Why can’t technical sanctions alone deter the dragon

The recent invasion of Ukraine by Russia led to targeted punitive activity by Western countries. Led by the United States, these sanctions were intended to damage the backbone of the Russian economy and act as a deterrent for the country to scale back its military operations in Ukraine. However, that didn’t work and the deterrent now turned into a punitive tool instead.

One interesting aspect of the West’s response was the imposition of technical sanctions on Russia. It was the first time in history that a single country was targeted with specific technology-related sanctions, such as export controls and import restrictions for critical technology components such as semiconductor chips. A notable development has also been the threat of secondary sanctions by the United States on any country or private company that violates technological sanctions imposed on Russia itself. Aside from US sanctions, there has also been a unilateral reaction on the part of major tech companies to withdraw their business operations from Russia due to the invasion.

Technical sanctions on Russia will have a devastating effect on its economy and affect the domestic market’s access to basic technology goods. But if there is Chinese aggression against Taiwan in the near future, will these sanctions work? Will technical sanctions be used as a reliable tool to deter or even punish the Chinese state from conducting its military operations across the Taiwan Strait? For a technologically advanced country like China, will these targeted sanctions have any impact on its technology economy?

China is becoming more integrated into the global economy and supply chain. This makes it more difficult to impose wide-ranging sanctions on China than against Russia; It also makes sanctions more costly for China because it has a lot to lose.

Read also | With Russia exposed to the ripple effects of the chip famine, China may not be a reliable partner.

Strong local technical economy

For a while, the Chinese government has been gradually trying to reduce its dependence on Western technology companies. The ban on Google, Facebook, and even LinkedIn’s exit from the Chinese market demonstrate the country’s intent to develop local alternatives to all technology services offered by Western companies. This has led to Chinese domestic tech companies rising to the task and proving that they are reliable alternatives to Silicon Valley companies.

From Alibaba (replacing e-commerce giants like Amazon) to Huawei (replacing telecom giants like Qualcomm and Cisco), China’s tech economy now hosts a vibrant group of companies that cater to ever-increasing domestic demand.

There is also an aspect of the size of the Chinese market itself. Most technology companies in China have grown due to the ability of the local market to provide them with the right business. Technical sanctions and banning these companies from participating in global markets will not lead to a complete collapse. For example, Huawei has already been blacklisted in many countries including the “Five Eyes” countries. While this has had a significant impact on Huawei’s revenue, it is still a force to be reckoned with in the telecom market.

China’s domestic technology economy is built on a foundation that minimizes external dependencies and relies on existing infrastructure and the local market. While technical sanctions and blocking technological goods or services from reaching the Chinese market can hamper companies’ ability to scale operations, they will not harm the economy in a way that a military decision can be reversed.

A well-established area of ​​influence

Another advantage of China in technology is the far-reaching impact it has made, especially in the developing world. The Chinese government has used its major foreign policy projects such as the Belt and Road Initiative (BRI) to export domestic technology around the world. This has resulted in many countries, in regions such as Africa, Central Asia and Southeast Asia, adopting Chinese technology infrastructure due to lower operating costs and ease of network construction (due to Chinese tech giants being involved in the deal).

In the event of technical sanctions being imposed on Chinese tech giants, an additional dependency will be created in this case. Sanctions will remove or effectively block access to many countries that currently use Chinese technology products and services. This could be a problematic situation for sanctioning countries because such a move could be detrimental to the overall conversation about technology hacking and access.

As the digital footprint of the Chinese tech ecosystem increases worldwide, the sanctions imposed will not achieve their results of technically isolating China. Export controls or even import restrictions on critical high-tech components can prevent access to critical global technology supply chains for China. But there is a possibility that the Chinese state will resort to intellectual property theft to create domestic alternatives and gray imports sufficient for its needs.

In terms of Silicon Valley giants playing a role in the sanctions, there will be little impact because most of them have either already been banned or have voluntarily withdrawn from China. In the case of Russia, the responses of these companies played a major role in assessing the impact of technical sanctions on its domestic economy. The same cannot be said for China.

So what might actually work?

Chinese tech companies have built great resilience, but serious tech sanctions imposed at a multilateral level have the potential to cripple the Chinese tech sector and economy. China is not isolated, as we see. One example is looking at what happened to Huawei’s profits and its mobile phone business after the United States and its allies imposed sanctions. One would have to think about what kind of specific penalties could be beneficial and which might be counterproductive, along with what kind of other penalties could accompany technical penalties. It should be a basket bag rather than just one bag. The goal is not to impede, say, core technology products in Africa or Southeast Asia. Doing so would isolate them from the West. The goal is to paralyze the operations of Chinese companies and progress requires a wide range of sanctions accompanying technology sanctions.

Technical sanctions on China by the United States alone will not serve as a deterrent mechanism and have little potential to inflict serious damage on the Chinese economy on their own. But Western countries should consider imposing these sanctions multilaterally, along with various economic blockades, to target and damage the business models of big Chinese tech companies in light of potential Chinese military aggression.

Arjun Gargeyas is a research analyst at the Takshashila Foundation. The opinions expressed in this article are those of the author and do not represent the position of this publication.

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