GOOD MORNING FROM LONDON
#1 EU IN A QUANDRY RE CHINA TRADE
#2 SEMICONDUCTORS – POLITICS NOT SCIENCE
#3 TAIWAN EFFORTS TO RESTRICT CHINA
#4 CHINA – ISRAEL – HAMAS
NIKKEI ASIA 11 0CTOBER 2023
EU INDECISION ON A CHINA POLICY
The European Union is looking to tighten export and investment controls on sensitive technology as concern over the bloc’s reliance on China grows. But an equally heavy reliance on Chinese trade and investment threatens to hinder efforts to “de-risk” its economy, as individual members have already found.
The European Commission last week announced four key technologies that could become subject to more stringent oversight by the EU; advanced semiconductors, artificial Intelligence, quantum technologies and biotechnologies. Stronger controls on exports or investments abroad are being considered specifically for technologies that the EU says could be used for military purposes or to violate human rights.
This would echo measures implemented by the U.S., though specific export controls are not expected to be announced until next spring at the earliest. The chances of the EU taking concrete steps on this front in the current political cycle, which runs until 2024, “look slim,” said Nick Reiners, senior analyst for geo-technology at the Eurasia Group, though he did not rule out such measures in the longer term as the EU hardens its stance on China.
GRAHAM PERRY COMMENTS;- RE A CHINA POLICY, THE EU HAS THREE MAIN PROBLEMS. FIRST – IT IS A UNION OF GOVERNMENTS AND NOT A GOVERNMENT OF ITS OWN. SECOND – IT IS COMPOSED OF POLITICIANS AND CIVIL SERVANTS NOT BUSINESSMEN. THIRD – BUSINESSMEN VIE WITH EACH OTHER IN THEIR OWN COUNTRIES AND WITH OTHER BUSINESSMEN IN THE EU FOR THE BEST PROFIT. THE CONTRADICTIONS ARE CONSIDERABLE. CHINA, BY COMPARISON, IS UNIFIED, POLICY IS CLEARER AND ACTION IS DECISIVE.
FOREIGN AFFAIRS 11 OCTOBER 2023
SEMI-CONDUCTORS – THE POLITICAL FLASHPOINT
The Biden administration’s plan for the United States to control the future of computing was never going to be easy, but at least it was meant to be straightforward: a strategy of denying China access to a limited group of advanced semiconductors while upgrading chip capabilities at home. In August 2022, President Biden signed the CHIPS and Science Act to boost U.S. manufacturing of advanced chips. Two months later, the White House introduced sweeping export controls designed to restrict China’s ability to buy or build the most sophisticated computer processors. Together, these moves aimed to position the United States favorably in a struggle over what is quickly becoming the world’s most consequential industry.
For years, semiconductors have been at the heart of the global economy, and nowhere more so than in China, where chip imports exceed oil imports. Micro-chips of varying complexity are ubiquitous in everyday devices, but the ultra-advanced chips targeted in Biden’s export controls are unique in their outsize impact. Crucial to expanding cutting-edge supercomputing and artificial intelligence, the chips in question would have played an indispensable role in building out China’s future AI ecosystem, bringing considerable benefits to China’s economy, weapons systems, and surveillance apparatus. By leveraging these chips’, highly concentrated manufacturing pipeline—disproportionately located in countries friendly to the United States—the Biden administration hoped to cut off China’s access to them altogether.
A year after the export controls were announced, Beijing is complicating Washington’s plan. Not only is the Chinese government doubling down on cutting-edge processors, it is also becoming more competitive in legacy chip manufacturing and chip design, threatening to take advantage of U.S. dependencies on Chinese semiconductors. Given China’s response to U.S. restrictions, it is increasingly likely that Washington will have to wage the chip war on two different fronts: expanding export restrictions for leading-edge chip production while simultaneously addressing China’s growing advantage in legacy semiconductor manufacturing and chip design.
GRAHAM PERRY COMMENTS;- ANY INTERRUPTION TO THE FLOW OF TAIWAN SEMICONDUCTORS TO THE US AND THE US ECONOMY SHUTS DOWN – THE US ECONOMY IS THAT VULNERABLE. A FLARE UP IN THE TAIWAN STRAITS BETWEEN CHINA AND US NAVAL VESSELS OR THE SHOOTING DOWN OF A CHINESE MILITARY AIRCRAFT OR A CLASH OVER RIGHTS TO CORAL REEFS IN THE SOUTH CHINA SEA AND THE WORLD IS ON THE EDGE.
NIKKEI ASIA 11 OCTOBER 2023
TAIWAN EFFORTS TO RESTRICT CHINA
Taiwan is set to announce this year a list of critical technologies it wants to protect from the reach of China, a top Taiwanese official told Nikkei Asia. “Before the end of the year, the National Science and Technology Council will announce what are considered core technologies that need to be protected,” Wellington Koo, secretary-general of Taiwan’s National Security Council, told Nikkei Asia.
“The policy will define national core technologies and cover industries including semiconductors, agriculture, aerospace and ICT [information and communication technology],” Koo said. “It will deal with investments, manpower, operations and technology transfer in these areas.”
Taiwan shares concerns held by the U.S., Japan and other governments about China’s push for advanced technologies. On Wednesday, the European Commission published a list of key technologies that pose a risk to the bloc’s economic security, in a move that follows a U.S. policy restricting China’s ability to access advanced technologies.
“The new policy will elevate critical technology in supply chain and semiconductors to a national security level, enabling closer scrutiny. The aim is to prevent efforts to acquire crucial tech by China, which is targeting upstream IC [integrated circuits] design in Taiwan,” Koo said.
China is still Taiwan’s biggest trade partner for both imports and exports. Integrated circuits (ICs) were China’s top import from Taiwan in the first eight months of 2023 and also in 2022, according to Taiwan’s International Trade Administration. China imported $29.43 billion worth of ICs from Taiwan in the January-August period this year. “Having this country’s core technology exported to China isn’t the only area that we’re scrutinizing from a national security angle. We’re working to prevent our semiconductor products and technologies from being used by China for defense or military purposes,” the security chief said.
GRAHAM PERRY COMMENTS;- THE SECRETARY-GENERAL OF TAIWAN’S NATIONAL SECURITY COUNCIL CONFIRMS THE DETERMINATION OF TAIWAN TO PREVENT CHINA’S PRODUCTION AND CHINA’S PURCHASE OF SEMICONDUCTORS. HIS COMMENTS CONFIRM THE HIGHLY RATED POLITICAL AND ECONOMIC SIGNIFICANCE OF SEMICONDUCTORS. CHINA IS COMMITTED TO SUCCEEDING JUST AS TAIWAN IS COMMITTED TO STOPPING CHINA. TENSIONS MOUNT.
NIKKEI ASIA 11 OCTOBER 2023
CHINA AND THE HAMAS/ISRAEL CONFLICT
Earlier this year, China had pledged to help facilitate negotiations between Israel and the Palestinians. Chinese state media talked up the possibility of a settlement based on a three-part proposal by Chinese President Xi Jinping. Moritz Rudolf, a fellow at Yale Law School’s China Center said. ”China has an economic interest in the stability of the region and they also have increased their political role.”
Unlike the U.S., India, Japan and others, which have come out forcefully in support of Israel, the Chinese government has maintained a neutral position. Beijing’s official response to the Hamas attack on Saturday called for an immediate ceasefire and repeated its support for a two-state solution with an independent State of Palestine as a way out of the conflict. It did not condemn Hamas.
Historically, China has had close diplomatic ties with Palestinian leaders. The president of the Palestinian Authority, Mahmoud Abbas, this year made his fifth official visit to China in his nearly two decades in office. But in recent years, China has also deepened relations with Israel, investing in infrastructure and the country’s vibrant technology sector.
Israel sought a stronger reaction from China “When people are being murdered, slaughtered in the streets, this is not the time to call for a two-state solution,” Yuval Waks of the Israel Embassy in Beijing told reporters. “We believe that China as a superpower in this world … should have taken a stronger stand.”
But Beijing appears more comfortable playing a mediator role. In March, China brokered discussions between bitter rivals Saudi Arabia and Iran, enabling a diplomatic rapprochement. Analysts saw this as a challenge to U.S. influence in the region.
GRAHAM PERRY COMMENTS; SHOULD A MEDIATOR PUBLICLY TAKE SIDES BETWEEN TWO PARTIES TO A DISPUTE? THE ANSWER HAS TO BE “NO”. CHINA SURPRISED THE WORLD WHEN IT MEDIATED A SETTLEMENT BETWEEN TWO MAJOR POWERS – IRAN AND SAUDI ARABIA. QUIETLY AND WITHOUT NEWS BULLETINS, IT BROUGHT ITS INFLUENCE TO BEAR ON THE TWO OLD ADVERSARIES. IT CAN REPEAT THE EXERCISE WITH ISRAEL AND HAMAS BUT ONLY IF IT IS CONDUCTED WITHOUT THE GLARE OF PUBLIC COMMENT.