Under constant and increasing pressure from Washington, Europeans tend to side with the superpower in its rivalry with Beijing for global high-tech dominance. After years of pressure, European countries are moving to impose restrictions on high-tech exports to China in order to prevent the world’s second-largest economy from producing the most advanced processors on its own. This is a class of processors that has wide application in defense and military technology, which is why Washington always refers to national security considerations in its policy on this issue. However, at the same time, two more European countries may ban the import of technological equipment from Chinese manufacturers Huawei and ZET.

Yesterday, the Netherlands announced that it would impose restrictions on the export of technologies for the production of the “most advanced” processors. These are processors produced by the Dutch high-tech industry ASML. In her respective letter to the Dutch parliament, the country’s trade minister, Lisa Schreinemacher, did not specify which or which categories of processors would be affected by the soon-to-be-imposed export ban. It was enough to emphasize that the ban will be imposed with “surgical” precision and applies only to very specialized systems that produce the smallest processors, including ASML manufactured by the Dutch industry. He also added that interested companies should apply for licenses to export relevant technologies. For its part, ASML was quick to emphasize that it “does not foresee any financial implications of the business picture ban for 2023” and that it has yet to receive any clarification from the Dutch government. It should be noted that ASML EUV processors belong to the most advanced technological class, but their export has already been banned since 2019.

A few hours earlier, this was preceded by a statement from Berlin that it was considering importing technological equipment from Chinese manufacturers such as Huawei and ZTE. These are two Chinese giants whose equipment has so far been used in Germany’s third-generation (5G) telecommunications networks. But these are also two Chinese industries that Washington has accused of spying on the West with malware and leaking information to the Chinese military. At a press conference he gave on the matter, Maximilian Kahl, spokesman for the German Interior Ministry, stressed that it was important for German telecommunications companies “not to be overly dependent on some of their suppliers.” At the same time, he warned that if it is determined in early April that there is a risk to the country’s national security, then German companies will not receive compensation from the government for components that will need to be removed from their networks and replaced.

The Netherlands will impose restrictions on technology exports, and Berlin is considering importing Chinese-made technological equipment.

A related report by the Danish company Strand Consult last year showed that 59% of the components and spare parts in German fifth-generation networks are products of Chinese companies such as Huawei and ZTE. If Germany eventually decides to ban these imports, Germany will become the third European country after Sweden and the UK to ban imports of telecommunications equipment from China. Washington not only banned the use of Huawei equipment in US 5G networks, but also imposed severe restrictions on the export of microprocessors from the Chinese telecommunications giant. Commenting on this issue, Torsten Benner, director of the Institute for World Policy in Berlin, stressed that “the decision to equip 5G networks should have been seen as the easy part of the job and taken a long time ago.” He also added that it is unwise “to depend on companies associated with the ruling party of China, because in this way we repeat the mistakes we made with Russia.”

It should be noted that a survey conducted in September by the German Marshall Fund among citizens on both sides of the Atlantic showed that the majority of Europeans are in favor of a “harder” attitude towards China. At the same time, more than half of the respondents called Beijing either a “competitor” or an “opponent.” Attitudes towards China were very negative in Sweden, Lithuania, Poland, the Netherlands and Germany. In fact, according to Martin Hull, director of the Prague-based think tank Sinopsis, “it’s the same kind of awakening that we’ve seen in the US and Australia, and it’s about some of the nasty aspects of working with China.”

Chinese industry “cunning” violates Washington’s technology embargo.

In itself, high technology is used by Chinese companies to circumvent the bans and, in fact, the exclusion of high-tech processors imposed on them by Washington. According to a related report by the Financial Times, Chinese AI companies facing US embargo are using ISPs to access high-tech processor manufacturing through intermediary companies. The British newspaper even points out that the maneuvers used by Chinese industrialists betray possible loopholes in Washington’s technology blockade policy. They often resort to lease agreements for the necessary equipment or even buy processors through their subsidiaries in China.

For example, iFlytek, a state-owned voice recognition technology company that has been blacklisted in Washington since 2019, was granted access to Nvidia A100 processors under a lease. These are the processors needed for artificial intelligence applications. An iFlytek engineer said the company “leases processors and hardware on a long-term basis, and it’s like owning them.” Also, employees of facial recognition company SenseTime, which suffered the same fate as iFlytek, told the FT that the company hired intermediaries to buy technology parts banned by Washington. They even pointed out that in some cases, SenseTime has bought cutting-edge processors directly through subsidiaries that are not on Washington’s blacklist.

At the same time, private cloud companies are giving Chinese industry access to high-tech American processors. Shanghai-based cloud company AI-Galaxy, founded by former Nvidia and AliCloud executives, charges $10 an hour to provide access to Nvidia A100 processors. The fact that Chinese AI companies are gaining access to high-tech Nvidia processors highlights the difficulties the US is facing in trying to contain Chinese companies, the British newspaper notes. In October, Washington banned American companies from selling advanced processor manufacturing equipment to Chinese firms. A spokesman for the US Department of Commerce said the agency’s security team is “vigilantly monitoring and investigating possible violations of export bans, but does not comment on any allegations.” At the same time, an export control expert said that the relevant prohibitions imposed by Washington do not apply to companies providing cloud services. At the same time, he added that only the case when processor technology is used to manufacture weapons of mass destruction is considered a violation of the embargo. Notably, since Washington imposed the embargo, local authorities in China have rushed to help industrial enterprises stockpile advanced technology processors. An iFlytek spokesperson even said the bans have led to a surge in computer inventories with the help of the Chinese state, which has bulk-buyed and stocked Nvidia processors.