By Eduardo Baptista
BEIJING (Reuters) – Washington’s new restrictions on China’s semiconductor industry are fueling fears that Beijing will hit back as trade tensions rise between the two largest economies.
Chinese authorities have pledged to take action to safeguard the interests of their companies and the country has in recent years amassed a range of tools that analysts say could be used to retaliate against US companies. Here are some:
SAFETY ASSESSMENT
Beijing’s announcement last May that it would block some government purchases from Micron after the US memory chip maker failed a security investigation is widely seen as one of China’s first retaliations in the US-China chip war.
Concerns have grown that US tech giant Intel could be a future target, after the Cybersecurity Association of China (CSAC) claimed the US company had “continually harmed” the country’s national security and interests and that its products manufactured in China sold should be subject to a safety assessment.
Intel is one of the largest suppliers of chips used in electronic devices, including personal computers, and traditional servers in data centers in China. Last year it received more than a quarter of its total revenue from China.
Retaliation can also take place through other channels. U.S. business chambers in China have complained in recent years that U.S. companies have faced increasing problems, such as slower customs clearance and increased government inspections during times of escalated tensions such as the U.S.-China trade war.
UNRELIABLE ENTITY LIST
China announced in September that it would investigate US company PVH Corp, owner of fashion brands Tommy Hilfiger and Calvin Klein, for “unfairly boycotting” Xinjiang cotton and other products under the unreliable entity list (UEL) framework.
That was the first time Beijing had taken action against a company for removing Xinjiang cotton from its supply chain to comply with U.S. rules, and one of the few times it had used the UEL since the list was created.
Beijing created the list during Trump’s first presidency and threatened to ban US companies from importing, exporting and investing in China.
So far, the list includes American companies involved in arms sales to Taiwan, such as Lockheed Martin and RTX’s Raytheon Missiles & Defense.
EXPORT CONTROLS ON CRITICAL MINERALS
China dominates global mining and processing of rare earths and has imposed rules to regulate their exports since last year.
In August, China imposed export restrictions on antimony, a strategic metal used in military applications such as munitions and infrared missiles, as well as batteries and photovoltaic equipment.
China issued new restrictions on some graphite products used in electric vehicle batteries in October 2023, days after Washington banned foreign subsidiaries of Chinese companies from buying restricted semiconductors.
In July 2023, China announced restrictions on the export of eight gallium and six germanium products, metals widely used in chip production, citing national security interests.
DUAL USE STANDS
China recently expanded its oversight of dual-use items – products that have both civilian and military applications – with new export controls coming into effect on December 1.
The new rules, first announced in September, create a unified and simplified export control list, while also requiring Chinese exporters of dual-use items to disclose details about end-users. This allows Beijing to better identify supply chain dependence on China within the US military-industrial complex.
The list is expected to cover a wide range of advanced technologies where China is a leading power or wants to become a leading power, including chip technology, artificial intelligence, quantum computers and drones.
Chinese sanctions on US drone manufacturer Skydio this year have reduced battery supplies, according to the Financial Times.
“As (China’s) containment intensifies, more US industries, companies and the entire economy will pay an increasingly high price,” state-owned Global Times wrote in an opinion article on Skydio earlier this month.
(Reporting by Eduardo Baptista; Editing by Brenda Goh and Sam Holmes)
