American export controls intended to slow down Chinese technology actually caused Chinese firms to boost their R&D spending by 49.1%.
April 23, 2026
Original Paper
Export Controls and Innovation in Sanctioned Countries
SSRN · 6630175
AI-generated illustration
The Takeaway
Trade sanctions on dual-use products were designed to stifle technological progress in sanctioned economies. Instead, Chinese companies responded by increasing their patenting by 41.3% to find domestic alternatives. Policymakers often assume that cutting off access to high-end components will freeze a rival's innovation. These numbers show that the sanctions acted as a catalyst that accelerated the development of a self-sufficient tech ecosystem. For the global market, this means sanctions might be creating a more powerful and independent competitor in the long run.
From the abstract
This paper studies how Chinese firms responded to the 2007 U.S. “China Military Catch-All Rule,” which restricted exports of dual-use products with military applications. By comparing sanctioned goods to those that were just excluded from the policy, we estimate firm-level effects on imports, R&D, and patenting. Treated firms sharply reduced imports of controlled products and increased innovation activity: R&D spending rose by 49.1%, patenting by 41.3%, and the number of active inventors by 30.4