Wow. China's high-tech economy just took a major boot to the knackers...

 

A recent move by the Biden administration has really put the boot into China's high-tech industries.  In a series of tweets, Jordan Schneider sums up the situation.  Here's part of Threadreader's condensed version.

The US government's new export controls are wreaking havoc on China's chip industry.

New rules around "US persons" are driving an "industry-wide decapitation." 

The following is the translation of a thread posted earlier this week by @lidangzzz.

"Lots of people don’t know what happened yesterday.

To put it simply, Biden has forced all Americans working in China to pick between quitting their jobs and losing American citizenship. 

Every American executive and engineer working in China’s semiconductor manufacturing industry resigned yesterday, paralyzing Chinese manufacturing overnight.

One round of sanctions from Biden did more damage than all four years of performative sanctioning under Trump. 

Although American semiconductor exporters had to apply for licenses during the Trump years, licenses were approved within a month. 

With the new Biden sanctions, all American suppliers of IP blocks, components, and services departed overnight —— thus cutting off all service [to China]. 

Long story short, every advanced node semiconductor company is currently facing comprehensive supply cut-off, resignations from all American staff, and immediate operations paralysis. 

This is what annihilation looks like: China’s semiconductor manufacturing industry was reduced to zero overnight. Complete collapse. No chance of survival. 

There's more at the link.

I have three immediate reactions to this news:

1. China cannot let this stand.  Premier Xi dare not allow his country's high-tech industries to be stranded like this.  He must and will retaliate, so hard that (he hopes) he can force the USA to back down.  That may include measures such as invading Taiwan, to get his hands on that island nation's high-tech chip foundries and expertise.  This may be the event that triggers such an invasion.  It's that serious.  (Yes, Taiwan is doubtless prepared to destroy its chip foundries if China invades;  but if Xi is persuaded that his own special forces can carry out a lightning strike to take over the foundries before they can be destroyed . . . oh, boy.)
2. Frankly, I don't know how the Biden administration managed to stiffen its sinews enough to do this.  We all know that the Biden family is in the pockets of Chinese financiers and politicians - there's been so much evidence of that in recent years that it's beyond dispute.  The same can be said for many US politicians, on both sides of the aisle.  That being the case, why/how have US politicians taken a decision that so drastically impacts their paymasters?  I'd love to know.
3. Every country in the world that has a high-technology economic sector - including Europe - must now weigh up the risk that a unilateral decision by another country (the USA, of course, but also conceivably other high-tech nations) may completely disrupt (a) vital part(s) of its economy without warning.  That may have profound implications for future government funding and industry focus in the biggest economies in the world.

Peter Zeihan sums up China's dilemma like this:

I suspect things are going to get very "interesting" (in the sense of the fabled Chinese curse), very quickly . . .

Peter