High-tech and high stakes in China’s intense US rivalry

Behind the scenes to the build-up of Sino-American talks, another conflict is being played out in the courts. Major Chinese companies targeted by the investment ban imposed during the Trump era are planning to take legal action in the United States.

The move followed a decision in a US court last week to temporarily halt sanctions on high-tech giant Xiaomi. 

Federal Judge Rudolph Contreras called the blacklisting of the smartphone group “deeply flawed.” He also cast doubt on the US Defence Department’s decision in January to accuse Xiaomi of having links to China’s military.

Up to US$10 billion was wiped off the company’s value after it was placed on the US Entity List with its share price tumbling more than 9%.

But after its legal victory, Chinese tech companies such as surveillance operator Hikvision and leading semiconductor manufacturer SMIC look certain to appeal against the ban.

“Twisting technology into politics has been a major cause of intense, even out-of-control, tech competition [between the US and China] over the past few years, and it closes off communication,” Li Zheng, of the Institute of American Studies at the China Institutes of Contemporary International Relations, said in a commentary on China-US Focus.

The issues:

• High-tech is at the core of the economic rivalry between the two nations.
• It fits into Washington’s broader policy to combat Beijing’s predatory trading practices.
• But this is just one area of conflict in an all-consuming row. 
• China’s rapid military expansion in the South and East China Seas has rattled democracies in the Indo-Pacific.
• Beijing claims nearly all of the 1.3 million-square-mile South China Sea as its “sovereign territory.” 
• The US has also called for an end to human rights violations against ethnic Uyghur Muslims in Xinjiang.
• Other issues include the pro-democracy clampdown in Hong Kong and the bullying of Taiwan.

Aggressive and repressive: “We look forward to the opportunity to lay out in very clear terms to our Chinese counterparts some of the concerns that we have about the actions they’re taking,” US Secretary of State Antony Blinken said on Wednesday, referring to the meeting in Anchorage later this week.

Delve deeper: Blinken and National Security Adviser Jake Sullivan will outline Washington’s position to Chinese State Councilor Wang Yi and Foreign Affairs top diplomat Yang Jiechi in a symbolic summit. Various commentators have hinted that the talks could lead to a meeting between US President Joe Biden and his Chinese counterpart Xi Jinping later this year. But that might be wishful thinking.

Stumbling blocks: Beijing has mounted a fierce campaign in what it sees as Washington’s meddling into its domestic affairs. That includes issues such as Hong Kong, Taiwan, which is considered a renegade island, and Xinjiang. The South China Sea is also a no-go area after the PLA Navy began building military installations around sandbars and on mini islands.

Warning shot: “China is strongly urging the United States and Japan [after the 2+2 meeting in Tokyo this week] to stop interfering in China’s internal affairs,” Foreign Ministry spokesman Zhao Lijian said at a media briefing.

Tech broadside: “The United States has long benefited enormously from the open global cooperation in technology. [Yet ] in a bid to retain its monopoly in the scientific field, the previous US administration, chose to politicize scientific matters, over-stretch the concept of national security and abuse state power,” Zhao said, referring to the high-tech dispute.

China Factor comment: Washington and the other capitals of major democracies have legitimate concerns about China’s leading high-tech companies. There is growing evidence that most have strong links with the ruling Communist Party government and that will continue. Earlier this month, a five-year blueprint was rolled out at the National People’s Congress for multi-billion-dollar research partnerships between state-run enterprises and the private sector. The aim is to cut Beijing’s dependence on crucial foreign components such as semiconductors and spearhead a new wave of high-tech sectors. The chips are down.