The Commerce Department on Friday is issuing final rules to prevent China from benefiting from the $52 billion in subsidies for semiconductor manufacturing. The regulation, the last hurdle before the Biden administration can begin awarding the money, restricts how recipients use federal funds to ensure they do not help speed China’s technological advancement or aid its military modernization. Commerce Secretary Gina Raimondo describes the rules as “guardrails” that will advance shared national security interests by preventing the re-insourcing of critical technologies abroad and ensuring that the US remains a leader in semiconductor production, research, and workforce development.
This rule complements existing export controls and inbound investment screening programs, which protect American national security by limiting the transfer of sensitive technologies to foreign entities. The rule also strengthens transparency and accountability by requiring funding recipients to disclose publicly any material expansion of their semiconductor operations in foreign countries of concern and the number and size of any such projects that are already underway. The new rules add a specific definition for “material expansion” to clarify that the scope of the regulations includes both the construction of new facilities and upgrades to existing ones, as long as overall chip manufacturing capacity does not increase by more than 5 percent. This limit is intended to provide clarity and consistency for funding recipients while ensuring that the rules are not applied arbitrarily or in a way that interferes with their business operations or labor negotiations.
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The US and Chinese ministers of commerce held what was described as a candid, substantive, and constructive meeting on Tuesday. A readout on the ministry’s website said that US Commerce Secretary Gina Raimondo raised “serious concerns about the US Section 301 tariffs on China, semiconductor policies, and export control”. Similarly, China’s Commerce Minister Wang Wentao expressed significant concerns about the “US policies of distortion and interference in Chinese economy and trade” and reaffirmed “China’s commitment to bilateral cooperation based on mutual respect, equality, and win-win outcome.”
To avoid escalating tensions, the White House announced Friday that US National Security Advisor Jake Sullivan will travel to Beijing next week for meetings with Chinese officials. Those talks are expected to include discussions on “global macroeconomic stability including debt relief, global public health security, and climate change.”
The trip comes as the two sides seek to establish a framework for further high-level meetings between Presidents Joe Biden and Xi Jinping. The pair could meet this November at the Asia-Pacific Economic Cooperation summit in San Francisco, a year after their last face-to-face meeting in Bali. The White House also laid the groundwork for a meeting between Vice President Mike Pence and Chinese Vice Premier Liu Yang at that summit. Both have emphasized the importance of strengthening ties between their nations, which face rising competition for global market share and influence. The US-China competition for global influence will only intensify as both countries continue to develop their economic and strategic capabilities.
