October 31, 2024 (121) Comments Finance

China's Export Ban: A New Front in the US-China Tech War

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In recent times, China has taken a significant step by implementing export controls on critical dual-use itemsThis list notably includes gallium, germanium, antimony, superhard materials, and graphiteSuch measures are clearly aimed at the United States and serve as a direct response to the restrictions imposed by the U.Son China's semiconductor industryThe implications of this move have sparked a whirlwind of discussion and analysis, as stakeholders consider both immediate and far-reaching consequences.

Public reaction to these export controls is robust and variedSome experts argue that this action will effectively send a strong message to the U.S., compelling it to reassess its trade policies with ChinaConversely, others caution that while this move might impact the U.Seconomy, it is unlikely to sever its supply chains entirelyThe complexity of global trade networks and resource dependencies suggests a nuanced and multifaceted response from U.S

industries.

A closer look at statistical data reveals that China holds a dominant position in the production and reserves of crucial materials like gallium and germaniumTake gallium, for instance; China's reserves account for a staggering 68% of the global total, with its production exceeding 90% of the world's supplyThese figures illustrate China's formidable strength in gallium resourcesHowever, this dominance does not mean the U.Sstands trapped without optionsIndeed, 32% of the reserves and 10% of global production are spread across various other parts of the worldAlthough sourcing gallium from these regions may result in significantly increased costs for the U.S., the country's substantial economic power and resource allocation capabilities still render this pathway feasible.

The situation is similarly intricate regarding germanium resources

Although China plays an influential role in the production and supply of germanium, the U.Sactually holds a remarkable 45% of the global reserve, surpassing China's own 41%. For reasons tied to economic strategies and environmental considerations, the U.Shas opted not to exploit its own germanium resources at presentHowever, should the supply tense dramatically, particularly if China's export control measures lead to significant shifts in the global germanium market, it seems likely that the U.Swould reconsider its stanceRestarting domestic germanium mining operations may emerge as a viable option to reduce reliance on imports.

The supply landscape for antimony and graphite bears resemblance to that of gallium and germaniumChina clearly leads in antimony production and smelting, but it is essential to recognize that there are also significant antimony resources available in overseas markets

In regard to graphite, China's output constitutes around 77% of global production, leaving 23% sourced from other regions as potential procurement avenues for the U.S.

Tracing the provenance of mineral resources poses greater challenges compared to electronic products like chipsMinerals lack clear branding or production markers, complicating efforts to track their movement along supply chainsThis reality suggests that even if China enforces specific export controls against certain countries, other nations might find loopholes to indirectly facilitate the sale of such resources to the U.Sthrough re-exportation and similar trade practices.

Despite the complex landscape and potential avenues for trade evasion, the export control measures implemented by China are poised to have a noteworthy impact on the United States

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Reflecting on similar measures enacted by China last year, which resulted in a drastic increase in the prices of related materials on the global market, a next phase of enforcement could be even more stringent and far-reachingIt is anticipated that this renewed pressure will further elevate market prices for essential materials, leaving U.Smanufacturers—who depend on these resources for production—grappling with substantial cost pressures and thereby potentially diminishing their market competitiveness.

Critically, when viewed through a long-term strategic lens, the persistent tension around supply chains and inflated costs is likely to induce profound shifts in operational decisions among American companiesIn response to these challenges, businesses may be compelled to recalibrate their production strategies—considering reductions in the use of affected materials, seeking alternative substitutes, or relocating manufacturing processes to regions less affected by export controls

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