China’s decision to control the export of two key metals showed it has some power to retaliate against moves by the U.S., Japan and Europe to cut Beijing off from advanced technology. But it also risks backfiring.
The new export licensing system unveiled late Monday highlighted China’s dominant position in global production of gallium and germanium, which are used to make chips, electric cars and telecommunications equipment. The announcement — which was made just days before U.S. Treasury Secretary Janet Yellen visits Beijing — appears timed to give China leverage as it pushes the White House to remove export controls that risk hobbling the nation’s development.
Yet the measure is a double-edged sword, and may simply accelerate efforts by those countries to reduce dependence on the world’s second-biggest economy. If Beijing did at some point use these new rules to restrict shipments and cut supply to other nations, prices would likely rise and make it more economical to boost output in Japan, Canada, the U.S. or elsewhere.