China's Xi warns against tech 'confrontation' during Dutch premier's visit

Creating technological barriers and severing industrial supply chains would only lead to confrontation, Chinese President Xi Jinping has warned, as new Dutch policies on chip exports to China threaten to strain bilateral ties.

"Decoupling and breaking links" led to nowhere and cooperation was the only option, Xi told Dutch Prime Minister Mark Rutte during a meeting in Beijing on Wednesday, according to Chinese state media.

Earlier this year, the Dutch government began denying licences for ASML, the biggest supplier of lithography equipment to global computer chip makers, to export advanced "DUV" tool lines to China, bowing to demands from the United States.

At the same time, the Netherlands is under pressure to protect its own economic interests, which include ASML. The country's biggest company counts China as its second-largest market after Taiwan.

"Artificially creating technological barriers and cutting off industrial and supply chains will only lead to division and confrontation," Xi told Rutte.

"The Chinese people also have the legitimate right to development, and no force can stop China's scientific and technological development and progress."

'Chip war'

Rutte's talks in Beijing were expected to centre on whether ASML would receive Dutch government licences to continue maintaining billions of euros worth of advanced equipment it has already sold to Chinese customers that now fall under export restrictions when current licences expire, many of them by Dec. 31.

The export curbs so far have had only a modest impact on the financial performance of ASML, which dominates the global market for lithography systems - tools vital in helping to create the circuitry of computer chips.

But in the longer term, if the Netherlands is seen as an unreliable business partner, Chinese chipmakers may seek to replace its equipment with that of rivals such as Nikon and Canon.

Dutch Trade Minister Geoffrey van Leeuwen, who was also in Beijing as part of Rutte's delegation, told Dutch business daily FD on Tuesday that defending the interests of ASML was his "number one" priority.

His remarks reflect the diplomatic tightrope on which the Dutch government must walk, with ASML now a focus in the US-China "chip war".

China was willing to expand the import of "high-quality" goods from the Netherlands, state media cited Xi as telling Rutte, without giving details.

More broadly, China was willing to continue developing an open and pragmatic cooperative partnership with the Netherlands, Xi said.