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China’s Dual Circulation Policy Includes $29b for Semiconductors
China is racing to develop semiconductors and other core technologies to reduce its vulnerability to United States. Its leaders are mobilizing tech companies, tightening links to the countries participating in China’s Belt and Road Initiative, and sustaining a campaign of cyber-industrial espionage. China is preparing for a future in which it cannot rely on the United States for essential technologies. The National People’s Congress unveiled a five-year plan in which municipalities, provinces, and companies will invest close to $1.4 trillion in building “new infrastructure” through AI, data centers, 5G, the Industrial Internet, and other new technologies. Chinese policymakers especially seek to reduce their country’s dependence on the United States for semiconductors. In October 2019, Beijing established a $29 billion semiconductor fund, and in August, Chinese officials introduced other policies to support the chip industries, including tax benefits, research and development support, and incentives for international semiconductor companies to relocate to China. Two government-backed chip manufacturers have reportedly hired more than 100 veteran engineers and managers from Taiwan Semiconductor Manufacturing Company, and a cybersecurity firm recently revealed a two-year hacking project that stole source code, software development kits, and chip designs from seven Taiwanese chip firms.
The Chinese government is trying to mobilize private tech firms, too, in support of national goals. At a meeting in July with Chinese entrepreneurs, Xi called on businesses to be patriotic and innovative. More than half the 25 business leaders at the conference worked in emerging tech fields, such as chip making, artificial intelligence, and smart manufacturing. Alibaba established a semiconductor division, called Pingtouge, in September 2018, and Baidu released a smart chip, called Kunlun, in July 2019. Alibaba and Tencent have announced huge new investments in cloud services and data centers to support the new infrastructure. China has taken an interest in open-source solutions that it believes will not be subject to U.S. sanctions. Huawei, for example, has pledged to invest $1 billion to attract developers to its open-source replacement for Google Mobile Services, and China has actively and enthusiastically participated in the open-source chip project RISC-V. Moreover, the less welcoming that Chinese technology firms find European markets, the more these companies will focus on building digital infrastructure for and providing services to the countries that have signed on to the Belt and Road Initiative.
Finally, if worse comes to worst, Beijing retains a powerful policy tool in its quiver: it can always retaliate against U.S. technology firms. China’s Ministry of Commerce has reportedly prepared an “unreliable entity list” of foreign people and businesses: those that cut off supplies to Chinese companies for noneconomic reasons could see their business in China severely curtailed through bans or restrictions on trade, investment, regulatory permits, and licenses. Some in the Chinese media and the business community have suggested that Apple or Qualcomm could eventually be punished for Washington’s campaign against Huawei. So far, however, Beijing has avoided such actions and has chosen instead to position itself as the restrained, responsible actor in the trade dispute with the United States. From; Foreign Affairs
China is racing to develop semiconductors and other core technologies to reduce its vulnerability to United States. Its leaders are mobilizing tech companies, tightening links to the countries participating in China’s Belt and Road Initiative, and sustaining a campaign of cyber-industrial espionage. China is preparing for a future in which it cannot rely on the United States for essential technologies. The National People’s Congress unveiled a five-year plan in which municipalities, provinces, and companies will invest close to $1.4 trillion in building “new infrastructure” through AI, data centers, 5G, the Industrial Internet, and other new technologies. Chinese policymakers especially seek to reduce their country’s dependence on the United States for semiconductors. In October 2019, Beijing established a $29 billion semiconductor fund, and in August, Chinese officials introduced other policies to support the chip industries, including tax benefits, research and development support, and incentives for international semiconductor companies to relocate to China. Two government-backed chip manufacturers have reportedly hired more than 100 veteran engineers and managers from Taiwan Semiconductor Manufacturing Company, and a cybersecurity firm recently revealed a two-year hacking project that stole source code, software development kits, and chip designs from seven Taiwanese chip firms.
The Chinese government is trying to mobilize private tech firms, too, in support of national goals. At a meeting in July with Chinese entrepreneurs, Xi called on businesses to be patriotic and innovative. More than half the 25 business leaders at the conference worked in emerging tech fields, such as chip making, artificial intelligence, and smart manufacturing. Alibaba established a semiconductor division, called Pingtouge, in September 2018, and Baidu released a smart chip, called Kunlun, in July 2019. Alibaba and Tencent have announced huge new investments in cloud services and data centers to support the new infrastructure. China has taken an interest in open-source solutions that it believes will not be subject to U.S. sanctions. Huawei, for example, has pledged to invest $1 billion to attract developers to its open-source replacement for Google Mobile Services, and China has actively and enthusiastically participated in the open-source chip project RISC-V. Moreover, the less welcoming that Chinese technology firms find European markets, the more these companies will focus on building digital infrastructure for and providing services to the countries that have signed on to the Belt and Road Initiative.
Finally, if worse comes to worst, Beijing retains a powerful policy tool in its quiver: it can always retaliate against U.S. technology firms. China’s Ministry of Commerce has reportedly prepared an “unreliable entity list” of foreign people and businesses: those that cut off supplies to Chinese companies for noneconomic reasons could see their business in China severely curtailed through bans or restrictions on trade, investment, regulatory permits, and licenses. Some in the Chinese media and the business community have suggested that Apple or Qualcomm could eventually be punished for Washington’s campaign against Huawei. So far, however, Beijing has avoided such actions and has chosen instead to position itself as the restrained, responsible actor in the trade dispute with the United States. From; Foreign Affairs
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