'Green transition' hit as China announces export controls on two critical minerals

Tue 4 Jul 2023
Posted by: Phillip Adnett
Trade News

China flag on shipping container

Yesterday (3 July), China’s customs authorities unveiled a set of export restrictions on two key critical minerals used primarily in the production of semiconductors, solar panels and other critical components.

The metals gallium and germanium will be subject to export restrictions in order to “safeguard national security and interests”, according to China’s Ministry of Commerce and Administration of Customs.

From next month onwards, exporters will require special licenses to move the metals out of China, which remains the largest supplier of both critical minerals.

Bloomberg reports that any efforts to move towards net zero will require both minerals, which are used in the production of everything from electric vehicles to solar panels.

Move and countermove

According to the FT, Beijing’s move comes as retaliation for controls imposed by the Dutch, Japanese and US governments against China’s tech sector.

A further series of similar export controls on semiconductors are being considered by Washington and the Hague and could come into effect over the summer.

The announcement comes days before US treasury secretary, Janet Yellen, is due to visit China, following on from secretary of state Antony Blinken’s summit with Chinese president Xi Jinping in June.

Wider geopolitics

Although Blinken’s visit resulted in warm words, the geopolitical mood remains tense.

Both the EU and US have been exploring how to move supply chains away from China and towards friendlier countries in recent months.

A recent EU decision on reducing European reliance on China was reportedly “softened”, with European Commission president, Ursula von der Leyen, saying that the approach was “diplomatic de-risking”.

Thierry Breton, European Commissioner for the internal market, announced today (4 July) that the EU and Japan have agreed to boost “resilience of the chips supply chain”, which included an ‘early warning’ system supply chain materials.

Currently, the EU gets 71% of its gallium and 45% of its germanium from China.

Friend shoring debate reopened

As reported previously by the IOE&IT Daily Update, Beijing had made a recent diplomatic push against efforts to move supply chains away from Chinese shores.

Premier Li Qiang had warned at a recent summit that such “de-risking” strategies would lead to economic fragmentation and that such efforts by Governments were “false propositions”, since businesses were in the best position to decide what was risky or not.

Today, Xi also said that his administration opposes “decoupling and breaking links”, as reported by CNBC, as well as protectionism and unilateral sanctions.