China Tech Check
Yellen’s Hype Overcapacity, China endorses private sector participation and leadership in major tech, Spitting Chips, Splitting Supply Chains, Harmony OS on Top.
Yellen’s Hype Capacity
Experts urge US to stop economic coercion as Yellen again claims China ‘overcapacity’
By Ma Jingjing (Global Times)
US Treasury Secretary Janet Yellen on Thursday said she would press China to address the country's macroeconomic model that has led to "overcapacity," claiming that it poses a "threat" to the viability of firms and workers globally, making her the latest American politician calling for a hardline stance toward China as the 2024 US presidential election approaches.
Chinese observers criticized Yellen for engaging in a political show to shift the blame for the US' domestic problems to China and win votes for the Democratic Party. The real purpose behind the US' hyping of China's new energy "overcapacity" is to contain China's advantage in the new energy industry, observers said, calling on the US to stop its hegemonic and economic coercion and instead respect market economy principles and international trade rules to ease its anxiety.
"I will keep pressing China to address its macroeconomic model, which is channeling too much savings and too many subsidies into manufacturing, contributing to industrial overcapacity. This poses a threat to the viability of firms and workers around the world," Yellen said during a press conference at the G20 Finance Ministers and Central Bank Governors Meetings held in Brazil on Thursday, according to a press release on US government website.
As US politicians compete to be more hardline on China issues for the upcoming presidential elections, Yellen's remark is a kind of political show to shift the blame for the US' domestic problems to China, Zhou Mi, a senior research fellow from the Chinese Academy of International Trade and Economic Cooperation, told the Global Times on Friday.
However, this is unwise because the US' escalating decoupling from and crackdown on China is causing instability to China-US economic and trade relations, severely disrupting the international industrial and supply chain structure, and forcing US consumers to pay higher prices, Zhou said.
The self-contradictions and inconsistencies between words and deeds in the US' policy toward China will do no good to restoring political trust between the two countries, he said, noting that there is still a long way to go to stabilize and improve the bilateral relationship.
US politicians have been sensationalizing the rhetoric of so-called overcapacity in China's new energy sector for a period of time. At the Economic Club of New York held in June, Yellen claimed that China's "over-concentrated supply chains" poses additional security and economic concerns to the US.
Following months of misleading overcapacity claims, the US in May announced a sharp increase in its Section 301 tariffs on Chinese electric vehicles (EVs) from 25 percent to 100 percent.
Yu Xiang, a senior fellow at the Center for International Security and Strategy, Tsinghua University, told the Global Times on Friday that the US' hyping up of so-called overcapacity in China's new energy sector is unreasonable because the nature of international trade is to export a country's advantageous products.
"The real purpose behind the US' move is to contain the development of China's new energy sector, and its nature is protectionism disguised as 'fair competition,'" Yu said, noting that this is a clear example of hegemonic and bullying acts.
Globally, there is no surplus of high-quality production capacity, but rather a serious shortage. China's export of new energy products not only helps countries, including the US, reduce inflation and help their people live better lives, but also contributes to addressing climate change and accelerating the green transition, Yu said.
Yu said the US' "overcapacity" narrative conflicts with global demand for new energy and economic principles. "Many US financial institutions conduct business in China. Every year, China buys large amounts of soybean, oil, aircraft, and other commodities from the US every year. Has it ever labeled the US as having overcapacity?" he asked.
According to a study by the International Energy Agency (IEA), global sales of new energy vehicles will reach 45 million in 2030, and close to 65 million in 2035, up from around 14 million in 2023.
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Tech Initiatives
China endorses private sector participation and leadership in major tech initiatives
By Global Times
China is supporting private enterprises in leading major technological breakthroughs, emphasizing the improvement of mechanisms for their participation in national projects. This is part of a series of significant measures launched following the recently concluded third plenary session of the 20th Central Committee of the Communist Party of China.
The third plenary session adopted a resolution on further deepening reforms designed to comprehensively advance Chinese modernization. Reforms and policies regarding the private economy are crucial components of this resolution.
The meeting highlighted the construction of a high-level socialist market economy system, while also emphasizing the need to better leverage market mechanisms to create a fairer and more dynamic market environment, stimulating the intrinsic motivation and innovative vitality of the entire society, according Han Wenxiu, executive deputy director of the office of the Central Committee for Financial and Economic Affairs.
Enterprises, as an essential part of China's economy, have played a crucial role in the development and construction of multiple innovation and high-tech fields. Enterprises have become the main source of effective invention patents in China. According to the National Intellectual Property Administration, in 2023, enterprises accounted for over 70 percent of effective invention patents, exceeding 3 million in total.
The resolution issued after the third plenary session further emphasized the importance of developing the private economy, aimed at promoting the complementary and common development of various ownership economies in China, Han said.
Further deepening reform comprehensively to advance Chinese modernization is a significant goal of this session, including attention to both private and state-owned enterprises. According to Han, China will push for independent operations and market-driven reforms of state-owned enterprises, and foster a better environment for the private sector, providing more opportunities through a long-term mechanism that supports capable private companies in leading national technological projects.
Administrative inspections involving private enterprises should be standardized, the best business environment is one governed by law, hence the need to formulate and introduce a law promoting the private economy, Han added.
Encouraging private enterprises to participate in major national projects is a development plan China highly values. Zheng Shanjie, chairman of the National Development and Reform Commission (NDRC), China's top economic planner, stated in March that private enterprises are encouraged and supported to participate in major national projects and shortfall projects.
The NDRC will continue to recommend high-quality projects to private capital, helping private capital to find projects and assisting private investment projects in fundings, Zheng stated.
Read more here.
Spitting Chips, Splitting Supply Chains
US weighs more limits on China's access to AI chips
By Devika Nair, Arsheeya Bajwa, Karen Freifeld, Shilpi Majumdar, Daniel Wallis (Reuters)
The Biden administration is considering further restrictions on China's access to chip technology used for artificial intelligence, Bloomberg News reported on Tuesday, citing people familiar with the matter.
The measures being discussed would limit China's ability to use a cutting-edge chip architecture known as gate all-around, or GAA, the report said. GAA is a type of transistor architecture that helps improve chip performance and reduces power consumption.
The United States has been working to limit Beijing's access to advanced AI chips, such as those designed by leader Nvidia (NVDA.O), through tightened trade restrictions amid fears that China may use the technology to bolster its military.
With the scope of the potential rule still being determined, it is not clear when officials will make a final decision, the report said.
"The new controls are part of an effort by allied countries to each impose separately controls they had agreed to several years ago during Wassenaar Arrangement multilateral regime meetings but that were not ultimately approved because Russia blocked the consensus-based regime from publishing the controls," said Washington lawyer Kevin Wolf, a former Commerce official.
Wolf noted that in March, the UK imposed controls over technology for integrated circuits with "Gate all-around Field-Effect Transistor" (GAAFET) structures, which are generally for advanced node integrated circuits. "The U.S. and other allies are thus expected to impose this GAAFET and many other earlier-agreed-upon controls this summer," Wolf said.
The rule is not yet finalized after industry officials criticized the first version as overly broad, the report said, adding that it is unclear whether the ban would restrict China's ability to develop its own GAA chips or seek to block U.S. chipmakers and other overseas companies from selling their products to Chinese firms.
Leading semiconductor firms including Nvidia, Intel (INTC.O) and Advanced Micro Devices (AMD.O), along with chip manufacturers Taiwan Semiconductor Manufacturing (2330.TW) and Samsung (005930.KS) are aiming to start mass production of chips with the GAA design within the next year, according to the report.
Nvidia and Intel declined to comment. The other companies did not immediately respond to Reuters requests for comment, while the U.S. Department of Commerce declined to comment.
Stricter restrictions on exports of advanced semiconductors to China have already hampered chipmakers' position, with companies such as Intel and Qualcomm (QCOM.O) saying their sales would take a hit after the U.S. revoked some of their export licenses for a customer in China.
The Bloomberg report also said there have been some early-stage discussions about limiting exports of high-bandwidth memory (HBM) chips.
HBM chips, such as those made by South Korea's SK Hynix (000660.KS) and Micron Technology (MU.O), help speed up AI applications and are used by companies like Nvidia.
Read more here.
Harmony OS on Tops
Forget Windows 11 or macOS – Huawei launches desktop OS in 2024
By Kristina Terech (TechRadar - amended)
Huawei is looking to take on the big players in the desktop operating system arena with its own Android-free PC alternative. Reports indicate that the Chinese tech giant’s new OS could ship later this year, and that its design will be macOS-inspired.
Looking to take on mainstays like Windows 11 and woo users away, Huawei already has the expertise and experience of making its own operating system, HarmonyOS - and a new iteration, HarmonyOS Next - for mobile devices and wearables like smartwatches. Working against Huawei, though, is the fact it’s been facing scrutiny around concerns that its products supposedly facilitate surveillance by the Chinese government.
Jason Will, who Windows Central names as a HarmonyOS developer, posted on X to point out that an increasing amount of images showing interface layouts for the PC version of HarmonyOS Next are appearing on Huawei’s developer website. Jason Will goes on to suggest that this means a desktop incarnation of HarmonyOS for PCs is going to be launched in the last quarter of 2024.
The troubled backstory to HarmonyOS
While the prospect of converting Windows users to HarmonyOS Next might be part of what’s motivating this move by Huawei, there’s also the fact that the US government put restrictions on Huawei that prevented it from utilizing Windows and Android on its devices. More specifically, the US imposed sanctions that prohibited American tech companies like Google, which develops Android, and Microsoft, which develops Windows, from doing business with Huawei.
These measures meant that Huawei was not allowed to pre-install Windows or Android on the smartphones, laptops, and other devices it manufactures. So, presumably this was the main driving factor in Huawei developing its own operating systems and software, which would additionally enable developers to make apps on its platform and distribute them.
Before all this happened, Huawei had established itself as a popular brand outside of Asia, catching the attention of consumers with Windows laptops and tablets which were praised for having great displays and slim, well thought out designs. The same was true of its smartphones which definitely carved out a fanbase in the US, Europe and elsewhere.
Could HarmonyOS Next on PC succeed?
I would expect the design of the PC flavour of HarmonyOS Next to be consistent with the other operating systems in the HarmonyOS umbrella. Looking closely at Jason Will’s shared images of HarmonyOS Next for PCs, it seems that the operating system’s design is heavily influenced by macOS (or indeed, copied from, the more cynical might suggest), including a similar status bar, dock bar, and overall aesthetic.
Notably, HarmonyOS Next is open source, and completely Android-free, being built on its own microkernel (the core building blocks of an operating system) which gives it some impressive performance advantages.
As Windows Central observes, the idea therefore seems to be for HarmonyOS Next to exist totally independently of software from US companies, abandoning Android completely - and of course that means apps will need to be developed for the operating system from scratch, too.
Apparently, developers can dive in now as HarmonyOS Next has been released as a developer sandbox to build and test applications. Naturally, building up the software ecosystem around the OS will take some time, and is a vital element of its success (or lack therein).
Now, making an operating system that’s totally independent of US software is unlikely to win the confidence of US legislators, or banish any wider surveillance-related concerns (despite HarmonyOS Next’s open-source nature). So, Huawei’s desktop OS is set to face a serious uphill struggle in other regions, but in China - a huge market - Huawei might poach a significant number of users away from Windows. And maybe some users in other countries could even follow - especially given that Windows 10 hits end-of-support late next year.
Read more here.