M A Hossain,
In the evolving chessboard of global technology, China has just made a decisive move that could redefine the balance of power. By ordering all state-funded data centers to cease using or purchasing foreign artificial intelligence chips, Beijing effectively cut one of its last strategic dependencies on the United States. This is not just a commercial decision—it is a declaration of technological sovereignty. For Washington, long accustomed to wielding chips as instruments of leverage, the ground beneath that dominance has begun to crack.
Soon after Xi Jinping and Donald Trump met in South Korea, Beijing's action suggested that the choice was well-thought-out and not taken hastily. All new state-funded data centers in China must use domestic processors, such as Huawei and Alibaba. Existing facilities dependent on U.S. chips will face audits and gradual phase-outs. In short, the message is clear: China’s future AI infrastructure will be built on Chinese technology.
For many years, the United States held a dominant position in the global semiconductor industry. The United States shaped the modern world's technological arteries from Taiwan to Silicon Valley. Washington believed that by restricting China’s access to high-end processors—particularly those used in artificial intelligence and defense—it could slow Beijing’s rise. But this week, the tables have turned. The world’s second-largest economy has decided to decouple on its own terms.
Beijing’s directive is more than bureaucratic policy—it is a strategic rupture. Companies like NVIDIA and AMD, once dominant in the Chinese market, now face exclusion from what was their largest growth frontier. NVIDIA’s CEO bluntly admitted that America went “from 95% market share to 0%.” The cost is monumental—not only in revenue but in influence. A generation of U.S. policymakers believed that controlling chip exports could dictate China’s technological ceiling. Now, it seems the ceiling has vanished.
China’s strategy is neither sudden nor reactionary. Beijing has invested tens of billions of dollars over decades to produce its own semiconductor ecosystem. For AI and military systems, China has built a technological foundation that spans from legacy chips used in consumer electronics to advanced logic chips. That effort—often dismissed in Washington as inefficient state capitalism—has matured.
The results are now clear. A recent report from the U.S. National Institute of Standards and Technology found that Chinese AI models have advanced significantly even without American hardware. The implication is significant: software innovation and algorithm training are closing the gap that U.S. sanctions were initially intended to widen. Beijing's confidence reflects this shift.
The decision to ban foreign AI chips must also be understood within China’s broader doctrine of “algorithmic sovereignty.” This strategy envisions complete control of the nation’s computing infrastructure by 2027. The goal is twofold: insulate critical sectors from external coercion and project self-reliance as a symbol of national strength. By removing American chips from its digital infrastructure, China is securing both its data and its dignity.
It poses a problem for the United States. Although the goal of Washington's sanctions was to slow down China's technological advancements, it's possible that they hastened them. Beijing innovates more quickly the more restrictions America places on it. A historical irony is reflected in this. Export restrictions imposed by the United States on the Soviet Union in the 1950s boosted Moscow's own defense sector. Seventy years later, China is showing a similar trend, albeit on a much grander scale.
The geopolitical consequences are immense. The world’s AI race has entered a new phase where interdependence—the hallmark of globalization—is giving way to self-reliance. Both China and the United States are building insulated digital ecosystems, each wary of the other’s code, chips, and algorithms. The idea of a shared internet governed by open trade and cooperation feels increasingly obsolete.
China’s new regulation specifically targets state-funded data centers that are less than 30% complete, forbidding them from installing foreign chips. Facilities already operational may receive temporary exemptions. This gradual transition reflects pragmatism rather than haste. Beijing knows the costs of technological decoupling, but it also knows the price of dependence.
The rift began in 2022, when Washington imposed sanctions on sending high-end chips and manufacturing gear to China, all in the name of national security. That move slammed the door on China’s access to advanced AI processors like crunching data, running military simulations, and powering big machine learning projects. The U.S. believed that denying these tools would limit China’s ambitions. Instead, it gave China a reason to accelerate its domestic alternatives.
What followed was a surge in innovation. Huawei, once battered by sanctions, returned with its own AI processors. Alibaba’s cloud division rolled out chips designed for large-scale data processing. Dozens of smaller firms entered the race, many backed by state-led capital. The once-fragmented Chinese semiconductor sector began to consolidate under a common mission: independence.
China’s leadership, drawing from both political will and industrial muscle, sees this not merely as a technical transformation but as a national renaissance. In Chinese state media, chip independence is described in the same breath as the country’s historical self-strengthening movements of the late Qing dynasty—periods when technological mastery symbolized survival and sovereignty.
This trajectory is not unique to China. Russia, too, has embraced full technological self-reliance. Recent strategic weapon systems such as Poseidon and Borevestnik rely entirely on domestically produced parts. Across Eurasia, a pattern is emerging: nations once constrained by Western control over key technologies are carving out their own paths.
From Washington’s perspective, the latest Chinese ban represents both an economic loss and a strategic warning. The U.S. can no longer assume permanent dominance in advanced industries. It also faces its own dependency dilemmas—particularly in rare earth processing, where China remains the undisputed leader. America can reduce chip exports, but it cannot easily replicate China’s mineral supply chains, which form the backbone of everything from smartphones to fighter jets.
The competition ahead will not be about who sells more chips but who controls the architecture of the digital future. China’s concept of “algorithmic sovereignty” challenges America’s long-standing advantage in software and AI governance. It’s a battle of ecosystems: Silicon Valley’s open innovation model versus Beijing’s state-guided autarky.
Yet, for all the rivalry, both sides are converging in mindset. The U.S. seeks to insulate its own tech industries from Chinese interference, while China seeks to do precisely the same in reverse. The world is fragmenting into technological blocs, each erecting firewalls—literal and strategic.
Beijing’s latest move thus represents more than a policy directive. It is a signal of arrival. China no longer sees itself as a technology importer; it sees itself as a global innovator capable of setting standards, not following them. In cutting the cord with U.S. chipmakers, China has ended a chapter in which American leverage dictated its digital destiny.
M A Hossain, political and defense analyst based in Bangladesh. He can be reached at: writetomahossain@gmail.com
This article published at :
1. The Nation, Pak : 18 Nov, 25
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