US-China battle over critical raw materials likely to heat up after Beijing hints at fresh export curbs

Expect China to announce more measures, curbing exports of critical raw materials that are required to manufacture high-end equipment and technology items. Earlier this week, Beijing’s sudden decision to restrict shipment of gallium and germanium — needed to manufacture chips, solar panel, computer motherboards, mobile phones among many other items came as a rude shock to the world. Though China said that the decision was necessary to protect its national interest and security, it was directly aimed at the US.

Wei Jianguo, former vice-minister of commerce told local news organisation China Daily that the dragon’s “export restrictions on gallium and germanium is just the beginning, and the country has more tools for countermeasures if Washington plans tougher technology restrictions on Beijing.”

According to Wei, the decision was not sudden but was well thought out and was taken to create panic and pain in certain countries.

“This is just the beginning of China’s countermeasures, and China’s tool box has many more types of measures available. If the high-tech restrictions on China become tougher in the future, China’s countermeasures will also escalate,” he told the news organisation.

As the tech battle between the two largest economies of the world intensify, US Treasury Secretary Janet Yellen’s visit to China will be keenly watched. While she is expected to somewhat ease the tension, experts see little long-term impact.

Although her visit is well-intentioned, it will not be a panacea for the current conflicts between the United States and China, South China Morning Post said.

Experts, however, also opined that such knee jerk reactions could end China’s dominance in this field as countries will eventually start to look out for alternate supply sources even as Beijing at present produces about 60 per cent of the global germanium requirement and 80 per cent of gallium. In fact, in the post Covid phase the exercise to diversify supply chain networks have already begun.

Besides, China’s natural resources for these items are depleting fast, something that Beijing must account for.

From August 1, exporters dealing in these items would require prior approval of the government. It also said that certain items “meeting certain characteristics shall not be exported without approval.”

“In order to safeguard national security and interests, with the approval of the State Council, it is decided to implement export controls on items related to gallium and germanium,” the Ministry of Commerce (MOFCOM) and the General Administration of Customs (GAC) said in a statement.

A SCMP opinion piece noted that by ramping up their rhetoric and acting with explicit intent, the two countries are not only inflicting economic pain but also increasing the chances of a hot war.

Also read: Will China’s sudden decision to control gallium, germanium exports boomerang, benefit India?