China's "warning" to U.S.

Chinese official media say export restrictions on rare metals used to make semiconductors and electric cars are a "warning" to the United States that China will not be pushed out of the global supply chain.

In an editorial published Tuesday, the Global Times said Washington and its allies are trying to crack down on China's technology sector, ignoring "the potential damage the technology iron curtain could cause to global supply chains and industrial chains.

"But the question now is how long Washington can ignore warnings about the consequences when China begins to take legitimate and reasonable steps to safeguard its national security and interests," the officially backed newspaper said.

The newspaper added: "China's move may be more of a warning that it will not be pushed out of the global semiconductor supply chain than the U.S. pressuring its allies to cooperate with the chip ban on China."

Separately, the state-run China Daily on Wednesday quoted a former Chinese official as saying that the restrictions were just the "beginning" of Beijing's sanctions and measures.

In an interview, Wei Jianguo, a former vice minister of commerce, said, "(China's) export controls on chip-making materials are a deliberate and heavy-handed punch." He added that countermeasures will escalate as long as they target high levels of Chinese measures.

U.S. seeks supply chain diversification

China's Ministry of Commerce and Chinese Customs announced Monday that as of Aug. 1, exports of certain gallium and germanium products will require special approval to "safeguard security and national interests.

In a separate but related industry, China holds about one-third of the world's rare earth reserves, which are key to the production of electric car batteries and electronics. It has at least 85 percent of the world's rare-earth processing capacity, which it can use to turn rare earths into materials that manufacturers can use, a capability that other countries hope to develop.

Most of these raw materials are produced in China, but I think blocking exports also means they will lose revenue and force the rest of the world to look for alternative sources," said Stewart Randall of Shanghai-based consultancy Intralink, which tracks China's semiconductor industry. "

A Commerce Department spokesman said Wednesday that the United States "strongly" opposes China's announcement of export controls on gallium and germanium, two metals needed to produce semiconductors and other electronics, adding that Washington will consult with its partners and allies to address the issue.

"These actions underscore the need for supply chain diversification. The United States will work with our allies and partners to address this issue and increase the resilience of critical supply chains," a Commerce Department spokesman said in an e-mailed statement.

The move follows reports that the U.S. is considering imposing new restrictions on exports of artificial intelligence chips to China, the latest move by Washington to curb China's technology sector.

The U.S. and China have battled fiercely for strategic influence in recent years, with both sides announcing tit-for-tat sanctions on key industries, including advanced chips.

Gallium is used to produce integrated circuits, LEDs and photovoltaic panels for solar panels, while germanium is used to make fiber optics and infrared camera lenses.

The sudden announcement of the controls from Aug. 1 sent companies scrambling to secure supplies and pushed up prices.

"The impact of the restrictions will certainly lead to higher prices, but it won't be as painful for the rest of the world as the chip restrictions have been for China," said John Strand of Copenhagen-based Strand Consult.