China becomes increasingly radicalised in response to reported SMIC ban

It looks like the US is imposing export restrictions on Chinese chip fab SMIC, which could be the last straw that tips China into a full-blown political response.

Reuters reports that suppliers of equipment to SMIC will now have to apply for special export licenses on pain of being put on the US naughty step. While there didn’t appear to be official confirmation of the move at time of writing, Reuters says it has seen the letter from the Commerce Department, which was presumably a controlled leak, so that’s a lot more solid than the usual ‘people familiar with the matter’.

The rationale for imposing sanctions of Chinese companies continues to evolve too. In this case the US thinks there’s an unacceptable risk that SMIC could pass on such high-tech gear to the Chinese military, which is now apparently reason enough to act against it. This seems like a very wide new front of the trade war, since any Chinese company could theoretically collaborate with the Chinese military.

“SMIC reiterates that it manufactures semiconductors and provides services solely for civilian and commercial end-users and end-uses,” said the company in a statement, stressing it has received no direct communication on the matter. “The company has no relationship with the Chinese military and does not manufacture for any military end-users or end-uses. The company will continue to pay close attention to this matter and issue further announcement as and when appropriate. Shareholders and prospective investors are advised to exercise caution when dealing in the securities of the company.”

That last bit seems like a forlorn hope since its shares were apparently down 7% on the news and it will presumably receive the leaked letter soon. It looks like the Chinese Communist Party has tired of exercising caution too, as there are increasing signs it is preparing both a counterattack and a full domestic mobilisation. The trade war is starting to take on the characteristics of a military one.

Earlier this month the CCP reportedly announced plans for much greater state control of the Chinese private sector, in the process confirming the suspicion that it could always do so whenever it wanted. Today the English-language homepage of the state-controlled Global Times features nothing but op-eds attacking the US actions against Chinese companies.

The most remarkable of them is a piece headlined China needs new long tech march after US attack on SMIC. While it provides further evidence of Xi Jinping’s desire to appropriate private property in the name of taking on the US, the specific language used is especially ominous.

The ‘long march’ refers to a protracted military manoeuvre undertaken by Communist forces during the Chinese civil war, which eventually allowed them to counterattack and prevail. It also cemented Mao’s position at the top of the CCP. The term has also been appropriated by communists in other countries to describe their strategy of subverting society in order to take it over.

The invocation by the Chinese state media of early Maoist narratives to characterise the Chinese response to the threat posed by US sanctions seems bellicose. External threats have always been one of the main reasons given by politicians for unilaterally increasing their power and Xi is not about to miss that trick. The apparent US strategy of pushing until it provoked a response has achieved its aim, but there’s no telling what more is to come from this cornered tiger.