China’s highest legislative body has passed a new law on export control, which will allow the Chinese government to restrict or ban exports of “strategic materials and advanced technology” to specific foreign companies from 1 December 2020.
The firms would be set out on a newly established list, akin to the US Commerce Department’s Entity List. The law will apply to all companies in China, including foreign-invested ones, according to Chinese state media Xinhua News.
Military and nuclear products will be strictly controlled under “advanced technology”, and other technologies deemed to “relate to the safeguard of China’s national security or the fulfilment of China’s anti-proliferation and other international obligations” will also be subject to export control.
Additionally, rare-earth metals, for which China’s market share exceeds 60%, may be included in the list of restricted items, according to speculation from Nikkei Asia. Analysts have suggested that the inclusion of rare-earth metals on the list could have various worldwide implications.
Companies that are dependent on rare-earth metals, such as Shin-Etsu Chemical, the largest chemical company in Japan, could be affected by a possible ban. Shin-Etsu produces neodymium magnets (the strongest type of permanent magnet), and China is a major source of dysprosium, a key rare-earth metal used in the manufacturing of the magnets, although the firm is trying to reduce its dependence on Chinese materials.
The new law will also only further complicate Bytedance’s proposed deal to sell its popular video-making app TikTok to American technology corporation Oracle, as the government could cite the law to prevent certain technologies from being exported to US companies.
In August, Beijing added various technologies, including voice recognition, text analysis, and content recommendation – all key aspects of TikTok – to its list of regulated exports, indicating its displeasure with the proposed deal.
The law also states that “China may take countermeasures against any country or region that abuses export-control measures and poses a threat to China’s national security and interests.” This could potentially give Beijing more leeway to take reciprocal action against countries that have been deemed to be hurting Chinese interests.
This latest move by Beijing could be seen as another blow to deteriorating US-China relations. Last month, Washington curbed American exports to China’s biggest chipmaker, Semiconductor Manufacturing International Corp (SMIC), and took various steps to prevent Huawei Technologies from obtaining American software and technology used by other semiconductor companies.
The Trump administration has also been attempting to ban the popular Chinese apps TikTok and WeChat in the US, citing national security concerns that the apps could be used by the Chinese government to spy on American citizens.
However, China’s latest bill allows for exceptions to be made for export-controlled items. An exporter in China can still acquire approval from the government to send controlled items abroad by submitting proof of the item’s proposed final application, which will need to come from the end-user.