Context:

On October 22, 2022, the 20th National Congress (NC) of the Communist Party of China (CPC) adopted a resolution on the amendment to the CPC Constitution. The head of the Secretariat of the 20th NC provided the amendment to Xinhua News Agency.

Key points:

The reason behind the CPC Constitution revision

• It is customary for the CPC to amend the Party Constitution to reflect the theoretical and practical innovations since the last NC. This process enhances the normative and guiding role of the Party Constitution.
• It is necessary that the Constitution is aligned with the important contents of the 20th NC so that the CPC can implement these new ideas.

The characteristics of the revision process of the CPC Constitution

• The entire Constitution revision process was guided by General Secretary Xi Jinping. Opinions of CPC members were widely solicited. Summarizing the comments and suggestions from various regions, departments, and the 19th and 20th NC representatives, the revisions were first considered by the plenary sessions of the Standing Committee of the Political Bureau and then by the entire Political Bureau. Finally, the amendment to the Constitution was unanimously adopted at the NC on October 22.
• The new Constitution reflects the wisdom and consensus of the whole party, represents the will of the whole Party, and is one of the living practices that the Central Committee uses to fully develop the Party's democracy.
• In general, the new Constitution has remained unchanged. Only those elements that must be changed to reflect the new conditions of the NC and on which there is already a consensus within the Party have been amended.

The main revisions of the new amendment to the Constitution include:

• The theoretical development of Xi Jinping's Thought on Socialism with Chinese Characteristics in the New Era: the "two combinations", which connects the basic principles of Marxism with China's specific reality and its important traditional culture.
• Achieving the Second Centenary Goal of the Party to build a modern, powerful socialist country by 2050.
• The major achievements and historical experience of the Party's centenary struggle with emphasis on the spirit of struggle and self-revolution.
• Enhancing the Party’s existing structure with the further development of full and strict governance over the Party, the promotion of the Party’s founding spirit – being loyal to the Party and not letting the people down, and the continual process of the Party’s self-revolution.
• The comprehensive leadership of the Party; the Party is the highest political leadership force.
• The basic tenets of the socialist economic system: Public ownership is the mainstay of the economy, with multiple ownership economies developing together; distribution according to labor is the mainstay, with various forms of distribution co-existing; and there is a socialist market economy.
• The continuous development of China’s defenses and its military by strengthening the multiple military branches with science and technology and the necessary talent, making it a world-class organization.
• A United Front that comprehensively, accurately, and unswervingly implements the "one country, two systems" policy and resolutely opposes "Taiwan independence".
• A diplomatic philosophy that promotes the common values of peace, development, fairness, justice, democracy, and freedom for all humankind, and emphasizes that we should work together to build a universally safe, open and inclusive, clean, and beautiful world.
• The basic condition that the Party's leading cadres at all levels must oppose privilege in all its forms.
• Safeguarding the basic tasks of the Party's grassroots organizations by promoting the normalization and institutionalization of study and education of Party history, strengthening grassroots social governance, and leading both the United Front work and the women's organizations.

Context:

The United States has made a practice of using legislation as an important tool in their bid for cutting-edge technology leadership. Today, 75 percent of the world's chip manufacturing has been concentrated in the Asia-Pacific region, while US domestic capacity has declined from 38 percent in 1990 to 12 percent. In an attempt to further thwart China's semiconductor industry, decouple it from global supply chains, and promote restructuring and "de-Sinicization", President Biden signed the Chips and Science Act of 2022 on August 9. The funding level for the US semiconductor industry is considered to be the most significant government intervention in industrial policy in decades and will provide long-term strategic support in the US geopolitical competition with China.

Key points:

Content of Chips and Science Act of 2022

• The act provides roughly US$280 billion in new funding to boost domestic research in and manufacturing of semiconductors in the United States, with the primary aim of countering China. Companies are subjected to a ten-year ban prohibiting them from producing chips more advanced than 28-nanometers in China and Russia if they are awarded subsidies under the act. The allocation of the funding will be spread out over a five-year period. The Chips and Science Act of 2022 is a well-designed planning document that seeks to help the US semiconductor industry to build a complete ecological support system, from advanced manufacturing capabilities to cutting-edge technology development, to talent training, and to technology applications and alliance cooperation.

Main features and trends of the new US legislation for the semiconductor industry

• The law provides legal protection for all cutting-edge science and technology. The law’s language on semiconductor design and manufacturing reflects US hegemony, with the purpose of containing China’s semiconductor industry through subsidizing U.S. domestic chip manufacturing and unfairly narrowing Chinese companies’ abilities to compete in the global market. However, the practical application of this legislation will be difficult to implement, especially given the historic lack of capital investment in US manufacturing and infrastructure.
• In support of the US New Cold War “containment strategy” against China, this legislation will scale up funding for the US domestic semiconductor industry, increase export controls vis-à-vis China, especially in the area of advanced semiconductor technologies, and intensify data audits on Chinese companies, under the guise of privacy protection and security reviews to suppress and marginalize Chinese companies.

Impacts on China’s semiconductor industry

• US-led western countries have fallen into line in support of the US as it attempts to control key semiconductor resources, technologies, and supply chains in Taiwan, and the countries of Japan and Korea, and Europe. Its goal is to slash China's access to international resources and innovation techniques by forcibly decoupling it from the global semiconductor industry supply chain. These tactics by the US have begun to negatively impact China’s growth in the hi-tech sector, making market fluctuations more uncertain and challenging the survival of domestic companies. The difficulties in creating quality domestic alternatives are mounting.

Response to the challenges

• More emphasis is being put on the necessity of sustainable investment and scientific economic planning. The reconstruction of the global semiconductor industry chain is accelerating amid the competition between major countries. Many countries have followed China's example in promoting development in their domestic high-tech industries. China should strengthen its strategic determination to explore new national mechanisms to respond to the risks and challenges emerging from the restructuring of the semiconductor industry’s global value chain. In addition, China must improve the autonomy of key technologies, especially in bottleneck fields, accelerate the development of domestic production in all industries, but specifically in the semiconductor manufacturing sector, encourage enterprises to actively explore new opportunities by adopting diverse sources and localization measures, give full play to the domestically developed innovation capability of new technologies, and develop new government policies and financial mechanisms to guide the sound development of China’s hi-tech industrial sector.