China Criticizes U.S. CHIPS Act, Questioning WTO-Consistency

As President Biden signed the CHIPS Act of 2022 yesterday, Chinese government officials and trade associations expressed their opposition to specific aspects of the law, calling it an example of "US’s practice of economic coercion" and raising questions as to whether it is consistent with WTO rules.

When talking about the Act at today's press conference, Wang Wenbin, a Chinese Foreign Ministry spokesperson, said that the industrial policies provided by the law "include terms limiting relevant companies’ normal investment and trade in China and normal China-US sci-tech cooperation," and "would distort the global semiconductor supply chains and disrupt international trade." "China is firmly against that," Wang said.

Furthermore, "[t]he so-called 'protection measures' have a strong geopolitical undertone and constitute another example for the US’s practice of economic coercion," Wang added.

Wang also emphasized that the U.S. policy "needs to be in line with WTO rules, consistent with the principle of openness, transparency and nondiscrimination."

We previously reported that the law requires producers, in order to receive the subsidies, to agree not to expand production of particular semiconductors in China, although there are broad exceptions that might limit the impact of the provision.

Along the same lines, in a statement (link in Chinese) issued by the China Council for the Promotion of International Trades (CCPIT) and China International Chamber of Commerce (CCOIC), the two associations highlighted that the law "provides large amount of subsidies to its domestic industry" and "various measures to encourage companies to build factories in the United States." "These clauses discriminate against some foreign companies, showing that the United States is using government power to forcibly change the international division of labor in the semiconductor field and harm the interests of companies from all over the world, including Chinese and American companies," they argued.

More specifically, the statement argued that "this is a typical industrial subsidy" and "not consistent with the non-discrimination principle of the WTO."

Beijing-based Globe-law Law Firm also stated (link in Chinese) that the subsidies in the CHIPS Act may constitute prohibited subsidies or actionable subsidies, and may also violate the MFN and national treatment principles under the WTO. But it also acknowledged that it will have to wait until the law is implemented to analyze whether China's chip manufacturing industry is injured, the level of injury, and the causal relationship between such injury and U.S. subsidies.

CCPIT and CCOIC also mentioned the research and innovation section of the law, which "provides for a series of measures to ensure that technologies developed under the 'Made in America' ​​programs are produced in the United States." This "restricts the fair participation of enterprises in some countries in global competition."

A Global Times editorial piece pointed out that the "content of the Act shows a clear tendency of cracking down on China's chip industry."

Back in July, China's commerce ministry said that the bill would "distort the global semiconductor supply chain and disrupt international trade" and it will "take measures to safeguard its legitimate rights when necessary." However, there is no indication yet as to what actions China might take in response to the signing of the legislation.