Latest news with #ExportControlLaw
The Diplomat
01-08-2025
- Business
- The Diplomat
China's Export Control Playbook: More Than Just Rare Earths
Rare earths have recently been at the center of China-U.S. trade talks and media coverage. Given China's dominance in the global supply, these minerals are often seen as Beijing's trump card against Washington – a perception reinforced by the recent U.S. unbanning of some AI chip sales to China following Beijing's easing of rare earth controls. However, rare earths constitute only a fraction of China's broader strategic design of export controls. A closer examination of China's evolving export control regime reveals a far more expansive and systematic approach, targeting a broad spectrum of other mineral resources and advanced technologies beyond the widely discussed rare earths. Export controls have been a key economic tool in great power competition. China's rapid development and application of the regime have equipped Beijing with new sources of leverage in international negotiations and begun to impact the global economy. The key question is not whether China will implement such controls, but rather whether and how they can retain effectiveness in a shifting geopolitical landscape, including evolving global supply chains. China's Growing Interests in Export Controls China's export control regime, initially established in the early 1990s as part of its nuclear nonproliferation commitments, has gained a sharper strategic focus in recent years. A significant turning point occurred in 2020 with the enactment of the new Export Control Law, which provided a legal basis for regulating the exports of goods, technologies, and services deemed crucial to national security. Subsequent updates to the Catalogue of Technologies Prohibited or Restricted from Export (the Catalogue), including its further revision in late 2023, extended its reach into emerging high-tech domains. This institutionalization deepened in 2024 with the promulgation of the Regulations on Export Control of Dual-use Items, which introduced a unified control system, provided implementation details, and strengthened oversight of high-tech sectors. The List of Dual-use Items Subject to Export Control was then released to integrate control lists derived from pre-existing regulations and rules systematically. Over the past few years, Beijing has intensified its efforts to tighten export controls on a broader range of minerals and technologies beyond rare earths. This trend continued into 2025: amid escalating U.S. tariffs on Chinese goods, China imposed additional restrictions in February on five critical minerals – tungsten, tellurium, bismuth, molybdenum, and indium – followed by the export controls over seven key rare earths in April. In July 2025, Beijing introduced a new wave of measures, including the enactment of the Mineral Resources Law, a crackdown on the smuggling of strategic minerals, the inclusion of technologies crucial for electric vehicle batteries and nonferrous metal processing in the Catalogue, and export bans targeting eight Taiwan-based entities. Recent legal and regulatory developments have established a comprehensive legal framework that integrates interconnected laws, administrative regulations, and departmental rules across different levels. All these suggest a clear departure from China's earlier, more opaque and informal practices of export controls. While this formalization helps overcome principal-agent problems, enhances enforcement, and sends a clearer diplomatic signal to foreign actors, it also reduces policy flexibility. Legal commitments may constrain the state's ability to adjust or reverse course without incurring significant reputational or political costs associated with backing down, particularly when these measures are portrayed as defiance against Western hegemony. Strategic Use of Export Controls and Their Global Impacts China's current export control regime now extends well beyond rare earths, encompassing a wide range of technologies and minerals vital to defense and high-tech industries. It serves not only as a counter-pressure tool against the United States but also influences tech giants' business operations, as well as global trade flows and supply chains in emerging sectors. One early example was the TikTok deal. In 2020, China added personalized information push services and AI interactive interfaces – crucial to TikTok's recommendation algorithm – into the Catalogue. This move significantly complicated any foreign acquisition of the platform's underlying technologies. By requiring adherence to Chinese laws and government approval, Beijing effectively influenced the transaction of these technologies to a strategic competitor. China, the world's leading drone manufacturer, which accounts for 80 percent of the global consumer drone market, implemented export control measures to restrict foreign access to drone-related components and technologies. A typical example is U.S. drone maker Skydio: Chinese sanctions on the company in late 2024 effectively disrupted its supply chain, making it challenging to find alternative suppliers in the short term. In 2024, following Western allegations of China's support for Russia's war efforts in Ukraine, Beijing announced new drone export controls. These restrictions reportedly affected the flows of key components for unmanned aerial vehicles to the United States and Europe. China's export control regime has also expanded to encompass a broader range of mineral resources beyond rare earths, including gallium, germanium, graphite, and antimony. According to an IEA report, among the 20 critical minerals analyzed, China is the leading refiner for 19, with an average market share of about 70 percent. With its dominance in these markets, China's stringent export controls not only affect global prices and supply chains but also pose challenges to other countries' defense and high-tech sectors. While the impact of China's recent inclusion of technologies crucial for electric vehicle batteries in the Catalogue remains to be seen, the above cases illustrate China's broadening scope and growing use of export controls, as well as their potential implications for the global economy. The Paradox of Weaponizing Market Dominance Given the time required for alternative sourcing and technological breakthroughs, China retains considerable short-term leverage, not only through rare earths but via an increasingly broad set of other minerals and technologies. However, in the long run, China may face a dilemma: how to leverage its market dominance without eroding the trust and interdependence that underpin it. China's strategic use of export controls has sparked widespread global concerns. The United States, Europe, and other economies are now accelerating efforts to diversify supply sources and reduce their reliance on Chinese markets. For instance, at the June 2025 G-7 summit, leaders pledged to strengthen cooperation in securing the supply chains of critical minerals essential for high-tech and green industries, aiming to break China's grip. Chinese restrictions may also spur new competitive pressures from producers worldwide, especially those in Western countries. Recently, the U.S. has ramped up investment in building reliable domestic supply chains of materials such as rare earths and gallium, while deepening international collaboration with like-minded partners in Canada, Australia, Japan, and Europe. Given all these geoeconomic push-backs, the longer-term effectiveness of China's strategy, therefore, hinges on the pace at which the U.S. and its allies can secure viable alternatives and cultivate a post-China supply chain. Successful diversification would gradually weaken China's ability to weaponize interdependence, thereby undermining the very leverage it aims to preserve. When the U.S. imposed technology restrictions on China, many of its allies supported the move, making China the target of coordinated actions, especially in areas like high-end semiconductors. Now, as China attempts to leverage its dominance in areas where it has an advantage through export controls, Western countries are responding with collective efforts to reduce dependence on Chinese supply chains. This pattern suggests that China faces strategic disadvantages in using negative economic statecraft, given the broader geopolitical alignment against it. Conclusion China's export control regime has evolved from a loose policy mechanism into a precise and institutionalized instrument of economic statecraft. By tightening controls over technologies and mineral resources where it holds a competitive advantage, China can inflict economic pain on targets and gain a bargaining chip in international negotiations. However, in weaponizing interdependence, Beijing walks a fine line between asserting dominance and catalyzing the very diversification that could erode it. In the long run, it may confront a paradox: how can it preserve its leverage without accelerating the very decoupling it seeks to avoid?
NDTV
21-07-2025
- Business
- NDTV
6 Ways China Beat Trump At Trade Negotiations - And What India Can Learn
The June 2025 agreement between the US and China to ease export controls marked a significant turning point in their ongoing trade confrontation. Despite President Trump's bluster and maximalist rhetoric, the substance of the deal reveals a Chinese tactical victory. It was Beijing, not Washington, that dictated the pace, terms, and structure of the negotiation. China secured the removal of key US restrictions while offering limited, vague, and easily reversible concessions. There are six key factors that enabled China to extract concessions and stabilise the trade truce on its own terms. Rare Earth Edge First, the most potent lever was Beijing's precise restriction of rare earth exports, especially heavy rare earth elements such as dysprosium and samarium-materials indispensable to US defence systems, EV motors, and advanced electronics. Unlike the 2010s, China has since vertically integrated and state-centralised the entire rare earth supply chain, eliminating wildcat miners and enforcing stringent export licensing under "dual-use" military-industrial clauses. The result: a credible threat of supply chain paralysis for US defence and tech manufacturers. This forced Washington to prioritise the restoration of rare earth flows. Building Pressure Within US Second, China operationalised a suite of new legal instruments, including the Export Control Law and the Anti-Foreign Sanctions Law, to signal that Western companies could face legal jeopardy if they complied with US sanctions. This placed firms in a regulatory dilemma: violate US law or risk penalties in China. The ambiguity and scope of these laws added risk premiums to US restrictions and created stakeholder pressure within the US corporate sector to seek de-escalation. Structural Patience Third, Xi Jinping operates within a system of centralised authority, long-term policy continuity, and near-total control of the narrative. Trump, by contrast, thrives on spectacle, rapid cycles of escalation, and reactive policymaking. China framed the negotiations as a test of national sovereignty and "economic bullying", allowing it to rally domestic support and present any compromise as strategic resistance. The lack of political cost for slow-walking talks gave Beijing structural patience. Building Their Own The fourth lever was state-orchestrated industrial substitution and technological resilience. The Huawei case epitomises this lever. Despite US restrictions on chipmaking equipment and AI accelerators, Huawei launched a 5G smartphone in 2023 using domestically produced chips via chiplet "stacking". The perception that Chinese industry could bypass Western tech reinforced Beijing's credibility and deflated US assumptions about sustained technological chokeholds. This industrial resilience signalled to US negotiators that restrictions were increasingly ineffective and self-harming. Surgical Approach Fifth, China pursued calibrated trade retaliation and tactical concessions. Rather than blanket retaliation, China issued surgical trade restrictions targeting politically sensitive US exports (e.g. ethane) while selectively granting rare earth export licences to European firms (such as Volkswagen suppliers). This fragmented the Western alliance and demonstrated Beijing's capacity to divide pressure coalitions. In contrast, the US suffered from coalition fatigue and domestic backlash from industry groups over export controls. No Longer Dependent On Imports Finally, declining Chinese import demand - especially from the US - provided a kind of strategic insulation. Xi Jinping's shift towards economic self-reliance, emphasising industrial localisation, software substitution, and inward-focused stimulus, has structurally reduced China's import elasticity. China's imports have remained flat, while exports soared 33% since 2022. This makes tariff threats less effective because China no longer needs to import as much. As The Wall Street Journal noted, "China's vision of trade is exporting without importing." This reduces US leverage based on access to its own market. As the US presses India with a "take-it-or-leave-it" offer in bilateral trade negotiations - demanding sweeping access to India's agricultural, dairy, and pharmaceutical markets - New Delhi must draw critical lessons from how China successfully negotiated with Washington in June 2025. Unlike India, which is now reacting to ultimatums, China entered talks with pre-positioned leverage: a monopoly over rare earth exports, retaliatory legal frameworks, and an insulated domestic economy. India must shift its negotiation strategy from defensive tariff retention to assertive, leverage-backed diplomacy rooted in strategic chokepoints, industrial capability, and phased reciprocity. India Has Its Own Strengths First, India must build credible negotiation leverage rooted in operational chokepoints. China controlled the tempo of talks by targeting materials such as dysprosium that the US couldn't easily substitute. India has equivalent strengths in bulk generics, vaccine manufacturing, and digital services - critical nodes in global supply chains. Instead of pre-emptively offering tariff concessions, India should introduce targeted export approval mechanisms or destination-specific licensing for select pharmaceutical categories, such as complex generics and biosimilars, where US import dependence is structurally high. For digital services, India should temporarily pause new cross-border data transfer permissions in sectors such as fintech and health-tech until commercial access and data equivalence frameworks are secured from the U.S. As Good As One Gets Second, India must abandon the concessional mindset in market access negotiations and assert a strict reciprocity-based framework. If the US is demanding tariff reductions and the removal of quantitative restrictions in agriculture, dairy, and pharmaceuticals, India must counter with binding and verifiable commitments in return, such as regulatory streamlining, mutual recognition of standards, and preferential access in US government procurement. These must be structured as enforceable deliverables, not political assurances. China played this game precisely: export licences for rare earths were selectively granted to allies and withheld from adversaries until key concessions were extracted. India cannot allow sensitive sectors to be opened without tangible, sector-matched gains. Concessions must be calibrated and time-bound, with sunset clauses if the US fails to reciprocate. Look Deeper Third, India must confront the regulatory asymmetry embedded in US trade practices. While headline tariffs may appear low, US non-tariff barriers - including sanitary and phytosanitary (SPS) standards, drug import protocols, and origin compliance measures - function as covert trade restrictions. Indian consignments are routinely rejected for minor technical infractions, creating a chilling effect on exporters. The recent $500,000 consignment of Alphonso mangoes is one such example. These barriers are opaque, discretionary, and often non-negotiable. India must demand binding transparency commitments, risk-based inspection protocols, and pre-clearance mechanisms as preconditions to any tariff realignment. The US-UK "Economic Prosperity Deal" signed in May is a cautionary example: despite tariff concessions, the US retained core restrictions and gave London little commercial value. India must not accept an outcome where headline wins mask structural losses. Finally, India must impose its own negotiation architecture and sequencing. A modular, multi-phase agreement structure is essential. Begin with trade in services and digital commerce, where India enjoys a surplus and global competitiveness. Reserve tariff liberalisation in agriculture, processed foods, and medical devices for a second or third tranche, contingent on high-value quid pro quo, such as technology access, joint R&D platforms, and strategic investment windows. The US cannot expect a full-spectrum agreement aligned to its electoral timeline. India's objective must be to maximise strategic value per concession, not to rush a deal for diplomatic closure. China won by controlling the tempo and scope of engagement. India must now do the same-with precision, leverage, and a clear-eyed view of national interest.
