Global Impact: US declares ‘emergency’ on sensitive tech in latest plans to restrict investment on China

But Congress – that boisterous, other branch of the US government – has been more of a check on the Biden administration since the Republicans took control of the House of Representatives after last year’s midterm elections.

One of the chamber’s first acts was to establish its Select Committee on the Chinese Communist Party, signalling that other, established bodies like the House Foreign Affairs Committee, the Congressional-Executive Commission on China and the US-China Economic and Security Review Commission have been insufficiently hardline.

The new committee has held six hearings so far, some in the evening to reach a wider audience, on topics including “The Chinese Communist Party’s ongoing Uygur genocide” and “How to counter the Chinese Communist Party’s economic aggression”. The committee’s inaugural hearing featured former deputy national security adviser Matthew Pottinger, who asserted during the prime-time event that the Chinese government “fears most of all its own people”.

‘Limited’ fallout expected from Biden’s investment curbs on China’s quantum tech

While hearings don’t necessarily translate into laws that collide with Biden’s objectives, they can put immense pressure on administration officials in a public setting, such as when Representative Blaine Luetkemeyer, a Missouri Republican, accused Thea Rozman Kendler, assistant secretary of commerce for export administration, for not curbing the flow of hi-tech exports to China enough.

The House committee’s singular focus on China does not limit the extent to which other, long-established committees cover this domain. Nazak Nikakhtar, a Commerce Department official in international trade during the Trump administration, told the Senate Foreign Relations committee in May that the mentality of most department officials remained “pro business”, and she called for a “complete culture shift”.

This kind of pressure makes it more difficult for Biden to pull punches when drafting China-related initiatives, such as the executive order announced on Wednesday that will restrict venture capital and private equity investments into China’s hi-tech market.

Are US tech curbs the end of the road for better relations with China?

The House committee doesn’t limit itself to matters normally managed by the commerce, state and defence departments.

Alfred University, a private school in upstate New York, decided to close its Confucius Institute after the committee initiated a review into its Pentagon contract worth millions of dollars for hypersonic missile research. America’s National Defence Authorisation Act (NDAA) prohibits the Pentagon from funding institutions of higher education that host Confucius Institutes, which are at least partially funded by an arm of Beijing’s Ministry of Education.

And when hearings aren’t enough to force Biden to take a harder tack against China, there are laws Congress can pass with comfortable vetoproof majorities.

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China imposes restrictions on US chip maker Micron, escalating tech war

Biden thanked congressional leaders and the bill’s authors for their “leadership” on the overwhelmingly bipartisan legislation, but in a sign of possible ambivalence, did not host a signing ceremony as presidents sometimes do with high-profile bills.

Hundreds of China-related bills that Biden may or may not be enthusiastic about, including one that could close the Hong Kong government’s three representative offices in the US, are before Congress. That act has not yet reached the floor in either the House or the Senate for a vote, so it’s not clear whether it will come down to a test of wills between Congress and the White House.

It could, however, wind up as a measure in the NDAA, where some China-related provisions are sometimes channelled by lawmakers to boost the likelihood of them becoming law. This year’s NDAA, which must pass to keep the US military funded, has numerous provisions aimed at countering Beijing, including required assessments of a blockade of fuel to China and other military options in the event of an attack on Taiwan.

China lashes out at US ‘double standards’ at the WTO

That uncertain congressional-executive test of wills was on full display this week, when Biden signed the United States-Taiwan Initiative on 21st-Century Trade First Agreement Implementation Act, which passed the House and Senate with strong bipartisan support.

The law seeks to give Congress a say in further agreements that the Biden administration’s Office of the US Trade Representative intends to strike under his US-Taiwan Initiative on 21st Century Trade. It also requires the passage laws to enable the implementation of such agreements.

In a more explicit example of Biden’s reluctance, he released a statement immediately after signing, asserting the right to decide what the administration is obliged to share with Congress.

Stay tuned to see how that turns out.

60-Second Catch-up

Deep dives

AI, superconductor experts joined Chinese summer leadership retreat in Beidaihe

Theme of the annual gathering was ‘high-level scientific and technological self-reliance’, according to state media
Qiao Hong, whose area is brain-inspired robotics, vowed to carry out ‘original work’ to serve the country’s strategic needs

Some 57 scientists at the “forefront of domestic technology” were at the seaside resort east of Beijing with top Communist Party leaders for seven days until Monday, official news agency Xinhua reported.

China’s chip-making tool industry unites behind self-sufficiency drive but huge challenges remain

Representatives from hundreds of chip equipment firms are attending the China Semiconductor Equipment Annual Conference 2023
Chinese chip-making tools and components makers have stepped up to try and fill the gap posed by tough US trade sanctions

China’s chip-making capabilities remain highly reliant on imported parts for key semiconductor equipment, with even mature processes not completely free of US sanctions, according to industry experts attending a chip-manufacturing tool event in the country.

Representatives from more than 600 Chinese semiconductor equipment companies including Naura Technology Group, Advanced Micro-Fabrication Equipment, and US sanctions-hit Shanghai Micro Electronics Equipment (SMEE) were in attendance at the three-day China Semiconductor Equipment Annual Conference 2023, which kicked off on Wednesday in Wuxi, eastern Jiangsu province.

Photo: CFOTO/Future Publishing via Getty Images

China’s chip imports fall 17 per cent by volume in first seven months amid ongoing tech war

The fall in IC import volume compared with an 18.5 per cent year-on-year drop in import volume in the first half
China imported 42.4 billion units of IC in July alone, up 2.6 per cent from a month earlier

China imported a total of 270.2 billion units of integrated circuits (IC) in the first seven months of 2023, down 16.8 per cent from the same period last year and showing a modest improving trend despite tougher trade restrictions imposed by the US and its allies.

The fall in IC import volume compared with an 18.5 per cent year-on-year drop in import volume in the first half, and a 22.9 per cent decline in the first three months.

Divide grows in Washington over US-China trade, as hawkish bipartisanship starts to crack

At the latest hearing of the House select committee on China, Republicans argue for decoupling while Democrats contend the move would hurt American businesses
‘We’ve got to stop everything going to China; if we don’t they use everything against us,’ one panel member says

US lawmakers’ debate over how best to handle the US-China economic relationship was on full view at a congressional hearing on Thursday, with many Republicans arguing for a complete decoupling while some Democrats contended such a move would weaken American companies.

Representative Blaine Luetkemeyer, a Missouri Republican, took aim at Thea Rozman Kendler, assistant secretary of commerce for export administration, during her testimony before the House select committee on China.

Pentagon creates generative AI task force

‘We must consider the extent to which our adversaries will employ this technology and seek to disrupt our own use of AI-based solutions,’ says new unit’s leader
Washington is increasingly wary of Beijing’s access to its AI technology for military use

The US has established its first generative artificial intelligence task force, the Pentagon announced on Thursday, amid fierce competition with China in the domain that is vital to future warfare.

Task Force Lima, as it is called, will assess, synchronise and employ generative AI capabilities across the Defence Department, ensuring that it remains at the forefront of cutting-edge technologies while safeguarding national security, according to a Pentagon statement.

China’s hi-tech self-sufficiency quest faces 3 barriers – but 1 potential huge pay-off

China wants to boost its tech self-reliance, while the United States and its Western allies are blocking Chinese firms from accessing advanced chips
The US, Japan and the Netherlands have banned advanced chip-making equipment sales to China

China wants to develop the world’s most advanced technology on its own as Western countries step up legal blockades aimed at cutting it out of the world technology trade.

Beijing has unveiled a wide range of policies to boost tech self-reliance over the past decade, providing state funding to keep pace with the United States.

Joe Biden signs into law bill approving US-Taiwan trade agreement to boost bilateral economic ties

Agreement covers streamlining customs procedures, combating corruption and helping small businesses navigate regulatory procedures in both markets
Legislative branch’s authority asserted as law requires US trade representative to brief Congress on negotiations with Taiwan

US President Joe Biden on Monday signed into law a bill that approves the first agreement negotiated under the US-Taiwan Initiative on 21st Century Trade and commits the administration to consult Congress for future agreements under the initiative.

The agreement, signed on June 1, covers streamlining customs procedures, combating corruption and helping small businesses navigate regulatory procedures in both markets. It broadly aims to strengthen the US-Taiwan trade and economic relationship, but does not include any market-access provisions.

China remains in focus as US House and Senate shape Pentagon budget bill

Both chambers’ versions of the National Defence Authorisation Act are heavy with measures to counter China on Taiwan, technology, Indo-Pacific and influence
Both versions require assessments of military options in the event of a PLA attack on Taiwan, including a blockade of fuel to China

After months of combing through more than 1,000 amendments, the US Senate finally passed its version of the National Defence Authorisation Act last week – and as has been the case in recent years, it was ripe with measures to counter China.

The NDAA, legislation that establishes the top-line budget and directs policy for the Pentagon for the coming financial year, is a “must-pass” bill because its enactment is required for members of the military to receive their pay and benefits on time. As a result, provisions not strictly tied to defence often make it into the bill.

Global Impact is a weekly curated newsletter featuring a news topic originating in China with a significant macro impact for our newsreaders around the world.

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