House Republicans this week urged the Biden administration not to strike a deal with Beijing after Chinese officials reportedly offered to restart counter-narcotics activities with the U.S. in exchange for lifting certain trade restrictions. Beijing asked the U.S. to lift restrictions on the Ministry of Public Security’s Institute of Forensic Science, The Wall Street Journal recently reported. The institute was added to the Entity List in 2020 for its ties to human rights violations.
Chip export news
Two U.S. semiconductor companies said they still see opportunities to sell into the Chinese market despite sweeping export controls announced by the U.S. in October (see 2210070049) and potentially more restrictions coming soon.
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The top lawmakers on the House Select Committee on China urged the Commerce Department to strengthen its Oct. 7 China chip controls, saying Chinese firms have “identified workarounds.” In a letter last week to Commerce Secretary Gina Raimondo, Reps. Mike Gallagher, R-Wis., and Raja Krishnamoorthi, D-Ill., said the interim final rule’s threshold for the “bidirectional transfer rate of 600 Gbyte/s should be lowered sufficiently to prevent clever engineering that bypasses the regulations.” They also said the rule, which will be updated in the coming months when finalized by the Bureau of Industry and Security (see 2307260071), should address Chinese firms using cloud computing services to “outsource their advanced computing needs” and evade the export controls (see 2303210037 and 2305160092).
The U.S. Court of Appeals for the 9th Circuit, in a July opinion, reversed a California district court's decision acquitting Yi-Chi Shih, an employee at China-based firm Chengdu RML, of conspiracy to violate export control laws via his export of semiconductors to China. Judges Andrew Hurwitz and Ryan Nelson said "a rational factfinder could find that the exported [monolithic microwave integrated circuits] were not exempt from the [Export Administration Regulations] as fundamental research."
The Semiconductor Industry Association this week released a report on the state of the American chip industry, highlighting issues surrounding U.S. Chips Act implementation, the manufacturing industrial base, global chip demand, American technological competitiveness, geopolitical tensions impacting the industry and more.
The Bureau of Industry and Security shouldn’t renew the one-year authorizations it gave to certain foreign chip companies as part of its Oct. 7 China chip controls unless the agency makes “significant” changes to the restrictions when it finalizes the controls in the coming months, said Derek Scissors, a China policy expert with the American Enterprise Institute. Scissors said extending the licenses beyond their October expiration would “undermine” the Biden administration’s goal of denying China advanced semiconductor technology and unfairly advantage foreign companies over U.S. firms.
Commerce Secretary Gina Raimondo this week declined to say when she expects the Bureau of Industry and Security to finalize its Oct. 7 China chip controls (see 2210070049, saying it’s more important to her that the agency takes its time and gets the updated restrictions “right.” She also said she doesn’t see Chips Act funding and restrictions on American chips sales to China as contradictory and denied reports that the administration has delayed new export controls against China in an effort to limit damage to its relationship with Beijing.
U.S. policymakers should explore new ways to restrict transfers of items and services that China may be using to advance its artificial intelligence capabilities, such as data, algorithms and human capital, the Center for a New American Security said in a report this week. Although the administration should “aggressively” restrict exports to China of advanced semiconductor equipment, the report said Washington also needs to “seek out creative tools to regulate other basic building blocks of AI.”
A spokesperson for China's Ministry of Commerce said China is "deeply dissatisfied" with Japan's export restrictions on semiconductors (see 2303310031), which took effect July 23 "[d]espite China's serious concerns." The spokesperson said during a press conference this week that the country has made "serious démarches to Japan at various levels." Imposing trade restrictions "to push for decoupling and disrupt" high-tech supply chains is "wrong and against the law of the market economy, the principle of free trade and international economic and trade rules," the spokesperson said. China wants Japan to keep its larger trading relationship in mind and "not to abuse export controls," the spokesperson said.