Workers work on a power battery production line at a workshop of a battery production company in Hefei Economic and Technological Development Area in Hefei, east China’s Anhui province. Photo: Xinhua

Published: 10:00pm, 20 Oct 2022Updated: 5:05pm, 21 Oct 2022

China faces an urgent need to devise a counterplan in the face of sweeping new tech controls imposed by the United States, as the implications of its unprecedented moves are seen extending far beyond China’s semiconductor industry and into advanced sectors that Beijing deems critically important drivers of future economic growth.

The ripple effects of Washington’s containment efforts threaten to reach other strategic sectors that it sees as being linked to supply-chain security, including certain pharmaceuticals, rare earths, and items related to batteries and electric vehicles, said Nick Marro, lead analyst for global trade at the Economist Intelligence Unit.

“Many American firms – as well as European, Japanese, South Korean and Taiwanese companies – will get caught in the crossfire,” Marro said. “In the longer term, the loss of foreign inputs in China’s tech supply chains could also lead to [additional] costs, while minimising product and service choice in ways that affect the tech sector’s competitiveness and productivity.”

Other than striving for success in technological breakthroughs and self-reliance, China doesn’t have any other option in the short term, said Shi Yinhong, an international relations professor at Renmin University in Beijing.

“China’s connections with other developed chip-making countries such as the Netherlands, Japan and South Korea could hold out for a while. But after all, they have already decoupled with China in the most advanced technologies, and the pressure from the US, as well as their own concerns about China, could all play a part. So, I am afraid [the buffer] won’t last for long.”

China is dependent on various types of foreign technologies – including those with military applications, such as for aircraft engines and submarines – that will be affected by the tech blockage, Shi said.

Henry Gao, a law professor at Singapore Management University, anticipates that Beijing will require tech companies to devote more resources to innovation in core technologies.