U.S. to limit Nuclear Technology Exports to China

Trump administration announced that it would sharply restrict exports of civilian nuclear technology to China.  

US officials claimed was being diverted to power new generations of Chinese submarines, aircraft carriers and floating nuclear power plants

Background

The United States and China are two of the largest economies in the world. Both countries consider the other as a partner in trade and an adversary in geopolitics. Diplomatic relations between US and China was first established in 1844 with the Treaty of Wanghia. This agreement allowed the US to trade in Chinese ports. After the Qing Dynasty was overthrown, in 1911, the US recognized the legitimacy of the Republic of China (ROC) government.

US President Donald Trump has previously been a critic of China. He blamed the country for loss of jobs within the US and has often criticized the US trade deficit with China. China’s trade surplus with the United States widened in 2017 while total foreign trade volume maintained rapid growth.

Experts have begun sounding the alarm about an impending trade war between US and China. Former chief executive of Hong Kong Tung Chee-hwa recently said that a trade war must be avoided. “In such a big relationship, there is bound to be disagreement, but rash action on either side will only create the environment for a very serious trade war, which is not good for any country. Patient discussion and negotiation, particularly considering the long-term prospects of the relationship, will be very important,” he said.

Analysis

The Trump administration announced on Thursday that it would sharply restrict exports of civilian nuclear technology to China that officials claimed was being diverted to power new generations of Chinese submarines, aircraft carriers and floating nuclear power plants.

The announcement mixed security warnings with longstanding complaints that Beijing was continuing to steal nuclear-related technology from American firms to benefit Chinese state-owned companies.

The administration officials revealed little of the intelligence evidence that they said would back up their claims. The move appeared to be part of a more concerted effort by the administration to put new pressure on China beyond the tariffs that President Trump has announced on Chinese goods.

The Trump administration said it would impose a new review system on foreign investments to prevent adversaries — chiefly China — from obtaining new technology by taking minority stakes in American companies or starting joint ventures here.

The Justice Department announced the arrest of a Chinese intelligence officer who was charged with stealing secret information from GE Aviation, one of the largest suppliers of jet engines.

China has been an established nuclear weapons state since the early 1960s. While the Trump administration said it was acting to halt proliferation, the reality is that China is largely self-sufficient when it comes to developing nuclear weapons.

The restrictions announced are largely aimed at fears that advanced reactors, especially compact power plants that could fuel China’s ambitions to project power, would speed the emergence of the Chinese military as a force with global reach.

The administration officials said Beijing was looking in particular to develop floating nuclear power reactors for use in the South China Sea, where it is building military instillations on reclaimed reefs.

China is not a major customer for American nuclear technology; only about $170 million in nuclear-related sales went to Chinese customers last year. But the announcement on Thursday amounted to a significant setback in cooperative agreements that have had a chequered history since the Reagan administration.

Counterpoint

Amid warnings from the American nuclear industry that failing to deal with China on nuclear issues was to open the way for France, Japan and South Korea to supply Beijing with nuclear technology. China has robust trade relations with other uranium-rich countries in Africa and Asia, apart from their alliance with Russia, to be gravely affected by this new restriction.

Assessment

Our assessment is that the new restriction is a measured by tame response to China’s escalation in the trade war. There is no significant impact of the new export limitations on China’s civilian nuclear program. We believe that, in addition to the recent Treasury department regulation which limits foreign investments in US tech companies, this is meant to intimidate Beijing into backing down in the trade conflict. We feel that China could announce a new strategic trade partnership with Russia in the coming days to counter the US’s growing regulations.