China's Response To US Chip Move Limited By Economic Reality

Beijing's restrictions on American chipmaker Micron in retaliation to sweeping US chip curbs marks a major step up in its response to Washington's pressure and could open the door for further measures in the geopolitical standoff, analysts say, as per an AFP report.

But they warned President Xi Jinping's ability to raise the stakes will be limited as he battles to re-energise the world's number two economy while it struggles to recover from years of zero-Covid-imposed inertia.

Washington expressed "serious concerns" over the ruling that came just as leaders of the world's seven richest nations (G7) signed a statement urging Beijing to end "economic coercion".

The move marked a significant shift in China's response to US measures that have targeted the country's technology sector, with Gary Ng, a senior economist at Natixis who specialises in the global chip trade, calling it "a landmark case", reported AFP

He emphasised it was China's first cybersecurity probe into a foreign company since tighter rules were announced in 2021, and a rare instance when the scope of such reviews was expanded to include national security concerns.

"I wouldn't be surprised if regulators used these reviews as a tool for retaliation in future" when faced with other geopolitical issues, he said.

Emily Weinstein, a research fellow at Georgetown University specialising in the US-China tech rivalry, added that the definition of what fell under "critical information infrastructure" was very broad -- ranging from online government services and defence to healthcare and water conservation, according to the AFP report.

"Technically that could mean that anything qualifies," she said.

"China has consistently found national security or other reasons to create protectionist barriers" including mandatory technology transfer agreements, which require companies to store all data locally and requirements for foreign entities to have joint ventures with local partners in several sectors, added the AFP report.

China began an investigation into Micron in late March, five months after the US unveiled sweeping curbs aimed at cutting off Beijing's access to high-end chips, chipmaking equipment and software used to design semiconductors.