Are sanctions against China working?

Questions over US technology sanctions against China [View in browser]( [Bloomberg]( Welcome to Balance of Power, bringing you the latest in global politics. If you haven’t yet, sign up [here](. The sophisticated chip found in the Chinese company Huawei’s new phone has provoked much hand-wringing in Washington over a central concern: US sanctions may not just be insufficient; [they may be backfiring](. It’s a legitimate worry, but surely no one expected Beijing would halt its drive to scale the heights of technological progress in response to Washington’s efforts. In 2019, when then-President Donald Trump initially targeted Huawei, the issue wasn’t so much US-China competition as concerns that the company’s global telecommunications networks would aid Beijing’s espionage efforts. Under President Joe Biden, the policy has morphed into an all-encompassing effort to knee-cap China’s development of everything from sophisticated chips to artificial intelligence and supercomputing, in the name of hindering its military’s advance. Understandably, President Xi Jinping’s government objects, while some key US allies doubt the wisdom of moves that serve to hold back the world’s second-largest economy, even if the US denies that is its intention. There’s already been blowback: China recently barred exports of two critical minerals, and restricted the use of Apple iPhones at state-backed companies and agencies — a move the US called “aggressive and inappropriate.” While the US is cracking down on China, its own big tech is facing scrutiny at home and in the European Union too. French antitrust enforcers raided the offices of a business that the Wall Street Journal identified as AI-chip giant Nvidia on suspicion of “anticompetitive practices.” Whether Beijing can gain ground in the chip race remains unclear: China’s economy is struggling and it lacks access to the most advanced chipmaking machines. While nationalists crowed over the rollout of Huawei’s Mate 60 Pro, its chip is three generations behind those used in the latest iPhones. But one thing is clear: In a global technology war that’s turning increasingly nasty, US hopes that China will simply accept second-class status are fading. — [Karl Maier]( US Commerce Secretary Gina Raimondo in Shanghai on Aug. 30. Photographer: Aly Song/Reuters/Redux Global Must Reads US White House staff received guidance about how they will be affected by a [government shutdown](, the latest sign preparations for the federal workforce are accelerating as a spending deal remains out of reach ahead of Sunday’s deadline. With the Democratic-led Senate and Republican-led House still far apart on the outlines of a measure to avoid the halt, discussion is shifting from whether it will happen to [how long it might last](. Ukraine has stepped up missile and drone attacks on Russian-occupied Crimea as a four-month-old counteroffensive makes halting progress in the country’s east and south. The attacks have destroyed weapons, bases and supply lines, limiting Russia’s military capabilities by undercutting its Black Sea fleet, but they aren’t likely to enable Ukraine to make a [decisive breakthrough]( in the ground war this year, a source says. Smoke rises from a headquarters building for the Russian Black Sea fleet in Sevastopol, Crimea, on Sept. 22. Source: Planet Labs/AP Photo The EU is looking at ways to [lock down]( improvements in its working relationship with the US in case Trump wins next year’s presidential election. EU officials want to “Trump proof” agreements including any resolution of disputes over steel tariffs and the Biden administration’s green technology subsidies. Unions in Arizona are negotiating with TSMC on labor issues that have dogged the Taiwanese chip giant’s Phoenix construction site, a flagship project of Biden’s efforts to make more critical components in the US. As Mackenzie Hawkins [reports](, the dispute shows how the administration is getting caught between the president’s economic vision and the workers he’s promised will reap the rewards. The coup in Gabon that ousted a key French ally in Africa [shook up bond investors]( by destabilizing one of the region’s few international borrowers. August’s unseating of long-term President Ali Bongo initially led to record declines in Gabon’s dollar debt, and losses cascaded to neighbors Cameroon and Republic of Congo as the market’s attention focused on who may be next. Senior US and Chinese officials held “candid” talks in Washington as a [flurry of high-level diplomacy]( bolsters expectations Xi will attend a major summit in California this year. Argentina’s congress approved a bill that [will eliminate income taxes]( for almost all formal workers, a move advocated by the economy minister and presidential candidate, Sergio Massa, before elections next month. The acting leader of Myanmar’s government-in-exile said resistance forces are in control of about 60% of the country’s territory and [are poised to threaten]( the ruling junta in key strongholds as fighting rages across the Southeast Asian nation. Washington Dispatch Never let a crisis go to waste, the saying goes, but for some politicians it might be better phrased: Don’t pass up an opportunity for campaign fundraising during a crisis. With Washington lurching toward a government shutdown, three Republican congressmen fired off emails to supporters. One of them, Representative Matt Gaetz of Florida, described the conflict as a “historic fight to stop a corrupt government funding system.” He asked for donations in amounts ranging from $5 to $100. Gaetz, a strident critic of Speaker Kevin McCarthy, has opposed temporary measures that would keep the government open and allow more time for negotiations. Democrats, too, have made similar appeals when an event seems to coincide with their viewpoints. Senator Elizabeth Warren of Massachusetts and Representative Alexandria Ocasio-Cortez of New York, used the collapse of the Silicon Valley Bank in March to fire up donors. “The era of ‘too big to fail’ was supposed to be over,” Ocasio-Cortez told her supporters. One thing to watch today: The University of Michigan releases consumer sentiment data for September. [Sign up for the Washington Edition newsletter]( for more from the US capital and watch Balance of Power at 5pm ET weekdays on Bloomberg Television. Chart of the Day China’s economy [showed signs of a stronger recovery]( in September, according to SpaceKnow, a US company that analyzes satellite images. Activity around Chinese shopping malls remained at relatively high levels in September following an increase in August, indicating improving consumer confidence. And Finally Twenty-seven-year-old Ph.D. student Itziar Irakulis Loitxate isn’t a detective but she may be the closest thing the world has to [climate police](. As Aaron Clark reports, she’s one of the world’s foremost remote sensing scientists who uses satellite observations to identify some of the most damaging emissions, uncovering massive cases of industries spewing methane into the atmosphere. Halting the releases could do more to ease heating in the next few years than almost any other single measure. Irakulis Loitxate. Photographer: Maria Contreras Coll/Bloomberg Pop quiz (no cheating!) The currency of which country is the world’s best performer this quarter? Send your answers to balancepower@bloomberg.net. 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