The United States government has decided to extend a waiver to allow mainland China-based Taiwanese and South Korean firms to import chip-making equipment for another year from October.
The decision, reported by Nikkei, came ahead of US Commerce Secretary Gina Raimondo’s August 27-30 trip to China.
This move, together with the US Commerce Department’s recent decision to remove 27 Chinese firms from its unverified list, is welcomed by Beijing.
In early July, Chinese officials held deep talks with US Treasury Secretary Janet Yellen in Beijing and persuaded the Biden administration to reduce to the scope of its investment curbs against China’s high technology sectors.
During Raimond’s visit, Beijing plans to ask Washington to cancel extra tariffs that have been imposed on Chinese steel and aluminium products.
“The essence of Sino-US economic and trade relations is to achieve mutual benefit and win-win results while pushing forward the economic and trade cooperation is in the common interests of the two countries and their peoples,” Shu Yuting, a spokesperson of the Chinese Commerce Ministry, said in a media briefing on Thursday.
“We have noticed some difficulties and challenges in bilateral trade and investment recently, which are closely related to a series of unilateral and protectionist measures implemented by the US,” Shu said. “China will continue to raise relevant economic and trade concerns with the US, and strive to create a fair and stable business environment for companies from both sides to carry out trade and investment cooperation.”
Last October, the US Commerce Department’s Bureau of Industry and Security’s (BIS) said mainland China-based chip fabs that produce logic chips of 16-nm or smaller, DRAM memory chips of 18-nm half-pitch or smaller, or NAND chips with 128 layers or more will have to apply for licenses to purchase items from the US.
At the same time, the Biden administration offered a one-year waiver to allow Taiwanese and South Korean chipmakers, such as TSMC, Samsung Electronics and SK hynix, to ship US tools to their mainland fabs without having to apply for a licence. The exemptions were set to expire October this year.
Some analysts said the waiver can help prevent widespread disruption in the global semiconductor supply chain. But some others said the prolonged exemptions will reduce the effectiveness of the US chip export control against China.
In June, US Undersecretary of Commerce for Industry and Security Alan Estevez told an audience at an industry gathering that the government would extend exemptions for South Korean and Taiwanese chip suppliers with their facilities in China.
The Wall Street Journal reported on June 12 that the US government was considering the waiver extension in view of perceptions that it may have underestimated the complexity and effects of isolating China from the production of advanced technology.
Meanwhile, the Biden administration is reportedly monitoring whether US-sanctioned Chinese telecom giant Huawei is constructing facilities under the names of other companies and indirectly purchasing American chip-making equipment in order to bypass US sanctions. Bloomberg reported on Tuesday that Huawei is receiving an estimated US$30 billion in state funding for secretive chip production.
Tin mill steel
In the first seven months of this year, China’s Foreign Direct Investment (FDI) fell 9.8% to US$111.8 billion from the same period of last year, according to the Ministry of Commerce.
For the same period, China’s exports to the US decreased 18.6% to US$281.7 billion, according to the General Administration of Customs. The country’s total exports dropped by 5% to 1.46 trillion. Some economists blamed the slowing economy in the West for the decline.
On August 17, the US Commerce Department said it will set preliminary anti-dumping duties of 122.5% on tin mill steel imported from China, 7.02% on imports from Germany and 5.29% on imports from Canada to protect domestic steelmakers. No duties will be imposed on the steel products imported from Britain, the Netherlands, South Korea, Taiwan and Turkey.
China’s duties were higher as a major producer refused to cooperate in the investigation while other respondents could not prove that they were independent of the Chinese government, according to a Commerce Department official.
“This is a major example of the United States’ harsh measures against China’s economy and trade,” Liu Xiaowei, a Hubei-based commentator, says in an article. “A US official said a lack of cooperation of a Chinese company led to an ‘adverse inference’ determination. What kind of hegemonic logic is this?”
Liu adds: “While the US media claimed that Raimondo’s visit is aimed at strengthening communication with Beijing, we should maintain a clear mind and closely monitor the United States’s actions. If the US becomes capricious again after the talks, it is questionable whether Sino-US relations will continue to improve.”
He says China should not place too many hopes on Raimondo’s trip as the Biden administration’s overall China strategy remains confrontational.
WTO’s ruling
In March 2018, then US President Donard Trump ordered the imposition of 25% tariffs on steel imports and 10% tariffs on aluminium imports. The order mainly targeted China. It exempted imports from Canada and Mexico.
In April of the same year, China initiated a World Trade Organization (WTO) dispute complaint against the United States’s extra tariffs.
On December 9 last year, the WTO said the US Section 232 tariffs violated its rules because they were not imposed “in time of war or other emergency in international relations.” But on August 16 this year, the WTO said it recognized that the US Section 232 actions on steel and aluminium are security measures, and that China illegally retaliated with sham “safeguard” tariffs.
“China’s decision to pursue this dispute highlights its hypocrisy by both suing the US in the WTO and at the same time unilaterally retaliating with tariffs,” said the Office of the US Trade Representative. “China’s use of the WTO dispute settlement system to challenge the US Section 232 national security actions has caused grave systemic damage to the WTO.”
Wu Xuelan, a TV commentator, says in a recent video that if Washington wants to improve Sino-US relations, it should cancel its additional tariffs imposed on China’s steel and aluminium products. But if the US imposes more sanctions on China after Raimondo’s visit, she says, Beijing may rethink whether Chinese leaders should attend the APEC Summit in San Francisco in November.
Read: Raimondo could ease the tech war while in China
Follow Jeff Pao on Twitter at @jeffpao3