(Aug 5): The official newspaper of China’s ruling Communist Party warned of countermeasures against widening US technology curbs as Washington considers banning imports of some Chinese AI components, adding a fresh source of strain to the countries’ fragile trade truce.
In a commentary published Wednesday, the People’s Daily accused the US of “unilateral bullying” over the Federal Communications Commission’s (FCC) announcement last week that it would tighten restrictions on some foreign-made robots and power inverters, sectors in which China is a dominant manufacturer.
The newspaper did not mention the proposed restrictions on data centre components reported Tuesday, but its warning underscored the potential for Washington’s growing campaign against Chinese technology to complicate efforts by Donald Trump and Xi Jinping to stabilise relations before the Chinese leader’s expected US visit next month.
“The US measures, under the pretext of ‘non-discrimination’ or ‘national security,’ are in essence discriminatory treatment and suppression targeting Chinese enterprises and products,” the newspaper said. The commentary was credited to Zhong Sheng, a Chinese homonym for “Voice of China” that’s often used to convey Beijing’s views on foreign policy.
The FCC is drafting an order to ban Chinese-made data centre components, Bloomberg reported Tuesday, citing a person familiar with the matter. Reuters reported earlier that the agency was considering barring imports of new models of Chinese optical transceivers, which enable data to move at high speeds within and between data centres.
The agency is also considering other steps to prevent blacklisted China-based companies from connecting to US networks, the House Select Committee on China said in a report on the same day. The committee found that regulatory gaps had allowed three Chinese telecommunications companies barred from directly connecting to US networks to retain links to America’s internet infrastructure.
Chinese optical-equipment stocks slid on Wednesday morning, with Zhongji Innolight Co falling as much as 14% in Shenzhen before paring the decline. US, European and Japanese suppliers rallied, suggesting investors expect the proposed restrictions to hurt Chinese companies while benefitting overseas rivals.
Chinese suppliers control more than half of the high-speed transceiver market, leaving major cloud-computing companies with few near-term alternatives and potentially setting up industry resistance that could soften the proposed policy, according to Bloomberg Intelligence analyst Sean Chen.
Chinese companies may also be able to circumvent the restrictions by shipping products through factories in Southeast Asia, depending on how the FCC defines a Chinese optical transceiver, Chen said.
China exported US$61.6 million of optical transceivers to the US in June, accounting for 8.7% of its worldwide shipments. The US was previously the biggest destination for Chinese transceivers, but exports fell sharply after Trump returned to the White House last year.
Malaysia, where investment in data centres has surged, has since become the leading destination. It received US$260 million of Chinese optical-transceiver shipments in June.
Optical transceivers made up just 0.2% of China’s total exports in June, though shipments rose 27% from a year earlier in the first half.
The People’s Daily listed earlier FCC actions targeting Chinese telecommunications and video-surveillance equipment, drones and routers, describing them as part of an effort to suppress Chinese technology and contain the country’s industrial development.
“This move by the US side runs counter to the current momentum of stabilisation and improvement in China-US relations,” the newspaper said, citing the May summit in Beijing between Xi and Trump. “If the US side is bent on going its own way, China will take resolute countermeasures.”
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