On December 3, 2024, China imposed its most stringent set of critical mineral restrictions after the United States not only slapped export controls on 24 types of chipmaking equipment and three categories of software essential for semiconductor development, but also added 140 Chinese companies to the export control list.
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While these measures and countermeasures have been going on for a while, this is arguably the first time Beijing has reacted so strongly, targeting the US specifically and signalling to the incoming Donald Trump administration that it has a major source of leverage – critical minerals. Compared to restrictions in 2023 on critical minerals like gallium and germanium, last month’s controls are more targeted. The objective is to stop the export of dual-use materials critical for defence and technological development.
Both countries are levelling up the game. Since 2022, the US has ramped up restrictions on China’s access to critical and emerging technologies, such as advanced chips. In retaliation, China has banned chips from US companies like Micron in its sensitive sectors.
On November 15, China released an export control list of dual-use items aimed at creating a consolidated list. This was followed by an announcement last week on a ban on such products to 28 US defence contractors, with 10 of them placed on an unreliable entities list over Washington’s arms sales to Taiwan. These events must be placed in the context of intensifying trade restrictions between the US and China.
China could arguably strike a serious blow with the use of export controls. For instance, consumer goods giant Henkel has been affected by delayed deliveries of critical minerals, prompting the German firm to declare a force majeure.
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A dispassionate study of escalating tit-for-tat trade restrictions clearly shows a widespread misuse of national security as a tool of economic statecraft. While China has called out the US for “overstretching the concept of national security, abusing export controls, and wantonly imposing illegal unilateral sanctions”, it has also done the same in retaliation. When justifying its latest move, a Chinese commerce ministry spokesperson said the export bans are aimed at protecting national security and fulfil non-proliferation and other international obligations.