In a display of unwavering resolve, the Biden administration is set to strengthen its export restrictions on artificial intelligence (AI) chips and chip-making tools destined for China. This decision comes just days after Chinese officials cautioned against imposing stricter rules, signaling a growing rift in the ongoing tech trade war. According to a US official cited by Reuters, the administration has officially communicated its intentions to Beijing, with the update expected as early as October.
China’s response to US export controls
China has already taken a series of measures in response to the comprehensive export controls imposed by the US on high-end chips in 2022. Recently, reports surfaced of China’s plans to launch a state-backed investment fund aimed at raising a substantial $40 billion to bolster its domestic semiconductor sector. This move underscores China’s determination to reduce its reliance on foreign chip suppliers and enhance its technological self-sufficiency.
Speculation surrounding AI chip restrictions
Speculation has been rife since June that the United States would tighten its AI chip restrictions targeting Chinese firms. Reports emerged that the US was considering clamping down on the computing power that chips intended for export could possess. This development has ignited a debate in the US about the effectiveness of chip sanctions in curbing China’s technological advancements. Consequently, the US Congress is contemplating even more stringent sanctions as part of a competition bill aimed squarely at China.
US Commerce Department’s planned update
The US Commerce Department, responsible for overseeing export controls, is actively working on an update to the export restrictions put in place last year. The impending update aims to align more closely with new rules introduced by the Netherlands and Japan, further limiting access to chip-making tools. Additionally, it seeks to close existing loopholes in export restrictions pertaining to AI chips.
A US official, speaking on the condition of anonymity, disclosed, “The PRC (People’s Republic of China) has been expecting an update around the one-year anniversary, based on conversations with administration officials.” These conversations took place in recent weeks as part of a diplomatic effort to inform Chinese counterparts about the forthcoming rule changes.
Biden administration’s diplomatic outreach
The decision to provide China with advanced notice of the rule changes is part of the Biden administration’s broader strategy to stabilize relations with Beijing. Recent events, such as the US intercepting a Chinese spy balloon over its territory in February, have escalated tensions between the two global powers. To counteract this, the Biden administration has engaged in high-level diplomacy, including visits by Commerce Secretary Gina Raimondo in August and talks between National Security Adviser Jake Sullivan and Chinese Foreign Minister Wang Yi in September.
However, it is evident that China remains steadfast in its position. Beijing’s spokesperson, Liu Pengyu, responded to the US move by stating, “China firmly opposes the US’s overstretching of the national security concept and abuse of export control measures to wantonly hobble Chinese enterprises.”
Tensions in US-China relations
It is essential to acknowledge that tensions between the US and China are not one-sided. In a concerning development, US Commerce Secretary Gina Raimondo had her emails allegedly compromised by hackers based in China during the summer. These incidents only serve to further strain the relationship between the two nations.
Chinese President Xi Jinping has consistently urged the country’s private sector to collaborate in creating an independent Chinese tech sector. He has stressed the importance of “winning the battle” on core technologies, underlining China’s determination to achieve self-reliance.
In April, China called upon the World Trade Organisation (WTO) to scrutinize technology export restrictions led by the US. The country also vowed to take decisive measures to safeguard its rights and interests, particularly after Japan joined in imposing chip restrictions.
Additionally, Beijing took a strong stance by banning key domestic industries from purchasing chips from US memory chipmaker Micron in May, citing national security concerns. Chinese Commerce Minister Wang Wentao rebuked Japan for its semiconductor export controls, labeling it as “wrongdoing” and a violation of international economic and trade rules.
Chinese regulators have launched a series of corruption probes targeting prominent figures in the semiconductor industry, signaling a crackdown on misconduct within the sector. In July, China unexpectedly imposed export restrictions on two critical elements used in semiconductor and communications equipment manufacturing.
