China has imposed restrictions on the exports of gallium and germanium, ratcheting up trade tensions with Western allies.
Invoking “national security interests,” the Chinese Ministry of Commerce said on Monday that companies that intend to sell products containing the two targeted materials would need to first obtain an export licence.
In practice, this means that if the central government refuses to issue the licence, the company will be outright banned from exporting.
The government will treat the merchandise as a “dual-use” item, a term that describes goods that can be employed for commercial and military purposes and therefore warrant an extra layer of oversight.
The rules will apply as of 1 August, the ministry said.
The unexpected news from Beijing put Brussels on high alert, as it comes in the midst of a renewed push to wean the European Union off its commercial dependencies.
The ambition has been translated into the Critical Raw Material Act, a regulation presented in March that establishes legally-binding targets on the domestic extraction, processing and recycling of “strategic” rare-earth metals.
Both gallium and germanium fall under the category of “strategic” because they are considered to be essential to fulfill the bloc’s green and digital transition.
But achieving greater independence is no easy task: China is estimated to control 80% of the production of gallium and 60% of that of germanium, giving the country a comfortably dominant position over the world’s supply chains.
Gallium and germanium “are critical, they are essential for our industry, especially for their use in strategic sectors, and also (in the sense) that we are dependent on a single supplier,” a European Commission spokesperson said on Tuesday afternoon in reaction to Beijing’s decision, noting that an internal analysis was underway.
The spokesperson openly cast doubt over China’s invocation of “national security” reasons to justify the surprise move and urged the country to base its trade policy on “clear security considerations” in line with the World Trade Organization (WTO).
“The Commission is concerned that these export restrictions are unrelated to the need to protect the global peace and also the stability and the implementation of China’s non-proliferation obligations arising from international treaties,” the spokesperson said.
The spokesperson refused to speculate on possible counter-measures.
The new dispute opens a new chapter in the increasingly fierce technology race that has pitted the United States, and to a lesser extent Europe, against China.
Washington wants its allies to heavily curb, or downright prohibit, advanced electronic components bound to the Chinese market in order to prevent Beijing from securing global tech supremacy and challenging the Western-led international order.
The Netherlands became earlier this year the first EU country to move decisively against China when it imposed severe restrictions on the exports of the semiconductor machinery that Dutch company ASML manufactures in exclusivity.
The limitations, which partially inspired the European Commission to design its first economic security strategy, were further expanded last week.
Meanwhile, growing media reports indicate the US is considering fresh curbs on China-bound exports of cloud-computing services and AI semiconductors.
The coincidence of events suggests that Beijing is willing to leverage its market dominance over rare metals to retaliate against what it sees as the “politicised” trade controls slapped by Western allies.
Mao Ning, spokesperson for the Chinese Ministry of Foreign Affairs, denied any tit-for-tat intention and defended the restrictions on gallium and germanium.
“China is always committed to keeping the global industrial and supply chains secure and stable, and has always implemented fair, reasonable and non-discriminatory export control measures,” Ning said on Tuesday morning.
“The Chinese government’s export control on relevant items in accordance with law is a common international practice, and it does not target any specific country.”
