The deterioration of US-China relations has been a long-standing trend, with tensions growing even during periods of booming trade between the two countries in the 1990s and 2000s. During Barack Obama’s presidency, these tensions began to darken further as the US shifted its focus towards Asia, tensions over the South China Sea escalated, and incidents in the digital sphere isolated the two nations. Donald Trump took an even tougher stance against China, openly expressing his grievances with Beijing.
The high-tech sector has become a critical front in the containment of China. Washington’s general policy restricts Chinese companies’ access to US and allied technologies, which can be used for both military and civilian purposes. President Joe Biden has continued this policy, indicating that there is no major bipartisan disagreement on the issue of relations with China.
In a new executive order, President Biden has declared a national emergency due to certain countries using American civilian technology to develop their military-industrial complex. China, along with the Special Administrative Regions of Hong Kong and Macau, are named in the order. The concept of a state of emergency has its own peculiarities, with over four dozen emergency proclamations simultaneously in force on various foreign policy issues in the US. The president invokes these proclamations under the Emergency Provisions Act of 1977, which allows the use of economic sanctions to counter existing threats.
The executive order introduces two main innovations. Firstly, the administration must compile a list of foreign individuals or entities connected to high-tech transactions from a particular country, in this case, China. This list is likely to include major Chinese technology and industrial companies, as well as their executives or employees. Secondly, US citizens will have to report certain transactions with these individuals to the authorities, and a number of other transactions will be prohibited as determined by the administration.
This new legal mechanism provides the White House with wide-ranging powers to restrict Chinese companies’ access to cooperation with US high-tech firms. The flexibility of the mechanism will depend on its ability to revise the categories of transactions, technologies, and foreign individuals subject to restrictions. As a result, this mechanism is expected to be more comprehensive than existing regulations.
The restrictions already imposed include a ban on US nationals buying or selling securities of “Chinese military companies,” which was implemented by President Trump and slightly modified by President Biden. Major Chinese companies in industries such as telecoms, aircraft manufacturing, and electronics have been named in these restrictions. Furthermore, Huawei and its subsidiaries were added to the US Department of Commerce’s Entity List in 2019, prohibiting their access to certain electronics products manufactured using US technology. Several Chinese companies were also placed on the Military End-User List, preventing them from supplying certain products on the US Department of Commerce’s Commerce Control List. These restrictions are in addition to separate legal mechanisms for sanctioning Chinese individuals regarding the situations in Hong Kong and the Xinjiang Uygur Autonomous Region.
Despite these restrictions, the intensity of US embargoes against China is not comparable to those against Russia. The number of Chinese individuals subject to US financial sanctions is only in the dozens, while the number of Russian individuals has exceeded 1,700. Additionally, the US has been able to build a large coalition of sanctions allies against Russia, while it is more challenging to establish such a bloc against China.
However, there is no guarantee that Beijing will not face a similar scenario in the future. Sanctions against China seemed unlikely in 2016, but the situation has drastically changed in the early 2020s. The US and China both see the inevitability of their confrontation but are delaying its escalation for their own reasons. It is difficult to predict when and to what extent relations between the two nations will break down, just as it was challenging to foresee the crisis in relations between Russia and the West. Currently, there is a gradual accumulation of restrictive measures, including Biden’s new executive order, giving Beijing time to prepare for the worst-case scenario.