China's Countermeasure on 'Semiconductor Raw Metal Export Controls'... "A Lever to Enhance Negotiation Power"

Background of Yellen's Announcement Three Days Before Her China Visit

China announced export controls on gallium and germanium, key raw materials for semiconductors, as a countermeasure against the U.S. semiconductor pressure. This announcement, made three days before U.S. Treasury Secretary Janet Yellen's visit to China, is interpreted as a move to enhance bargaining power in economic discussions with the United States.

The Wall Street Journal (WSJ) reported on the 3rd (local time) that the export restrictions on gallium, germanium, and their compounds are seen by the related industry as retaliation against U.S. semiconductor export controls targeting China.

Gallium and germanium are essential raw materials widely used not only in semiconductors but also in 5G base stations, solar panels, and lasers. China is a major producer of key raw materials, including gallium and germanium, which are by-products of processing raw materials such as zinc and bauxite, and holds a dominant market position in smelting and processing. According to the European Commission, China monopolized 80% of the world's gallium and germanium production as of 2020.

In a statement, China's Ministry of Commerce said, "To protect national security and national interests, gallium, germanium, and their compounds will be included in export control starting August 1." It added that exporting these metals will require approval from the Ministry of Commerce, and exporting companies must report detailed information about overseas buyers.

According to Chinese customs, China's export value of gallium and germanium is only $36 million and $54 million respectively, but WSJ forecasts that the impact of export restrictions could be much greater.

[Image source=Reuters Yonhap News]

This sanction strongly reflects a retaliatory nature against U.S. semiconductor sanctions. Earlier, when the Biden administration imposed export controls targeting China in advanced technology sectors including semiconductors since last year, China began countermeasures such as banning the purchase of products from U.S. semiconductor company Micron. Paul Triolo, Senior Vice President for China at the Washington-based Albright Stonebridge Group, pointed out, "China's export controls target not only individual companies but also specific industries."

Since this announcement comes ahead of Janet Yellen's visit to China from August 6 to 9, attention is focused on whether she will directly address the export control issue during the visit. Secretary Yellen previously warned in April, "We want a healthy economic relationship between the U.S. and China, but we will respond to unfair economic practices."

Experts interpret this sanction as a move to leverage the issue in economic discussions between the U.S. and China, which are expected to intensify with Yellen's visit, aiming to gain an advantage in negotiations. Vice President Triolo said, "China's export controls on raw materials send a signal to the U.S. that it is interested in dialogue about the export controls initiated by the U.S.," adding, "This move will allow China to exert more influence in future talks with the U.S."

Yellen's visit to China comes less than a month after U.S. Secretary of State Tony Blinken became the first Biden administration cabinet member to visit China and meet with President Xi Jinping. She is expected to meet with senior Chinese economic officials including Vice Premier Hu Chunhua and People's Bank of China Governor Yi Gang.

This content was produced with the assistance of AI translation services.