The US hit the heart of China's economy

The United States hit the very heart of China's economy and, in particular, its technology sector, imposing restrictions on the supply of equipment and technology to local companies, CNBC writes with reference to interviewed experts.

Recent measures by Washington require semiconductor suppliers to obtain licenses to sell overseas, including China's largest chip maker SMIC. Such a step effectively nullifies Beijing's efforts to develop its own microelectronics and ensure its independence from other countries, which is especially relevant in the context of a trade war.

The US authorities justify the new demands by fears that the equipment, components, and technologies sold to China may be used for military purposes, including against the United States itself. According to the head of investment firm Independent Strategy David Roche, the new rules “affect the very core of China's ability to be autonomous in technology.” SMIC may be set back in its development for several years, he said.

The company itself claims that it has nothing to do with the Chinese army, special services, or the military-industrial complex. Amid the innovations, SMIC shares traded on the Shanghai Stock Exchange fell in price by more than 6 percent.

The blow turned out to be all the more painful since the United States, along with European countries, occupies a leading place in the world semiconductor market and plays an important role in the global supply chains. Other Asian companies could compensate for the lack of access to equipment and technology, but they are likely to be wary of dealing with China due to the prospect of falling under sanctions.

SMIC was supposed to replace Taiwanese TSMC as the microchip supplier for Chinese smartphone maker Huawei. The latter himself was under massive restrictions from the United States due to accusations of transferring personal data of users to special services.

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