If you want to gauge the state of relations between Beijing and Washington at year’s end, look at Chinese technology stocks.

Hong Kong’s Hang Seng Tech Index had a wild ride today, heading for the lowest close since its launch in 2020 before rallying. It’s still down 30% this year. That followed a third consecutive day of declines for shares of Chinese companies listed in the U.S., many of which are tech stocks.

The reason for the volatility is simple: renewed friction between the U.S. and China along the key fault-line of technology.

Key Reading

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When Joe Biden assumed the White House in January, the expectation was that he’d dial down the tension after the Trump administration imposed sanctions on China.

But while the rhetoric has moderated, actions on both sides have served to deepen their standoff, with China snuffing out democracy in Hong Kong and showing aggression toward Taiwan.

The Biden administration is now considering tightening restrictions on China’s largest chipmaker as part of its efforts to limit Beijing’s access to leading technology.

Separately, the U.S. is adding drone maker DJI and AI giant Megvii Technology to a blacklist over the alleged oppression of Uyghurs in Xinjiang, the Financial Times reported.

Meanwhile, the U.S. securities watchdog has announced rules that may force Chinese companies to delist.

It’s a concerted push that will inevitably accelerate Chinese efforts to become more self-sufficient: Chinese smartphone maker Oppo this week unveiled a self-designed chip that delivers sharper images.

Japan and Europe, too, are pressing ahead with their own plans to secure the supply of semiconductors to avoid getting further caught up in the conflict.

Analysts refer to the geopolitical moves as “techno-nationalism.” It’s a term we’re likely to hear more of in 2022.

Vir: Bloomberg