As the 2024 U.S. presidential election approaches, the Biden Administration is ramping up its efforts to solidify its trade strategy against China.
Restricting access to Chips
A key aspect of this strategy has been enforcing strict controls on advanced technology, particularly semiconductors.
Recently, the White House succeeded in pressuring the Netherlands to tighten restrictions on China's access to ASML technology. However, South Korea, the world’s second-largest chip producer, has resisted similar pressure, according to El Economista.
Compounding Washington's challenges, a significant quantity of Nvidia’s cutting-edge chips has found its way into China through smuggling networks. The U.S. and its allies have aimed to stifle China's technological progress by restricting its access to advanced chips, but these sanctions are proving increasingly ineffective.
Smuggling operations are undermining these efforts, allowing Nvidia’s A100 and H100 chips—banned for sale to China since September 2022—to enter the country. These chips are crucial for high-performance computing tasks, such as training sophisticated AI models.
Lower Prices than America
Chinese firms are now able to offer cloud computing services at prices significantly lower than their American counterparts, thanks to the availability of these advanced chips.
The black market in China is thriving, with over 100,000 H100 chips reportedly in circulation, despite official restrictions.
Online platforms in China, such as Xiaohongshu and Taobao, list these prohibited chips for sale, indicating a robust underground market.
This black market is facilitated by the chips' small size, which allows them to be discreetly transported. Traffickers often use creative methods to evade detection, such as concealing chips within everyday items.
Additionally, the low VAT rates in regions like Macao and Hong Kong make these areas attractive for smuggling operations into mainland China.
