Sanctions and Bans Are Making China Stronger

Imagine a world where the West and China live in harmony. 

At its annual military parades, Beijing shows off its M1 Abrams tanks, M777 howitzers, and the world's most advanced fighter jets, F-35 --- all made in America. Soldiers march in lockstep, holding German HK416 assault rifles, while French H160M military helicopters sweep through the clear sky of the Chinese capital. 

In low Earth orbit, the International Space Station welcomes Chinese astronauts, who conduct research with their US colleagues and maintain equipment provided by China, Japan, Canada, and other nations. 

Knowing its place in the world supply chains, China, the world factory, churns out loads of consumer goods destined for Costco, Walmart, and the like while importing hi-tech products from the advanced industrialized countries. 

This would be a China dreamed by Western liberals and neoconservatives: A Chinese client state subservient to the US, fully integrated into the so-called rules-based world order, entirely reliant on Western technology and industry, and with a laughable domestic strategic industrial base.

This scenario could have occurred had the US and its allies not continued their containment policy toward China, steering it away from the Western sphere of influence. Taking various forms, these external pressures have had significant impacts on China as they slow it down in its attempt to catch up to the West, especially in the short and medium terms. 

However, in many areas, the Western sanctions, embargoes, and bans have strengthened, rather than weakened, China's resolve to create its own strategic industries and technology, and forced China to cut off its dependence on the West in four areas discussed below.

The Beidou Satellite Navigation System

The Beidou Satellite Navigation System is a case in point. For decades, China had relied on the US Global Positioning System (GPS) for both civilian and military uses. The US action in the 1996 Taiwan Strait Crisis upended China's dependence on the US system. To deter Taiwan's independence movement, China fired missiles as a warning. In response, in addition to sending two carrier groups, the US shut down its GPS signal in the Pacific. As a result, the People's Liberation Army (PLA) lost track of two of its missiles. 

This humiliation at the hands of the US was more than China could bear. It became the driving force for China to develop its own global satellite navigation system from scratch.

It took China 26 years. 

When the 55th and last satellite was launched on June 23, 2020, China succeeded in building and deploying its entirely homegrown global navigation satellite system. Its military is guaranteed secured access to communications and weapons tracking. Most importantly, Beidou allows the PLA to guide its missiles without worrying about US interference.

Even more significant is the rise of an indigenous industrial chain underlying the satellite navigation system, "consisting of chips, modules, boards, antennas and terminals" and no longer dependent on imported products. China produces its own high-end receivers and other products, which are exported to more than 120 countries.

Due to the US manipulation of its GPS in the1996 Taiwan Strait crisis, China now enjoys fully independent global position and navigation services for civilian and military ground, sea, and air operations. 

The Defense Industry

China's vigorous development of its indigenous arms industry is also in part due to external pressure. In 1989, when students demonstrated in Beijing's Tiananmen Square, the Chinese government led by Deng Xiaoping sent troop to suppress the protests. 

In response, the US and EU imposed arms embargo on China. Ironically, the flows of Western arms and defense technology had increased in the 1980s after Deng initiated the Four Modernizations in 1978. China looked to the West to modernize its badly obsolete, 1950s Soviet arsenal and could have become a major buyer of Western weapons. 

The 1989 ban reinforced Deng and its successors' determination to build a homegrown arms industry, which lagged far behind Russia and the West due to internal strife such as the decade-long Cultural Revolution and its disastrous impact on economic development.

Thirty three years on, China has progressed tremendously in manufacturing its own weapon systems, independently of Russia, Europe, and the US. China was the second largest weapons producer in the world from 2015 to 2019. For example, instead of relying on imported military boats, China built hundreds of warships in a frenzy. In 2019 alone, it launched 24 warships, big and small. China's navy is now the largest in the world and has launched eight Type 055 destroyers, one of the most technologically advanced.

China's navy has come a long way since the 1990s. Then, the US mocked China's capability to take back Taiwan. With its decrepit navy, its detractors pointed out, China would have to launch the "million-man swim" to cross the 110-mile-wide Taiwan Strait, which separates the island from continental China.

The Chinese Space Station

China's even more spectacular achievement is the development of its space station (CSS). Again, the US played an outsize role in spurring China's space efforts. In 2011, the US Congress enacted a law  forbidding any US contact with China's space program out of security concerns. The Wolf Amendment barred China from the International Space Station, built by the US and manned by astronauts from fifteen countries, and squashed China's desire to join the ISS.

The US exclusion of China from ISS had the opposite effect: Rather than see its space program fizzle out, China has become a major space power, without relying on any US cooperation, assistance, and technology.

As with the satellite navigation system, the Chinese space station program took at least a decade to come to fruition. In 2011, China's first experimental space station, Tiangong 1, reached its orbit and was used by two crewed missions to test orbital docking capabilities. In 2016, Tiangong 2, the second test orbital station, went into operation for two years to test key technologies. In April 2021, the first module of the permanent Tiangong station was launched and received two crewed missions. In July 2022, the second of the space station's three modules was successfully put in orbit.

China relied on its science personnel, ingenuity, and resources to construct the space station from scratch. However, it sought help from Russia to alleviate some of its weaknesses. In a 1994-1995 deal, Russia transferred its Soyuz spacecraft technology to China, which received "training, provision of Soyuz capsules, life support systems, docking systems, and space suits." Lately, China created its own space suits, robotic arms, and other components to help its taikonauts carry out their tasks.

What is significant is that the US no-China law on space cooperation with China has created a strong rival in space competition. Had the US accepted China joining the ISS, China would not have possessed its own indigenously developed space station. Like the other 15 nations, except for Russia, China would have been a subordinate member with limited space capabilities and forever dependent on the US.

The Chip Industry

Since 2020, China has been in a midst of a chip war initiated by the US. Under the Trump administration, the Commerce Department imposed sanctions forbidding Taiwan Semiconductor Manufacturing Company (TSMC) to manufacture chips designed by Huawei's HiSilicon subsidiary and then banning any semiconductor company (including the Chinese Semiconductor Manufacturing International Corporation, SMIC) from selling chips to Huawei without procuring a license.

Then, Huawei was on the cusp of beating Samsung and becoming the largest provider of smartphones worldwide.

For decades, the Chinese government has poured hundreds of millions of dollars to nurture a domestic chipmaking industry, with mixed results. The money was not lacking, but skilled personnel and the accumulation of know-how were, hampering China's progress in this industry. Reliant on mostly US, Japanese, and European hardware and US software, Chinese chip firms have occupied the lower level of the value chain.

The series of US sanctions designed to blunt China's rise in high-tech has been a wake-up call for China. 

As a result of the US sanctions, growth in China's chip industry has grown faster than the rest of the world. In 2021-2022, 19 "of the world's20 fastest-growing chip industry firms over the past 4 quarters, on average, hail from the world's No.2 economy."

Ironically, the US sanctions achieved what the Chinese government had failed to do: Fearing loss of suppliers, Chinese firms have accelerated the use of homegrown components, instead of foreign ones, thus aligning themselves with the government's industrial policy of self-sufficiency. Thanks to American sanctions and fear of future ones, indigenous chip equipment and software companies have been given a chance to sell their products on the Chinese market, to expand their production capabilities, and to move up the value chain: "Total sales from Chinese-based chipmakers and designers jumped 18 per cent in 2021 to a record of more than 1 trillion yuan (US$208 billion), according to the China Semiconductor Industry Association."

Nonetheless, China has a long way to go to create an indigenous chip industry. The experts' consensus is that no nation can create its own chip supply chain, given the complexities and requirements in this industry. At the time of writing, Huawei's smartphone business is in shambles and the company has been unable to find homegrown alternatives for chips with support for 5G connectivity.

Even though it is reported that SMIC is now able to produce 7nm chips, it still relies on foreign equipment and software.

However, because of the constant US measures to freeze China from the worldwide supply chain, China has no choice but to develop an indigenous chip making and designing industry. A decade from now, it is expected that China will foster enough capabilities to stand on its own and withstand Western sanctions.

Conclusion

The external pressures, in the form of service denials, embargoes, and sanctions, have compelled China to develop its local industries and technology while reducing its dependence on Western capital, technology, and market. Without those external pressures, China would not have created its own Beidou Satellite Navigation System from scratch, developed its indigenous arms industry, deployed its homegrown Tiangong space station, and launched into the chip making and designing race. 

If these sanctions and bans were not imposed, China would not have been so determined to mobilize its resources and spend decades on building its strategic sectors. It would still have relied on the US's GPS, purchased Western weapons, participated in US-led ISS, and worked within the chip supply chain dominated by US companies. A Western policy light on sanctions, embargoes, and bans would have kept a feeble China in the US orbit. 

In these four areas, instead of weakening China, Western sanctions and bans on China have produced unintended consequences: The more the US and its allies sanction China, the more China becomes a formidable challenger, near-peer rival, and fierce competitor.