In a recent move reflecting the ongoing trade conflict between the United States and China, Beijing has adopted measures similar to those previously employed by Washington. This shift comes as China strengthens its export rules on rare earth materials, requiring foreign companies to seek approval from the Chinese government for any exports containing Chinese-originated materials or utilized technology.
China’s New Export Rules
This new regulation, which particularly impacts foreign smartphone manufacturers, showcases China’s intention to exert control over the global technology supply chain. Jamieson Greer, the U.S. trade representative, noted that this rule grants China significant leverage over international trade.
The U.S. Policy Influence
China’s updated export controls parallel a long-standing U.S. policy, known as the foreign direct product rule. This rule allows the U.S. to regulate foreign-made products by extending its laws beyond its borders. Such precedents have informed China’s own regulatory practices, particularly in response to the trade war initiated by former President Donald Trump in 2018.
Adopting U.S. Strategies
The adoption of similar policies indicates that Beijing is following Washington’s lead. Neil Thomas from the Asia Society Policy Institute stated that China is learning from U.S. strategies, having observed how effective export controls can be in limiting its economic growth and flexibility.
Beijing’s Expanded Toolkit
- In 2020, China introduced the Unreliable Entity List, mirroring the U.S. entity list restricting foreign companies.
- In 2021, the anti-foreign sanction law was enacted, permitting Chinese authorities to deny visas and freeze assets of specific individuals and firms.
- China has also implemented stricter export controls and foreign investment reviews to fortify its economic stance.
Recent Developments in the Trade War
After Trump imposed tariffs in 2023, China utilized its newly developed legal instruments, including the Unreliable Entity List, to target numerous U.S. firms. This included placing well-known corporations like PVH Group and Illumina on restrictions that limit their business activities in China.
Additionally, Beijing’s response involved announcing export controls on critical elements for high-tech production, such as tungsten and molybdenum, thereby affecting the broader technology supply chain.
Risks of Mutual Retaliation
Although these strategies have empowered China to challenge U.S. policies, experts warn about the risks involved. Jeremy Daum from Yale Law School highlighted the potential for misunderstandings in reciprocal actions, indicating that what one side views as a justified response might be misinterpreted as escalation by the other.
As both nations navigate this trade war, the consequences of their actions could have widespread implications for global supply chains and economics. The competition forms a complex landscape where both sides are armed with similar tactics but faced with unique risks.
