China is set to impose export restrictions on rare earth minerals, gallium and germanium. The US won’t compromise on national security, said US treasury secretary Janet Yellen in Beijing. India’s former foreign secretary says Beijing should stop looking at relations with India from the US prism. Taiwan will open a new office in Mumbai. Chinascope tries to read between the lines to make sense of China – and the world.
China over the week
Beijing has decided to impose restrictions on the export of two critical rare earth minerals used in manufacturing semiconductor chips, gallium and germanium, from 1 August. The decision is seen as a response to the United States’ move of rallying its companies and allies to restrict the sale of high-end semiconductor chips to China, affecting the latter’s businesses.
Chinese state media didn’t leave room for any speculation, blaming the US for its semiconductor restrictions.
“It is they that challenge the world supply chain, and the blames that belong to them should never be shifted to China as it’s defending its own legal national interests in this rather uncertain world,” said an op-ed in China Daily.
So far, most semiconductor companies in the world – including Taiwan Semiconductor Manufacturing Company Ltd – have said that Beijing’s restrictions won’t significantly impact their businesses.
Besides semiconductor companies, German automaker Volkswagen has said the minerals are required for their cars’ autonomous driving function, adding that the company is assessing the impact of the export control.
Clearly, Beijing has finally decided to use tit-for-tat retaliation by playing the rare earth card – an option discussed during the Donal Trump administration in 2019.
The US, European, and Taiwanese semiconductor companies will likely begin sourcing the two rare earth minerals from other sources – which may be more expensive. We can’t say precisely yet what impact the disruption will have on the cost of semiconductors, but a bump is expected.
Beijing would want Washington to ease its restrictions on high-end chips, but the US treasury secretary Janet Yellen who was in China this week to deliver the message, indicated that the US will not back down.
“We are still evaluating the impact of these actions, but they remind us of the importance of building resilient and diversified supply chains,” said Yellen about China’s restrictions on rare earth minerals.
Beijing timed the announcement just before Yellen’s visit to signal that China won’t take it sitting down.
Yellen’s 10 hours of talks in Beijing over two days didn’t yield any significant breakthrough except the promise of further talks- much like Antony Blinken’s recent visit.
During her trip, Yellen met He Lifeng, China’s new vice premier who replaced Liu He as the economic tsar. Yellen said the visit opened a channel of communication with China’s new economic team under He Lifeng.
After meeting Yellen, He Lifeng acknowledged that the Chinese spy balloon incident hurt ties with the US.
“Unfortunately, due to some unexpected incidents, such as that involving the airship, there were some problems in the implementation of the consensus reached by the two heads of state,” said He Lifeng.
Yellen’s message was that the Joe Biden administration will continue to impose national security-driven restrictions on technology access leading up to the elections. The US doesn’t want to ‘decouple’ but ‘de-risk’, Yellen said.
Meanwhile, rumours spread on Chinese social media that Yellen has made three demands: China purchase $850 billion of national debt, withdraw anti-sanction measures, and committ not to stop supporting Russia. Users alleged that Yellen came begging for the purchase of US treasuries, a domestically popular narrative that was amplified on social media.
These rumours suit China’s domestic narrative, but the reality is that Beijing finds itself in the corner because of the US restrictions.
With a conflicted expression of unease on his face, President Xi Jinping virtually attended the Shanghai Cooperation Organization (SCO) meeting hosted by India on 4 July.
SCO member states displayed their differences as India refrained from endorsing China-led Belt and Road Initiative (BRI). But Beijing managed two feats at the cost of India’s SCO presidency.
China manned to get other member states to back BRI, and to include Xi’s policy rhetoric by way of mentioning ‘creating a community of the common destiny of humanity’ in the joint statement.
New Delhi may be happy that they could host SCO while keeping their distance from Beijing’s agenda, but Xi has managed to incorporate his ideas into SCO joint statement quite comfortably. Needless to say, SCO’s future is in a bit of a pickle despite inducting Iran as a new member.
It’s not every day that a former Indian diplomat speaks candidly at a geopolitical event held in Beijing. Former foreign secretary Shyam Saran attended the 11th World Peace Forum’s where he said, “I don’t think we should always look at India or India’s foreign policy only from the perspective of Sino-US relations. India has more interests than just choosing to cooperate with the United States, China or Russia.” During an interview with Beijing Daily, Saran spoke about Beijing viewing the relations with India through the US prism.
While convincing China to believe otherwise might be possible, Prime Minister Narendra Modi’s state visit to the US only adds to Beijing’s suspicion about the growing bonhomie between India and the US.
Saran’s comments were lost in the fast pace of geopolitical developments.
Also read: China’s new foreign affairs law says it will target India if relations go worse
China in world news
Taiwan is set to open a new representative office in Mumbai, according to its Ministry of Foreign Affairs. Taiwan had opened its first representative office in Chennai in 2012.
Former Ambassador to China Ashok Kantha pointed out that Beijing, by and large, understands that India’s Taiwan policy has been “pragmatic and transparent”, and that India isn’t deviating from its “larger China policy”.
Ambassador Kantha says Taiwan’s Mumbai office is unlikely to create any fallout with Beijing as the economic relations with India have their logic.
The Chinese state media hasn’t commented on the development yet.
Gourangalal Das, India’s ambassador to Taiwan, will soon leave his post in August. The next appointee will be tasked with maintaining the momentum in India-Taiwan relations. India has decided to chart its own course on Taiwan by not following the high-optic support offered by the US and the EU. Beyond the politics, the economic fundamentals of India-Taiwan relations have only grown strong.
Must read this week
China must rethink its reliance on property sales to see real growth – Stephen McDonnell
The Terra-Cotta Army’s Secret Weapon – Wu Haiyun
Analyzing China’s Escalation after Taiwan President Tsai’s Transit through the United States – Centre for Strategic and International Studies
The author is a columnist and a freelance journalist. He was previously a China media journalist at the BBC World Service. He is currently a MOFA Taiwan Fellow based in Taipei and tweets @aadilbrar. Views are personal.
(Edited by Prashant)
