This year was marked by the strengthening of US sanctions against Chinese companies: the harassment of Huawei continues, and it is about to spread to the contract manufacturer SMIC. The Chinese authorities have regularly publicly voiced their dissatisfaction with the US actions, but next year they may have a real chance to respond in practice by limiting the export of rare earth metals.
According to some data, China accounts for about 36.7% of the proven reserves of rare earth metals in the world, and 70.6% of the world production of these elements important for the microelectronic industry is concentrated here. Rare earth metals are used not only in electronics, but also in the production of components for electric vehicles, as well as in medicine for the treatment of cancer. It is clear that China has ample opportunities to influence the world market for rare earth metals.
According to the Nikkei Asian Review, as early as next week, the Chinese authorities will begin to discuss a bill related to the new export control rules. Following the example of US law, it will allow the PRC to restrict the access of certain foreign companies to components and materials of Chinese origin if the supplies pose a threat to national security. If adopted, the new export control law will enter into force in 2021.
The new law may include contracts between Chinese suppliers and companies operating in third countries. Japan, for example, is a foreign policy ally of the United States, and therefore China’s “mirror measures” may affect the supply of Chinese materials and technologies to this country. Given the high demand for rare earth metals from Japanese companies, the imposition of such sanctions by China could have very negative business consequences. The bill provides for the possibility of restricting the export of Chinese goods through third countries, so it will not be easy for businesses to find loopholes in the new export control rules.
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