China Decided To Restrict Exports Of Two Important Minerals

China Decided To Restrict Exports Of Two Important Minerals
Daniel Johnston

8 months ago2 mins

What’s going on here?

China made an audacious move in the trade war, restricting the export of two uber-important minerals.

What does this mean?

The West and China have long been in a mini tug-of-war, with the US clamping down on certain tech exports to China – especially in the chipmaking space – and Europe cooling its attitude toward the world’s second-biggest economy too. But two can play at that game, and China isn’t exactly known to back down. So, starting next month, it’ll be restricting the export of two key minerals – gallium and germanium. And these aren’t just any old rocks: they’re the lifeblood of semiconductor, telecommunication, EV, and solar cell industries. Among other things, that means the EU’s ambitious decarbonization plans could take a big hit, especially since the bloc heavily relies on China for those minerals right now.

EU raw material supplies from China
Source: Bloomberg, European Commission

Why should I care?

Zooming in: Fool me twice.

The EU learned a hard lesson about over-reliance when Russia invaded Ukraine, leaving the bloc scrambling for alternative oil and gas supplies last year. And now a similar scenario could be unfolding with China. But some researchers reckon it’ll take at least a decade for the West to significantly reduce its reliance on China’s supply chains. And if things escalate, there’s more at stake: China’s $7 trillion consumer marketplace is a crucial destination for European exports – and that’s another big bargaining chip.

EU China trade deficit
Source: Bloomberg

The bigger picture: Double-edged protectionism.

Recent trade tensions between the world’s two biggest economies have made simmering international tempers a few degrees hotter – and that comes with some hefty drawbacks See, these moves can hit supply chains’ efficiency, curb competition, and hike up prices for consumers. And as an added kick in the teeth, they can put a damper on innovation and global economic growth too.

Finimize

BECOME A SMARTER INVESTOR

All the daily investing news and insights you need in one subscription.

Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

/3 Your free quarterly content is about to expire. Uncover the biggest trends and opportunities. Subscribe now for 50%. Cancel anytime.

Finimize
© Finimize Ltd. 2023. 10328011. 280 Bishopsgate, London, EC2M 4AG