On Thursday, the US House Foreign Affairs Committee released a report urging tighter restrictions on export of critical technologies to China – including a policy of denial for all items controlled for national security reasons.
“We can no longer afford to avoid the truth: the unimpeded transfer of US technology to China is one of the largest contributors to China’s emergence as one of the world’s premier scientific and technological powers,” asserted the Committee’s chair, Michael McCaul (R-TX). He also argued for the necessity of the US to adopt a “win-at-all-costs mentality” when considering competition with China over intellectual property.
The report alleged that the Commerce Department’s Bureau of Industry & Security (BIS) – the regulatory body responsible for export controls – prioritizes business and commerce over national security, resulting in a flow of US tech that fuels the military and civilian fusion of the adversary: the Chinese Communist Party (CCP).
According to the Committee, BIS should assume any item useful to the military will end up with the People’s Liberation Army (PLA) and therefore should deny China access to any items controlled for national security reasons.
Also proposed is the ability for national security bodies to have input on license approvals, and license fees to pay for all of the extra work and oversight needed from BIS.
The report stated that BIS currently approves almost all applications for licenses allowing export-controlled products to reach China. Between January and March 2022 BIS only denied eight percent of applications for PRC companies.
Even applications to export goods to heavily sanctioned Chinese companies like Huawei and chipmaker SMIC are being approved, the report found, with $60 billion of kit reaching Huawei and $40 billion going to SMIC between November 2020 and April 2021.
Furthermore, the lawmakers argued, assurances from Beijing that US tech will only be used as promised cannot be trusted – because China “regularly violates international agreements to which it agreed.”
The 66 pages of the report [PDF] represented a 90-day review of technology transfer and BIS restrictions.
The document stated that China is leading development in 37 categories of critical technologies, out of 44 on Uncle Sam’s radar. Beijing is also investing hundreds of billions of dollars while “building a more aggressive technology transfer regime.”
“China steals annually upwards of $600 billion worth of American intellectual property,” claimed the report, citing a 2017 paper [PDF] published by The National Bureau of Asian Research.
But while the technology transfer may be ongoing, there is evidence that export bans are having significant effect on China’s businesses and economy. Even with only eight percent of licenses denied, Huawei saw Q1 2023 profits plunge 46 percent year-on-year while revenue has remained largely flat for three years after previously growing strongly. ®
