BEIJING/SHANGHAI (Reuters) – China’s export controls on metals used in semiconductor manufacturing are “just the start”, an influential trade policy adviser said on Wednesday, as he steps up a technological battle with the United States a few days before the visit of the American Treasury Secretary Janet Yellen Beijing.
Shares of some Chinese metallurgical companies rallied for a second session as investors bet higher prices on gallium and germanium, targeted by Beijing’s export curbs, could lift earnings.
Germanium is used in high-speed computer chips, plastics, and in military applications such as night vision devices as well as satellite imaging sensors. Gallium is used in the construction of radar and radio communication devices, satellites and LEDs.
China’s abrupt announcement of controls from August 1 on exports of certain gallium and germanium products, also used in electric vehicles (EVs) and fiber optic cables, has companies scrambling to secure their supplies and drive up prices.
Announced on the eve of US Independence Day and just ahead of Yellen’s planned visit to Beijing from Thursday, analysts said it was clearly timely to send a message to the Biden administration, which targets the Chinese chip sector and pushes allies such as Japan and the Netherlands to do the same.
China’s move also raised concerns about whether restrictions on rare earth exports could follow, they said, pointing to how it limited shipments 12 years ago in a dispute with Japan. China is the world’s largest producer of rare earths, a group of metals used in electric vehicles and military equipment.
Analysts described Monday’s move as the second, and so far biggest, countermeasure in the long-running US-China tech fight, after banning some key domestic industries from buying from the US maker of Micron memory chips in May.
On Wednesday, former vice commerce minister Wei Jianguo told the China Daily newspaper that countries should prepare for more if they continue to pressure China, describing the controls as a “heavy punch well thought” and “just a start”.
“If restrictions on China’s high-tech sector continue, countermeasures will intensify,” added Wei, who served as vice minister of commerce from 2003 to 2008 and is now vice chairman of the think tank. state-backed China Center for International Economic Exchanges.
The state media tabloid Global Times, in a separate op-ed on Tuesday evening, said it was a “convenient way” to tell the United States and its allies that its efforts to prevent China to procure more advanced technologies was a “miscalculation”.
China’s Ministry of Commerce did not respond to a request for further comment.
LIMITATION OF EXPORTS TO CHINA
Washington is considering new restrictions on the shipment of high-tech microchips to China, after a series of restrictions in recent years.
The United States and the Netherlands are also expected to further restrict sales of chipmaking equipment to China, as part of efforts to prevent their technology from being used by the Chinese military.
A day after China unveiled the restrictions, Chinese President Xi Jinping reiterated his call for “stable and smooth operation of regional industrial and supply chains” in a virtual address to leaders attending the World Organization summit. Shanghai cooperation, according to state media.
Shares of Chinese metallurgical companies such as Yunnan Lincang Xinyuan Germanium Industry Co and Yunnan Chihong Zinc & Germanium Co jumped for a second session on Wednesday, as local media reported that higher germanium prices would boost corporate revenue growth.
Gallium at 99.99% purity in China traded at 1,775 yuan per kg on Tuesday, unchanged overnight but up 6% week-on-week and 4% year-on-year, respectively, market data from the Shanghai Metal Exchange on Refinitiv Eikon showed. However, it was 46% lower than the same period a year ago.
Chinese germanium bullion was priced at 9,150 yuan per kg on Tuesday, also flat on the day and week, according to Refinitiv data. It was down 4% month-on-month and up 4.6% year-on-year, respectively.
(Reporting by Beijing Newsroom and Brenda Goh; additional reporting by Amy Lv in Beijing; editing by Christopher Cushing and Muralikumar Anantharaman)