President of China Xi Jinping and the President of the United States Joe Biden met in Indonesia in mid-November. In the pictures, the men shake hands and smile, but in reality the relations between the great powers are ice cold – especially in the field of trade.
A trade war broke out between the world’s largest national economies in the spring of 2018, when the then president of the United States Donald Trump imposed import tariffs on Chinese steel and aluminum.
The trade war is not over. Now especially precious technology rubs off between the countries.
In October, the United States imposed strict restrictions on the export of advanced semiconductors to China. The restrictions are estimated to significantly cripple the operations of Chinese chip manufacturers.
According to experts, the technology war between the countries is only accelerating.
What is the technology war about? What does it mean for Finland and Finnish companies? We asked this from a trade policy researcher and representatives of Finnish business life.
“Technology is power”
At the center of the technological war is the competition for world technological supremacy.
The United States aims to slow down China’s technological and military development and ensure that China does not overtake the United States in its development.
It’s not exactly a new thing. The United States has been concerned about China’s technological capabilities since the early 2000s. For example, a few years ago, the United States banned companies that manufacture microcircuits from supplying components to the technology giant Huawei.
Technology is an important instrument of power, emphasizes the research director of the Foreign Policy Institute Mikael Wigell.
– Tomorrow’s power structure will be largely determined by who controls the technology of the future, i.e. artificial intelligence robotics, quantum computers and data management. These have tremendous power political abilities and of course economic opportunities.
Technology-related export restrictions are also reflected in Europe in many ways.
The latest restrictions imposed by the Biden administration prevent US companies from exporting advanced semiconductors and chip-making equipment to China.
Director of International Affairs of the Central Chamber of Commerce Lenita Toivakan According to
– They can mean that even European companies with certain US technology in their products will not be able to export these products to China.
For example, the Dutch company ASM International, which manufactures equipment for the semiconductor industry, has estimated that the export restrictions will reduce its sales to China by approximately 40 percent.
Bad news for Finland
In general, the tightening of trade relations between China and the United States does not bode well for small countries like Finland. Toivakka emphasizes that both the United States and China are important trade partners for Finland. According to customs statistics, China was Finland’s fourth most important trading partner last year, and the United States was the sixth most important trading partner.
In the worst case, Europe and Finnish companies have to choose sides: Should we continue cooperation with China or the United States?
The question will hardly concern all sectors, but it may come up in some industries, says Toivakka.
According to research director Mikael Wigelli, the danger for Finnish companies is the shortage of components and the differentiation of standards required for products in China and the United States.
– If technical standards cannot be agreed upon, the products will not work globally and then they will have to be manufactured according to different standards. It means more costs and makes it difficult to introduce new technology to the market.
“Worrying development”
A lot of attention is also paid to the tightening of superpower relations in the companies themselves.
For example, the Finnish listed company Vaisala has operations in both the United States and China. Vaisala is especially known for weather measuring devices. It also manufactures measuring devices for industrial use.
Strategy Director of Vaisala Anne Jalkala according to the “technological and economic divergence” between the United States and China is a worrying development from the point of view of all globally operating technology companies.
– We are following the situation closely, Jalkala says.
So far, the restrictions have not affected Vaisala’s operations. According to Jalkala, due to the corona pandemic, a lot of work has already been done to secure supply chains.
– We are well prepared for this situation as well.
Trade relations between China and the United States are not expected to warm up, at least for a while. One reason is that anti-China action is one of the few issues in the United States that unites Democrats and Republicans.
Research director Wigell predicts that the only thing ahead is an accelerating spiral of sanctions between the United States and China.
China is now striving to make its semiconductor industry more and more self-sufficient. Financial newspaper Financial Times reported on Wednesday (you will switch to another service)that China has established a new conglomerate of companies and research institutes whose mission is to develop the country’s semiconductor industry.
The subject can be discussed until December 3 at 11 p.m.
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