In the four years Democrats spent in the political wildness during the presidency of Donald Trump, their critiques of the Republicans' policies often included a common acknowledgment: China was challenging the U.S.'s fundamental interests, and it was right to push back.
Two Foreign Affairs articles captured the mood. In one in 2019, Kurt Campbell and Jake Sullivan—now President Joe Biden's Asia czar and his national security adviser, respectively—declared the era of engagement with China was over.
In its place would come competition and coexistence, and America would need to establish favorable terms in key domains—military, economic, political and global governance.
In another in 2020, Biden sent a similar message from the campaign trail. "China represents a special challenge," he wrote. "To win the competition for the future against China or anyone else, the United States must sharpen its innovative edge."
His administration's announcement in October of high-technology export controls to China represented a profound policy shift, a step to blunt Beijing's sharpest tools—and a willingness to risk it alone, if necessary.
Sullivan said at Georgetown University on October 13 that the "carefully tailored" measures targeted China's capacity to produce the most-advanced semiconductors. That expertise, he added, would need to remain in American and allied hands in a "small yard, high fence" approach.
"These restrictions are premised on straightforward national security concerns. These technologies are used to develop and field advanced military systems, including weapons of mass destruction, hypersonic missiles, autonomous systems and mass surveillance," Sullivan said.
It was an unprecedented intervention that signaled America's intention to retain primacy in emerging technologies by controlling "chokepoints" in the global supply chain, leaving Chinese innovation a generation behind, if not more.
It would ensure the security of America and its allies wasn't undermined by their own technology in the future, Sullivan said.
Targeted Decoupling
The full ramifications of the sanctions won't emerge for some time—the Commerce Department has granted export licenses in specific cases—but signs of disruption were immediate, with reports indicating that U.S. executives were leaving top posts at Chinese semiconductor companies over potential legal exposure.
The export controls were expected to accelerate Chinese President Xi Jinping's plans to build China's own ecosystem of technologies and standards, but they started by putting a very real dent in his goal of placing China among the world's future leaders in science and technology. Crucially, the controls arrived before Beijing could wean itself off foundational U.S. expertise in the field.
In practice, the measures are both sweeping and precise, effectively blacklisting dozens of Chinese firms from accessing high-end American semiconductors, as well as chip-making tools and know-how. Unique to the controls were their references to "U.S. persons," who were forbidden from supporting the research and production of China's fabrication facilities.
In the case of China's leading chip-makers—the likes of SMIC and YMTC—the controls on equipment, software, and personnel were even more rigorous, intended to actively degrade their capacity to innovate beyond current levels.
The high-tech decoupling may be selective, but it was all but certain to impact China's commercial sector. Some analysts have described it as the "Huawei model," a reference to the U.S.'s kneecapping of the Chinese telecommunications giant—also on national security grounds—through software exclusion and hardware bans.
The Chinese government's policy of "military-civil fusion" has raised the imperative to deny it access to so-called dual-use technologies, those with both civilian and military applications, said Lindsay Gorman, a senior fellow at the German Marshall Fund's Alliance for Securing Democracy.
Previous attempts to avoid inadvertently aiding China's military modernization have been ineffective, and the U.S. has long accused Beijing of improprieties including corporate espionage and forced technology transfer targeting China-based foreign firms.
"The United States has recognized that it is impossible to keep U.S. components from ending up in Chinese warplanes if we're also selling them to the Chinese commercial sector," Gorman told Newsweek.
"The effect will very likely hamstring China's civilian tech sector in its ability to produce these high-end chips. Ultimately, they may slow down China's AI progress as the field advances to require more and more to compute," said Gorman, who most recently served as a senior adviser for technology and national security strategy at the White House.
China's attempt to catch up to the U.S.'s dominant position in advanced chip-making had been aided by access to U.S. technology. "Now that access is being revoked," Gorman said.
"If Chinese firms can find workarounds–such as by smuggling U.S. chip technology from other countries—we can expect a crash program for an indigenous semiconductor supply chain. But, due to the complexity of the inputs involved, these workarounds are not likely to be easy fixes that will have the industry back up and running in months," Gorman said.
Observers expect China to try to offset costs by enlarging the market share of its mature chipsets, ones that are widespread in commercial devices.
Meanwhile, the restrictions would debilitate China's domestic industries in artificial intelligence, electric vehicles, robotics and 5G, Philip Hsu, a visiting fellow at the Brookings Institution, told Newsweek.
Beijing would likely respond with a nationwide effort, Hsu said, "by injecting massive state-steered funds into the industry; ushering in technologies, equipment and talents through alluring offers in Asia and Europe; and sustaining pre-existing and creating new demands in Asian and European markets for China's high-tech products."
China Takes a Hit
China was already facing economic uncertainties ahead due to an adherence to Xi's signature zero-COVID policy and unfavorable demographic projections.
On Monday, China's National Bureau of Statistics published third-quarter GDP data indicating growth of 3.9 percent, up from 0.4 percent in Q2 and bringing year-on-year growth to 3 percent. Retail sales grew below expectations, while the urban unemployment rate was also up to 5.5 percent.
The agency surprised long-time watchers when it suddenly delayed the data's scheduled release on October 18, a decision that would've undermined investor confidence in the economy.
The unexpected drift from financial regulatory and transparency was in all likelihood linked to the atmosphere surrounding the Chinese Communist Party's 20th National Congress, said Ya-ling Lin, an associate research fellow at the Institute for National Defense and Security Research in Taipei.
The twice-a-decade gathering began on October 16 and concluded on Saturday with Xi confirmed for an unprecedented third five-year term as leader. Publishing the Q3 data at the time would've taken attention away from the all-important event, Lin said.
"But this also raises the possibility that the Q3 data was not satisfactory. That is to say, its economic performance including GDP growth may have rebounded in relation to Q2, but the rebound was not as strong as expected," she told Newsweek before the data was released.
"China set a growth target of 5.5 percent this year, but that now looks difficult to achieve," Lin said.
Economists watching Xi's opening remarks at the party congress noticed an apparent revision of Beijing's goal of raising GDP per capita and doubling the national economy by 2035.
According to Lin, China would instead target Japan and Germany levels of high-tech manufacturing. In light of the new restrictions on technology, it would undergo an economic restructuring that necessarily sacrifices growth for quality, she said.
Ngor Luong, a research analyst at Georgetown's Center for Security and Emerging Technology, said Xi's speech reaffirmed a desire for economic self-sufficiency through his "dual circulation" model, which seeks to reduce domestic dependencies while ensuring the Chinese market remains vital to others.
Xi also emphasized security, Luong told Newsweek. In his two-hour speech, China's leader mentioned the "economy" 22 times, down from 102 times at the 18th party congress in 2012, when he became CCP general secretary. References to "security" rose from 36 to 50 times.
"We see the term 'security' coming up a lot lately and this idea of the securitization of economic and technological policy," Luong said.
"He's combining economic security with broader national security—how to guard China against exogenous changes like the U.S.'s export controls. There's a greater emphasis and desire to safeguard China against these vulnerabilities," she said.
Compete vs. Contain
There was little fanfare when the latest sanctions were announcement on October 7, a Friday night in Beijing, in the lead-up to the party congress. China's responses have been fairly tame, a combination of the recent pageantry and possibly a sign of an ongoing evaluation of the damage.
Shortly after the restrictions came into effect on October 12, Mao Ning, China's foreign ministry spokesperson, accused the U.S. of weaponizing dependence and "overstretching the concept of national security...to unjustifiably suppress Chinese enterprises."
"Introducing arbitrary restrictions for political purposes destabilizes industrial and supply chains, and harms others as well as oneself. It will only further weaken the already fragile global economy," Mao said.
In the coming weeks, the reactions of Xi and his roster of close allies atop the party leadership will be ones to watch.
Like his predecessors, Xi's ideological line has been to instill a deep sense of distrust of the West among the Chinese public, partly out of concern for the CCP's own regime security, but also as a powerful cause behind which intensifying nationalist fervor can unite.
The White House can expect Secretary of State Antony Blinken's message in May—that the U.S. neither seeks to "block China from its role as a major power," nor stop the growth of its economy—to ring follow in Beijing, where Washington's latest move will be seen as upping the ante of the full-spectrum U.S.-China rivalry.
"There is no doubt that Beijing has perceived increasingly since the Trump era that the U.S. has launched an all-out containment—across diplomatic, economic, military, and ideological spheres—of China, which I think is not entirely a misperception. And the new wave on chips surely strengthens Beijing's view as such," said Hsu.
Like it or not, it will serve as powerful ammunition for Xi as he further propagates the idea of a West that is determined to contain China's rise.
"The choice Washington now faces isn't between containing China's power or forcing them to accelerate their dual-circulation strategy. Beijing is moving ahead with dual circulation regardless," Eric Sayers, a non-resident fellow at the American Enterprise Institute, told Newsweek.
"Instead, our choice is between acting now to limit their power or waiting until the future when it will only be more costly and less impactful. This new rule is a significant step towards a strategy of containing Beijing's techno-geopolitical power today when Washington's position is strongest," he said.
The balance is difficult to strike, but the U.S. would've considered the fallout and its inherent unpredictability.
"Sometimes, it's less important to make decisions based on what Beijing might think, and more important to take steps for the United States and global democracies to succeed in the tech competition we're in. This is one of those times," Gorman argued.
Reached by Newsweek, a State Department spokesperson said: "These measures reflect longstanding concerns and are part of our regular effort to assess the appropriateness and efficacy of export controls, and whether new measures are necessary to protect our national security."
Step One
This month's controls were the first wring of a tightening chokehold on China's tech ambitions. There remains a range of areas in which the U.S. government could intervene to further protect its leverage in the chip game.
How far it goes will depend on how successful Beijing becomes at circumventing the restrictions. To effectively police them, however, the U.S. will need to design and staff the mechanisms to enforce its new rules.
Aside from American companies, those of other countries involved in chip-design software and manufacturing equipment also will be impacted by the sanctions as long as their business has some U.S. involvement and has end users in China.
For the average consumer, costs may be limited for now, but subject-matter experts predict a high likelihood of bifurcated semiconductor supply chains in the future, where the U.S. and its allies use one standard, and China and its partners use another.
To that end, the U.S. is seeking closer cooperation with leading chip-makers, such as Taiwan's TSMC and South Korea's Samsung, which enjoy an outsized share of the global foundry market, manufacturing chips designed by the U.S. and others.
But Washington's challenge remains to secure allied assent for its national security concerns in the short term and active support for its technology agenda in the long term, especially if it wants to persuade foreign companies not to ditch U.S. components for the sake of Chinese market access.
From the U.S. perspective, the new export controls also tell only half the story. To advance America's technical edge, Biden signed into law the CHIPS and Science Act in August, injecting nearly $53 billion into U.S.-based research, development and manufacturing.
Earlier this month, Biden said the CCP "actively lobbied against" the bill in Congress. His administration expects the law to open the door to more private-sector investment in the industry, including from foreign firms.
Perhaps the best indicator of American ambition will be seen in its invest in STEM education, a generational project for today's youth to ensure it has the human capital to remain competitive in tomorrow's technologies.
Update 10/25/22, 03:04 a.m. ET: This article has been updated to include a statement from the Department of State.
