US-China Business Leader Calls for Slowdown of 'Accelerating' Tech Controls
The U.S. and China need to pause their escalating trade restrictions against one another and have a “serious” conversation about how to manage national security risks around technology to prevent a dangerous decoupling of their two economies, the outgoing leader of a major U.S.-China business organization warned this week.
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Craig Allen, who will retire as president of the U.S.-China Business Council at the end of this year (see 2409100027), said both governments need to agree that we “do not want to bifurcate our technology innovation ecosystems,” but he said he fears they’re headed in that direction. He specifically pointed to the latest round of U.S. semiconductor-related export controls announced earlier this month, which put in place new restrictions over certain foreign-made chip equipment (see 2412020016 and 2412030022), and the immediate response by Beijing, which signaled it also planned to implement its own version of controls over foreign-made items (see 2412110052).
“We should not underestimate the potential impact of China's response and the introduction of the foreign direct product rule,” Allen warned during an event this week hosted by the Center for Strategic and International Studies. He said he fears the U.S. and Chinese controls “collectively” could be “quite disruptive” to American commerce and manufacturing.
“China is signaling that it can, and it will, respond reciprocally and perhaps asymmetrically to U.S. trade actions,” Allen said, “and the implications are significant.”
He added that technology companies are increasingly being forced to choose between “localizing” in China to take advantage of sales to Chinese customers, or decoupling from the country to avoid the “business, regulatory and reputational risks” from doing business there. He said the latest U.S. export controls and China’s response represent a “big step up” in those tensions.
“I would encourage both governments to have a serious talk about national security risks and clearly delineate what is go and what is no-go,” Allen said. “Right now, the expansion of export controls by both countries is accelerating, and if we do not arrest that acceleration, then it will become more and more difficult for the” two sides to “coexist.”
Allen added that he has “great confidence” that the incoming Trump administration understands the importance of the U.S.-China economic relationship “despite the calls for tariffs and whatnot.” He said he would “plead” for both Trump and Beijing to discuss how to better manage geopolitical risks and give companies from both countries clearer “guidelines” on what kind of business activity is off-limits.
“Right now, we're kind of in the worst of all possible worlds,” he said. “We're anticipating that what is legal on Tuesday might not be legal on Wednesday, and we're adjusting our forecasts as such.”