Economic Conflict
China has launched counterattacks against U.S. economic restrictions on the Chinese market. The counterattacks include three measures implemented last month and this month.
“As the U.S.-China conflict escalates and China announced legislative initiatives and export control measures to secure economic security and counter U.S. sanctions earlier this year, Korea should prepare for further measures and manage risks,” the Korea Institute for Foreign Economic Policy said in an Aug. 10 report on China’s economic security countermeasures and their implications.
China has implemented three measures against the U.S. economy, according to the report. In April of this year, China amended its anti-espionage law for the first time in a decade, expanding the subjects of espionage from traditional state secrets to any information deemed relevant to national safety and interests and increasing authorities’ investigative power and penalties against anti-espionage law violators. Chinese police seized computers and cell phones from employees of U.S. consulting firm Bain & Company in Shanghai, China at the time. In June, the country enacted its first foreign relations law, providing a legal basis for responding to foreign interferences, sanctions and repression. Both laws have been in effect since July.
In particular, the foreign relations law states that foreigners and foreign organizations in China shall not threaten China’s national security or undermine China’s social public interests. This can be a “perception-is-reality” rule. It makes foreign companies in China feel that they are on thin ice.
Chinese government authorities also initiated export control measures on 38 gallium- and germanium-related items beginning on Aug. 1. These items are used in the semiconductor, display, and solar equipment industries. This has been seen as China’s counterbalance to the U.S. and other countries’ restrictions on the export of semiconductor equipment to China. China is responsible for 94 percent of the world’s gallium supply and 83 percent of the world’s germanium supply.
The problem is that as the U.S. government embarks on further restrictions on investments in China, China may come up with even stronger measures. In fact, China released a list of banned and restricted technologies this year but has yet to make an announcement on whether or not it will finally implement the measure. This leaves the possibility of China taking more actions open in addition to the possibility of prolonging its material export controls. China’s list of banned and restricted technologies includes light detection and ranging (LIDAR), rare earth and solar equipment, next-generation nuclear, bio and big data technologies.
Meanwhile, as the U.S.-China rivalry heats up and the two countries exchange trade export controls in high-tech sectors, China is becoming increasingly dependent on imports from the United States and its allies, analysts say.
On Aug. 9 (local time), the Wall Street Journal (WSJ) reported that China relied on the U.S. and its allies for more than 70 percent of its imports of about 400 items, ranging from luxury goods to raw materials, according to an analysis of world trade data from 2022 by Victor Cha, deputy director of Asia at the Center for Strategic and International Studies (CSIS).
According to the analysis, China relies on the United States and its allies for 70 percent of its 412 import items, and the value of such imports reaches about US$47 billion (about 62 trillion won) annually. This is due to a lack of Chinese alternatives.
By country, Japan is the top exporter of such items to China with 124 items, followed by the United States (87), Germany (64), South Korea (28), and France (27).
Based on this data, Cha said the United States and its partners could potentially stop China’s economic restrictions or even punish China for them if they unite.