Bloomberg is reporting that the German government is considering curbing all chemical exports to China which could be used in the production of semiconductors, as part of a broader strategy of Washington to limit the access Beijing has to advanced technologies. The report quoted people familiar with the matter.
For its part, Berlin is seeking to limit its economic exposure to Chinese retaliation. The initiative being considered is one part of a broader government suite of initiatives designed to prevent China from acquiring key services and products required for microchip production.
A vital element of the global supply chain, semiconductor chips are important to the production of a wide range of products, including cars, refrigerators, smartphones, and artificial intelligence.
If the initiatives are adopted it could have a sizable impact on China’s ability to develop critical technologies, since it would restrict sensitive exports of chemicals from such German companies as the science and technology titan Merck, as well as the largest chemical producer in the world, BASF.
Although Germany does not produce semiconductors itself, Merck and BASF are vital sources for chemicals critical to the production of such chips for companies all over the world. Such export restrictions would jeopardize China’s entire semiconductor industry, impacting the development of advanced technologies, and even limiting its ability to produce semiconductors.
According to the outlet, the US and the EU are coordinating closely with German Chancellor Olaf Scholz, and Economy Minister Robert Habeck.
Washington has been pursing initiatives around the world with various governments as it seeks to limit China’s access to sensitive technologies and limit the technological development of its semiconductor industry in particular.
Berlin is seeking to balance on the one hand, its relationship with its allies and on the other, its relationship with China, which is the nation’s most important trading partner for the last seven years in a row,
Last month, the US managed to secure an agreement from the Netherlands, to restrict semiconductor technologies to China, following a pressure campaign by Washington. In response the government of the Netherlands pledged it would limit all exports of the “most advanced” semiconductor technologies.
The Trade Minister of the Netherlands, Liesje Schreinemacher issued a letter to parliament announcing the decision and noting the restrictions would be implemented prior to the summer.
Germany’s initiative on export controls is still in development, as officials grapple with the fact that such an initiative will undoubtedly have an impact on the country’s trade relations with China.
Beijing has repeatedly said that by seeking such restrictions, the United States is violating free-trade rules.
