China restricts exports of two metals EU deems ‘strategic’

Gallium and germanium are silvery-white metals that can be found in a wide variety of electronics, such as semiconductors, smartphones, pressure sensors, transistors and fiber optics, as well as solar panels, camera lenses and space systems.

Appealing to “national security interests,” China’s Ministry of Commerce he said on Monday that companies that will sell products containing the two materials in question must first obtain an export permit.

In practice, if the central government refused to issue a permit, the company would be immediately banned from exporting.

The government will treat such merchandise as “dual-use” goods, a term that describes goods that can be used for both commercial and military purposes and therefore require an extra layer of control.

The rule will take effect from Aug. 1, the ministry said.

The unexpected news from Beijing has Brussels on high alert, as it comes amid a renewed push to rid the European Union of its commercial dependencies.

That ambition has been translated into the Critical Raw Materials Act, a regulation tabled in March that sets legally binding targets on the domestic extraction, processing and recycling of “strategic” rare earth metals.

Both gallium and germanium fall into the “strategic” category as they are deemed essential to meet the bloc’s green and digital transition.

But achieving greater independence is no easy task: China is estimated to control 80% of production gallium and 60% of it germaniumgive the country a comfortable dominant position over the world’s supply chains.

Gallium and germanium “are very important, very important for our industry, especially for their use in strategic sectors, and also (in the sense) that we are dependent on one supplier,” a European Commission spokesperson said on Tuesday afternoon in reaction to the Beijing decision, noting that internal analysis is in progress.

The spokesman publicly cast doubt on China’s calls for “national security” reasons to justify the surprise move and urged the country to base its trade policy on “obvious security considerations” in line with the World Trade Organization (WTO).

“The Commission is concerned that these export restrictions are unrelated to the need to protect global peace as well as stability and implementation of China’s non-proliferation obligations arising from international agreements,” the spokesperson said.

The spokesperson declined to speculate on possible countermeasures.

A new dispute opens a new chapter increasingly fierce technology race which is pitting the United States, and to a lesser extent Europe, against China.

Washington wants its allies to curb, or completely ban, advanced electronic components tied to the Chinese market to prevent Beijing from securing global technological supremacy and challenging the Western-led international order.

Dutch to be earlier this year the first EU country to move decisively against China when it imposed tough restrictions on the export of semiconductor machines manufactured by Dutch company ASML exclusively.

Limitations, which partially inspired the European Commission to design the first economic security strategyexpanded further last week.

Meanwhile, growing media reports suggest the US is considering new restrictions on exports of cloud-computing services and AI semiconductors to China.

The serendipitous events suggest that Beijing is willing to capitalize on its market dominance in rare metals to retaliate for what it sees as “politicized” trade controls slapped on it by Western allies.

Mao Ning, a spokesman for China’s Ministry of Foreign Affairs, denied any intent of revenge and defended restrictions on gallium and germanium.

“China has always been committed to keeping the global industry and supply chain safe and stable, and always implementing fair, reasonable and non-discriminatory export control measures,” Ning said Tuesday morning.

“The Chinese government’s export control of relevant goods in accordance with law is a common international practice, and does not target any specific country.”