China strongly opposes U.S. Chips and Science Act

China has expressed strong opposition to the United States’ “unfair” new legislation on chip subsidies, saying that using political power to intervene in a sector that is highly globalized and based on market dynamics will eventually harm the interests of companies globally, including in the U.S. U.S. President Joe Biden last week signed the Chips and Science Act to offer USD52.7 billion in subsidies and extra tax credits for U.S. semiconductor production and research. The legislation prohibits companies from expanding their advanced semiconductor manufacturing in China for 10 years after they receive subsidies to build a U.S. plant.

Foreign Ministry Spokesman Wang Wenbin said that the legislation is an example of economic coercion by the U.S., and decoupling will harm both itself and others. Restrictions and suppression will not stop the pace of China’s technological and industrial development, he said. In a joint statement, the China Council for the Promotion of International Trade (CCPIT) and the China Chamber of International Commerce, said that the legislation provides for a typical industry-specific subsidy that does not conform to the non-discrimination principles of the World Trade Organization (WTO). The bill identifies particular countries as key targets, which would force companies to adjust their global development strategies and layouts, they said. In particular, the bill gives a wide definition to “any country of concern”, which would infinitely expand the discretionary power of its law enforcement, they added. Following the passage of the bill, shares of South Korea's SK Hynix and Samsung Electronics fell on the stock exchange. Hao Min, Professor of Technology Security at the University of International Relations in Beijing, said that the U.S.’ intention to boost its own growth by blocking other countries’ technological development will not work in the long run and will hurt the U.S. in the end.

According to the latest U.S. Congressional Budget Office estimates, the new semiconductor legislation will increase the U.S. budget deficit by USD48 billion over the next five years and by USD79 billion through 2031. While the Boston Consulting Group expected it would cost USD350 billion to USD420 billion to create a self-sufficient semiconductor supply chain in the U.S., an executive from a Chinese chip design and manufacturing firm said that “the USD52.7 billion subsidy is really a drop of water in the bucket, not to mention that it will be divided up by a number of chip companies,” the China Daily reports.