China planning ‘innovative’ export controls as trade tensions with US rumble on

The nation’s export control law came into effect in 2020, expanding Beijing’s ability to respond to the trade restrictions it faces from other countries.

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The law resembles the US Export Administration Regulations in producing a list of controlled items – including sensitive technology, military equipment and dual use items – that require a licence to be exported.

It explicitly allows China to retaliate against a country that violates export controls and endangers national security, although there is no clear definition of what would constitute a violation of those rules.

In November 2021, the US blacklisted 12 Chinese firms – including quantum computing and semiconductor companies, the world’s top commercial drone maker DJI Technology and China’s Academy of Military Medical Sciences – over their links to the military or alleged involvement in the surveillance of Muslim minorities in Xinjiang.

The following month, China hit back with its first white paper on export controls, pledging more engagement to shape “fair, reasonable and non-discriminatory” global export curbs.

The paper said the controls would cover dual-use items, military products, nuclear materials and other products that had the potential to undermine national security and the national interest.

It also said other restrictions would be related to non-proliferation and other international obligations.

Starting on August 1 this year, China has imposed restrictions on gallium and germanium – two rare metals used for making hi-tech equipment – and several industrial compounds to “safeguard national security and interests”. At the start of this month it also placed restrictions on the export of drones that have potential military uses.

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China is the world’s largest producer of the two elements, with more than 95 per cent of the global gallium output and 67 per cent of germanium production.

The White House had said that it “firmly opposes” Beijing’s restrictions, adding that Washington would “engage with our allies and partners to address this and to build resilience in critical supply chains”.

China is one of the world’s biggest makers of civilian drones, and some Chinese brands have been used in military conflicts around the world, including by both sides in Ukraine.

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The China Council for the Promotion of International Trade, the country’s trade promotion agency, said earlier this week that friction between major countries had remained high this year.

Figures show the main trade frictions are with the US, European Union and India, while the industries most affected are electronics, mechanical equipment and light manufacturing.