Anger over Ascend guidance and "AI containment"; Golden Dome; Rare Earths; Support for small and micro enterprises

Summary of today’s top items:

1. Rising anger over Huawei chip guidance - The recent US Department of Commerce guidance warning about the use of Huawei Ascend chips really hit a PRC pain point. In a meeting with the President of the Asia Society Foreign Minister Wang Yi said the US’ “recent move to seek a complete blockade on China's chips is a blatant act of unilateralism and bullying”. On Wednesday the PRC Ministry of Commerce issued another statement about the guidance, saying that:

China has taken note of the U.S. Department of Commerce’s recent issuance of guidelines which, under the pretext of presumed violations of U.S. export controls, seek to ban China’s advanced computing chips worldwide, including certain Huawei Ascend chips. These U.S. measures are a typical instance of unilateral bullying and protectionism, severely undermining the stability of the global semiconductor industry chain and supply chain, and depriving other countries of the right to develop advanced computing chips and high-tech industries such as artificial intelligence.

China believes that the U.S. abuse of export controls to contain and suppress China violates international law and the basic norms of international relations, seriously harming the legitimate rights and interests of Chinese enterprises and endangering China’s development interests.

China emphasizes that the U.S. measures allegedly constitute discriminatory restrictive measures against Chinese enterprises. Any organization or individual that implements or assists in implementing these U.S. measures will be suspected of violating the Law of the People’s Republic of China on Countering Foreign Sanctions and other relevant laws and regulations, and must bear corresponding legal responsibility.

So any company that is considering using these chips has to run the risk of breaking US law and then, if they cooperate or provide information to the US government, breaking PRC law. That may not be a hard decision for PRC firms, which can use the PRC chips inside China and ignore US law, but it seems like it makes it much riskier for anyone outside the PRC to use these chips.

Will the PRC try to use this guidance as a pretext to re-trade the Geneva “consensus”?

2. CICIR on US AI diffusion rule and “AI containment against China” - A “research team” at the Institute of Technology and Cybersecurity of the MSS-affiliated China Institute of Contemporary International Relations published an article on the recent US moves to rescind the AI diffusion rule and make massive chip sales into the Middle East. I have published a full translation of The U.S. Enters the “Trump 2.0 Era” of AI Containment Against China 现代院：美国对华AI遏压进入“特朗普2.0时代” here.

This last paragraph in the April Politburo study session readout I think is a decent view into how the top leadership sees the global competition and opportunities around AI:

Xi Jinping emphasized that AI can become an international public good that benefits all humanity. We must vigorously engage in international cooperation on AI, help Global South countries enhance their technological capabilities, and contribute China's efforts toward bridging the global intelligence divide. Efforts should be made to promote greater alignment and coordination among all parties in terms of development strategies, governance rules, and technical standards, and to form a global governance framework and standards with extensive consensus as early as possible.

And that may contribute that may contribute to why there is so much anger over the Ascend guidance. DeepSeek has increased their confidence, and frankly it should have, as while the US firms are well funded, well supplied with Nvidia chips and mostly closed, China now has an excellent open source LLM it can offer the vast majority of the world that does not really care about Chinese data collection and narrative shaping, and they can offer it for free. It could actually turn out to be much more powerful in the information domain than almost any other channel/platform they have.

With DeepSeek, the Chinese leadership may see an opportunity to mount a global version of AI “encircling the cities from the countryside 农村包围城市” against the US, which would have all sorts of economic, information and geopolitical effects, probably many in the PRC's favor. I think US policymakers realized that, and the shift on the AI diffusion rule is in part a reaction to that perceived threat. Right now the US AI global chokehold is Nvidia chips, and China, even if they have decent enough alternatives, can not produce enough for their domestic market for the next few years. So if the US can train the world on better chips and provide better free models then what appears to be the emerging PRC strategy may not work.

3. Rare earths - We are still waiting to see if, as the US side believes, the Chinese side did agree to lift export restrictions on rare earths as part of the Geneva truce. And if they are not lifting the export controls, how will the Trump team react?