Editorial | China’s caution about Nvidia’s advanced chips is only prudent

For Beijing, escaping the US tech chokehold is more important in the long run than making any temporary advances

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Technicians work on chip processing equipment at a semiconductor manufacturing plant in Suqian, Jiangsu province, on October 20. Photo: AFP

Published: 7:15am, 26 Jan 2026

The geopolitical tug of war over artificial intelligence between the United States and China has created an intriguing situation. With the US Department of Commerce approving the sale of the H200, Nvidia’s second-most-advanced semiconductor, to Chinese firms, people might think China would welcome it. Instead, Beijing is encouraging a boycott to get domestic tech firms to use Chinese-made chips.

America’s “small yard, high fence” strategy to restrict tech transfer to China has given way to Washington, under President Donald Trump, taking a 25 per cent cut on Nvidia’s and other chipmakers’ sales of chips of comparable grades. But it seems China is returning the favour with its own “small yard, high fence” plan.

Washington was convinced by Nvidia and other chip industry leaders that tough US restrictions actually forced China to rapidly develop its domestic chip industry along with fully integrated supply chains. While their argument was self-serving, given the vast Chinese market, it was not untrue. US export controls have proved to be counterproductive; China’s drive for chip manufacturing self-sufficiency advanced so rapidly last year that even policymakers were pleasantly surprised. The ratio of domestically developed semiconductor equipment surged to 35 per cent by the year’s end, up from 25 per cent in 2024 and surpassing Beijing’s initial target of 30 per cent.

China is succeeding in building a semiconductor industry favouring domestic suppliers over US rivals. The new US strategy is to try to slow down advances by getting Chinese firms to use ready-made American chips. Unfortunately for Washington, Beijing is well aware of the risks and rewards. It has told domestic tech ‍companies not to purchase Nvidia and other comparable US chips unless absolutely necessary. New rules are being set to cap the total number of advanced AI chips that they can import.

China is playing the long game. As part of the coming 15th five-year plan, it is committed to self-reliance across the entire AI ecosystem. After being tied up by US export controls and sanctions, it has become apparent that escaping this tech chokehold is more important in the long run than making any temporary advances.

Policymakers and some industry experts are also suspicious of American chips, which could have “kill switches”, though Nvidia has vehemently denied it. But this is no different from the distrust and phasing out of Huawei and ZTE equipment in the European Union and the US.

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.css-1m2rp1p{color:#34b8b5;}Editorial | China’s caution about Nvidia’s advanced chips is only prudent

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}For Beijing, escaping the US tech chokehold is more important in the long run than making any temporary advances

Editorial | China’s caution about Nvidia’s advanced chips is only prudent

For Beijing, escaping the US tech chokehold is more important in the long run than making any temporary advances