Warning to the US
China’s commodity controls are ‘thoughtful hard hit’
07/05/2023 10:44 am
Rare earths are important raw materials in the chip industry, and China is mining large deposits. China is responding to US export restrictions in chip production with a countermeasure that could only be the beginning.
A day ahead of US Treasury Secretary Janet Yellen’s visit to China, the tone between the two countries is getting rougher. The export controls for certain raw materials for chip production are a “well-thought-out hard blow” and “just the beginning,” former Chinese Deputy Minister of Commerce Wei Jianguo told the pro-government newspaper China Daily. He is an influential adviser to the government in Beijing. “If restrictions on China’s high-tech sector continue, countermeasures will escalate.”
In addition, the Chinese state-run newspaper “Global Times” published an editorial praising export controls for certain metals as a “practicable way”. They showed the US and its allies that efforts to keep China away from advanced technologies were a miscalculation.
From August 1, companies exporting gallium and germanium products must apply for a license. “This is clearly designed to send the not-so-subtle message to the U.S. government that China is in good hands when it comes to semi-conductor, aerospace and automotive inputs. China is increasingly willing to hurt U.S. companies inflict,” said Paul Triolo, China expert at consulting firm Albright Stonebridge. China is the world’s largest supplier of the so-called rare earths required for the manufacture of computer chips and solar panels.
US export restrictions anger China
The USA had previously restricted, among other things, the export of high-performance chips and machines for their production. In addition, Western governments are urging telecom companies to refrain from using components from Chinese manufacturers such as Huawei in their mobile networks due to security concerns. The current commodity controls are not China’s first retaliatory move. For example, the government banned certain companies and organizations from using chips from the US manufacturer Micron.
Western countries are following developments with a worried expression. There are also deposits of rare earths in other regions of the world, explained the ZVEI, the association of the German electrical and digital industry. “However, only a few countries other than China are currently willing to mine these raw materials and process them until they can be used industrially.” The association therefore called for Europe’s dependence on raw material supplies to be reduced.
The current discussion brought price jumps to Chinese suppliers of rare earths for the second day in a row. The shares of mining companies such as Yunnan Lincang Xinyuan or Yunnan Chihong rose by up to ten percent. In Australia, the titles of Lynas, the largest promoter of rare earths outside of China, temporarily gained a good two percent.