12/5/2024
The recent U.S. restrictions on China’s semiconductor industry evoke the Chinese proverb “杀敌一千自损八百” (shā dí yī qiān, zì sǔn bā bǎi), meaning "to kill 1,000 enemies at the cost of 800 of your own." This aptly describes a lose-lose strategy, where harm inflicted on an opponent comes with significant self-sacrifice.
The U.S., in its bid to curb China's tech advancement, seems willing to endure bigger losses of its own, particularly in the semiconductor sector. This move carries broad implications:
Impact on the U.S.
Corporate Losses: U.S. companies like KLA, Lam Research, and Applied Materials face shrinking market access in China, resulting in lost revenue and reduced global competitiveness in the long run.
Supply Chain Disruption: The restrictions could destabilize the global semiconductor ecosystem, leading to higher costs, delays, and inefficiencies.
Unintended Consequences: Such measures will accelerate China's push toward self-sufficiency in semiconductor development.
Trigger China anti-restrictions measures like we already see today.
Finally, the restrictions is setting a precedent that makes other nations wary of becoming overly reliant on U.S. technologies or partnerships or exposing themselves to the potential risks of having supply chain disruptions or geopolitical entanglements. It is prompting other countries to diversify suppliers, invest in domestic technologies, or value alliances outside U.S. influence. Ultimately, this is creating an environment where, whenever possible, alternative frameworks become more attractive in global trade and technology ecosystems.
Despite the challenges, China is strategically neutralizing this lose-lose scenario through a mix of domestic resilience, innovation, and global collaboration.
Internal Circulation: Policies like “dual circulation” aim to boost domestic consumption and innovation, reducing dependency on exports and foreign technology.
Self-Reliance: Investments in core technologies such as semiconductors, AI, and clean energy are accelerating, enabling China to wean itself off foreign suppliers.
Global Partnerships: Strengthening ties with Global South, Asia, Africa, and Latin America through initiatives like the Belt and Road expands China’s influence and diversifies its economic ties.
Regional Collaboration: Closer economic and political ties with ASEAN, BRICS, and similar groups provide multilateral buffers against U.S.-led policies.
Seeking Common Ground: While preparing for prolonged competition, China is exploring dialogue with the U.S. on shared interests like climate change, green energy and global health to mitigate excessive confrontation.
Long-Term Vision: China is most likely to experience slower economic growth under U.S. restrictions on technology and trade, but in the long run, it is crucial for China to prioritize peace and stability while balancing domestic resilience with pragmatic diplomacy, realizing that peace and stability provides hope for neutralizing these challenges.
By focusing on peace, stability and sustainable policies and maintaining healthy diplomacy, China has opportunities to mitigate adverse effects and continue its development trajectory, even amidst external pressures.