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China’s ambition to become the world’s No. 1 economy is being “pulled” by the US just because of this technology

Achilles’ heel China

Semiconductor chip is like the heart to drive innovation technology. However, the US has been restricting the export of important semiconductor components to China. Therefore, many questions arise as to how long the country of billions of people can maintain the technology industry if one day lacks this important component.

Core technologies are China’s Achilles heel (fatal weakness). Therefore, this is also the goal for the US to limit its technology.

Without mastering the complex chips necessary to manufacture technological products, hope can surpass the US and become a economy China’s world top 1 will never come true.

“Chips are the foundation of the modern economy,” said Jun Zhang, an associate professor of economic geography at the University of Toronto. However, China is facing unprecedented pressure from the US.”

The promulgation of measures to limit the export of semiconductor components to China by the US is one of the reasons why many international organizations have begun to “step back” or cancel their forecasts that China may surpass the US in order to export to China. became the world’s largest economy, according to information provided by the South China Morning Post (SCMP). The gap between the two economies widened last year.

China's ambition to become the world's No. 1 economy is being dragged down by the US just because of this technology - Photo 1.

Goldman Sachs forecast last November that the China’s economy may decrease by 1.7 percentage points due to the impact of the economic war between the two powers or in the next 4 years, the annual growth rate will be reduced by about 0.4 percentage points. And possibly, the main reason is coming from the semiconductor chip sector.

The digital economy accounts for 39.8% of China’s GDP. This is considered the main driver of economic growth. However, to achieve peak performance, the country needs semiconductor chips.

But a string of technology industries, from driverless cars, high-speed computers to artificial intelligence, have suffered significant losses before the US embargo. In the near future, economic losses will increase.

Dan Wang, an analyst at Gavekal Dragonomics, wrote in a report published last month that “virtually every hardware company in China has to plan for the consequences of the US embargo. . These clamping measures could hinder progress in China’s semiconductor industry.”

In August 2022, US President Joe Biden signed into law the Science and Chips Act to promote the development of the US semiconductor industry through subsidies worth $52.7 billion. Then in October, the US administration expanded the list of technology restrictions on China, mainly on advanced semiconductor chips, chip-making software and tech talent.

Containment efforts have increased last month since the United States worked with the Netherlands and Japan to limit the supply of advanced chipmaking equipment to China.

“This is a shock to the Chinese tech industry,” said Thomas Helbling, deputy director for Asia-Pacific at the International Monetary Fund (IMF). But it will only last for the short term.”

But the situation also looks to get more complicated as the European Union (EU) is expected to pass the EU Chip Act later this year. This will further complicate China’s situation. The act is expected to increase Europe’s chip production by around 20%.

However, some analysts still expect that, if it masters the semiconductor chip, prevails in this technology war, China can still hope to surpass the US in the future.

China neutralizes the attack

China’s leaders identified high-end chips, industrial machinery equipment, basic electrical equipment, hardware, materials, software and algorithms as the focus points that the country needs to work on. So the government has set a target to raise chip self-sufficiency rate from 30% in 2019 to 70% by 2025.

China's ambition to become the world's No. 1 economy is being dragged down by the US just because of this technology - Photo 2.

According to Xinhua, China’s Politburo convened a closed-door meeting at the end of January to discuss ways to improve the country’s technological autonomy.

Thanks to the support of the top leadership, China’s digital economy will receive additional finance and great resources to accelerate the process of replacing foreign technology.

Beijing has mobilized government funding, the contribution of many enterprises and talented personnel to achieve future technology goals.

In addition, the Chinese Academy of Sciences has started a campaign since 2019, focusing on the development of semiconductor technologies to be able to autonomously produce the world’s most advanced chips.

Since then, more than a dozen prestigious universities, including Peking University and Tsinghua University, have established faculties specializing in integrated circuit (IC) development and research.

China’s research and development spending is also rapidly approaching that of the United States. In 2022, this spending is up 10.4% year-on-year, to a record high of about $455 billion, or 2.55% of national GDP.

China has quickly formed an ecosystem of devices, components and materials for semiconductor chips. However, domestic chipmakers still lag far behind their global rivals.

“The global semiconductor supply chain is often centered on US companies, and China’s influence is relative,” said Hyung-Gon Jeong, a senior research fellow at the Korea Institute of Foreign Economic Policy. weak. The billion-dollar economy is expected to suffer a negative impact if multinational companies one by one leave China due to US sanctions.

Currently, there are a number of foreign companies that have moved their production facilities out of China. This has forced the national authorities to commit to expanding market access and improving the business environment to retain businesses.

Synthesis

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