Sat, Jul 08, 2023 page8

• Learning from Tokyo in lowering Chinese risk

  • By Chang Meng-jen 張孟仁
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  Following the decision by European Commission President Ursula von der Leyen in an address in March to “de-risk, not decouple” from China, other Western democracies have taken the same approach to reduce import dependence on China.

  Fresh on the heels of the energy crisis brought on by Russia’s invasion of Ukraine, China and the US have ramped up their tech battle. The Netherlands and Japan have joined the US in limiting China’s access to advanced semiconductor machinery, while the European Council will reduce critical dependencies, and de-risk and diversify supply chains where necessary.

  In response, the Chinese Ministry of Commerce announced that it will impose export controls on gallium and germanium, used in semiconductors and electric vehicles, from Aug. 1.

  As China accounts for 80 percent of global gallium and germanium production, its export controls have increased geopolitical tensions amid the race to develop advanced computing technology.

  Former Chinese deputy minister of commerce Wei Jianguo (魏建國) stepped up the threat by saying that the export controls on chipmaking materials were “just the start” and that the country has more sanctions-related tools.

  Beijing’s retaliation with economic coercion and market dependence have proven that the “de-risking” strategy and the pursuit of supply chain diversification was a timely solution.

  Its decisive blow to pull the rug from under the West’s feet will do doubt leave it reeling, but it would also bolster resolve to diversify supply chains, which is what happened as a result of an incident on Sept. 7, 2010, when a Chinese trawler collided with Japan Coast Guard vessels near the Diaoyutais (釣魚台, known as the Senkaku Islands in Japan). Tokyo arrested the Chinese captain of the trawler, prompting Beijing to protest and suspend exports of rare earth minerals to Japan. The export restrictions ended, but Japan in 2012 developed an electric motor that does not use rare earth minerals. It reduced dependence on imports of the minerals from China from 86 percent in 2009 to 55 percent in 2015, while Toyota developed a new magnet for electric motors that reduces use of rare earth elements by up to 50 percent.

  The Japanese government has always backed the policy, regardless of which party is in office.

  The EU is drafting raw materials legislation to bolster all stages of its supply chain and diversify imports to reduce strategic dependencies on China. Concerned about Beijing using its economic influence as leverage, the EU and Japan have signed a memorandum to improve cooperation on semiconductors, focusing on the establishment of an early warning system to share information promptly and avoid supply chain disruptions.

  This is especially critical as the EU imports 27 percent of its gallium and 17 percent of its germanium from China, and the West relies heavily on China for critical raw materials and distillation. The EU might also have realized that cutting imports of fuel from Russia and accelerating investment in renewable energy have increased dependence on China, as Beijing controls 80 to 90 percent of the products needed for a green transition.

  The US has underscored that it will engage with allies and partners to address supply chain issues, meaning that reducing dependence on China will become a shared consensus.

  Washington might soon take a leaf out of Japan’s book.

  Chang Meng-jen is chairman of Fu Jen Catholic University’s Department of Italian Language and Culture, and coordinator of the university’s diplomacy and international affairs program.

  Translated by Rita Wang
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