China, fed up with US sanctions, is hitting back with export controls – and more could come

China’s export restrictions on rare metals and the Micron ban reflect its hardening attitude after decades of sanctions and embargoes from the West
As China learns from the West, its export controls are likely to turn a one-way track into a two-way street

Zhou Xiaoming

Published: 12:30am, 21 Jul 2023

Why you can trust SCMP

I remember encountering export control in action for the first time when I visited a precision instrument company in Northern Ireland in 2011. The CEO told me there was a huge unmet demand for its products in China. But for fear of being fined or even jailed for violating the British government’s export control measures, his company had to abandon the business opportunity.

In the four years that followed, as the top economic and commercial diplomat at China’s embassy in London, I heard time and again similar complaints.

Britain is not alone in implementing export controls, though. Many governments use them to fulfil their obligations to multilateral organisations and ensure the supply of raw materials for domestic industries.

Western governments have imposed the world’s most elaborate and extensive export control measures, often for ideological or geopolitical objectives. In 1949, the United States led in setting up the Coordinating Committee for Multilateral Export Controls to fight communism. Its successor, the Wassenaar Arrangement, has, in addition to a munitions list, a long list of dual-use goods and technologies, ranging from telecommunications to aerospace and propulsion.

China has been a major target of the West’s export control measures since “Red China” was born in 1949. During the Cold War, more products were restricted for export to China than to the Soviet Union. Washington’s control list for China in 2007 included aeroplanes and their engines, optical fibres, advanced navigations systems, lasers and depleted uranium. To this list, Washington has in recent years added emerging and basic technologies, such as in 4G semiconductor materials, advanced electronic computer-aided design (ECAD) software and network safety.

Despite their pervasive export control regimes and sweeping export restrictions on China, Washington and some of its Western allies voiced concerns recently when China decided to control its exports of gallium and germanium. The Biden administration went as far as saying it “firmly opposes” Beijing’s decision. This reaction is characteristic of the West’s double standards – in the words of Chinese internet users, setting fires themselves while denying others so much as a light.

Gallium and germanium are rare metals used in 5G communications, electric vehicles and renewable energy industries, as well as the manufacturing of military systems. Photo: Reuters

Gallium and germanium are typical dual-purpose goods. Used in 5G communications, electric vehicles and renewable energy industries, the niche metals also go into the manufacturing of military systems such as advanced radars on F-35 fighter jets.

China is conscious of the threat arising from escalating provocations at its doorstep, such as the intrusions of warships and warplanes into its territorial waters, and military exercises with China as the hypothetical enemy. In such a hostile environment, providing its adversaries with minerals used to manufacture weapons is tantamount to handing them the knife. Naturally, like any other country, China would not want its adversaries to be able to use its products against itself.

Even so, Beijing’s new licensing regime is about controlling exports, not an outright ban. China does not appear to intend to cut off supplies of the two niche metals; according to its trade ministry, export applications that meet requirements would be approved.

The international business community can expect the supply of the two metals to continue, as long as they are used for “legitimate purposes”. Although China did not define this, it would be appropriate to interpret it to mean: not for military use.

China is ever mindful of the security and stability of global supply chains, and has shown its willingness to maintain it. In 2020, while the European Union was considering excluding Huawei Technologies from the bloc’s 5G networks on national security grounds, China decided in June that year, to the surprise of many in the West, to award contracts to Nokia and Edison to provide 5G equipment. The decision enabled the European companies to increase their share in China’s market.

China’s latest move signifies its hardening attitude to sanctions from the West. As China learns from the West, its export controls are likely to turn a one-way track into a two-way street.

02:05

China imposes restrictions on US chip maker Micron, escalating tech war

China has repeatedly warned of the consequences of Washington’s relentless crackdown on its hi-tech sectors, and made clear its resolve to safeguard its interests. Although this has been largely all bark and no bite, the country now looks more ready to walk the walk, and avail itself of trade tools to defend its interests.

In May, Beijing banned the country’s operators of critical infrastructure from buying from US chip maker Micron. More actions are likely to follow. Its new export regime may well be a harbinger.

Rather than a retaliation against particular actions, such as the Dutch government’s decision to restrict the export of advanced chip-making machines to China, China’s export controls on gallium and germanium are a response to the hostility in general from Washington and – to a less extent – its Western allies. By making China its adversary, Washington has forced Beijing to hit back.

What if China declared a protectionist trade war on the US and the West?

For decades, the US has been able to get as much gallium and germanium from China as it desired. But this is changing. In all probability, Washington’s vulnerability and insecurity in these two critical minerals would increase rather than reduce, at least in the short and medium terms. Washington’s China containment strategy is coming home to roost.

Truth is, in our interconnected world, all countries live in glass houses. We ought to be extremely cautious about throwing stones – doing so not only risks damaging the houses of others, but also our own.

Zhou Xiaoming is a senior fellow at the Centre for China and Globalisation in Beijing and a former deputy representative of China’s Permanent Mission to the United Nations Office in Geneva