August 5th, 2024

Overview

This week, we analyze a recent meeting between the Chinese and Ukrainian foreign ministers that was meant to explore how China could contribute to peace in the Russia-Ukraine War. We also discuss the Biden Administration's decision to further restrict China's access to advanced semiconductor technology.

Enlisting the Reluctant Dragon

By Editor Jack Sepulvado

Ukrainian Foreign Minister Dmytro Kuleba met with his Chinese counterpart Wang Yi in China to discuss the country’s role in creating peace between Ukraine and Russia.

Creating peace together: On July 23, Ukrainian Foreign Minister Dmytro Kuleba arrived for a four-day visit in Guangzhou, China, where he met with his Chinese counterpart Wang Yi. Together, they primarily discussed Ukraine’s ongoing war with Russia. Kuleba reportedly stated that Ukraine would only enter negotiations to end the war if Russia acted in “good faith” but noted that “no such readiness is currently observed.” He also stressed that a just peace between Ukraine and Russia was in “China’s strategic interests.” Wang reasserted his country’s commitment to ending the conflict according to the four principles outlined by Chinese President Xi Jinping, which emphasizes a fair and equitable outcome in any political settlement.

On the rocks: Kuleba’s visit marks his first since Russia began its invasion in early 2022. The war has put a strain on the otherwise relatively sanguine Ukraine-China Relationship. China is Ukraine’s largest trading partner, and Ukraine was one of the first countries to join Beijing’s Belt and Road initiative. However, many now see China as an indirect supporter of Russia's war effort. Last year, Xi hailed a “no limits partnership” between his country and Russia. Since the invasion, China has also supplied dual-use goods, which can be used for either military or civilian purposes. More recently, China chided Ukraine for not attending a conference in Switzerland that aimed to lay the groundwork for an end to the war.

A foot in the door?: Despite not yielding concrete commitments from China to intervene on Ukraine’s behalf, many in the Ukrainian government hope that Kuleba’s visit could set the stage for a future meeting between Xi and Ukrainian President Volodymyr Zelensky. Ukrainian foreign ministry spokesman hailed Kuleba’s visit as an “indisputable” step towards a meeting between China and Ukraine’s presidents. However, China appears to display caution about such a visit, as it could suggest support for Ukraine over Russia. Indeed, the Kuleba-Wang meeting was held in Guangzhou rather than Beijing, likely a move to put distance between Xi and the Ukrainian foreign minister.the same.

U.S. Cracks Down on China’s Semiconductor Imports

By Editor Tanner Nalley

The Biden Administration released another round of export controls on semiconductor technology, aimed at restricting China’s access and setting them back years.

U.S. tightens grip: The U.S. plans to further limit China’s access to high-end semiconductor chips and advanced equipment used to manufacture them. To implement these regulations, the Biden Administration will expand the Foreign Direct Product Rule, originally designed in 1959, to control the export of goods made with American technology, even if those goods are manufactured overseas. As a result, Chinese semiconductor fabricators would be banned from receiving exports from other countries as they attempt to develop their own cutting-edge chips. Exports from other countries like Israel, Taiwan, Singapore, and Malaysia would be affected. However, exceptions have reportedly been carved out for other countries like the Netherlands, Japan, and South Korea, which have close relations with the U.S.

Not their first rodeo: This latest round of regulations on semiconductor chips destined for China is not the first. The Biden Administration previously imposed export controls on China in 2022 and 2023. In the first round, the U.S. moved to limit China’s ability to acquire advanced chips by halting U.S.-based companies from exporting processors or the equipment used to produce them to Chinese firms without special licenses. The goal was to curtail the country’s efforts at modernizing its military and specifically deny them access to semiconductor chips used in artificial intelligence applications. In 2023, the U.S. Commerce Department updated the rules, cutting down on loopholes and ensuring the robustness of the controls.

Strong reactions: Because the new round of export controls specify exceptions for certain countries, the new landscape will advantage certain companies like the Dutch-based supplier of semiconductors and related products ASML and Japanese semiconductor equipment company Tokyo Electron. Immediately after the U.S. decision was announced, shares from both companies jumped by 7%. At the same time, these new regulations will offer challenges for China and its tech firms as they are reliant on foreign technology. In response to the ruling, Chinese foreign ministry spokesperson Lin Jian vowed that such impositions would only make China more determined to become self-sufficient, bolstering the country’s strength in technology and innovation. In truth, such trade restrictions by the U.S. may lose their potency if China manages to develop its own fully-fledged home-grown semiconductor industry sufficiently.