China curbs rare metals exports as part of extant semiconductor confrontation
Beijing imposes export controls on germanium and gallium, two key metals for microchips, optical fibres, and solar panels, against the background of the US-Sino trade war. But curbs can be a double-edged sword.
Beijing (AsiaNews) – China has fired another salvo in its ongoing confrontation with the United States.
The two superpowers are already at loggerheads over Taiwan, space, Asia-Pacific, Middle East, military supremacy, new technologies, semiconductors, and economic dominance.
This week China’s Ministry of Commerce and China Customs announced that exports of certain gallium and germanium products would require special approval from 1 August to “preserve security and national interests”.
According to the US Geological Survey, China is the world leader in gallium production with 98 per cent, and germanium with 68 per cent; thus, the United States is dependent on China for these the two critical elements for its own industrial chains.
The stakes could not be higher with dominance in key sectors as the future prize, with potential impact on the military, supercomputers, artificial intelligence, and the sustainable economy (like electrification, solar power, etc.).
Western actions to reduce reliance on China can appear as belated attempts to stand up to Chinese companies pushing their way forward, crushing the competition, and grabbing market shares and resources thanks to government subsidies, state aid, protectionism, and industrial nationalism.
This has already led China to clash with Japan for dominance in trade and mining in Africa, a continent Beijing already dominates, making Japan’s electronics and automotive industries particularly vulnerable.
This week, the latest act in the cold war pitting Beijing against Washington (and its Western allies) was consummated with the Netherlands restricting exports to China of advanced chip printers, triggering China to retaliate with exports controls on gallium and germanium.
The two metal are used in a variety of high tech products, like semiconductors, fibre optics and panels, which are crucial for the green transition from fossil fuels.
As part of this, China has let loose its mouthpieces against the West, with major newspapers and agencies calling restrictions on exports of rare earths and metals a "warning" to the United States.
An editorial in the English edition of the Global Times,[i] attacks Washington and its allies for trying to crush China’s tech sector with no regard for the “potential damage the technological iron curtain may cause to global supply and industrial chains”.
“But now the question is how long Washington can ignore the warning over the consequences when China starts taking legitimate and reasonable measures to safeguard its national security and interests,” the state-backed newspaper said.
The latter went on to say, “China’s move this time may be more of a warning, showing that China will not be passively squeezed out of the global semiconductor supply chain”.
Separately, the state-run China Daily yesterday quoted a former Chinese official saying the curbs were “just the start” of Beijing’s sanctions and measures.
“(China’s) export control of chip-making materials was a well-thought-out heavy punch,” Wei Jianguo, a former vice commerce minister, said in an interview, noting that countermeasures would escalate if steps against China’s high-tech sector are not reversed.
China’s restrictions, announced on the eve of US Independence Day (4 July) and before US Treasury Secretary Janet Louise Yellen’s visit to Beijing, are a clear message to the Biden administration.
Beijing’s move has raised concerns on whether restrictions on rare earth exports could follow, Chinese media note, pointing to how it curbed shipments 12 years ago in a dispute with Japan. China is the world's biggest producer of rare earths.
This is China's second, and so far biggest, countermeasure in the US-China tech fight, coming after it banned some key domestic industries from purchasing from US memory chipmaker Micron (MU.O) in May.
A day after China unveiled the curbs, Chinese President Xi Jinping repeated a call for "stable and smooth functioning of regional industrial and supply chains" in a virtual address to the Shanghai Cooperation Organisation summit.
It is hard to forecast developments in the medium term, but more cuts, sanctions, and restrictions could come amid the intensifying global struggle, especially over rare earths which, experts explain, although not difficult to find, have a complicated production process with a heavy environmental impact.
Considering this, the Eurasia Group warns that tit-for-tat is "a double-edged sword”. China’s past attempt to exploit its dominant position in the sector led to shortages and higher prices, which stimulated competition and improved mining and processing ventures outside China.
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[i] The paper follows the editorial line of the People’s Daily, the Communist Party of China’s newspaper.
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