China opposes US chip subsidy law, says political power will hurt its interests

A tech company in Anhui province tests chips at a tech firm in Hefei. China opposes the United States' new legislation on chip subsidies, saying political power will hurt the interests of companies in the world, including in the US.

The comments came after US President Joe Biden signed the Chips and Science Act on Tuesday and offered $52.7 billion in subsidies and additional tax credits for US semiconductor production and research.

After receiving a subsidy to build a US plant, the legislation prohibits companies from expanding their advanced semiconductor manufacturing in China for 10 years.

At a news conference on Wednesday, Wang Wenbin said that the law is an example of economic coercion by the US, and decoupling will harm both itself and others. He said that restrictions and suppression will not stop the pace of China's technological and industrial development.

In a joint statement on Wednesday, the China Council for the Promotion of International Trade and the China Chamber of International Commerce said that the legislation is a typical industry-specific subsidy that does not conform to the non-discrimination principles of the World Trade Organization.

They said that the bill identifies certain countries as key targets, which would lead to companies having to adjust their global development strategies and layouts. They said that the bill gives a broad definition of a country of concern, which would expand the discretionary power of its law enforcement.

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South Korean chip giant SK hynix fell nearly 3.5 percent on Wednesday on the Korea Exchange after the bill was passed, while tech heavyweight Samsung Electronics Co Ltd fell 1.5 percent.

Feng Weijiang, secretary general of the National Institute for Global Strategy, said that the new semiconductor legislation is a high point in the US's attempts to set barriers to other countries like China.

He said that the US is recovering its relatively unadvanced chip manufacturing industry at the cost of the efficiency and profits of multinational companies in the semiconductor field, and that this move will also hamper innovation and development in the global semiconductor industry.

Chip companies that are forced to choose sides will lose the Chinese market because of the legislation that requires them not to boost production of advanced chips in China if they are subsidized. He added that no company would like to abandon China's huge semiconductor market.

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Hao Min, a professor of technology security at the University of International Relations in Beijing, said that the US's intentions to boost its own growth by blocking other countries' technological development won't work in the long run and will hurt the US in the end.

The US budget deficit will increase by $48 billion over the next five years and by $79 billion through 2031, according to the latest US Congressional Budget Office estimates.

According to an executive from a Chinese chip designing and manufacturing firm who wished to remain anonymous, Boston Consulting Group expected to cost between $350 billion and $420 billion to create a self-sufficient semiconductor supply chain in the US, but he said that the $52.7 billion subsidy is a drop of water in the bucket, not to mention that it will be divided up by a number of chip companies.