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US Sanctions Will Make China Stronger

Above photo: US Speaker of the House Nancy Pelosi, alongside members of Congress, holds the CHIPS and Science Act after signing it during an enrollment ceremony on the West Front of the US Capitol in Washington, DC, July 29, 2022. Saul Loeb | AFP | Getty Images.

NOTE: This article was written in August, 2022. It is being posted today on the 73rd anniversary of the revolution in China.

Why the latest high-tech ban against China by the U.S. – the CHIPS Act – will only serve to put taxpayer money into the wallets of corporate America and the corrupt politicians.

For the past five years, with the rapid decline of the U.S. empire and the peaceful rise of China, the U.S. has rapidly developed a baffling policy of anti-China hysteria. From Trump to Biden, Republicans and Democrats, neo-cons and “progressives,” are all now focused entirely on a racist cold war of China-bashing and Russophobia, rather than doing anything constructive for the people of the United States and global society.

From a never-ending trade war, financial war, sanctions and the war against Huawei they turned to spreading unfounded stories of Chinese communist “high-tech” spies in the U.S., and a “Wuhan man-made” virus hoax. They play at “gunboat diplomacy” by sending aircraft carriers to the South and East China Seas in an effort to  intimidate China, while they provoke ethnic and social tensions by playing their “Taiwan card,” their “Hong Kong card” and their “Xinjiang card,”. The U.S. has failed to harm China with these actions, while they actually undermine their domestic security. But this doesn’t seem to stop them. Now their latest initiative is the CHIPS Act.

What is the CHIPS Act?

When I first heard this alphabet soup of a title in the media, I thought it was referring to “CHiPs,” the 1977 hit TV series about the California Highway Patrol. Instead it’s just another one of the fast-food type legislative bills in D.C., written by Beltway insider elites for their own cynical agenda, packed like hipster-telemarketing hype with lots of sugar coating and racist hatred fomenting fear mongering, but no actual substance and no mechanism to guarantee it will ever be implemented.

The CHIPS Act received bi-partisan approval in Congress and was signed at light-speed by President Biden on August 9th. It is a gigantic $280 billion law that includes $24 billion in tax breaks and $200 billion in new spending for unspecified future R&D as well as $100 million funding annually over five years for the State Department. It has designated $52.7 billion (19% of the overall budget) to bring semiconductor chip manufacturing to the U.S. and, as the media says, away from the current production hubs in East Asia. Just like any other bill from D.C. that sounds “too good to be true,” beneath the hype, there are many money-making opportunities for “Big Tech”.

To be fair, it will be good news for the U.S. if this bill can truly help the commercial chip manufacturing industry restart and bring back some high-paying, skilled jobs to U.S. communities, since chip manufacturing has now mostly left the U.S. for Asia. However, this is motivated by pure cold-war, zero-sum thinking. The White House says that by signing the CHIPS Act, the U.S. will be able to lower costs, create jobs, and strengthen supply chains. At the same time, it aims to “Counter China.”

The White House press release points out that the primary goal is to advance “U.S. global leadership” in technology. It is a meme to remind the world that no other country may rise above the U.S.1 The key provision of the bill forces chip manufacturing companies that accept funding from the U.S., or do business with U.S., to stop doing business with China. China is labeled as “evil” because they are catching up.

This toxic rationalization is enhanced by the right-wing and left-liberal media and think-tanks. On August 12th NPR interviewed Sourabh Gupta from the Institute for China America Studies (ICAS), a Washington-based think-tank. Gupta’s speech was full of MAGA-type “America first” rhetoric. He said that we just need to manufacture a certain amount of chips here so the U.S. will not be vulnerable to blackmail, or be in peril if there is a war in East Asia, or if there are other general supply chain snafus. The Key provision of the bill forces chip manufacturing companies who want to do business with U.S. companies or accept funding from the U.S. to stop doing business with China.

With this expression of economic imperialism in the de-facto form of sanctions, the U.S. uses “carrot and stick” policies to effectively block China from acquiring the latest chip manufacturing technologies or products from the U.S. “It absolutely does [shore up the U.S.’s position]” in global chip leadership, says ICAS’s Gupta. It forces East Asian manufacturers who currently have good business relationships with China, to fearfully ask the U.S. government for permission to continue to produce legacy chips in China while they produce cutting edge chips at home, or in the U.S., only for U.S. use. This way the technology which goes into cutting-edge chips “does not bleed into China and enhance China’s productive capabilities in any way,” Gupta concluded.2

This is a very racist statement because, the underlying rational is ONLY “white America ” has the right to own the crème de la crème, no one else should even dare to think about it! The best outcome for other countries (including China) is to be the loyal assistant for their white masters.

More than money is at stake here. The U.S. fears losing their power to use technology to spy on and control the world. That’s the fundamental reason the U.S. is freaking out about the rise of Huawei and is carrying out, on all fronts a dirty war against the Chinese technology giant. The U.S. is also carrying out a war against China’s popular TikTok, that is becoming more powerful than Facebook and YouTube around the world. Former President Trump almost succeeded in forcing China to sell the platform to the U.S. Beyond that, if China will soon be able to manufacture top-level chips, the U.S. will no longer be able to control the devices that people around the world use every day. So, there is a desperate need to use any despicable means to counter China’s unstoppable technological rise.

As Edward Snowden has exposed, the U.S. has been systematically using technology to spy on everyone in the U.S. and around the world. Every U.S.-made device has a “loophole” to allow the CIA/NSA to break into phones in order to spy on and track the user. U.S. software has a “backdoor” that allows the government enter private accounts, to read personal files and private messages, or easily break into operating systems to install spyware to manipulate or paralyze equipment. U.S. agencies can use their internet power to launch information wars and color revolutions through U.S. social networking sites anywhere around the world.

All these U.S. imperialist opportunities will be gone if China can offer alternative high-tech products. China has different technology standards than the U.S. which make it extremely difficult for them to hack into the systems. The U.S. will no longer be able to be the “Peeping Tom” of the world, nor able to use technology to control and blackmail anyone anywhere. This is what the U.S. fears.

The U.S. cannot afford to carry out a ‘Chip War’ against China

Soon after Biden signed the CHIPS act, China’s Foreign Ministry issued a statement firmly opposing it, saying it will “disrupt international trade and distort global semiconductor supply chains.”

The bill is supposed to boost U.S. semiconductor manufacturing; however, many experts and industry figures are not too optimistic about the law. Instead of letting business, scientific and expert communities develop workable solutions, with international cooperation, it contains many extremely limiting stipulations.

The essence of the CHIPS Act is that it provides government incentives for bringing semiconductor production back to the U.S. Currently almost all U.S. chip makers, including Intel, Micron, Texas Instruments and other major global chip makers, like South Korea’s Samsung and China Taiwan’s TSMC, own or operate as joint ventures with manufacturing operations in China and/or Southeast Asia. This accounts for 70% global capacity.

However, the main problem with the Act is that public investment can only be obtained under one condition: companies must choose the U.S. over China. They will not be allowed to expand their production in China over the next decade. According to China’s National Business Daily, the Act added additional China-related provisions to hinder the development of China’s advanced manufacturing processes. To maintain so-called U.S. technological leadership and supply chain security, recipients of financial assistance are required to agree to a prohibition of substantial expansion of semiconductor manufacturing in China. The restrictions will apply to any new factory unless the factory mainly produces “legacy semiconductors” for the U.S.

In a nutshell, it’s an “either/or” clause that prohibits companies that receive federal funding from significantly increasing production of advanced-process chips in China for ten years.

There’s no doubt the CHIPS Act is just another political stunt. After a failing trade war, a spy war, a cold war, a color revolution and hostilities in the South China Sea, the U.S. intends to start yet another expensive “chip war” against China. They want to use “carrots” (money) and “sticks” (sanctions) to force U.S. companies and those in other countries to erect a technological “iron curtain” around China to effectively split the current global supply chain into two (U.S./world vs. China).

Yet, it is questionable whether the U.S. has the ability to pull the whole world into its “chip war.” More importantly, the US may want to curb the development of China’s semiconductor sector by imposing various restrictions, but “this may only lead to more supply chain disruptions. As the US becomes increasingly accustomed to abusing various export controls and restrictions, it is actually sabotaging its own supply chain by inviting more risks,” China’s Global Times, said.

Another problem with the CHIPS Act is the U.S. declining production capacity. The U.S. remains a major supplier of key technologies for chip manufacturing, including electronic design automation tools (EDA Tools), many advanced designs and their intellectual property patents. Yet most final products are not made in the U.S. which produces only 10% of global market share. Over the years, China has penetrated the global supply chain so deeply that nearly all chipmakers package and test their products in China.

The CHIPS Act does not solve the fundamental problem of the decline of wafer manufacture in the U.S. This is one of the key processes in chip manufacturing. With the provisions in the Chip Act, the U.S. is likely to have shot itself in the foot, according to the recent report by China’s National Business Daily (NBD).   The NBD argues that by subsidizing U.S. local wafer factories and restricting advanced Chinese processes, the bill may miss its goal. In advanced chip manufacturing processing, the real rivals are South Korea and the Taiwan Province of China, while the Chinese Mainland is thriving on the manufacture of mature chip technologies.

China is the largest market for the global semiconductor industry and has a well-developed manufacturing environment, including many highly skilled workers, research facilities and investment capital. All of this allows China enough room to develop its own indigenous chip technologies and to pursue cooperation with global players who opt to take China’s side, in spite of Washington’s hegemonic obstruction. “China doesn’t have to follow the same path of chip development as the U.S.” concluded another Global Times article last year “any attempt to remove China from the value chain will hit a dead end”.

China imports nearly $400 billion worth of chips each year, more than crude oil imports. There are good reasons for U.S. manufacturers to shift final production of their products to China. According to Russia’s Sputnik analysis, no matter what means the U.S. uses to curb the development of China’s technology industry, it will directly harm the interests of American companies. Back in 2019, when the U.S. first imposed restrictions on Huawei, Qualcomm, Intel, Micron Technology and others lost $10 billion in revenue — the amount Chinese companies spend on electronic components each year.

Wall Street does not regard the CHIPS Act as a “good” bill. The stock prices of U.S. chip companies did not rise but fell. On August 9th, the day when Biden signed the bill, PHLX Semiconductor Index (composed of the 30 largest companies primarily involved in the design, distribution, manufacture, and sale of semiconductors) closed at 2866.90 points, down 4.57%, Qualcomm fell 3.59%, Broadcom fell 2.33%, Micron fell 3.74% and Intel dropped 2.43%, according to the National Business Daily (NBD).

There are many indications that the bill will do nothing but waste lots of money, and do more harm than good to the U.S. semiconductor industry and supply chain. It will not be able to defeat China in the long run. So why is the U.S. so desperately pushing it? No doubt it’s for the upcoming election. The CHIPS Bill will enable many politicians and investors in corporate America to make some quick and easy money.

Corruption, lies and video tapes

According to Russia’s Sputnik news agency,  tech giants such as Intel or Texas Instruments seem to be the main beneficiaries of the new law. They have ample opportunity to attract public funding over the next five years — an extremely rare situation in capitalist America, where the U.S. is constantly waving the “free trade” banner to keep other countries from subsidizing their businesses for export production (witness the long U.S. war against Europe’s subsidy for Airbus).

Besides the business community, U.S. politicians will also benefit from the bill; one of them is Nancy Pelosi, No. 3 in the U.S. government and one of the most powerful political oligarchs in Washington, D.C. Her recent provocative trip on August 2-3rd to visit China’s Taiwan province resulted in a major condemnation by China. Pelosi, known for several decades for her strong, hawkish and hysterical anti-communist/anti-China stands, made her last political trip before the mid-term elections to Asia, in a move that was intended to break the U.S. “One China Policy” promise which could change the entire future direction of China-U.S. relations, possibly sparking major military tensions with China.

But behind the anti-China political hype, her political trip was exposed later by a few in the U.S. and foreign media: She’s using public resources to help her son’s private business interests.

According to a report in the Global Times August 13th, during her high-profile Asia trip, the U.S. media was initially (and intentionally) silent about the photos/videos from her trip which clearly showed there was a shadow member of the delegation, Paul Pelosi Jr, Nancy Pelosi’s only son who has no government post, nor is he a political consultant of Pelosi’s. He was not on the official list of Pelosi’s team to Asia, “prompting political figures and netizens on the (Taiwan) island to suspect whether he has a secret mission that cannot be exposed, such as pursuing business interests for his family.

Chiu Yi, a former politician from Taiwan, told the Global Times that American politicians always come to the island of Taiwan for one of two purposes: to get Taiwan’s financial support, or to promote procurement. Pelosi’s visit exposed a third – filling pockets via financial and stock market manipulation.

According to Chiu, Paul Pelosi Jr’s most important role was to connect Pelosi and her husband in the U.S. “Asian, U.S. and European stocks were all affected by Pelosi’s visit to Taiwan. Her son who has basically followed his father into the finance business managing financial operations, mergers and acquisitions. So there was obviously a high degree of insider stock trading suspicion. The husband runs the business in the U.S.; Pelosi is in charge of causing trouble, and the son worked as an aide to Pelosi,” on the trip, the expert explained to the Global Times.

It is pretty certain that Pelosi’s son talked about some deal with TSMC (Taiwan Semiconductor Manufacturing Company, Limited) after being introduced to TSMC Chairman Mark Liu on August 3rd. The deal would have been either “related to TSMC’s investment in the U.S. or the purchase of TSMC chips” he concluded. In addition, Chinese media reported that Pelosi’s Asia trip in Singapore, Malaysia and South Korea also provided him an opportunity to secure some chip-related business deals — just a few days before Biden signed the CHIPS Act.

However, Pelosi’s biggest fortune has come from mainland China! It sounds too crazy to be true. But while she’s shouting anti-China rhetoric, her husband Paul Pelosi and her son openly and frequently have traveled to China since 1990s, and have made lots of money. According to the latest report their China investment fund in Hong Kong had reached $17.4 billion. Many of his investments in China are in state-owned enterprises and the largest IT companies such as Alibaba, Meituan, Tencent, Postal Savings Bank of China, Pinduoduo, etc.

This is a typical two-faced western politician, what the Chinese call “making money while anti-China” hypocrite. According to the July 28th Business Insider’s “Insider” investigation,  Paul Pelosi and his son are making massive stock trades and win almost every time; Pelosi’s cumulative family wealth at least $46.1 million, making her the fourteenth richest member of the Congress.

He has holdings in corporations such as Slack, Tesla, Disney, Visa, Salesforce, PayPal, Alphabet, Facebook, and Netflix — companies that together spend tens of millions of dollars each year lobbying the federal government. In addition, according to the “Insider,” stock trades Paul Pelosi has made since 2021 include U.S. semi-conductor companies Micron and NVIDIA, companies which will surely benefit from the recent CHIPS Act.

Why the CHIPS Act will fail – and at taxpayers expense

The U.S. accounted for more than 37 percent of the world’s semiconductor production in 1990. Today, the high-end semiconductors produced in the US account for about 12 percent of the global semiconductor production, with Asian economies including China claiming larger shares of the market, according to the China Daily.

Many experts had pointed out that while the CHIPS Act acts as a de-facto “chip sanction” against China, it’ll affect China in the short run (it needs some time to develop its own cutting-edge semiconductor supply chain to catch-up); but for the long-run, the U.S. will have shot itself in the foot.

Because U.S. intentions are not principled, every elite investor inside the Beltway and on Wall Street is paying lip-service to the “anti-China” cause for their own gain. Just think about this as sanctions on steroids (lots of money will pour in) that will only look good for the U.S. in the very short term, maybe up to the 2022 mid-term election or 2024 presidential election (if it still has funding). But just like Biden’s massive $2 trillion infrastructure plan last November, which has ended up going nowhere, the CHIPS Act will meet the same fate: soon after the money runs out, the hype will run out too.



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