Beijing: US sanctions on China's semiconductor industry could cost China up to 0.6% of its GDP and devalue the yuan against the dollar by up to 3%, according to a research note by Barclays.
While the impact is "manageable" for the time being, US controls on China's semiconductor exports could have a significant impact on the country's production and currency if the sanctions are extended to "lower-end semiconductors" or include supplies from other countries.
According to Barclays estimates, the economic cost to China could reach 3% of GDP and in a worst-case scenario could lead to a 7% drop in the value of the Chinese currency against the dollar.
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According to the research note, "controls on US semiconductor exports to China are part of a broader strategic agenda that, while manageable for the time being, could have a significant impact on China's production and currency going forward."
Concerned that high-tech items could strengthen China's military, the US Department of Commerce's Department of Industry and Security introduced several updates to its existing high-tech export control rules on October 7.
New regulations limit off-the-shelf access to China. High-end logic and memory semiconductors above certain technology thresholds, as well as the equipment needed to manufacture them domestically.
According to the Washington Post, the latest sanctions are the tightest in years, and many analysts believe they could end high-end semiconductor manufacturing in China if no replacement for the US-origin technology is found.
According to the Barclays report, the new sanctions are part of a broader set of strategic objectives aimed at "preserving the status quo in Taiwan, reducing US dependence on China in key areas, and making China's technological position less asymmetric in the world".
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US-China relations have deteriorated in recent years due to trade and technology tensions, with both telecom giant Huawei Technologies Co and China's top foundry, Semiconductor Manufacturing International Corporation, being added to a US trade blacklist known as the Entity List. Used to be.
Instead of relaxing Trump-era sanctions after President Biden takes office in 2021, the US announced a massive US$53 billion plan to tighten technology controls and restart chip manufacturing on US soil .
According to Barclays, US tariffs and non-tariff measures implemented since 2017 are likely to cost China more than $100 billion. With shipments being sent to China, analysts believe the country's semiconductor fate is becoming increasingly uncertain.
The bank also warned that there are significant risks if potential US sanctions are extended to include "low-end semiconductors or chips for commercial and civilian use, or supplies from other countries".
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According to the report, China may focus on increasing self-reliance in semiconductor technology as it has little option to retaliate.