Japan's Chip Export Controls: A Blow to Business Relations with China

Japan's recent announcement of export controls on 23 types of chip-making equipment has sparked concern and criticism from China, with officials warning that the move could damage business relations between the two countries. The export controls, which align with the United States' push to curb China's ability to make advanced chips, have been slammed by China as an abuse of export control measures and a departure from free trade and international economic and trade rules.

China's Ministry of Commerce has stated that the export controls will seriously harm the interests of Chinese and Japanese enterprises, seriously damage the economic and trade cooperation relationship between China and Japan, and disrupt the global semiconductor industry. Zhang Wei, vice-president of the Chinese Academy of International Trade and Economic Cooperation, echoed these sentiments, noting that Japan's export control measures are contrary to market rules and will cause shocks to industrial development. He emphasized that cooperation on semiconductors is one of the most representative examples of mutual benefits from China-Japan economic and trade ties.

The Chinese mainland is the largest export destination for Japanese semiconductor equipment manufacturers, with such exports from Japan to the mainland hitting 820 billion yen ($5.9 billion) in 2022, exceeding 30 percent of Japan's total chip-making equipment exports and almost double the amount of US exports in the same sector to the mainland. For major Japanese chip equipment makers, the mainland market contributes to about 20 to 30 percent of their sales revenue. Amid the export control measures, Japanese company Tokyo Electron expected its annual revenue to fall 23 percent year-on-year, highlighting the potential economic impact on Japanese companies.

Tu Xinquan, dean of the China Institute for WTO Studies at the University of International Business and Economics in Beijing, argued that there is no reason for Japan to invoke national security exceptions to defend its export control measures, as the chip manufacturing equipment that Japan now exports to China is not in any way related to national security. He noted that China and Japan have close economic and trade ties, indicating that there is no state of emergency between the two countries in terms of international relations.

Wei Shaojun, a professor of integrated circuits at Tsinghua University, warned that Japanese companies are also bound to suffer losses as a result of the export restrictions, echoing the concerns raised by Chinese officials and experts. The export controls could lead to supply chain disruptions, price fluctuations, and potential retaliation or diversification of supply chains by Chinese companies, further straining the relationship between the two countries.

In conclusion, Japan's export controls on chip-making equipment have raised concerns and criticism from China, with officials warning of potential damage to business relations and economic impact on both countries. As the situation unfolds, it will be crucial for Japan and China to engage in dialogue and find a mutually beneficial solution to address the concerns and mitigate the potential negative consequences.