The US-China tech export war is intensifying as both nations continue pushing their antagonistic agendas to curb the other’s technological advancements. As expected, trade tensions between the USA and China are escalating again in the semiconductor sector as four top Chinese industry associations have recently warned against purchasing US chips, claiming they are ‘no longer safe’ and threaten national security principles. The Chinese associations, representing major industries from telecommunications to the digital economy, have opted for a considerable change in the mindset of Chinese businesses. They are now advised to consider non-US suppliers to safeguard their operations and reduce reliance on US technology.
The industry associations’ response follows the latest US crackdown, targeting China’s semiconductor industry. The new restrictions, introduced by the US Department of Commerce, extend to 140 Chinese companies and cover a broad range of products, including critical semiconductor equipment and high-bandwidth memory used in AI chip development. These measures aim to limit China’s access to advanced technologies essential for its military modernisation and AI capabilities, with the Biden administration labelling the restrictions necessary for US national security.
However, Beijing is far from passive in this ‘tech conflict’. Chinese authorities have been ramping up retaliatory measures in response to the curbs. One of the most notable moves came last year when China blocked US chipmaker Micron from some government purchases following a failed security review. Similar scrutiny has been directed at other US tech giants like Intel, with significant revenue from China. Furthermore, China has increasingly turned to its ‘unreliable entity list’ to target US firms, such as PVH Corp, probed for complying with US sanctions on Xinjiang cotton, showing China’s determination to impose economic and market barriers on American companies.
China has also used its control over rare earth materials as leverage, imposing export restrictions on critical elements like gallium, germanium, and antimony. These materials are vital for semiconductor manufacturing and military applications, and their abundance means China’s strategic advantage in global supply chains. In addition to the listed, the recent imposition of new export controls on dual-use technologies to US military users or for military purposes further underscores China’s strategy to regulate products that have both civilian and military applications. The change in course aims to secure China’s rise and dominance in these sectors and limit US access to critical technologies needed for advanced military and AI applications.
Amid these tensions, the semiconductor sector has become a focal point of a global power struggle. The USA has restricted the sale of advanced chipmaking equipment to China, focusing mainly on equipment from US-based companies such as Lam Research and Applied Materials and European suppliers like ASML. While China has made strides toward becoming more self-sufficient in semiconductor manufacturing, the US curbs continue to impact China’s access to cutting-edge equipment and expertise essential for advancing its chip technology. Despite the setbacks, Chinese companies, such as Empyrean and Nata Opto-Electronic, have been building equipment stockpiles and pushing for greater localisation to mitigate the effects of the sanctions.
The expanding reach of US export controls also affects global partners, including Japan and the Netherlands, which supply critical chipmaking equipment to China. While Japan and the Netherlands have been exempt from some of the curbs, their involvement in the US rules still limits the scope of their exports to China. However, the USA seems quick to monitor and enforce these regulations, further entangling allies in the conflict.
The conclusion is that the escalating tech conflict between the USA and China provokes deepening concerns in the two governments about data security, military supremacy, and leadership in critical areas like AI and semiconductors. With both countries fiercely safeguarding their strategic priorities, this tech rivalry is poised to reshape global supply chains, innovation landscapes, and the overall power dynamics in the tech sector, undoubtedly influencing the world economy for years to come.
New export restrictions will ignite global trade tensions.
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At the Investment Forum in Moscow on 4 December, Russian President Vladimir Putin hailed Bitcoin and digital currencies as essential for reducing financial inefficiencies and increasing economic stability. He argued that cryptocurrencies like Bitcoin provide an alternative to the US dollar, which he criticised for being used by the US government to push its political agendas.
Putin pointed to Russia’s $300 billion in frozen reserves, highlighting how this has led many countries to explore safer alternatives like Bitcoin. He emphasised that no one can ban Bitcoin, asserting that these technologies will inevitably evolve as nations seek to lower costs and improve reliability.
Russia has already taken significant steps in embracing cryptocurrencies, with new legislation recognising them as property and offering tax relief for crypto transactions. It signals Russia’s intent to foster innovation and protect its financial system from external pressures.
Putin’s comments align with broader discussions within BRICS nations about using digital currencies for cross-border payments, further challenging traditional financial systems and solidifying crypto’s role on the global stage.
A federal judge has denied the US Securities and Exchange Commission’s bid to sanction Elon Musk over missed testimony in its investigation of his $44B Twitter purchase. The judge concluded that sanctions were unnecessary after Musk testified in October and paid $2,923 to cover the SEC’s travel expenses.
The US SEC is probing whether Musk delayed disclosing his stock purchases in early 2022, potentially enabling him to buy Twitter shares at a lower price before revealing his significant stake. Critics argue this delay might have given Musk an unfair financial advantage leading up to his eventual takeover.
Musk, currently the world’s richest person, attributed the delay to a misunderstanding of SEC rules. The billionaire, whose ventures include Tesla and SpaceX, has had prior conflicts with the SEC, including a 2018 settlement over his tweets about taking Tesla private.
As the US prepares for Donald Trump’s second term, China is significantly increasing its semiconductor imports from the US, anticipating potential sanctions. In October, China imported $1.11 billion worth of microchips, a 60% rise from the previous year, and has already imported $9.61 billion in the first ten months of 2024, marking a 42.5% year-on-year increase. This surge reflects China’s growing demand for US semiconductors, particularly CPU-based processors and chips for storage and signal amplification, which align with its AI ambitions.
Despite these imports, China faces hurdles in advancing its chip technology. US sanctions have crippled Huawei’s ability to develop competitive AI chips, with the company’s upcoming processors lagging years behind NVIDIA’s offerings. This setback is largely due to restrictions on access to advanced lithography equipment, such as ASML’s EUV tools, essential for creating cutting-edge chips.
Meanwhile, China has been ramping up its chip manufacturing efforts, investing $25 billion in equipment in the first half of 2024, surpassing spending by Korea, Taiwan, and the US. However, as one-third of global semiconductor demand, China’s position remains critical for the industry. The impact of Trump’s potential tech restrictions, whether broad or selective, will likely influence the global semiconductor market, requiring careful balancing of US production and Chinese demand.
Russia is taking significant steps to establish a domestic payment system that will allow for trade and international transactions independent of Western financial institutions. Prime Minister Mikhail Mishustin announced this initiative at the Moscow Financial Forum, emphasising the need for a principles-based approach to international trade. He highlighted that the government, the Bank of Russia, and the financial community will collaborate to create a new settlement infrastructure.
Mishustin explained that this system aims to enhance the transaction experience for Russian businesses and their international partners by ensuring equality among countries, maintaining payment confidentiality, and enabling instant transactions at minimal costs. Notably, he revealed that a substantial portion of settlements between Russia and China are already conducted in national currencies, accounting for around 70% of their transactions.
However, existing sanctions have disrupted trade flows between Russia and its key partners, such as Turkey and China, potentially affecting the nearly $300 billion in annual trade with these nations. While Mishustin did not specify whether the new system would differ from the BRICS Pay network recently tested by the bloc, he reiterated the importance of creating a robust alternative to foreign systems.
The US Securities and Exchange Commission (SEC) is seeking sanctions against Elon Musk for failing to appear for court-ordered testimony regarding his $44 billion acquisition of Twitter. Musk, citing the need to oversee SpaceX’s Polaris Dawn mission launch, notified the SEC just hours before the scheduled testimony on 10 September that he would not attend. The SEC, however, contends Musk was aware of the launch in advance and accused him of employing delay tactics, as his absence violated a May court order.
Musk’s legal team defended his actions, stating that his presence was critical for the safety of the astronauts, and rescheduled the testimony for 3 October. They argue that the situation was an emergency that Musk had not created and believe that further sanctions are unnecessary. However, the SEC remains sceptical, warning that Musk’s failure to appear in October could result in additional legal action.
Why does this matter?
The ongoing SEC investigation focuses on whether Musk violated securities laws in early 2022 when he delayed disclosing his purchase of Twitter stock after reaching a 5% ownership threshold. Musk eventually revealed a 9.2% stake and made a bid for the company. Despite his claim of misunderstanding disclosure rules, the SEC continues to scrutinise his actions, reflecting Musk’s long-standing clashes with the regulator, which began with a 2018 lawsuit over tweets about taking Tesla private.
Russia’s central bank has advised businesses to adopt ‘multiple choice solutions,’ including cryptocurrencies and other digital assets, to manage payments with foreign partners amidst Western sanctions related to Ukraine conflict. The sanctions have severely impacted Russia’s trade with non-sanctioning countries like China, India, the UAE, and Turkey. Key financial institutions, such as the Moscow Stock Exchange and Russia’s SWIFT alternative, have been targeted, exacerbating the challenges for the Russian economy.
Elvira Nabiullina, the central bank governor, highlighted at a financial conference in St Petersburg that the main economic hurdle is the disruption in payment systems. She noted that new financial technologies offer unprecedented opportunities, prompting the central bank to relax its stance on cryptocurrencies for international payments. Businesses have become innovative and discreet in finding solutions, often not disclosing their methods even to the authorities.
Nabiullina also discussed ongoing efforts to establish a new global payment system independent of Western institutions, noting that countries like Russia and its BRICS partners are feeling increasingly vulnerable relying on a single international payment framework. The proposed BRICS Bridge payments system aims to integrate the financial systems of member nations, though progress has been slow and complex.
Adding to the discussion, Andrei Kostin, head of Russia’s second-largest lender VTB, emphasised the sensitivity of international payment mechanisms. He suggested that such information should be classified as a state secret to prevent quick countermeasures from Western entities, implying that Western diplomats closely monitor Russian financial strategies.
The US government is set to announce expanded sanctions on semiconductor chips and other goods sold to Russia, targeting third-party sellers in China. That move is part of a broader effort by the Biden administration to thwart Russia’s attempts to bypass Western sanctions and sustain its war efforts against Ukraine. The new measures will extend existing export controls to include US-branded goods, even those not made in the United States. They will identify specific Hong Kong entities involved in shipping goods to Moscow.
These upcoming sanctions come as President Joe Biden prepares to attend a summit with other Group of Seven (G7) leaders in southern Italy, where supporting Ukraine and weakening Russia’s military capabilities are top priorities. US officials have expressed increasing concern over China’s growing trade with Russia, which they believe is enabling Moscow to maintain its military supplies by providing essential manufacturing equipment. The broadened export controls aim to address this issue by encompassing a wider range of US goods.
Additionally, the US plans to impose significant new sanctions on financial institutions and non-banking entities involved in the ‘technology and goods channels’ that supply the Russian military. That decision comes amid efforts to ensure that Ukrainian President Volodymyr Zelenskiy can emphasise the critical situation facing Ukrainian forces in their ongoing struggle against Russia during his meetings with G7 leaders.
European Union leaders convened to address growing concerns regarding suspected Russian interference across the bloc in the forthcoming June elections. As Brussels escalates its warnings about disinformation campaigns, the EU leaders are deliberating on the potential imposition of sanctions targeting Moscow’s activities. Allegations of the EU lawmakers receiving payments to disseminate Kremlin propaganda have intensified the urgency for decisive action.
The EU leaders have pledged to closely monitor and mitigate risks of foreign interference in electoral processes. The commitment includes the establishment of a joint task force to monitor developments and coordinate with national authorities. However, Russia-friendly leaders such as Hungary’s Viktor Orban and Slovakia’s Robert Fico signalled a slim likelihood of the EU leaders taking more assertive actions before the elections.
Why does it matter?
Identified Russian disinformation tactics by the EU officials involve blending facts with false narratives to sow confusion among readers. Sanctions have been imposed on entities spreading Russian propaganda early this year. At the same time, the EU lawmakers under suspicion face scrutiny amid ongoing investigations into foreign influence, with calls for the European Public Prosecutor’s Office and the European Anti-Fraud Office to intervene against political meddling.
The United States and Europe are concerned that sanctions against Russia’s Kaspersky Lab will increase the risk of Russian cyberattacks against Western countries, according to the the Wall Street Journal.
As a result, discussions about possible sanctions against Kaspersky Lab at the US Department of the Treasury have been pushed back.
Previously, the Federal Communications Commission of the United States has added Kaspersky Lab products to its list of devices and services that pose a national security risk.
