On December 3, China declared an export ban on these metals to the US, a retaliatory action following US President Joe Biden's administration's introduction of new technology restrictions targeting China.
According to the Ministry of Commerce of China, China has introduced new restrictions on exporting dual-use items to the US, emphasizing national security concerns, compliance with international non-proliferation obligations, and adherence to its Export Control Law. These measures, which take effect immediately, are designed to limit exports that could be used for military or strategic purposes.
China stated that as part of these provisions, there is a total prohibition on exporting dual-use items intended for US military applications. Additionally, there are stricter controls on materials such as gallium, germanium, antimony, superhard substances, and graphite. Generally, export licenses for gallium, germanium, antimony, and superhard materials will not be granted.
Meanwhile, graphite exports will undergo more rigorous checks concerning the end-user and intended use. Any violations of these regulations, including unauthorized transfers to US entities or individuals, will incur legal penalties.
A spokesperson from the ministry responded that in recent years, the US has been accused of overextending the concept of national security, politicizing and weaponizing economic and technological issues. The US has reportedly misused export control measures to unjustifiably restrict the export of certain products to China and has placed multiple Chinese companies on sanctions lists.
These actions have been criticized for severely undermining international trade rules, harming the legitimate rights and interests of businesses, and disrupting the stability of global industrial and supply chains.
Chinese regime's export ban
In August 2023, Beijing introduced more stringent controls on the export of gallium and germanium, although the enforcement of these measures was not particularly rigorous at the time. In July 2024, China declared the nationalization of its rare earth resources, a decision that formally came into effect in October of the same year. This move marks a significant shift in the management and control of these critical materials, positioning China more firmly in the global supply chain of rare minerals.
According to Bloomberg, a European Union study conducted last year on critical raw materials highlighted that China is responsible for producing 94% of the global gallium supply and 83% of the world's germanium supply. Despite the existence of substitutions for these metals, CRU Group, a leading metals industry intelligence provider, indicates that alternatives are significantly more expensive and could potentially impede performance in their proposed applications.
Apart from China, gallium production capacity can be found in countries like Russia and Ukraine, where the metal is produced as a byproduct of alumina. Additionally, South Korea and Japan engage in gallium production as it emerges as a byproduct of zinc. In North America, germanium has recovered similarly as an adjunct to zinc, lead, and other metals.
Chinese associations call for stricter scrutiny
The China Semiconductor Industry Association has asserted that the recent restrictions imposed by the US on chip exports to China have led to significant disruptions in the global supply chain. The association's statement emphasized that the reliability and safety of these chips are now in question, echoing broader concerns about the stability of technological components amid geopolitical tensions.
In a related development, the China Association of Communications Enterprises has called for a government-led security investigation into the supply chain of crucial information infrastructures. The association, which counts major telecommunications companies such as Huawei, China Telecom, China Mobile, and China Unicom among its members, highlighted the importance of ensuring the safe and stable operation of these critical networks.
Meanwhile, the Internet Society of China has issued a separate statement urging domestic companies to prioritize the use of locally produced chips, whether manufactured by Chinese firms or foreign entities operating within China. It also encouraged Chinese firms to broaden their collaborations with international chip manufacturers, potentially mitigating the adverse impacts of the US policy measures.
In the automobile sector, the China Association of Automobile Manufacturers has expressed concerns over the current situation. The association noted that trust and confidence in US-made chips have been significantly undermined, suggesting a growing apprehension within the industry about dependence on American semiconductor technology.
A warning to Biden and Trump
According to Bloomberg Intelligence, Beijing is signaling to Washington, including the incoming Trump administration, that it has developed a new strategic tool, possibly foreshadowing a second US-China trade war during Donald Trump's expected second term. This time, the strategy might involve China escalating tensions by instituting export controls in response to US tariffs.
However, Bloomberg Intelligence continued to say that China's lack of US legal infrastructure, export-control monitoring capabilities, and extensive alliance network suggests that the economic impact on the US would be minimal. American companies have already shown their ability to adapt by finding alternative sources for materials like germanium and gallium.
