In this week's edition:

• Schumer Meets with China's Xi Jinping in Trip to Beijing
• U.S. Allows Samsung and SK Hynix to Expand Chip Plants in China
• Likely Biden-Xi Meeting 
• New Additions to Entity List 
• U.S. To Expand Chip Export Restrictions 
• “Foreign Pollution Fee” To Be Proposed 
• Commerce Sec On Huawei Advanced Chips Report
• Senators Send Inquiry to TikTok 
• Comments on Outbound Investment 
• Taiwan to Investigate Firms Suspected of Selling Chip Equipment to Huawei

A group of senators led by Majority Leader Chuck Schumer (D-NY) met with Chinese President Xi Jinping in Beijing on Monday, building up to a highly anticipated meeting between Xi and President Biden later this fall. State media reported that Xi told Schumer that the U.S. and China have the most significant bilateral relationship globally and that their common interests outweigh their differences.

Schumer criticized China’s response to the Hamas attack in Israel, urging Xi and the Chinese people to stand with the people of Israel and condemn the attacks. Schumer also expressed disappointment with Chinese Foreign Ministry’s statement which, in his view, lacked sympathy or support for Israel.

The bipartisan group of six senators is the first congressional delegation to visit China since 2019 and will also travel to South Korea and Japan.

The South Korean government has announced that the Biden administration will permit Samsung Electronics Co. and SK Hynix Inc. to obtain the necessary equipment to support and grow their semiconductor manufacturing activities in China, allowing the companies to import advanced American machinery. Washington has provided the firms with an indefinite exemption from the broader restrictions that prevent the export of advanced chipmaking equipment to China. A Samsung spokesperson stated that the decision eliminates uncertainty regarding the continuity of their operations in China.

A meeting between Presidents Biden and Xi during November’s APEC summit is looking increasingly likely, as ACG Analytics has previously stated. Although Beijing has not yet committed to the meeting, teams from the U.S. and China have been in San Francisco evaluating potential meeting sites. The months-long series of high-level meetings has set the stage for such a meeting.

The U.S. Bureau of Industry and Security (BIS) added 42 Chinese entities to its Entity List for national security purposes.

The Commerce Department will issue a set of updated export controls for advanced semiconductors and equipment which were initially released last year. The updates will reportedly further restrict types of equipment to align the U.S. with the rules out of the Netherlands and Japan as well as address some gaps in chip restrictions. The White House informed Beijing of the pending updates which may be released early this month.

Sen. Bill Cassidy (R-LA) plans to introduce a bill that would impose a “foreign pollution fee” on goods imported into the U.S. that are made with higher emissions than domestic goods. The bill is meant to level the playing field for U.S. manufactures who have higher costs due to stricter environmental regulations compared to Chinese manufacturers. The bill would also give low- and middle-income countries greater access to U.S. markets and development financing in exchange for better environment regulations. Cassidy said “It is unacceptable for China, or any country, to both freely pollute and export to the United States. Allowing it to do so effectively rewards Beijing for practices Washington does not permit at home.”

Commerce Secretary Gina Raimondo called the reports citing a semiconductor breakthrough by Huawei “incredibly disturbing” during a Senate Commerce Committee hearing. She called for “different tools” and “additional resources around enforcement.”

Sens. Marsha Blackburn (R-TN) and Richard Blumenthal (D-CN) sent a letter to TikTok seeking information on the company’s hiring of executives from ByteDance, the app’s parent company based in China, and requests a response by Oct. 13^th. Members of Congress have been raising concerns about TikTok’s ties to ByteDance and the Chinese Communist Party.

The U.S. Chamber of Commerce commented on the Treasury Department’s advance notice of proposed rulemaking for the Biden Administration’s Executive Order restricting U.S. investment in high-tech sectors in China. The Chamber called for the U.S. to coordinate an outbound investment restriction with allies to minimize negative impacts on U.S. businesses who would otherwise be disadvantaged against foreign firms. The Consumer Technology Association and the Semiconductor Industry Association issued similar comments.

Meanwhile, House Financial Services Committee Chairman Patrick McHenry (R-NC) submitted comments to Treasury Secretary Janet Yellen regarding Treasury’s proposed rulemaking creating an outbound review mechanism to scrutinize investment in high-tech sectors in China. According to McHenry, Treasury does not possess the statutory authority to direct the Assistant Secretary for Investment Security to oversee an outbound investment review process. Instead, that authority rests with Treasury’s Office of Foreign Assets Control (OFAC). ACG Analytics full analysis may be accessed here.

According to Taiwanese officials, 4 Taiwanese companies are under investigation for allegedly helping Huawei build semiconductor plants. The investigation will also determine if the companies in question violated rules of selling sensitive tech to China, including any dual-use tech. The companies are: Topco Scientific Co.; L&K Engineering Co.; United Integrated Services Co., and Cica-Huntek Chemical Technology Taiwan Co.

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