China limits export of 2 minerals to protect economy.

Communist China has just made a major announcement that is set to impact the production of electric vehicles, solar panels, military hardware, and more. They have revealed plans to restrict the export of two critical minerals.

These minerals, gallium and germanium, along with several other related metals, will now be subject to new export regulations. The motive behind these regulations is to punish the West for limiting China’s access to advanced semiconductors.

China currently dominates the global market as the leading producer of these minerals. They achieved this advantage by suppressing the price, as Christopher Ecclestone, principle at the natural resource research firm Hallgarten & Co., explains. However, when China stops suppressing the price, it becomes more viable for the West to extract these metals, resulting in an own-goal for China.

Ecclestone adds, “For a short while they get a higher price, but then China’s market dominance gets lost – the same thing has happened before in other things like antimony, tungsten and rare earths.”

Gallium is a versatile metal used in various applications such as aerospace, consumer goods, industrial equipment, military equipment, medical equipment, and telecommunications equipment. On the other hand, germanium is primarily used in the production of solar cells and fiber optics.

While some Chinese manufacturers believe that this move could backfire on China, others argue that it will have a limited impact on the international market in the short term. The Eurasia Group describes China’s actions as a “warning shot, not a death blow.”

According to the group, the new rules require Chinese exporters to obtain a license, but they do not automatically bar exports to specific countries or end-users. This move is intended to remind countries like the United States, Japan, and the Netherlands that China has retaliatory options and to deter them from imposing further restrictions on Chinese access to high-end chips and tools.

While some experts believe that consumers won’t notice much impact in the next year due to existing stockpiles, they caution that if the dispute continues beyond a year, a ripple effect will be felt. Others argue that the semiconductor industry, especially high-performance chips, will immediately feel the consequences of this move.

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