China’s Export Controls on 2 Metals Signal Warning to West: Experts

Experts urge supply chain diversification

A loader shifts soil containing rare earth minerals to be loaded at a port in Lianyungang, in China's Jiangsu Province, for export to Japan. (STR/AFP via Getty Images)

Starting Aug. 1, China will implement its recently announced export controls on two strategic metals, a move largely interpreted as retaliation for Western restrictions on the Beijing regime’s access to advanced semiconductors.

While Beijing’s export controls may not have an immediate effect on U.S. supply chains, experts warn that they should be viewed as a wake-up call. They say the move serves as a reminder of communist China’s ability to hit back at Western measures to showcase its leverage, prompting countries to be watchful and prepared.

Beijing announced in early July that it would restrict exports of gallium and germanium, two metals that are essential in the production of semiconductors and green-energy technologies.

It’s estimated that China produces 60 percent of the world’s germanium and about 90 percent of the world’s gallium.

Germanium is vital for solar panels, electric vehicle magnets, and batteries, while gallium is a key component of semiconductors used in mobile phones, 5G communication systems, LEDs, and other electronic products. They are also crucial to missile systems and military technology.

‘Shot Across the Bow’

“This certainly represents a ‘shot across the bow’ from the Chinese government in response to U.S. high-tech export controls,” according to Stephen Ezell, vice president for global innovation policy at the Information Technology and Innovation Foundation, a technology think tank.

“It remains to be seen how the Chinese government implements the licensing procedures,” he told The Epoch Times.

Beijing’s latest move follows a series of actions taken by the Biden administration that include broad export controls and the CHIPS and Science Act, aimed at hurting China’s high-end semiconductor manufacturing.

Japan, South Korea, and the Netherlands have also reached an agreement with the United States to limit China’s access to materials used in advanced computer chips.

Shortly after Beijing announced the new export controls as retaliation, Treasury Secretary Janet Yellen visited China to engage in economic dialogue with the regime. However, it’s unclear whether she discussed the latest export limits during her visit.

The White House declined to make a specific comment when The Epoch Times asked about the Biden administration’s response to the export restrictions put in place by the Chinese regime.

“I don’t have anything else to add,” White House press secretary Karine Jean-Pierre said during a press conference on July 11 in Vilnius, Lithuania, during the NATO summit.

She stressed, however, the importance of keeping communication channels open with Beijing.

“As we know, that relationship is vital. And so, we’re going to continue to do that. I just don’t have anything else to share,” she added.

National Security Threat?

Although abundant reserves of critical minerals can be found worldwide, the process of extracting and refining them into usable forms creates several challenges, including pollution.

As global mineral demand rises, the latest U.S. Geological Survey’s Mineral Commodity Summaries report (pdf) reveals that the United States is still far from securing its mineral supply chains. China is the dominant supplier of 16 “critical” minerals and 25 other minerals, according to the report.

When China restricted rare earth shipments in the past, it resulted in years of demand destruction as many end-users attempted to lower their use or move to alternatives in the years that followed. Hence, according to some experts, the latest export controls imposed by China are unlikely to work.

“I don’t think it’s a problem. It only becomes a problem if the U.S. refuses to look for alternative sources,” Derek Scissors, a senior fellow at the American Enterprise Institute and China expert, told The Epoch Times.

“We don’t know how this is going to play out yet. They’re trying to very cheaply intimidate the United States.”

Mr. Scissors noted that while the United States has vast mineral resources, it’s becoming increasingly reliant on foreign supplies.

The United States imports more than 80 percent of its rare earth elements and critical minerals.

When there are so many regulations, it isn’t profitable for U.S. companies to mine, he said, adding that such threats could prompt the U.S. government to seek alternative sources and reduce its reliance on China.

Emily Weinstein, a research fellow at the Center for Security and Emerging Technology, agrees that these export restrictions won’t have a significant impact on the tech industry.

The Chinese leadership is “grasping at straws” to gain some leverage in the trade competition, Ms. Weinstein said. However, she believes these measures won’t cause significant supply chain disruptions.

“These are not nearly at the scale of some of the export controls that the U.S., the Netherlands, or Japan have imposed on chips and associated technologies,” she noted.

Mr. Ezell, however, believes that the export restrictions are a potentially worrying development for the U.S. technology sector and that the United States and its allies should move swiftly to diversify supply chain sources.

These measures could be designed to limit exports for defense applications, as do U.S. rules. However, he noted that China may want to apply them more broadly, potentially affecting commercial players.

“Regardless, it shows the crucial importance of the United States and like-minded countries immediately working to diversify supply chain sources,” Mr. Ezell said.

He pointed out that the United States relies entirely on foreign supplies of gallium and that in 2022, China accounted for 70 percent of mine production and 85 percent of rare earths processing.

“The episode exposes a critical national and economic security vulnerability for the United States and like-minded nations.”