IMF: US curbs on Chinese chip technology harm global economy

By Al Mayadeen English
Source: Agencies
31 Jan 09:26

The IMF is looking into these trends in the semiconductor sector and trying to figure out what they mean for the global economy.

Semiconductor chips are seen on a circuit board of a computer in this illustration picture taken February 25, 2022. (Reuters)

The International Monetary Fund's (IMF) Chief Economist and Director of the Research Department Pierre-Olivier Gourinchas warned that trade curbs on China's microchip industry could be harmful to the global economy.

When asked about the impact of Japan and the Netherlands agreeing to adopt certain US export restrictions on China's chip-making industry, Gourinchas said, "Our analysis suggests that such reshoring... would be something that potentially could be harmful to the global economy."

Gournichas went on to say that the IMF is looking into these trends in the semiconductor sector and trying to figure out what they mean for the global economy.

The IMF official reiterated that their preliminary analysis indicates that moves by the US and its allies will not necessarily result in stronger growth.

Gournichas' remarks came just one day after Washington reached an agreement with the Netherlands and Japan to force anti-China chip restrictions, which limits both countries' exports of advanced chip-making equipment to Beijing as the US furthers its hostility against the Asian giant's semiconductor industry.

Semiconductors, more commonly known as chips, are a highly pivotal component in the defense industry, especially as it shifts and takes a more modern approach that delves into the futuristic realms requiring advanced semiconductors, which are key in manufacturing many things, from computers to autonomous vehicles, and even hypersonic weapons.

Earlier in December, China filed a case with the World Trade Organization, hitting back against US export sanctions on microchips.

China's ministry of commerce said its WTO complaint was a legal and necessary measure to defend its "legitimate rights and interests."

A RAND Corporation report issued back in February 2022 highlighted how China's current defense systems use less sophisticated chips made in China, meaning the US sanctions will not have an effect on Beijing's military capabilities, and that the damage will be limited.

Though this is costly for China and will cause strain on its resources, the PRC is fully capable of producing its own cutting-edge chips. However, production is projected to be just enough to fulfill its needs instead of it being for market consumption.

If anything, US chip firms will bear the brunt of their own country's decisions, especially as China serves as their largest market, accounting for 33%, 31%, and 27% of Applied Materials, Lam Research, and Intel, respectively.