US export controls on technology exports to China have backfired, hurting US technology companies, and have been unsuccessful in cutting China off from the technology, thus driving innovation in China’s technology sector, according to a report from the Federal Reserve Bank of New York.

"The US has imposed export controls to deny China access to strategic technologies [but] we find no evidence of reshoring or friend-shoring. As a result of these disruptions, affected suppliers have negative abnormal stock returns, wiping out $130bn in market capitalisation, and experience a drop in bank lending, profitability, and employment. [US firms'] total number of customers declines, potentially inflicting collateral damage upon the same US firms whose technology export controls are trying to protect,” the report said.

The US has attempted to lock in its lead in technology with a series of restrictions including the CHIPS laws that effectively ban export of America’s best technology to China.

The report also highlighted that "the benefits of US export controls, namely denying China access to advanced technology, may be limited as a result of Chinese strategic behaviour. Indeed, there is evidence that, following US export controls, China has boosted domestic innovation and self-reliance, and increased purchases from non-US firms that produce similar technology to the US-made ones subject to export controls."

“In other words, it's almost a pure loss for US firms, who lose customers, revenue and market capitalisation, whereas the affected Chinese firms find alternative suppliers and China boosts its domestic innovation and self-reliance,” China-watcher Arnaud Bertrand said in a post on social media.