China retreats when it comes to critical technology

The US is increasingly aggressive when it comes to chasing China’s technological ambitions.

Xi’s government has been frustrated that tens of billions of dollars poured into the industry over the past decade have failed to produce breakthroughs that allow China to compete on an equal footing with the US. In fact, SMIC and Yangtze, arguably the most advanced Chinese semiconductor companies, have been crippled by US sanctions.

Top Beijing officials last summer ordered a series of anti-graft investigations into industry leaders, blaming corruption for wasted and inefficient investments. The Big Fund will likely lose stature as a result, people said.

All of this happened as semiconductors increasingly became a key battleground in the China-US rivalry. Xi has repeatedly spoken of the need for a sense of urgency to resolve China’s so-called choke points: areas where the country still depends heavily on the US and other foreign powers, including critical technologies like chips.

He has begged top officials to achieve self-sufficiency on key technologies while the US seeks to isolate China. Securing a landmark third term in October, Xi vowed to “move faster” in implementing strategic projects to boost innovation, saying, “Efforts will be made to improve the new system of nationwide resource mobilization to support important projects.” achieve technological breakthroughs and boost China’s strength in strategic science and technology.”


In response, Chinese officials recently discussed whether to offer additional incentives to domestic semiconductor companies, the people said. However, many found it difficult to pool a sizeable amount after Beijing has spent heavily to fight COVID in previous years, according to the public.

Instead, officials are now asking local semiconductor material suppliers to slash prices to support their domestic customers, the people said. Weak tax revenues, declining land sales and the cost of containing COVID have strained Beijing’s finances, pushing the budget deficit to record levels last year.

Meanwhile, the US has been increasingly aggressive in chasing China’s technological ambitions.

Last year, it accelerated a campaign to curb Beijing’s chip efforts, using various tools, including export controls, to thwart China’s advances in emerging technologies. That was part of an effort to keep US National Security Advisor Jake Sullivan “as big as possible.”

Its key allies, including the Netherlands and Japan, have also agreed in principle to tighten controls over exports of advanced chipmaking machinery to China, Bloomberg News reported, in what could be another potentially crippling blow to Beijing’s big chip plans.

Featuring Debby Wu, Gao Yuan, Mayumi Negishi, Daniel Ten Kate, John Liu and Nasreen Seria.

Bloomberg LP China retreats when it comes to critical technology

Brian Lowry

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