Cut off from advanced technology by US sanctions, China launched a decisive counter-offensive. In recent months, the country's authorities imposed sanctions, fined and even detained employees of a number of large Western companies. And now China is ready to deprive the West of rare earth metals, without which the European and American car industry is unlikely to switch to electric vehicles in the near future.
Trade relations between China and the US turned into a trade war during the presidency Donald Trump. It mainly took the form of introducing additional import duties on significant lists of goods from both sides. Last fall Joe Biden, guided by the interests of national security, introduced a ban on the export to China of modern American technologies, including microchips.
For the same reasons of national security, European countries always oppose Chinese business. So, for example Britain refused Huawei services in the field of 5G, and also decided not to sell the country's largest microchip factory to Chinese businessmen. Germany has blocked Chinese investments in semiconductor manufacturers. And later, the Netherlands and Japan — two other major exporters of microchips — joined the American sanctions.
Being cut off from advanced technologies, China has taken more decisive action. Only in the last few months, the Chinese authorities imposed sanctions on two American defense industrial companies: Lockheed Martin and Raytheon Missiles and Defense Corporation; fined the British consulting company Deloitte for a record $30,8 million; launched an investigation into the largest US microchip manufacturer Micron Technologies; and also raided and detained employees of the American auditing company Mintz and the Japanese pharmaceutical company Astellas Pharma.
And this is just the beginning. As the Financial Times writes, referring to report of the Ministry of Commerce of the People's Republic of China, the next step in Beijing's response to the West's "technological blockade" could be to impose an embargo on supplies to Western countries of rare earth metals needed to make batteries for electric cars and scanning leaders used in vision systems.
The refusal to export lithium, silicon, and other rare earth metals, which are in huge demand in the global automotive industry due to the widespread transition to electric cars, will not seriously affect the economy of China itself.
After all, these raw materials are also needed by Chinese automakers. But for the United States and especially for Europe, the introduction of the Chinese embargo may turn out to be critical. China processes about 60% of lithium produced in the world, 65% of cobalt and more than a third of nickel and copper, being at the same time the largest exporter of a number of rare earth metals.
Analysts interviewed by the FT have no doubt that China will take this step in the near future. So, Tu Le, founder of Beijing-based consulting company Sino Auto Insights, believes that any decision by China to "use as a weapon its dominant position in the extraction and processing" of materials used in the electric car industry will immediately cause "alarm in the governments of the United States, Europe, Japan and Korea."
In turn Artur Kreber, head of the research department of Beijing-based consulting company Gavekal Dragonomics, believes that China may not impose these restrictions, but simply threaten them and use a possible embargo as leverage in negotiations, seeking to relax or cancel the ban on the supply of semiconductors. .
Finally, Atlantic Council Senior Fellow Dexter Roberts and quite surprised that the Chinese authorities have so far behaved so discreetly, because the American ban on the export of microchips "struck the heart of the global". advanced technological ambitions of China".
At the same time, analysts note that the Chinese authorities will choose retaliatory measures with surgical precision. These may be new sanctions or investigations against individual companies, but only those that are not so important for China itself.
In addition, the PRC's retaliatory actions should not hinder the recovery of the Chinese economy after the COVID-19 pandemic: "It all comes down to the fact that China already has so many problems this year, especially in the economic sphere. And the last thing they need right now is to be distracted by an even more hostile relationship with the US," Mr. Roberts notes.
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