Beijing allows US export-control checks on Chinese tech companies

The Biden administration says Beijing has relented and allowed US inspections of Chinese businesses, with a number of companies facing a deadline to co-operate by this week or risk being put on a trade blacklist.

Alan Estevez, the US commerce under-secretary for industry and security, said China had started letting American officials inspect some Chinese companies after Washington recently brought in tough semiconductor export controls.

Estevez said the Chinese commerce ministry — which since the Trump administration has refused to allow US officials to conduct end-use checks to ensure that American technology was not being diverted for unauthorised activity such as the manufacture of weapons — had become more receptive since Washington imposed the controls in October.

At the time, it put 31 Chinese companies, including memory chipmaker YMTC, on the “unverified list”, setting a 60-day clock for the companies to allow end-use checks or face the prospect of being added to a trade blacklist called the “entity list”, which would effectively ban US companies from supplying them with technology.

Speaking at the Center for Strategic and International Studies think-tank in Washington on Tuesday, Estevez said there were signs that the Chinese commerce ministry had responded positively, which he noted was the goal of putting companies on the unverified list and threatening tougher action for non-compliance.

“We are seeing better behaviour. Mofcom has been more forthcoming,” Estevez said, referring to the Chinese commerce ministry.

But Estevez warned that it was too early to draw broader conclusions about whether China had made a real shift. Beijing has in the past become more open to end-use checks before reversing course. “We’re seeing a change in attitude,” he said. “It’s not the first time we’ve seen a such a change in attitude, so it depends on how long that is sustained.”

Beijing approved visits of US officials to companies in Wuhan, Shanghai and several cities in Guangdong province in November, according to four government officials with direct knowledge of the matter. The decision came after the semiconductor industry and local authorities filed a series of petitions on the sweeping impact of the latest export controls.

“It is the industry’s unanimous response to the escalating US ban that has Beijing beginning to waver on whether it should continue to escalate its confrontation with the US over semiconductors,” said a government official in the tech hub of Shenzhen who was familiar with the matter. “Against such a sluggish macroeconomic backdrop, if geopolitical influences continue to penetrate, it does not benefit the Chinese semiconductor chain.”

The US’s unilateral export controls are designed to make it much harder for China to obtain advanced semiconductors and develop the technologies and tools needed to produce higher-end chips. These chips can be used in military applications ranging from nuclear weapons modelling to the development and testing of hypersonic weapons.

Washington has engaged the Japanese and Dutch in discussions to create a trilateral export control regime that would put restrictions on the export of chipmaking tools. The export controls imposed by Washington on October 7 prohibited US toolmakers from exporting advanced technologies to China, but they did not take aim at non-US companies.

Estevez and Tarun Chhabra, the top White House national security official for export controls, visited the Netherlands last month in an effort to make progress on a deal. Estevez on Tuesday declined to discuss the content of the recent talks but expressed confidence the US would reach a deal with its allies.

“We’re having good discussions,” he said. “I don’t expect any other country to say, ‘Hey, we’re gonna come in and let the United States dictate our policies and our plans.’ However . . . these countries or allies share our values.”

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