Xi’s metal curbs risk backfiring as G-7 seeks China alternative

 China’s decision to control the export of two key metals showed it has some power to retaliate against moves by the US, Japan and Europe to cut Beijing off from advanced technology. But it also risks backfiring.ighlighted China’s dominant position in global production of gallium and germanium, which are used to make chips, electric cars and

telecommunications equipment. The announcement — just days before US Treasury Secretary Janet Yellen visits Beijing — appears timed to give China leverage as it pushes the White House to remove export controls that risk hobbling the nation’s development.Yet the measure is a double-edged sword, and may simply accelerate efforts by those countries to reduce dependence on the world’s second-biggest economy. If Beijing did at some point uses these new rules to restrict shipments and cut supply to other nations, prices would likely rise and make it more economical to boost output in Japan, Canada, the US or elsewhere.

The move underscores the dilemma facing President Xi Jinping as he seeks to counter US efforts to prevent China from accessing the chips needed to dominate technology like artificial intelligence and quantum computing. Any reciprocal actions only give the US and Europe more ammunition to push for derisking, something Xi’s government has sought to counter.China always takes a tit-for-tat approach,” Roy Lee, Taiwan’s deputy foreign minister, said of the new measures, which he called a retaliation to export controls by the US and other democratic nations. These “will become an accelerator for countries including Taiwan, South Korea and Japan to reduce our dependence on China supply of those critical minerals and materials.”

China first introduced an export licensing system for rare earths in the 1990s while also gradually ramping up taxes, squeezing companies in Japan and elsewhere that relied on Chinese supplies. But the big shift happened in 2010, when Beijing temporary halted exports to Japan in reaction to a collision between a Chinese fishing boat and the Japanese coast guard near islands claimed by both countries.

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