EU and the Broad Technological Restrictions Against China

Alberto García M

October 18, 2023

Biden’s executive order will prohibit US venture capital firms from investing in three key sectors of the Chinese economy: semiconductors, quantum computing, and artificial intelligence.

Semiconductors: The export of US tools for chip manufacturing was restricted, but for these measures to be effective, other leading suppliers, such as the Netherlands and Japan, who produce key technology for semiconductor manufacturing, also had to join. Amid the semiconductor conflict, China banned the products of US manufacturer Micron Technology after a cybersecurity investigation determined that they adversely affect national security. China’s Cyberspace Administration explained on its website that Micron’s products “have serious cybersecurity issues and pose significant security risks,” and therefore, “did not pass the review.” The semiconductor sector is vital for China as it is one of the pillars of its plans to strengthen its technological self-sufficiency and reduce its dependence on other countries amid the trade war and sanctions imposed by the United States.

Quantum Computing: 2030 is the deadline that China (PRC) has set to achieve global supremacy in the field of quantum computing, an emerging technology with multiple applications in the economic sector. Currently, not only does it claim to have the world’s fastest computer but also the knowledge to decipher RSA, the public key algorithm mostly used for encrypting digital signatures and communications, exchanging keys, and establishing secure connections. To shed more light on the current state of the race for quantum supremacy between both nations, a GlobalData report indicated at the end of 2022 that the US is about five years ahead of China; however, it warned that the Asian nation is catching up quickly. Both countries want quantum supremacy not only for national pride but for the financial, industrial, scientific, and military advantages it can offer.

Artificial Intelligence: China’s provisional guidelines for AI activity and management are called “General AI Measures” and result from a joint effort of six government agencies, including the Cyberspace Administration of China (CAC), the National Development and Reform Commission, and the Ministry of Science and Technology. It will be the first set of AI rules applied in the country following the recent boom in development and will be overseen by the same agencies that created the measures. The 24 guidelines include measures that will require AI service platforms to register and undergo a security review before public release. The Chinese government will also demand labels for artificially created content. Likewise, the guidelines will hold service providers accountable for everything created through their platform. The draft regulation included specific financial penalties for those deviating from the guidelines, although these have now been removed. Instead, service providers will have to address problematic content within three months. The regulation aims to strike a balance between state control of technology and fostering innovation in the sector. China has been actively developing its AI scene, with local tech giants like Alibaba creating a rival for the popular chatbot ChatGPT. According to Beijing, “Washington seeks to curb US investment in China by abusing the concept of national security and politicising trade issues. Its true purpose is to take away China’s right to development and maintain its own hegemony. It is pure economic coercion and technological bullying.”

The Chinese Department of Commerce joined the criticism, asserting that the restrictions only seek to “decouple and sever supply chains under the pretext of national security.”

In any case, it is still unknown how Biden’s executive order will be implemented, as it will not be applied automatically. The option of including exceptions that allow US companies to continue investing in bonds and shares of Chinese tech companies is also being evaluated.

And the executive order might not come into effect until next year, coinciding with the campaign for the presidential elections in which Biden seeks reelection.