Biden’s tough line on China

It took several days of market carnage before Washington rolled out a Commerce Department official to explain its thinking on curbing Beijin [View in browser]( [Bloomberg]( Follow Us [Get the newsletter]( It took several days of market carnage before Washington rolled out a Commerce Department official to explain its thinking on curbing Beijing’s access to chip technology. The calming words on offer yesterday couldn’t mask the fact that US strategy on China has taken a dramatic turn, one that asks a lot of its allies. Key reading: - [How Biden’s Chip Actions May Be Broadest China Salvo Yet]( - [‘No Possibility of Reconciliation’ as US Slams China Chips]( - [America Is Unleashing Its Economic Arsenal Against China, Russia]( - [Taiwan Urges Calm on TSMC, Downplays Impact of Biden Chip Rules]( - [Biden Chip Rules Aim to Give US an Advantage, Official Says]( Sweeping new US restrictions were announced last Friday on sales of semiconductors and chipmaking equipment to China. The consequent market meltdown is tantamount to the fact they add up to the most drastic round of technology curbs on Beijing to date. Chip stocks erased more than $240 billion in global market value at one point this week. Stocks later recovered, but the rout left a dawning realization that US policy on China has hardened, and a new front has been opened. Whereas the Trump administration imposed trade tariffs on Beijing and singled out Chinese companies like Huawei for sanctions, President Joe Biden is going further with broad restrictions on sales of chip technology that China needs to advance. That approach affects US allies with any kind of tech business in China, effectively compelling them to comply or defy Washington. Chip-related stocks in key tech allies including South Korea, Japan, Taiwan and the Netherlands all plunged this week. In a speech last month exhorting the use of export controls as “a new strategic asset,” Biden’s National Security Advisor Jake Sullivan listed three core technologies of US focus. As well as computing — chips, AI and quantum — he singled out clean energy and biotechnology. Maintaining leadership in each area is a national security imperative, he said. That’s a clear declaration that US-China rivalry is only set to intensify. — [Alan Crawford]( An employee inspects integrated circuitry boards at the Smart Pioneer Electronics factory in Suzhou, China, on Sept. 23. Photographer: Qilai Shen/Bloomberg Click [here]( to listen to yesterday’s Twitter Space on the Chinese Communist Party Congress and [here]( for this week’s most compelling political images. If you’re enjoying this newsletter, click [here]( to sign up for Balance of Power. Global Headlines Flying in | UK Chancellor of the Exchequer Kwasi Kwarteng [dashed]( back to London from a meeting in Washington amid signs the government may be preparing to retreat from plans for big tax cuts that sparked turmoil in markets. Bank of England Governor Andrew Bailey’s strategy of cutting off an emergency bond-buying program looks to be bearing fruit, with markets rallying on the expectation of a government U-turn. - Liz Truss is only in the fifth week of her premiership, but doubts are growing about whether she can [survive]( the year, writes [Kitty Donaldson](. Standing firm | NATO must take Russian [threats]( to use nuclear weapons in its war on Ukraine seriously but shouldn’t let them disrupt international efforts to support the government in Kyiv, German Defense Minister Christine Lambrecht said. Ukrainian President Volodymyr Zelenskiy called for a Red Cross mission to have access to prisoners of war held in Russian-occupied Olenivka in the Donetsk region. - Russia and NATO are both proceeding with nuclear [exercises](, even as tensions escalate. - Elon Musk warned his company SpaceX cannot help carry the cost of its [Starlink]( high-speed broadband internet for Ukraine indefinitely. Inflation is spreading in the US economy, slamming the door on hopes the Federal Reserve will dial back interest-rate hikes that threaten to tip the country and perhaps the world into [recession](. Core inflation, excluding food and energy, jumped to a 40-year high of 6.6% in September from a year ago. That's bad news for Biden as his Democrats fight to maintain their slim hold on congress in the November midterm elections. Trump troubles | The House committee investigating last year’s attack on the US Capitol voted unanimously to subpoena Donald Trump, a [dramatic challenge]( to the former president just weeks before Republicans and Democrats face off in the midterms. The move likely won’t force immediate testimony from Trump on his role in events surrounding the Jan. 6 assault. - House Speaker Nancy Pelosi said in a video shot during the insurrection that she wanted to [punch Trump]( if he showed up at the besieged Capitol. Best of Bloomberg Opinion - [UK Chaos Threatens to Stall Global Inflation Fight: John Authers]( - [What Biden Should Make of Erdogan’s Bluster: Bobby Ghosh]( - [We Can’t Give Putin His Off-Ramp: Andreas Kluth]( Tightening race | Brazilian presidential contender Luiz Inacio Lula da Silva and incumbent Jair Bolsonaro are trying to shore up support among the poor amid signs the race is [tightening]( ahead of the Oct. 30 runoff. While opinion surveys show that Lula has a strong lead, major pollsters failed to fully capture support for the right-wing president in the first round. Lula supporters in Rio de Janeiro on Wednesday. Photographer: Andre Borges/Bloomberg Explainers you can use - [A Trader’s Guide to China’s Must-Watch Party Congress]( - [Banks Try Quiet Quitting Net-Zero as Fortune Favors Fossil Fuels]( - [Exxon’s Toxic Culture Drives Workers From a Once Coveted Career]( Tech lobbying | Three members of the European Parliament have [accused]( Meta, Amazon and Google of breaking transparency rules for lobbyists, according to documents seen by Bloomberg. As [Jillian Deutsch]( reports, the tech giants are said to have lobbied under the guise of a group claiming to represent small and medium-sized businesses to try to influence the Digital Markets Act and Digital Services Act. Amazon and Google denied the allegations. Meta didn’t immediately respond. Bloomberg TV and Radio air Balance of Power with [David Westin]( on weekdays from 12 to 1pm ET, with a second hour on Bloomberg Radio from 1 to 2pm ET. You can watch and listen on Bloomberg channels and online [here]( or check out prior episodes and guest clips [here](. News to Note - Hungary delivered a major emergency interest-rate hike to try to halt the [free-fall]( of its currency, resuming the European Union’s steepest monetary tightening less than a month after vowing to end it. - North Korea test-launched a short-range ballistic missile, fired barrages of artillery and flew about 10 warplanes near the inter-Korean border, saying the actions were a [warning]( over South Korea’s recent military moves. - Turkey criminalized the spread of what authorities describe as false information on digital platforms, giving the government [new powers]( ahead of elections next year. - Sweden’s right-wing political bloc, which won last month’s general election, has reached an [agreement]( on governing the country, though the anti-immigration Sweden Democrats won’t enter the cabinet. - A double murder in a gay bar in Slovakia’s capital has [rattled nerves]( in the eastern European nation, prompting the president to denounce a political climate that she said fuels hate. Pop quiz (no cheating!) In which country did the opposition reverse course by announcing plans to compete in the next presidential election no matter what the government does? Send your answers to balancepower@bloomberg.net. And finally ... Chinese censors took the extreme step of [restricting]( the search term “Beijing” on social media, after photos and video circulated of a rare protest in the capital denouncing President Xi Jinping days before he’s expected to secure a norm-breaking third term. Two banners unfurled from the city’s Sitong Bridge yesterday contained slogans blasting Xi’s strict Covid Zero policy, and calling for a school boycott and strikes. By today, most references to the event had been scrubbed from China’s heavily-policed internet. An intersection near a bridge where social media videos appeared to show smoke and protest banners in Beijing yesterday. Photographer: Dake Kang/AP Photo Like getting this newsletter? 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