The visit comes close on the heels of US secretary of state Antony Blinken’s trip to Beijing in June. ChinaUS treasury secretary Janet Yellen visited China on a four-day trip last week to mend the fraught relationship between two of the world’s largest economies. thinks that ties between the two nations are at their lowest point. There are significant disagreements over technology, trade and national security perceptions. Technology has become an important arena of US-China contestation.
China may soon find it difficult to source semiconductors specific to the development of artificial intelligence, expanding on US export control measures announced in October 2022. The US is preparing to constrain access of Chinese companies to US cloud-computing services.
It is also extra-territorialising the technology-denial regime by nudging nations like the Netherlands and Japan to halt sales of sophisticated chip-making equipment to China.
On the eve of Yellen’s visit, Beijing hit back by seeking to constrict the supply of strategic materials. China imposed export controls on critical metals like gallium and germanium, which are used in the production of semiconductors and electronics.
China has a formidable advantage, accounting for 95% of gallium production worldwide. Significantly, Beijing has let it be known that this is aprelude to future actions. Former commerce vice-minister Wei Jianguo sent out a veiled warning that if restrictions on China accessing advanced technology get tougher, countermeasures will also escalate.
China is showcasing its intent and flaunting capabilities in leveraging its dominance in critical elements points to the direction of the USChina tech war.
China using critical elements as leverage may provide a new impetus to the drive to diversify supply chains. America has engaged with its allies and partners to build supplychain resilience. It means a chance for India to work more closely with initiatives like the Minerals Security Partnership (MSP), a US-led grouping of developed nations established in June 2022 to secure supply chains in critical minerals. India joined the MSP grouping during Prime Minister Narendra Modi’s recent visit to the US and is the only developing nation in this grouping.
The fallout of China-US contestation was that the latter began discussing the need to shift manufacturing back to American soil or to other nations.
This presents an opportunity for nations like India and Vietnam that are keen on building their industrial base. However, the situation remains fluid, and Yellen landed in Beijing at a time when the global economy is staring at uncertainty.
Europe is grappling with a recession, and the US is teetering at the brink of one. China is facing economic headwinds. So, all eyes will be on how big corporations maintain their bottom line. Many Big Tech leaders have met Xi in recent weeks. Big Capital may find it better to bet on a known player rather than opt for greenfield markets. For example, auto major Tesla, plans to set up a second factory to produce batteries that can store large amounts of electricity in Shanghai.
There are some indications that China’s new economic policy mandarins may be taking a pragmatic approach. China’s commerce minister Wang Wentao met global pharma majors like Pfizer, Merck and AstraZeneca recently to discuss their business expansion plans in China.
US drug major Moderna has pledged to invest $1 billion in developing vaccines and manufacturing facilities in China. Remember Beijing’s chest-thumping narrative that China-made vaccines were the best bet against Covid-19?
Ahead of the 2024 presidential elections, the US political elite will need to be amenable to the interests of American corporations, given their preponderance in funding political campaigns. Washington will be under pressure from American businesses to adjust its approach to China. Though Yellen underlined that the world is ‘big enough’ for both China and the US to thrive, New Delhi will be watching carefully as to who sets the terms of engagement for a recalibrated China-US bilateral engagement.
This commentary originally appeared in The Economic Times.
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