"This new rule strikes the right balance in our complex relationship with China," said Commerce Secretary Carlos M. Gutierrez. "It is a common-sense approach that will make it easier for U.S. companies to sell to pre-screened civilian customers in China, while at the same time denying the access to U.S. technology that would contribute to China's military."

Harry Harding, a leading China specialist and the Director of Research and Analysis for New York-based consultancy Eurasia Group, said that the new regulations were extremely controversial. Harding said that it is still too early to conclude whether such regulations would increase or restrict U.S. hi-tech exports to China.

"This is an attempt, on the one hand, to control what we regard as strategic important technologies while making it easier to sell some kinds of technologies," said Harding.

Some U.S. trade groups have voiced fears that the negative effects of the law may outweigh the positive ones that the government has advertised. "Although the final China rule is a significant improvement over the version that was proposed a year ago, it is still defective because it is unilateral and because it will impose a significant liability and compliance burden on companies--far larger than the BIS estimates--without an equivalent improvement in our security," Bill Reinsch, President of the National Foreign Trade Council, told Beijing Review. The council is a Washington and New York-based business organization serving more than 300 member companies doing business abroad.

According to Reinsch, the new regulations are not primarily a trade issue for the U.S. Government, but a national security issue. "From that point of view, it is appropriate to look at China's military modernization," said Reinsch. "However, the U.S. Government should have listened to all of the comments submitted since last July and not gone forward with this rule."

U.S. companies, in general, do not favor such a rule, according to a Los Angeles Times article, "…Businesses balked, complaining that other countries were not joining the United States in the new export controls and that the ‘validated end user' program wouldn't work because Chinese officials were unlikely to allow the required on-site inspections of companies by U.S. officials…Industry groups and affected companies such as Boeing Co., Sun Microsystems Inc. and Applied Materials Inc. urged the Commerce Department to scrap the plan or make major changes."

Critics have argued that the U.S. new restrictions on "dual-use" commodity exports are pointless, as China could easily buy the technologies from Europe and Japan. At the same time the restrictions were announced, Chinese Commerce Minister Bo Xilai announced a plan to import more hi-tech products from Britain. Bo was attending the seventh Sino-British Economic and Trade Joint Committee held in London, where the two countries discussed strategies for easing their own trade imbalance. According to Beijing Morning Post the minister's words were welcomed by Alistair Darling, British Secretary of State for Trade and Industry.

Gerald Young, Vice President of E-business Systems for Bourns Inc., a company that makes electronic switches and sensors, told the Los Angeles Times, "Most of the stuff we build is competitively available from world market sources. Whether a customer in China buys it from us or a Korean source or some other sources, he's going to get the product."

Other U.S. exporters have expressed concerns that the new restrictions may put them at a disadvantage on the Chinese market. Concerns from business groups and related companies include the specific measures that they should take to conform to the new rules.

"The restrictions will hurt trade between the United States and China, not so much because of the specific items covered by the new rule, but because the extensive liability and compliance burden that the rule places on U.S. companies will cause some of them to simply stop doing business with China," said Reinsch. The real damage, he said, would be done to smaller companies that don't have extensive compliance staffs already in place and cannot afford to create them.

"Also, because the rule applies to re-exports as well as direct exports to China, our companies will have to obtain much more information from their other Asian and European customers, which will encourage those customers to ‘design out' American products so they can avoid dealing with this rule," he concluded.

(Reporting from New York City)