Historically, Western countries have made multiple miscalculations with regard to China. These range from counting on the country to be a perpetual and easy market for opium, a belief that the PRC-KMT United Front could hold, or that the KMT would win the Civil War as it entered it in a seemingly dominant position.
The most recent of these miscalculations came in the form of estimating that the People’s Republic would remain little more than a cheap manufacturing hub for the world’s corporations, with little technological advancements of its own.
Seeking to stem the rising tide, the U.S. has been implementing a growing number of export restrictions, designed primarily to curb China’s technology sector with the explanation that it is necessary to slow down the People’s Liberation Army’s (PLA) adoption and employment of artificial intelligence (AI) tools.
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China AI export restrictions: more harm than good?
The first major wave of these restrictions had a spillover effect in late 2023 as investors became fearful that the semiconductor giant Nvidia (NASDAQ: NVDA) would see its business decline as $5 billion worth of orders were put at risk.
Though the blue-chip chipmaker’s business was hardly affected — in part thanks to a series of alterations and compromises achieved in 2024 — it hardly welcomed President Biden’s plans to tighten the restriction.
Most recently, it received an ally in the form of Microsoft (NASDAQ: MSFT) in its hopes to prevent President Donald Trump from going even further with limiting China’s access to advanced hardware, per a February 27 Wall Street Journal report.
Amidst the turmoil, several developments emerged that indicate that it may be already too late to implement the hoped-for restrictions and that, ultimately, they’d do more harm than good.
To begin with, Nvidia itself claimed when urging Biden to abandon his plans near the New Year that the technology his administration was seeking to keep out of China was already widely available, strongly hinting that the flow of equipment could not be stemmed.
A potential bigger issue with both the previous Democratic and now Republican plans is that they could, inadvertently, accelerate China’s domestic research, development, and production.
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Cutting supply is not the same as removing demand, and the People’s Republic already boasts a massive tech sector with firms such as Alibaba (NYSE: BABA), Baidu (NASDAQ: BIDU), Huawei, and Xiaomi, just to name a few.
Furthermore, these firms — and several previous obscure entities — have already proven their ability to compete with Western goods and technology, with the most recent and impactful example coming in the form of the advanced DeepSeek AI model.
China’s electric vehicle (EV) industry demonstrates a similar fact with BYD overtaking Tesla Motors (NASDAQ: TSLA) already in 2023 and with Ford’s (NYSE: F) own CEO being highly impressed with Xiomi’s cars.
Indeed, there is a significant question about the exact scale of the advantage Chinese car companies might have as their products are severely hampered by high tariffs in the E.U. and all but banned in the U.S.
Finally, the danger arising both from the technology and funds that already entered the People’s Republic and from attempting to cut supply in 2025 is likely not lost on the American government.
Indeed, the country has to do little more than to look at its own history as the fact that the U.S. industrial revolution was kickstarted by theft from the U.K. hardly prevented it from becoming an industrial and technological powerhouse in its own right in a relatively short time frame.
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Simultaneously, there are no guarantees that China and its companies will simply shrug off the restriction or win the escalating trade war.
For all of the country’s successes, allegations about poor quality of work both domestically and internationally remain abundant, even if difficult to quantify with any precision due to political implications.
One dramatic example of what appears to be shoddy work took place on a train station in Novi Sad, Serbia, which was renovated by a Chinese company only to have a canopy collapse, killing 15 people mere months after the grand opening.
Again, however, while the event may serve as a strong example of the country’s companies not yet achieving a qualitative edge, it is difficult to gauge the actual cause due to the scale of corruption on the part of Serbia’s government that whistleblowers and investigative journalists uncovered in the months since.
Indeed, only time will tell if China’s apparent ability to advance and disrupt both in terms of manufacturing and technology is as competitive as certain recent developments indicate or as relatively weak as various incidents and mishaps hint.
Featured image via Shutterstock
