Christine Drews Sieger
China has hit back at the U.S., raising the stakes in their escalating economic rivalry.
The trade conflict between the United States and China has entered a new chapter after Beijing imposed new restrictions on American companies.
The move comes in response to a U.S. decision to expand its list of Chinese companies with alleged military ties.
The Chinese measures affect both industrial firms and defense-related companies. At the same time, Beijing is signaling that it will respond whenever Chinese businesses face new restrictions from the United States.
According to CNBC, several analysts believe that China’s countermeasures are primarily political in nature. Many of the affected American companies have only limited operations in the Chinese market.
The Technology Rivalry Continues
Earlier in June, the U.S. Department of Defense released an updated version of its monitoring list of Chinese companies with possible military connections.
Among the newly added names are technology giants Alibaba and Baidu, as well as electric vehicle manufacturer BYD.
The list includes companies that U.S. authorities believe support China’s military capabilities. Being placed on the list does not automatically trigger sanctions, but it may affect future contracts with U.S. government agencies.
Several of the affected companies argue that the allegations are unfounded. Some are therefore considering challenging the decision in court, as Xiaomi previously did successfully, CNBC reports.
Limited Impact
Among other measures, Beijing has imposed export restrictions on 10 American companies.
This means they can no longer receive certain products originating from China.
In addition, 46 American companies have lost the ability to bid on a range of government contracts in China. Most of these companies are affiliated with the defense sector.
Analysts point out that both Washington and Beijing are still trying to keep tensions under control.
According to CNBC, the latest measures are therefore viewed as another step in the long-running rivalry between the two countries rather than the beginning of a major escalation.
The Battle Over Rare Earths
The conflict also concerns access to so-called rare earth elements and other critical minerals, which are essential for the production of electric vehicles, wind turbines, advanced microchips, and military equipment.
China currently holds a dominant position in the global supply chain. According to the IEA, China is the leading processor of 19 out of 20 strategic minerals and controls, on average, around 70 percent of the global processing and refining market.
This gives the country significant influence over global supply chains and makes these raw materials an important geopolitical tool in its relationship with the United States and other Western countries.
The United States Seeks to Reduce Dependence
For this reason, the United States and several allied countries have spent recent years trying to reduce their dependence on Chinese supplies.
According to the IEA, they have done so through investments in new mines, processing facilities, and alternative supply chains.
However, experts believe it could take many years to build sufficient production capacity outside China.
This continued dependence gives Beijing a strong position in the technological and economic rivalry between the world’s two largest economies.
Sources: CNBC, IEA
