China Strongly Rejects New U.S. AI Export Control Measures

On Monday, China's Ministry of Commerce (MOFCOM) officially opposed the recent artificial intelligence (AI) export control measures implemented by the United States. The ministry asserted that these new rules will significantly harm the interests of businesses globally, including those based in the U.S. Additionally, China pledged to take necessary actions to protect its legitimate rights and interests.

The backlash from China follows the Biden administration's unveiling of an Interim Final Rule on Artificial Intelligence Diffusion, released on the White House website. This ruling intends to impose stricter limitations on the export of AI chips and technologies. Under these new regulations, the number of AI chips allowed to be exported to most nations will be capped, while unrestricted access to U.S. AI technology will be granted to America's closest allies. Conversely, exports to China, Russia, Iran, and North Korea will remain blocked, as reported by Reuters.

The MOFCOM spokesperson expressed concern that the measures tighten export controls on AI chips, model parameters, and related items while also expanding long-arm jurisdiction, making regular trade with China more challenging for third parties.

Many U.S. high-tech companies and industry groups have previously raised alarms regarding these regulations, citing a lack of adequate discussion and deeming the measures excessive. They anticipated that such hasty action would lead to dire consequences and urged the Biden administration to abandon the plan.

Despite these warnings, the Biden administration appears dismissive, pushing forward with the regulations. The spokesperson pointed out that this reflects an ongoing trend of overreaching national security concepts, representing an abuse of export control measures and a violation of international trade norms.

As outlined by the spokesperson, the U.S.'s misuse of these export controls disrupts international trade and economic relations, adversely affecting the market dynamics and the overall global economy. This disruption damages the interests of a wide array of companies, including those based in the United States.

In its response, China reiterated its commitment to safeguarding its rightful interests and announced plans to take adequate measures.

Nvidia, a prominent U.S. chip manufacturer, criticized the Biden administration's new rules in a statement. Nvidia described the "AI Diffusion" regulation as a misguided initiative that threatens to hinder global innovation and economic progress.

The company argued that, while marketed as an "anti-China" effort, these regulations would not significantly bolster U.S. security. Instead, they would impose restrictions on technologies that are already widely used in commercial markets, ultimately undermining American competitiveness.

Ken Glueck, executive vice president of Oracle, was also critical of the new controls, predicting they would adversely impact the U.S. technology sector. He characterized the rules as overly regulatory and warned they could unintentionally empower Chinese market players in the AI and GPU domain.

According to reports, the new restrictions will specifically target advanced graphics processing units (GPUs), essential for AI model training data centers. While some 18 countries, such as Japan, Britain, South Korea, and the Netherlands, will be exempt from these restrictions, about 120 other nations will face various caps. Conversely, countries like China, Russia, and Iran will see a complete ban on receiving this technology.

Ma Jihua, an expert in the telecommunications field, emphasized that the Biden administration's restrictive policies signal a broader strategy aimed at containing China through alliances with other nations. He observed that these measures not only hinder the global semiconductor industry but also potentially undermine U.S. domestic companies.

Despite exemptions for some allies, the global semiconductor market is interconnected. Limitations on exports could shrink the market and decrease sales for American chipmakers. The semiconductor industry relies on a global supply chain, involving not only sales but also raw materials and equipment.

U.S. policymakers may believe that withholding high-end chips will prevent other countries from advancing. However, this approach may be misguided, as evidenced by China's progress despite existing restrictions. Many domestic operators have effectively transitioned to using locally produced chips, reducing their dependence on American technology.

Chinese alternatives for GPUs are also emerging, leading to skepticism about the efficacy of U.S. measures aimed at stunting China's AI development.

China, AI, Export, Control, Economy