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US-China relations
OpinionComment
Aidan Yao
Aidan Yao

Macroscope | Why an accelerated US-China tech decoupling is truly worrying

  • A blanket ban on products that use US technology being sold to China would not just affect China’s tech development and hurt US companies with Chinese business
  • It would also rip up global tech supply chains, leaving the world economy with higher inflation and slower growth

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China is the biggest customer of US chips. Strictly enforcing the chip ban could inflict pain back on the US by inhibiting growth of its own companies. Photo illustration: Getty Images/iStockphoto
Aidan Yao
A sweeping ban on the sale of semiconductors and advanced chips to China marks a further escalation in an already tense Sino-US relationship. To be clear, tech frictions between the two countries are not new – many Chinese tech firms have been placed on the US entity list in recent years, restricting them from using US technology or operating in that market.
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The stated US intention is to prevent sensitive technology with military applications from being acquired by China. However, the latest move – which US officials said was necessary to stop China from becoming an economic and military menace – threatens a significant spillover into non-military applications.

Much uncertainty still surrounds the scale of implementation, but if strictly followed through, the announced measures could effectively sanction China’s access to critical inputs for its technological, economic and social development, with far-reaching ramifications.

For China, the restrictions will slow its technological progress in the near term. In response, Beijing is likely to try to find alternative supplies of semiconductors and/or seek ways to circumvent restrictions, but its success will depend on how strictly the US ban is enforced.

For example, would other countries be liable if their products sold to China involve US technology? A blanket ban, enforced on a global scale, would have a significant impact on China’s tech development, with material ripple effects on its manufacturing and export sectors.

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Over the medium to long term, the latest development will remind Beijing of the need to ramp up home-grown innovation. This has been one of the core focuses of China’s dual circulation strategy, although its progress has been hindered by corruption scandals in recent years.
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