High tech and China decoupling

    By Paul Lin 林保華
Taipei Times 2022.10.19

On Oct. 7, the US Department of Commerce’s Bureau of Industry and Security added 31 Chinese companies and research institutes — including China’s largest memorychip foundry Yangtze Memory Technologies Co — to its Unverified List of possibly noncompliant entities, while also imposing new controls on high-tech exports to China.

Whether by design or coincidence, this announcement was made at the end of China’s National Day holiday and on the eve of the Oct. 9 opening of the seventh plenary session of the 19th Central Committee of the Chinese Communist Party (CCP), which in turn was a prelude to the party’s 20th National Congress, which opened on Sunday.

On Monday last week, shares in the companies fell sharply, even though the CCP had ordered investors not to sell the shares before its national congress.

Chinese President Xi Jinping (習近平), general secretary of the CCP, is likely facing additional pressure at the congress, which ends on Saturday, even though decisions about personnel appointments and the party line were largely settled in advance.

Among the major controversies within the CCP over its party line, US-China relations are a major point of contention. That is because, as well as affecting China’s economic growth, they also have a bearing on relations between Taiwan and the US. The legitimacy of the CCP’s rule depends to a large extent on China’s economic growth. Its growth has almost halved since Xi became paramount leader, which makes him look like an out-and-out loser.

Meanwhile, Xi’s slogan of creating a “new normal” with regard to Taiwan, along with military threats, is making it increasingly difficult for either China or the US to back down.

On Sept. 19, Chinese Minister of Foreign Affairs Wang Yi (王毅), who was in New York to attend the UN General Assembly, met with representatives and members of the National Committee on US-China Relations, the US-China Business Council and the US Chamber of Commerce, and had a separate meeting with former US secretary of state Henry Kissinger on the same day. What Wang brought to the meetings was, of course, the new spirit of Sino-US relations that was decided at the Chinese leaders’ meeting in Beidaihe in the first half of August.

Reports on official Chinese Web sites said that Wang tried to entice US business groups by harping on about China’s huge market of 1.4 billion people. His message to Kissinger, on the other hand, emphasized that the most pressing task is to properly handle the Taiwan question, otherwise it threatens to have a “subversive impact” on Sino-US relations.

The CCP calls Kissinger an “old friend of the Chinese people.” No one knows how much he has benefited in the course of handling US-China relations, and he probably received some benefit this time, too. Speaking at an Asia Society forum in New York on Oct. 3, Kissinger said that Xi might adjust China’s relationship with the US after the National Congress by tilting modestly toward the US.

However, past rebukes against US President Joe Biden and US Department of State officials by Xi, former Chinese minister of foreign affairs Yang Jiechi (楊潔篪) and Wang himself make it difficult to place any faith in them.

If US leaders are not again deceived about a “change of direction” by the CCP, US-China relations will continue to move toward decoupling. The hardest ties to decouple are economic, because the US would also pay a price.

Minor sanctions have had good and bad effects on Taiwan and major sanctions would have a greater impact.

The US’ invitation to Taiwan, Japan and South Korea to join its proposed “chip 4” alliance is another sign of this trend. Technology sanctions imposed by the US have not caused China to decelerate its armaments development. There are sure to be many loopholes that allow China to increase its military threat against Taiwan and the US. Washington must decisively close such vulnerabilities if it is to respond to wars of aggression launched by China and Russia, and indeed to recent provocations by North Korea.

Taiwan Semiconductor Manufacturing Co (TSMC) has been a hot topic of discussion due to its role as Taiwan’s “silicon shield.” Interviewed in the Oct. 9 edition of CBS’ 60 Minutes, TSMC founder Morris Chang (張忠謀) spoke about how TSMC might be affected were China to resort to military force.

An Oct. 7 Bloomberg report quoted unnamed US sources as saying that were China to launch a full-scale assault on Taiwan, “the US would consider evacuating Taiwan’s highly skilled chip engineers.”

In such a scenario, TSMC’s advanced manufacturing workforce would certainly be high on the list for evacuation, but the question is whether there would be time.

These reports indicate that the US is serious about responding to a potential Chinese invasion and earnest about the technology sanctions democratic countries place on China.

In view of this trend, Taiwan’s semiconductor manufacturers must respond to sanctions by accelerating their decoupling from China.

Paul Lin is a political commentator.

Translated by Julian Clegg


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