US Warns China Of Update To Chip Export Controls

The Biden Administration is not backing down on its chip export restrictions to China, just days after a Chinese official warned against tightening the US rules.

Reuters reported, citing a US official, that the Biden administration has officially warned Beijing of its plans to update rules that curb shipments of AI chips and chip-making tools to China as soon as early October.

China has already undertaken a number of actions in the face of sweeping export controls on high-end chips introduced by the US in 2022. Last month for example China was reportedly seeking to launch a new state-backed investment fund to raise $40 billion for its domestic semiconductor sector.

Tougher rules

There has been speculation that Washington DC would tighten its AI chip restrictions against Chinese firms, ever since June when it was reported that the US was considering clamping down on the computing power export chips can have.

It comes amid a debate in the US about the effectiveness of chip sanctions against China, which has prompted the US Congress to double down and include even harsher sanctions in a competition bill it is preparing against China.

Now Reuters has reported that the US Commerce Department, which oversees export controls, is working on an update of export restrictions released last year.

The update seeks to limit access to more chip-making tools in line with new Dutch and Japanese rules, other sources told Reuters, and to close some loopholes in export restrictions on artificial intelligence (AI) chips.

“The PRC (People’s Republic of China) has been expecting an update around the one year anniversary, based on conversations with administration officials,” the US official reportedly said.

US officials provided the information to Chinese counterparts in recent weeks, the official told Reuters.

The official declined to disclose details on the particular conversations.

Stabilising relations?

Providing China with a heads up about the rules is part of a broader bid by the Biden administration to stabilise relations with Beijing, Reuters reported.

The outreach to Beijing came after the US in February shot down a Chinese spy balloon flying over America, which sharply escalated tensions.

The Biden administration has also sent a series of high-level officials to China, including Commerce Secretary Gina Raimondo in August.

Additionally, National Security Adviser Jake Sullivan held talks with Chinese Foreign Minister Wang Yi in September.

But so far China is also not backing down.

“China firmly opposes the US’s overstretching of the national security concept and abuse of export control measures to wantonly hobble Chinese enterprises,” Beijing spokesperson Liu Pengyu reportedly said in response to the US move.

It is worth remembering that tensions between the US and China are not one sided.

US Commerce Secretary Gina Raimondo, had her emails allegedly compromised by China-based hackers in the summer.

Chinese measures

Prior to that in February Chinese president Xi Jinping urged the country’s private sector to rally together and help create an independent Chinese tech sector, after previously calling on the country to ‘win the battle’ on core tech.

In April China urged the World Trade Organisation (WTO) to scrutinise US-led technology export restrictions, and said it would “take decisive measures to safeguard its rights and interests” after Japan joined chip restrictions.

Then in May Beijing banned some key domestic industries from purchasing chips from US memory chipmaker Micron, warning they were a national security risk.

Later that same month, Chinese Commerce Minister Wang Wentao urged Japan to halt its semiconductor export controls, calling it a “wrongdoing” that “seriously violated” international economic and trade rules.

Meanwhile Chinese regulators have launched a number of corruption probes targeting prominent figures in its semiconductor industry.

And in July this year China abruptly ordered export restrictions on two elements critical for manufacturing semiconductors and communications equipment.

And a former commerce minister and trade policy adviser warned that Beijing’s retaliation is just a start in the ongoing trade dispute.