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China Daily Global / 2021-03 / 16 / Page007

Folly of US sanctions highlighted

By LIU YINMENG in Los Angeles | China Daily Global | Updated: 2021-03-16 00:00

Action on Chinese tech firm leading to chip crunch cited as an example

Trade policies often have unintended consequences, such as when US sanctions on a major Chinese tech company contributed to a global shortage of semiconductors, a global trade expert told a recent business webinar.

"I think based on what I've seen and read, it's partly because of supply chain issues with COVID-19, but it's also being attributed to unintended blowbacks or consequences of our export control and growing tech battle between the US and China," said Robert Oberlies, an adviser to global companies on US and international transactions who has lived in the US and China.

He was speaking at a webinar on Thursday hosted by the Minnesota-China Business Council. The meeting focused on the China policies of the administration of US President Joe Biden and their implications for US business in navigating the transition from the administration of Biden's predecessor, Donald Trump.

Oberlies was referring to Semiconductor Manufacturing International Corp, or SMIC, China's top semiconductor firm. In December, it was added by the US government to an export "entity list", which restricts US firms from exporting technology to the company and "effectively made SMIC radioactive for US investors and many global investors".

The blacklisting of the company, along with supply chain disruptions caused by the pandemic, contributed to the global shortage of semiconductors, Oberlies said.

The automotive sector has been particularly hard hit by the US-China "chip war" because of the massive shortage of certain semiconductors used in vehicles.

Manufacturers in China and the US have had to shut down production. General Motors recently reported that it is idling three of its assembly plants in North America and running a fourth one in South Korea at half capacity for one week due to the semiconductor shortage.

"These are just a few examples of how complex the supply chains have become. It makes policymaking really challenging, because we are so interconnected, and often policies have many unintended consequences," Oberlies said.

The US-China relationship has deteriorated rapidly over recent years as the Trump administration took a hard line against China on trade, technology and other issues. China and the United States applied reciprocal tariffs on billions of dollars' worth of goods.

The US then put Huawei and other Chinese firms on an economic blacklist that prevented them from buying components from key US suppliers.

Oberlies said that supply chains already were changing in China before the pandemic and even the trade war, driven by China's desire to move up the supply chain to the higher value high-tech industry. China is also accelerating its efforts to be self-reliant.

Plans accelerated

He said some US companies already were planning for the change, and they were either relocating their manufacturing plants to second-or third-tier cities in China or to other countries like Vietnam. The trade war and the pandemic only accelerated their plans.

Despite the trade frictions, recent surveys from the American Chamber of Commerce and the US-China Business Council indicate a consistent desire of US companies to further invest in China, "but it's more a matter of in China for China, or in China for selling in the Asia market", Oberlies said.

"We have always been selectively coupled, and we are now just entering a new stage where we will couple in new ways, and less so in others, but continue to be vitally important to each other," Oberlies said.

Thomas Hanson, a former US diplomat who spoke at the event, said the Biden administration will seek to engage in more dialogue with China.

He expects the Biden administration to put more sanctions on the Chinese tech sector, but also to gradually ease levies on other sectors, such as agriculture.

"For the Biden team, this is all about geopolitics, and it's all about engaging our allies ... to the extent that our allies want to trade with China," he said.


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