China: Responding to US Tech Pressure

Published on September 29, 2020

Four ministries recently submitted a joint report to China’s State Council and to the Central Committee for Financial and Economic Affairs (CCFEA) on how to respond to the most recent round of US pressure on Chinese tech companies: the Ministry of Industry and Information Technology (MIIT), the Ministry of Science and Technology (MOST), the Ministry of Commerce (MOC), and the National Development and Reform Commission (NDRC).

The report characterized the US strategic goal as one of taking down China’s high-tech companies and digital economy over the next five years in order to give US companies a window to “follow up or even quickly surpass” their Chinese rivals.

The report went on to say that the US does not hesitate to use its national strength to suppress Chinese tech companies, cut chip supplies, or impose bans on Huawei,  WeChat, TikTok, SMIC and other firms, that the chip supply cuts and APP bans are just the beginning, and that China must prepare for a long-term confrontation.

** As to immediate measures, the ministries strongly recommended that China prevent TikTok and its advanced technology from falling into US hands “at all costs;” allowing the US to “seize” TikTok and its technology would not only set a dangerous precedent for other companies, but would also pose a direct threat to China’s national security.

** If [TikTok parent company] ByteDance were to be unable to control the proposed new company or if US shareholders were to be enabled to obtain the APP’s core algorithms, the ministries recommended the parent abandon, or the Chinese government veto, the deal.

**  Furthermore, if the US was to “completely” ban its chip companies from supplying Huawei for more than three months [NB – presumably timed to gauge the post-election environment], the ministries recommended that China impose sanctions and place the US firms that cut supplies off to Huawei on the “unreliable entity list.”

** From what we understand, Premier Li Keqiang and Vice Premier Liu He, who sits atop both the MIIT and MOST, approved the proposals, and sources expect President Xi Jinping to endorse the recommendations in due course as well.

** Officials also convened to discuss the most recent threat from the US to ban the supply of chips to China’s largest chipmaker, Semiconductor Manufacturing International Corporation (SMIC), and are monitoring the situation to see if the US in fact “immediately and completely” bans the supply of chips.

** If so, warns a source, Beijing will be forced to impose sanctions on relevant US tech companies, and several companies that refuse to supply Huawei and SMIC will be put on the “unreliable entities list.”

 

 

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