Concept Image Of Microelectronics And Flag Of China

The Biden administration last week took its latest actions to stymie the growth of China by issuing an executive order that bans new investment into vital technology industries in the Asian giant. 

When distilled, the executive order bans tech venture capital companies and other investment houses from investing in Chinese companies behind technologies like Artificial Intelligence, quantum computers, and semiconductors.

The White House framed the decision as an effort to ensure the U.S.’s national security by “protecting technologies that are critical to the next generation of military innovation.” 

The order said China eliminates “barriers between civilian and commercial sectors and military and defense industrial sectors, not just through research and development, but also by acquiring and diverting the world’s cutting-edge technologies, for the purposes of achieving military dominance.”

The New York Times reported that the Treasury Department played down the move and called it a “narrowly targeted action.”

China rejected the executive order as the latest part of the U.S.’s “ill intention campaign to contain China’s technological rise, which amounts to ‘economic coercion’ and violates basic market principles,” the Global Times, reported. The paper is a tabloid newspaper under the auspices of the Chinese Communist Party’s flagship newspaper, the People’s Daily.

The Chinese Foreign Ministry called the move a “clear act of overstretching the concept of security and politicizing business engagement.”

“The move’s real aim is to deprive China of its right to develop and selfishly pursue US supremacy at the expense of others,” the ministry said. China says the move is “tech bullying.”

One unnamed executive at a Chinese tech firm, told the Global Times that he does not believe the market will respond too dramatically to Biden’s executive order because the move was “advertised for a long time.”

“Moreover, the business community has no illusions about the U.S. government,” the executive said. “Under the U.S.’s technology war against China, U.S. direct investment in Chinese high-tech fields has been declining.”

Indeed, the Biden administration has already imposed export controls on semiconductor chips and, as we’ve reported, Biden signed the CHIPS and Science Act into law, which earmarks a nearly $53 billion investment “in U.S. semiconductor manufacturing, research and development, and workforce. The law also creates a 25 percent tax credit for capital investments in semiconductor manufacturing.” (See “SENATE SHOVELS $280 BILLION INTO CHIP MANUFACTURE GANG,” 2 Aug 2022.)

TRENDPOST: The tech executive told the Global Times that technological innovation is unlike other fields because, in many cases, it requires international cooperation.

The U.S. does not care how many regular people have to lose jobs, or what emerging market’s economy needs to tank, it will do all it can to make sure it doesn’t lose its Top-Economy status to China. 

Don’t take our word for it. 

Janet Yellen, the U.S. Treasury secretary, told a conference in April the Biden administration is so bent on containing China’s rise that it is willing to jeopardize the U.S. and global economy. (See “YELLEN: BIDEN WILLING TO DAMAGE U.S. ECONOMY TO CONTAIN CHINA,” 25 Apr 2023.)

Yellen admitted that an economic “decoupling” between the two superpowers should be something to avoid but said Washington’s chief priority is “national security” in its relationship with Beijing and everything else comes second.

Yellen said Washington will not compromise on these issues, “even when they force trade-offs with our economic interests.”

A month after Yellen spoke about U.S.-Chinese relations, Rep. Seth Moulton, D-Mass., attended a conference at the Milken Institute in Los Angeles and floated the idea that one way to deter China from invading Taiwan would be to put military assets in place to be able to destroy the headquarters of Taiwan Semiconductor Manufacturing Company, or (TSMC).

Moulton was with Michele Flournoy, who started WestExec Advisers with Antony Blinken, the secretary of state in 2017. The “secretive consulting firm” has been criticized for its revolving door in the Biden administration.

Flournoy distanced herself from his comments and said if TSMC was destroyed, there would be a “two trillion-dollar impact on the global economy within the first year” and “you’d put manufacturing around the world at a standstill.”

Moulton claimed the video was selectively clipped.

The Trends Journal has long noted that China’s business is business, while the U.S.’s business is war. (See: “TOP TRENDS 2021: THE RISE OF CHINA.”)

The New York Times reported last year that Beijing was able to leapfrog the U.S. when it comes to semiconductors that include circuits “about 10,000 times thinner than a human hair” and rival those made in Taiwan, which is known as an industry leader.

We have noted that both China’s manufacturing abilities and tech innovation were at third-world levels before Bill Clinton and George W. Bush brought the communist nation into the World Trade Organization at the turn of the century.

The Times said the Biden administration has worked to keep key equipment away from China when it comes to these semiconductors “because progress in chip manufacturing is now scrutinized as a way to define national power—much the same way nuclear tests or precision-guided missiles were during a previous cold war.”

TREND FORECAST: China’s tightening alliances with Asian, African, and South American nations highlight an aspect of Self-Sufficient economies, one of our Top 2022 Trends.

China is using its economic might to bind other nations more closely to it, doing more to ensure that those nations will remain trading partners that can leave China less reliant on geopolitical adversaries and competitors.

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