1682040881 Raids sanctions and millions of dollars in fines China is

Raids, sanctions and millions of dollars in fines: China is taking economic reprisals amid rising tensions with the US

As China moves against Western interests, the Asian giant’s trade and technology war with the United States has escalated by a notch in recent months. For now, Beijing has targeted certain companies amid mounting anger in the world’s second-largest economy at the pressure Washington is putting on them. However, the Chinese government, which believes that the US government is trying to undermine the country’s development by imposing trade bans and restrictions, is also considering a broader measure that would limit Western access to materials and technology in China dominated key sectors. such as intelligent vehicles and the photovoltaic industry.

In early April, the Chinese government launched an investigation into U.S. memory chipmaker Micron Technology’s products, a statement from the Cyberspace Administration of China saying the investigation was in the interest of “national security.” The measure targeted a sector at the heart of an intense commercial, military and technological rivalry between the two superpowers. In October, Washington imposed a ban on the export of the most advanced chips to China in a bid to prevent Chinese development of cutting-edge weapons. US allies like Japan and the Netherlands followed suit.

In February, shortly after Washington ordered the downing of a Chinese high-altitude balloon that had entered US airspace without permission, Beijing decided to sanction American defense manufacturers Lockheed Martin Corporation and Raytheon Missiles & Defense for “involved in the sale of weapons to… Taiwan [the self-governed island that Beijing views as part of its territory, and which receives military support from Washington]A week later, the US blacklisted five Chinese companies and a research institute for allegedly being linked to Chinese aerospace surveillance programs.

In March, Chinese measures also hit the white-collar sector. The Chinese offices of US law firm Mintz were raided and five Chinese employees arrested, while London-based accounting firm Deloitte was fined around $31 million for failing to adequately audit a Chinese financial firm. In addition, an executive of the Japanese pharmaceutical company Astella was arrested on charges of espionage. Panasonic director Tetsuro Homma, the new president of Japan’s Chamber of Commerce and Industry in China, said Tuesday during a speech in Beijing that the detention has raised awareness in Japan about the risks of doing business in China, Japanese news agency Kyodo reported.

Aiming to “ensure national security,” Beijing is considering limiting exports of certain crucial technologies in which it is a world leader. On Dec. 30, China’s Ministry of Commerce, along with its Ministry of Science and Technology and other departments, released a proposed update to the country’s catalog of technologies subject to export bans and restrictions.

A public feedback period was then opened – it ended on January 28 – and the changes are expected to be rolled out throughout the year. Released along with the announcement, the revised catalog features 139 items, seven of which are new. Notable additions to the list include the technology used to manufacture photovoltaic silicon wafers, which are used to manufacture solar panels.

The measure, which is the subject of ongoing debates in the Chinese government, could be interpreted in the short term as a form of “retaliation” and as a safety net to bolster the country’s position in the face of the threat of the The US is decoupling its economy from China’s – and fears that the European Union will do the same. That’s the verdict of Cosimo Ries, an analyst at Trivium China, a consultancy specializing in the Asian country’s renewable energy sector.

Chinese President Xi Jinping applauds during a meeting with his Gabonese counterpart Ali Bongo Ondimba in Beijing on Wednesday. Chinese President Xi Jinping applauds during a meeting with his Gabonese counterpart Ali Bongo Ondimba in Beijing on Wednesday. Ken Ishii (AP)

According to Ries, Beijing is aware of US efforts to invest in the domestic solar power industry, with the country’s anti-inflation law contributing billions of dollars to green energy development. In the EU, on the other hand, the proposed Net-Zero Industry Act aims for 40% of all products in sectors such as solar and wind energy to be manufactured within the European bloc. Such steps are a “long-term threat to China’s world domination in the solar industry,” says Ries. “Everyone is trying to build their own supply chain alternative,” so Beijing wants to “curb those efforts” by making it “a lot more expensive” for companies to produce without Chinese input.

According to Ries, China’s proposed throttling of technology exports shows that the “possibilities for reprisals are actually quite limited”. So far, Beijing has hardly done anything to react to the constant sanctions and restrictions from Washington. “China doesn’t have much to offer in this regard,” says Ries. “And those are probably some of the only areas where they can do something.”

Export ban on 24 types of technologies

If the catalog updates are approved, it will be illegal to export 24 types of technologies, while there will be restrictions on the remaining 115 (the sale of products will be allowed with a license, but there will be a strict ban on distribution the know-how involved in their creation). The last time the Chinese government updated this list was in August 2020 (and before that in 2008).

The ongoing debate over the measure appears to be intense, as is the public. Bai Chong’en, the dean of the School of Economics and Management at Tsinghua University, has openly lamented that adding silicon wafers to the list could have a negative impact on the global competitiveness of China’s photovoltaic industry. “Since the start of the feedback period, many foreign companies have been looking for alternatives to Chinese technology and are exploring the possibility of resuming operations with European and American firms,” ​​according to the state-run Economic Daily.

According to a report released last year by the International Energy Agency, over 97% of the world’s silicon wafer production currently comes from China.

For Beijing, striving for scientific and technological self-sufficiency is imperative amid rising tensions with Washington. China’s President Xi Jinping in March urged the country to pursue “high-quality growth” and embrace “innovation-led development,” while the Chinese Communist Party is stepping up oversight through a sweeping transformation of state institutions. By restricting exports of its cutting-edge technologies such as photovoltaics, rare earths, smart vehicles and biotechnology, China protects its privileged position by hampering progress in these industries in locations such as the US, EU and India while also aiming to increase its dependence on the country to reduce.

Another important technology to add to China’s restricted and banned list is the LiDAR laser radar system, which is essential for the production of autonomous and intelligent vehicles. According to a study by Chinese consulting firm AlixPartners, Chinese companies currently have a 58% market share in the industry. Beijing is also considering banning the export of technology needed to manufacture high-performance magnets, which are made from rare earth elements such as neodymium and samarium-cobalt. When it comes to rare earths — a group of 17 chemical elements found in most everyday electronics and vital to the manufacture of electric vehicles, wind turbines and advanced weapons — China is in a position of absolute dominance: it makes 85% of world production.

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