Illustration: Xia Qing/GT

Recently,MKsport the US Department of the Treasury announced that starting in January 2025, it would limit investments in China's semiconductor, quantum computing and artificial intelligence (AI) sectors that are fundamental to the development of the "military, intelligence and cyber capabilities," claiming it may "threaten the national security" of the US. This move has sparked widespread discussion, but after a few days of observation, the response from the industry has been relatively quiet.

The industry's reaction can be attributed to two main reasons. First, the limitation was not unexpected. Compared to the new rules of restrictions, the CHIPS and Science Act, introduced by the US government in 2022 to attract chip manufacturing back to the US while restricting production in China, along with the US' pressure on the Netherlands and Japan in 2023 to introduce restrictions on advanced chip-manufacturing equipment, had a far greater impact on the semiconductor industry.

Second, despite the restrictions, China remains an attractive market, and new investments are flowing in to make up for the lack of investment from certain countries or companies due to those restrictions. The US government is wrong in thinking that China's technological progress will be significantly slowed or hindered if the US stops investing in China.

From the Donald Trump administration to the Joe Biden administration, a series of aggressive policies toward China have had some short-term effects. However, they have ultimately led to the bitter realization that China is "hard to contain." Some US observations often set unrealistic targets, exaggerating the US' control over China's technological development. These American fantasies largely attribute China's achievements in high-tech fields, such as chips, to the US' "laxity," advocating that tightening control would prevent China from developing advanced chips or even reverse its existing chip manufacturing capabilities.

In reality, although the US has increasingly imposed destructive policies, breakthrough achievements in China have prompted the world to reassess the country's self-research capabilities. For example, advancements such as seven-nanometer chips, quantum computing prototypes and AI applications have demonstrated the level of expertise in China's products. 

To some extent, US sanctions have become a driving force behind China's continued advancements in key fields.

At the same time, the US' restrictive policies have dug the country into a deep hole. First, there is a significant funding gap. Over a year after the passage of the CHIPS and Science Act, many recipients have yet to receive the funding they applied for. According to the Federation of American Scientists, there is an $8 billion shortfall for the research portion. Second, there are high manufacturing costs. Compared to chips produced in China's Taiwan region, those made at TSMC's Oregon factory are 50 percent more expensive. Third, these policies have caused rifts between the US and its allies. The US policy aims to limit the development of China's high-tech industries, while also attracting foreign industries to the US. However, this approach can be perceived as unfair or harmful to US allies, as it disrupts their own industries and economic interests. As a result, they take measures to prevent the outflow of industries, resulting in a tug-of-war.

The rising production costs in the US, coupled with China's continuous technological breakthroughs and vibrant market, are prompting more and more foreign companies to reassess the pros and cons of the situation and look toward the future. On the same day that the US Treasury Department issued its investment ban, Intel announced it would expand its packaging and testing base in Chengdu, Southwest China's Sichuan Province, and inject $300 million there. 

To this day, the US' rules to curb high-tech investments to China are showing signs of fatigue, with its own problems increasingly exposed in the process. Meanwhile, Chinese high-tech enterprises have weathered the storm and are growing stronger with the support of the market and various sectors. The continuously improving business environment is also attracting global high-tech companies to China, to build a good industrial ecosystem and share in the development outcomes. In this shifting balance, the US' autocratic actions will ultimately lead to its own downfall, as it will lose support from others.

The author is a researcher at the Society for Technology and Strategic Trends. [email protected]