How China Aims to Tackle USA’s Export Ban Strategy With its New $143 Billion Investment Scheme

Published  December 20, 2022   0
China’s New Investment Scheme of $143 Billion

USA’s export ban strategy will largely impact the US consumers besides crumbling the business of the US firms that supply chipset to Chinese firms

The US government has been undertaking stern action against Chinese technology companies since the time of COVID-19 pandemic. In fact, ex-President Donald Trump passed an executive order back in May 2021 that restricted US firms from utilizing communications and information technology from any companies who are considered a threat to national security. In fact, current President Joe Biden also signed an agreement to ban Huawei and ZTE from operating on their soil. In an effort to counter these scenarios, the Chinese government has proclaimed to invest $143 billion, which will be used to offer fiscal subsidies and incentives to Chinese semiconductor manufacturers.

As per a media report, with the help of the investment, the chip-makers in the country will be able to enhance and develop their semiconductor technology ecosystem. The analysts stated that this is one of the three imperative strategies China has undertaken to protect their chip-making firms, thereby offering assistance to its huge hardware, electronics, military, and automotive industry. Lourdes S. Casanova, director of the Emerging Markets Institute at Cornell University told Voice of America, "China views semiconductors as a strategic resource. Therefore, it wants to become self-sufficient in all aspects of advanced chip design and manufacturing. These funds are meant to build China’s capabilities towards this goal."

Recently, China also moved to the World Trade Organization to counter the USA’s moves. They accused the USA by stating that the latter is misusing export control measurements and hindering the normal global trade in chips and other technology devices. Moreover, on Thursday, the White House issued a further notice to blacklist memory chip manufacturer YMTC and 21 other Chinese firms in the AI chip sectors. Analysts stated that this blunt move by the US will largely affect various other industries as well such as automobile manufacturing, electronics, and artificial intelligence who are dependent on chips made by the US based companies Nvidia and AMD.

The point to be noted is that the US move would not have been that efficient if semiconductor manufacturers in other countries particularly Japan and Netherlands intensify their supplies to China. The possibility is there because the $143 billion scheme will now help the Chinese companies to offer higher prices. Casanova exclusively opined to VOA that “Netherlands and other European countries will likely follow U.S. policy. However, other countries have been more reluctant. For instance, both Mexico and Brazil did not ban Huawei as a possible supplier of telecom equipment in the 5G auctions in both countries.

It is highly expected that Japan is not going to pay attention to the USA’s request because China’s leading trade associate is Japan, which is 22 percent and it is then followed by the US with 18.5 percent. Experts also added that loosening the semiconductor industry of China from the international supply chain will largely impact the US consumers besides crumbling the business of the US firms that supply chipset to Chinese firms.