With Chinese authorities set to begin controlling graphite exports, a key raw material for anode materials for batteries, in December, they held an event with Korean companies only to explain how they will enforce their export control policy.
This was the first time China, which has played the weaponize key minerals card amid its strategic rivalry with the United States, held an event of this nature for companies from a specific trading partner. Some analysts called it a friendly gesture to Korea.
On Nov. 21, the Chinese government held a policy briefing for Korean companies at the Four Seasons Hotel in Beijing, according to the Korean Ministry of Trade, Industry and Energy.
At the briefing, Chinese government officials focused on allaying the concerns of Korean companies, saying, “We understand that there are many concerns about export control on dual-use items, but as long as you abide by Chinese laws, there will be no problems.”
They added that export simplification through batch export licenses may be available for companies with recognized credibility.
The Korean government and industry are paying much attention to the fact that the business-friendly event was held exclusively for Korean companies amid a series of measures this year by Beijing that signaled to the outside world that it could weaponize key minerals dominated by China.
China imposed export controls on gallium and germanium, which are used in semiconductor manufacturing, in August, followed by graphite, a key raw material for anode materials, in December.
The global semiconductor and battery industries have become increasingly concerned that China’s selective denial of export licenses to companies from countries with which it is in conflict could trigger a supply chain crisis from China in unexpected places.
Gallium and germanium are mainly used in semiconductor R&D led by the United States and other countries, so there is not much demand from Korean companies. Rather, there were concerns about the situation following China’s implementation of graphite export controls, an important material for the secondary battery industry.
Specifically, concerns have been raised that China may ultimately impose selective export controls on some Korean companies that play a key role in the U.S. electric vehicle battery supply chain in order to pressure the United States.
“China’s export control measures are interpreted as retaliatory measures against the United States, so if U.S.-China relationships deteriorate in the future, there is a possibility that export licenses for Korean battery companies with factories in the U.S. may be delayed or canceled,” said the Korea International Trade Association in a recent report.
Against this backdrop, China’s decision to hold the policy briefing for Korean companies to allay concerns about supply chain stability is seen as a friendly gesture to Korea.
The policy briefing was reportedly held after several bilateral contacts in which the Korean government called on China to be more transparent in its export control and the Chinese side responded to it.
Most notably, the Korean government formally raised concerns that China’s graphite export controls could destabilize the global battery supply chain during a bilateral industry ministerial meeting on the sidelines of the Pan-Yellow Sea Rim Economy and Technology Exchange Conference held in China’s northeastern city of Dalian in late October.
At the time, the Korean side is said to have expressed its view that China should make efforts to boost policy transparency, such as holding briefings on the guidelines of export controls.
Some diplomats believe that the Chinese move is related to a slow recovery of bilateral ties between China and Korea that hit a low point in June following the Xing Haiming incident and, since then, has been subsiding.
While relations between China and Korea deteriorated significantly following inappropriate remarks by Chinese Ambassador to South Korea Xing Haiming in June, the two countries have since engaged in multi-channel bilateral contacts and have come to a consensus that nothing should negatively affect their common interests, mainly in the economic and trade sectors, according to some sources.
Although a summit was not held, Korean President Yoon Suk-yeol and Chinese President Xi Jinping met and shook hands at a conference room during a recent Asia-Pacific Economic Cooperation (APEC) summit.
Some analysts say that China feels the importance of managing stable relations with Korea as the U.S. Biden administration is upgrading the public export control system for high-tech industries such as semiconductors and strengthening anti-China coalitions that unite allies such as the Indo-Pacific Economic Framework.
On the other hand, a decision by the leaders of the United States and China at the summit held during the APEC summit to emphasize the stabilization of bilateral ties despite disagreements in key areas such as export controls and the Taiwan issue may have had a positive impact on reducing the likelihood of Korean companies being sandwiched amid the intensification of the U.S.-China conflict.