Behind Beijing’s high-tech showdown with the EU
‘China’s government is sharpening and testing its tools for controlling technology-related outflows’
China has built a Great Wall to protect its high-tech giants from foreign competition. It has also “weaponized supply” chains against major trading blocs such as the European Union.
Dressed up in a National Security law, the ruling Communist Party has increased its grip “on controlling foreign access” to key industries inside China.
A report released by the Mercator Institute for China Studies in Berlin highlighted the challenges posed by the world’s second-largest economy.
“In a shifting geopolitical environment, China’s government is sharpening and testing its tools for controlling technology-related outflows,” the MERICS study pointed out last week.
“As domestic firms climb up value chains, there is increased emphasis on controlling foreign access to retain critical innovation capacity within China,” the think tank said.
Why it matters:
- The Party-state uses dual-use export controls flexibly, MERICS stressed.
- “It seeks to present itself as a responsible stakeholder.”
- But it has also signaled its “ability to mobilize controls for other ends, such as retaliation.”
Delve deeper: “The end goal … is to keep supply and value chains in China. [President] Xi Jinping has been adamant about the need for [the country] to become indispensable in global technology production,” MERICS said.
Foreign governments and firms face an additional challenge.
MERICS
Between the lines: The EU has become a dumping ground for China’s excess capacity in solar panels, wind turbines, and electric vehicles. In turn, this is threatening Europe’s advanced tech sector.
The bottom line: There was a surge of Chinese EV exports into the bloc in June. The move came ahead of Brussels-imposed tariffs of up to 48%, rolled out on July 5.
Big picture: “Aggressive efforts at appropriating foreign technology have long been a prime cause for concern. [But now] foreign governments and firms face an additional challenge,” MERICS said in the report.
What happened: Last year, Beijing rolled out export licenses for critical rare earth minerals such as gallium and germanium. They are crucial in the production of semiconductors or chips. The building blocks of green tech.
China Factor comment: Attempts by the Chinese government to export its way out of an economic malaise have backfired, triggering tariff wars with the EU and the United States. Using rare earth minerals to blackmail Brussels and Washington could be the next step.