Amidst the ongoing tug-of-war between the United States and China ahead of U.S. President Donald Trump's visit to China scheduled for the 14th-15th of next month (local time), assessments suggest that the U.S. is attempting to pressure China with semiconductor and crude oil as leverage.

In response, China is strengthening its control over rare earths, its "counter-attack weapon," and how the Taiwan issue will be handled at the summit is also a point of interest.

Hong Kong media South China Morning Post (SCMP) reported on the 30th that while the U.S. is intensifying pressure on China in various sectors, China is unlikely to be swayed as it has already reduced its dependence on the U.S.

Chinese Semiconductors (PG) [Yonhap News] 

◇ U.S. Restricts Equipment Exports to China's HUA HONG SEMICONDUCTOR... 'Hindering AI Chip Development'

It is reported that the U.S. has recently targeted HUA HONG SEMICONDUCTOR, China's second-largest foundry (contract chip manufacturer), by restricting equipment exports to slow down HUA HONG's artificial intelligence (AI) chip development.

Reuters reported on the 28th, citing multiple sources, that the U.S. Department of Commerce has ordered its semiconductor equipment companies, such as Lam Research, not to send specific equipment to two of HUA HONG SEMICONDUCTOR's advanced manufacturing facilities.

SCMP also reported that the U.S. House Foreign Affairs Committee has advanced 20 new export control measures this month to prevent China's access to advanced technology and advanced semiconductor manufacturing equipment.

These include restrictions on the sale of advanced semiconductor equipment to China and calls for allies such as the Netherlands and Japan to align more closely with the U.S.

Chinese experts criticized these moves as political maneuvers in interviews with state media outlet Global Times.

Zhou Mi, a researcher at the Chinese Academy of International Trade and Economic Cooperation, called it trade protectionism, but questioned whether the U.S. could achieve its regulatory goals given the rapid growth of China's semiconductor industry.

Indeed, DeepSee, a Chinese startup that shocked the U.S. AI industry backed by massive capital by releasing a "cost-effective" AI model early last year, is now touting its collaboration with Huawei's AI chips instead of U.S. Nvidia for its recently released new model V4.

The issue of Iranian crude oil flowing into China could also become a U.S. pressure card following the outbreak of war between the U.S., Israel, and Iran.

The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) issued an "advisory" on its website on the 28th, prohibiting transactions with small private refiners (teapots) in Shandong Province, China, which purchase most of Iran's crude oil, and stating that foreign entities engaging in such activities could be subject to sanctions.

China purchases about 90% of Iran's crude oil exports, and most of these are traded through these small private refiners, according to OFAC.

Chinese-speaking region experts believe that China or Iran will not stop crude oil trade due to sanctions concerns, and view the U.S. Treasury's announcement as an attempt to solicit support for the war by directly involving China.

There are also observations that China has sufficient strategic reserves, and Dai Houliang, chairman of China National Petroleum Corporation (CNPC), China's largest oil and gas company, emphasized on the same day that all efforts would be made to prevent domestic supply shortages.

Chinese Premier Li Qiang visits a company in Jiangxi Province, China [Xinhua News Agency Capture]

◇ China Strengthens Control from Rare Earth Mining to Distribution

On the other hand, China is also raising the level of control over its "counter-attack card," the rare earth industry.

China's Ministry of Industry and Information Technology released the "Draft List of Administrative Penalties According to Rare Earth Management Regulations" on its website on the 28th.

This establishes penalty standards for violations in all processes of rare earth mining, smelting, and distribution, indicating a clear intention to manage rare earths as a national strategic asset.

Bloomberg News reported that "rare earth dominance provides China with strong bargaining power ahead of the U.S.-China summit," and that the U.S. economy, valued at $1.4 trillion (approximately 2 quadrillion won), is related to industries that use rare earths.

Meanwhile, Reuters reported that China will make Taiwan the top agenda item at the upcoming U.S.-China summit. This is because Chinese President Xi Jinping has made it clear that Taiwan will be the top agenda item.

This contrasts with the U.S.-China summit held at the end of October last year, the first since President Trump's re-election, where the Taiwan issue was not discussed.

There are concerns in Taiwan that the Trump administration, unlike the previous Biden administration, may approach the Taiwan issue from a "give-and-take" negotiation perspective. This is because President Trump may make concessions regarding Taiwan during trade negotiations with China.

There have also been reports that China has pressured the U.S. to go beyond stating that it "does not support" Taiwan's independence and instead "oppose" it.

Wu Xinbo, director of the Center for International Studies at Fudan University, stated, "The logic regarding the Taiwan issue is simple. If the U.S. does not want to go to major war with China over the Taiwan issue, it should not support Taiwan's independence," and added, "President Trump is not interested in a war with China."