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US Cracks Down on Chinese Corporations for Security Concerns

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WASHINGTON — The Biden administration on Thursday stepped up its efforts to impede China’s development of advanced semiconductors, restricting one other 36 corporations and organizations from gaining access to American technology.

The motion, announced by the Commerce Department, is the most recent step within the administration’s campaign to clamp down on China’s access to technologies that might be used for military purposes and underscored how limiting the flow of technology to global rivals has turn into a distinguished element of United States foreign policy.

Administration officials say that China has increasingly blurred the lines between its military and civilian industries, prompting the USA to put restrictions on doing business with Chinese corporations which will feed into Beijing’s military ambitions at a time of heightened geopolitical tensions, especially over Taiwan.

In October, the administration announced sweeping limits on semiconductor exports to China, each from corporations inside the USA and in other countries that use American technology to make those products. It has also placed strict limits on technology exports to Russia in response to Moscow’s invasion of Ukraine.

“Today we’re constructing on the actions we took in October to guard U.S. national security by severely restricting the PRC’s ability to leverage artificial intelligence, advanced computing, and other powerful, commercially available technologies for military modernization and human rights abuses,” Alan Estevez, the under secretary of commerce for industry and security, said in a press release, referring to the People’s Republic of China.

Amongst essentially the most notable corporations added to the list is Yangtze Memory Technologies Corporation, an organization that was said to be in talks with Apple to potentially supply components for the iPhone 14.

Congress has been preparing laws that will prevent the U.S. government from purchasing or using semiconductors made by Y.M.T.C. and two other Chinese chip makers, Semiconductor Manufacturing International Corporation and ChangXin Memory Technologies, due to their reported links to Chinese state security and intelligence organizations.

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The U.S. government added the businesses to a so-called entity list that can severely restrict their access to certain products, software and technologies. The targeted corporations are producers and sellers of technologies that might pose a major security risk to the USA, like advanced chips which can be used to power artificial intelligence and hypersonic weapons, and components for Iranian drones and ballistic missiles, the Commerce Department said.

In an emailed statement, Liu Pengyu, the spokesman for the Chinese embassy in Washington, said that the USA “has been stretching the concept of national security, abusing export control measures, engaging in discriminatory and unfair treatment against enterprises of other countries, and politicizing and weaponizing economic and sci-tech issues. That is blatant economic coercion and bullying in the sector of technology.”

“China will resolutely safeguard the lawful rights and interests of Chinese corporations and institutions,” he added.

On Monday, China filed a proper challenge to the Biden administration’s chip controls on the World Trade Organization, criticizing the restrictions as a type of “trade protectionism.”

The administration said that some corporations, including Y.M.T.C. and its Japanese subsidiary, were added to the list because they posed a major risk of transferring sensitive items to other corporations sanctioned by the U.S. government, including Huawei Technologies and Hikvision.

The Commerce Department said that one other entity, Tianjin Tiandi Weiye Technologies, was added for its role in aiding China’s campaign of repression and surveillance of Uyghurs and other Muslim minority groups within the Xinjiang region of China, in addition to providing U.S. products to Iran’s Islamic Revolutionary Guards Corps. U.S.-based firms will now be forbidden from shipping products to those corporations without first obtaining a special license.

Twenty-three of the entities — particularly, those supplying advanced chips used for artificial intelligence with close ties to the Chinese military and defense industry, and two Chinese corporations that were found to be supporting the Russian military — were hit with even tougher restrictions.

The businesses will likely be subject to what’s generally known as the foreign direct product rule, which is able to cut them off from buying products made anywhere on the earth with using American technology or software, which might encompass most global technology corporations.

The administration also said it will lift restrictions on some corporations that had successfully undergone U.S. government checks that ensured their products weren’t getting used for purposes that the federal government deemed harmful to national security.

As a part of the restrictions unveiled in October, the Biden administration placed dozens of Chinese firms on a watch list that required them to work with the U.S. government to confirm that their products weren’t getting used for activities that will pose a security risk to the USA.

A complete of 25 entities accomplished those checks, in cooperation with the Chinese government, and thus have been faraway from the list. Nine Russian parties that were unable to clear those checks were added to the entity list, the department said.

A spokesperson for the Commerce Department said that the actions demonstrated that the USA would defend its national security but in addition stood able to work in cooperation with corporations and host governments to make sure compliance with U.S. export controls.

In a separate announcement Thursday morning, a government board that oversees the audits of corporations listed on stock exchanges to guard the interests of investors said that it had gained complete access for the primary time in its history to examine accounting firms headquartered in mainland China and Hong Kong.

The agency, called the Public Company Accounting Oversight Board, said this was just an initial step in ensuring that Chinese corporations are secure for U.S. investors. But the event marked a step toward a possible resolution of a yearslong standoff between the USA and China over financial checks into public corporations. It also appeared to diminish the likelihood that major Chinese corporations will likely be mechanically delisted from U.S. exchanges within the years to come back.

Congress passed a law in 2020 that will have required Chinese corporations to delist from U.S. stock exchanges if U.S. regulators weren’t in a position to inspect their audit reports for 3 consecutive years.

Erica Y. Williams, the chair of the board, said the announcement mustn’t be misconstrued as a “clean bill of health” for firms in China. Her staff had identified quite a few potential deficiencies with the firms they inspected, she said, though that was not an unexpected end result in a jurisdiction being examined for the primary time.

“I need to be clear: that is the start of our work to examine and investigate firms in China, not the tip,” Ms. Williams said.

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