In an effort to stabilize tense relations between two global superpowers, the Biden administration has informed Beijing about the forthcoming revisions to regulations that restrict the export of AI chips and chipmaking equipment to China. The update, which could be released as early as October, stems from a U.S. policy decision to align its export restrictions with the more stringent rules recently implemented in the Netherlands and Japan.
Background on Export Restrictions
The Commerce Department, responsible for regulating U.S. exports, is finalizing an overhaul of rules initially introduced last year. This revision aims to further restrict access to advanced chipmaking tools and to patch existing loopholes concerning the export of AI chips.
This move wasn’t entirely unexpected by China. “The PRC anticipated an update around the one-year mark since the previous regulations were announced on October 7, 2022, based on prior discussions with administration officials,” stated a U.S. official, referencing the People’s Republic of China.
According to information being reported by Reuters for the first time, U.S. representatives have conveyed these updates to their Chinese peers in the past few weeks. Specific details on these communications, however, remain undisclosed.
Aims of U.S. Diplomacy with China
Alerting China about these rule changes is part of a broader diplomatic strategy spearheaded by the Biden administration to defuse the escalating tensions between the two countries. This approach was deemed necessary, especially after the U.S.’s decision to intercept and destroy a Chinese spy balloon in February heightened diplomatic strains.
In line with this, the U.S. has undertaken multiple high-profile visits to China. Commerce Secretary Gina Raimondo made her journey in August, closely followed by National Security Adviser Jake Sullivan, who met with Chinese Foreign Minister Wang Yi in September.
Originally, the October 2022 restrictions were instituted to deter the utilization of U.S. technology in bolstering the Chinese military. The goal was to limit China’s acquisition of high-end AI chips and hinder its imports of top-tier chipmaking equipment from the U.S.
The Department of Commerce chose not to comment on this development. Similarly, when questioned about the U.S.’s move, a spokesperson for the Chinese embassy in Washington replied they had “nothing to offer.”
However, spokesperson Liu Pengyu emphasized China’s discontent with the U.S.’s stringent measures. “China resolutely rejects the U.S.’s excessive application of the national security concept and its misuse of export control measures to deliberately handicap Chinese businesses,” Pengyu remarked.
Reactions and Speculations
Peter Harrell, a former White House official, highlighted that while he wasn’t privy to whether China had been forewarned about the updated rules, if they were, it would mark a significant turning point for the Biden administration. It would demonstrate their intention to prevent miscommunication and unintended diplomatic fallout.
In a similar vein, Treasury Secretary Janet Yellen had cautioned Chinese officials in July regarding restrictions on U.S. investments in China, which were formally announced in August.
Another crucial diplomatic event on the horizon is the Asia-Pacific Economic Cooperation (APEC) summit scheduled for November in San Francisco. The U.S. hopes to secure the attendance of Chinese President Xi Jinping. Insiders believe this hope influenced the timing of the export rule revisions’ announcement. The administration, they suggest, wants to sidestep any potential pitfalls that could discourage President Xi’s participation. Consequently, any rules not finalized by early October might be postponed until post-summit to avoid agitating Beijing.
Explaining the timing of the announcement, a U.S. official mentioned, “The Administration opted for the one-year anniversary for various reasons, one being to set a consistent rhythm.” However, they added that the final adjustments necessary for these rules are still ongoing. “Currently, definitive plans are yet to be established,” the official reported last Friday.
Interestingly, Presidents Biden and Xi haven’t had a face-to-face meeting since the G20 summit in Bali, Indonesia, last November. Notably, President Xi refrained from attending the subsequent G20 conference in India.
International Chipmaking Alliance
Earlier this year, a trilateral agreement was struck between the U.S., the Netherlands, and Japan, who collectively dominate the global chipmaking equipment sector. Their collaboration intends to harmonize their efforts concerning export controls.
This international alignment could potentially affect companies such as ASML, the leading global chip equipment manufacturer and the crown jewel of the Dutch tech industry. Since ASML’s systems integrate U.S. components, these revised rules could impact their operations, as highlighted by Reuters in June. When contacted for a statement, an ASML representative declined to comment.
It’s worth noting that it’s not uncommon for the U.S. to make last-minute alterations before finalizing regulations. As such, both the specifics and timing of these restrictions remain fluid and subject to change.
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