Beijing is highly concerned about Tokyo's moves to control semiconductor exports, China's Ministry of Commerce (MOFCOM) said during an economic partnership consultation with Japan on Wednesday.

Assistant Minister of Commerce Li Fei said China hoped Japan could abide by international rules, provide enterprises with a "fair, non-discriminatory and predictable" business environment and safeguard bilateral economic and trade cooperation, according to a MOFCOM statement.

Li was speaking to officials from Japan's foreign ministry led by senior deputy minister Keiichi Ono at a video conference on Wednesday.

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The two sides discussed the macroeconomic situation, industry supply chains, trade and investment and possible cooperation in the green technology and healthcare sectors.

They also "exchanged views" to prepare for a high-level economic dialogue between the two countries.

The last such dialogue took place in 2019 before the Covid-19 pandemic. Mistrust between the neighbouring nations has disrupted talks in recent years amid Beijing's strong presence in the East China Sea and the South China Sea and growing concern in Tokyo that Beijing will resort to force to take control of Taiwan, the self-ruled island that Beijing has vowed to bring under mainland control.

In January, Japan and the Netherlands agreed to comply with export restrictions against China's chip sector announced by the US government in October.

Tokyo is set to introduce updated export controls "this spring", according to a report by Kyodo on February 4 citing unidentified government sources. Under an amended government order, the export of cutting-edge chip equipment would be subject to approval by Japan's trade ministry, the report said.

Pang Zhongying, chair professor of international political economy at Sichuan University, said Japan was certain to impose the chip export curb against China, as Japan, the chair of G7 meetings this year, appeared to comply and commit to the US-led partnership.

"Regarding China as a strategic rival, Japan is willing to pay the economic cost for the chip export control," Pang said.

While Tokyo has not disclosed details of the restrictions publicly, observers speculate it will affect Japanese deep ultraviolet (DUV) system suppliers such as Nikon and Tokyo Electron, which makes etching and testing equipment. Tokyo Electron has said China accounts for more than a quarter of its annual revenues.

China is Japan's largest trading partner, accounting for around a fifth of its exports and almost a quarter of its imports. It's also a major manufacturing base for Japanese companies.

Tokyo's export control would deal a further heavy blow to the Chinese chip sector, which has sought to diversify its supply chain amid growing US sanctions by procuring alternatives from not only domestic companies, but also Japan and the Netherlands.

China has repeatedly stressed the importance of self-reliance and breakthroughs in "bottleneck" technologies such as chip design and production. During a study session of the 24-person Politburo on Tuesday, President Xi Jinping urged China to strengthen basic research in science and technology to become self-reliant and a global technology power, state news agency Xinhua reported.

"China's commerce ministry is doing its job by expressing concerns about business impact. However, there's little it can do as long as China's relations with Japan and the US do not improve," Pang said.

At the first formal security talks in four years between the two Asian powers in Tokyo on Wednesday, Chinese foreign vice-minister Sun Weidong said: "The international security situation has undergone vast changes and we are seeing the return of unilateralism, protectionism and a Cold War mentality."

Sun called on Japan to "consider its own interests" and make Asia a cooperation highland, instead of a frontier of confrontation.

Japanese deputy foreign minister Shigeo Yamada said: "While relations between Japan and China have a lot of possibilities, we are also facing many issues and concerns", noting Beijing's military ties to Russia, its suspected use of spy balloons in Japan and threats to peace and stability in Taiwan.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2023 South China Morning Post Publishers Ltd. All rights reserved.

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