Protectionism worked for China’s Internet companies, which leapfrogged their American counterparts. Online sales comprised 27% of total retail sales in China in 2022, compared to 15% in the United States. Mobile payments in China reached $US 70 trillion with a total of 158 billion transactions, compared to $8 trillion in the United States. //

Washington, DC, in October 2022, banned the export of high-end computer chips (with a transistor gate width of 7 nanometers or less) as well as the tools and software needed to make them. //

It isn’t clear what the Biden Administration was thinking. The official rationale for the chip control was to stop the Chinese military from gaining an advantage. According to a 2022 RAND Corporation study, virtually all military applications employ older chips (see chart below). The older processes are easier to harden, and most military software has been tested for years on existing hardware rather than rewritten for newer chips. //

If the objective was to hamstring China’s economy, it has failed. The chip ban undoubtedly imposed severe costs on China, which is attempting to reinvent large parts of the semiconductor supply chain at high cost. But China can recompense itself for those costs by turning excess supply into a vehicle to dominate semiconductor markets globally in the not-too-distant future.