The New Normal/La Nouvelle Normalité/新常態: Beijing’s First Counterattack, What’s Next?

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Severus Xisheng Wang 王希聖

Severus is currently pursuing a dual Master's degree at Sciences Po Paris and the London School of Economics in International Governance and Diplomacy and International Relations. He is currently serving as editor for Student Think Tank for Europe-Asia Relations (STEAR), content writer for The New Global Order (TNGO), and paper referee for Undergraduate Philosophy Journal of Australasia (UPJA).

Latest posts by Severus Xisheng Wang 王希聖 (see all)

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• The New Normal/La Nouvelle Normalité/新常態: Chinese President Xi Jinping’s Absence from G20 Summit Raises Questions About U.S.-China Relations - September 30, 2023

The Ministry of Commerce of China and the General Administration of Customs issued a notice on the evening of July 3rd, in accordance with the relevant provisions of the Export Control Law of the PRC, the Foreign Trade Law of the PRC, and the Customs Law of the PRC, in order to safeguard national security and interests, and with the approval of the State Council of the PRC, decided to implement export control on gallium and germanium-related items. Items that meet the relevant characteristics shall not be exported without permission. The announcement will come into effect on August 1, 2023.

Gallium and germanium are metals that are necessary components for the semiconductor industry. These chips can be used in high-power, high-frequency, and high-voltage environments, making these wafers suitable for a range of demanding applications. Thus, making chips is at the core of the US-China tech war.

Although the technology for mining, refining and manufacturing gallium and germanium is not unique to China, due to the complex production process, China has complete production lines and facilities, which can significantly reduce costs, so it has become a major global supplier. According to the Critical Raw Materials Alliance, about 80 per cent of the world’s gallium and 60 per cent of germanium are produced in China.

The US is not helpless in the face of China’s retaliation. According to a report by the Wall Street Journal on July 4, the US government may require Amazon, Microsoft, and other US cloud service providers to obtain permission from the US government before providing cloud computing services using advanced AI chips to Chinese companies. The US is also considering restricting the activities of Chinese cloud service providers, such as Alibaba and Tencent, in the US.

According to the report, the restriction on cloud computing is actually to fill the “loophole” in the Biden administration’s policy of restricting the export of chip equipment. Because Chinese AI companies use U.S. cloud services to get around current export control rules. The report quoted national security analysts as warning that Chinese AI companies that want to use advanced chips can get them from any cloud provider in the US without having to buy chips directly. China is the upstream for many products’ raw materials, and it is foreseeable that China will add more rare metals and even active pharmaceutical ingredients.

When one country’s dependence on another in any respect becomes a risk, de-risking is no different from decoupling.