【Text by Guan察者网 Columnist Bao Shaoshan, Translation by Ma Li】

When Washington declared war on China's technological rise, it assumed it had a firm advantage. Washington announced new tariffs, issued export bans, released entity lists, and imposed chip sanctions, among other measures, all aimed at isolating China, cutting off its access to Western technology, and stifling its technological development, all in an effort to maintain its own hegemonic position.

However, China's precise countermeasures now indicate that the relationship between the U.S. and China in terms of access to critical materials is extremely close, and the U.S. dependence on China is even deeper.

The Chinese Ministry of Commerce's latest round of export control measures targeting lithium batteries, graphite anode materials, and rare earth-related technologies are the most significant so far in the global struggle for material sovereignty. These measures were introduced under the guise of "national security" and help China fulfill its obligations to prevent the proliferation of weapons.

At the same time, the strategic timing and scope of these measures clearly reveal their geopolitical intentions: once again exposing the vulnerability of the United States in the material sphere, making people see that although the U.S. has been trying to block and contain China, it cannot restore its industrial base on its own.

Photo: Raw ore of rare earth elements

New Control Measures: Materials That Support the Daily Operation of the Modern World

China's new restrictions announced on October 9 no longer limited themselves to the materials themselves, but also included the equipment, technologies, and services necessary to make these materials practically useful. This is a clever and important upgrade in resource export controls: from simple resource management to controlling key technological aspects.

In terms of graphite anode materials and lithium batteries, China will implement an export licensing system for synthetic and natural graphite materials used in producing lithium battery anodes. Additionally, export restrictions also cover advanced production equipment and processes, including granulation process equipment, graphitization equipment, and coating modification equipment used in producing graphite anode materials. These are key technologies that determine the performance and durability of batteries. These technologies are crucial for producing electric vehicles, consumer electronics, and grid-scale energy storage systems. Currently, China accounts for over 90% of the global production of graphite used in anode materials and holds a dominant position in every link of the lithium-ion battery value chain.

As for the rare earth sector, China has added a series of rare earth-related technologies to the export control list, covering mining, smelting, separation, magnet manufacturing, and secondary resource recycling. These technologies are essential for manufacturing permanent magnets, which are indispensable for wind turbines, electric motors, guided missile systems, fighter jets, satellite components, and semiconductors. China refined nearly 90% of the world's rare earth oxides and produced the majority of neodymium-iron-boron (NdFeB) magnets required for high-performance electronic devices.

The export restrictions issued by the Chinese Ministry of Commerce target core areas of the clean energy, military, and semiconductor industries. In other words, these are the fields that the Biden administration planned to bring back to the U.S. through the Inflation Reduction Act and the Chips Act, investing billions of dollars, and are also the key areas of the future technological and military development envisioned by the Trump administration (the U.S. government's focus on clean energy has declined).

Direct Impact: People Realize the Foundations of the American Industrial System Are Not on American Soil

On both the material and temporal levels, the restrictions imposed on the U.S. are undeniable. The U.S. lacks the technical capabilities and corresponding industrial ecosystems to replace the products provided by China in a short period of time.

The Pentagon states that more than 78% of U.S. military equipment uses materials directly or indirectly sourced from China. Rare earth elements are widely used in numerous military fields, from jet engines, precision-guided weapons, radar systems, and nuclear submarine parts. If the Chinese rare earth supply chain encounters problems, the production and maintenance of U.S. weapons would be delayed.

Although the U.S. does have some rare earth deposits, it lacks the specialized technical expertise for smelting. It is ironic that these production stages were transferred to China decades ago. Rebuilding U.S. smelting capabilities could take five to ten years, and even without considering environmental approvals and personnel training, it would require billions of dollars in investment. As mentioned earlier, China's export restrictions on rare earth-related products actually play a significant role in maintaining world peace.

Despite the U.S. policymakers' emphasis on lithography machine technology and the chip design industry, less visible yet crucial materials such as rare earths, gallium, germanium, and graphite are still mainly sourced from China. Rare earth magnets play a vital role in chip manufacturing equipment and data center cooling systems. Restrictions on graphite and high-purity processing technologies will squeeze the semiconductor value chain from the bottom up, affecting everything from consumer electronics to artificial intelligence computing clusters.

China's new export restrictions will have widespread impacts. According to some assessments, if there is no rapid expansion of AI capital such as data centers in 2025, the U.S. GDP growth in the first half of 2025 would not exceed 0.1%. In other words, if it weren't for the modestly maintained capital expenditures related to artificial intelligence, the overall economic situation in the U.S. would be very poor.

Supply chain issues in the field of artificial intelligence would threaten its expansion, and increased costs would be inevitable. China's export restrictions will have a dual impact: on one hand, these measures affect the resources used to expand the U.S. power system; on the other hand, they create bottlenecks in semiconductor supply. The "artificial intelligence bubble" on Wall Street is likely to be affected by China's export restriction measures.

The electric vehicle revolution in the U.S. (if it can even be called a revolution) essentially relies on a battery industry dominated by China. Chinese companies hold a leading position in upstream raw materials and midstream processing. China processes two-thirds of the world's lithium and over 90% of the graphite. U.S. automakers only recently began investing in local production of cathode and anode materials, but the relevant production technologies and equipment are still primarily sourced from Chinese companies. If China stops supplying those technologies and equipment, the cost of U.S. electric vehicles would increase, production would decrease, and the decarbonization process would be delayed.

In short, the U.S.'s green transition and digital transformation are built on the foundation of China's supply chain. Now, these foundations are changing, and worse still, they may no longer exist.

Time, Capital, and Technical Capacity

For the U.S., announcing subsidies and implementing large-scale industrial programs is one thing, while rebuilding an entire industrial ecosystem that has been devastated by industrial outflows over the past 40 years is another. The U.S. faces three constraints: time, material resources, and technical knowledge.

Regarding time, developing new mining, refining, and magnetic material manufacturing capabilities cannot be completed within a few quarters or years; it requires a decade-long process. Environmental approvals alone could stall U.S. projects for several years, during which time Chinese companies have already achieved vertical integration and continuous upgrades.

As for material resources, even if the U.S. could mine all known mineral deposits on its land tomorrow, it still lacks the refining and separation facilities needed to convert these minerals into usable materials. If the minerals cannot be refined, mining them is meaningless.

Finally, the U.S. also faces limitations in technical knowledge and production equipment. China has almost a monopoly in rare earth processing equipment and graphite treatment technology, meaning that even friendly suppliers (such as Australia, Canada, or Brazil) are highly dependent on Chinese equipment and expertise. The U.S. lacks skilled labor and has no industrial base to quickly replicate China's advantages.

The result is a structural problem. No matter how grandiose the rhetoric or how generous the subsidies, they cannot shorten the time required for industrial production. Perhaps the U.S. can print a lot of dollars, but it cannot mass-produce excellent metallurgists, engineers, or mass-establish mineral processing plants. As I pointed out in May this year, the U.S. can retain its dollar advantage, while China possesses dysprosium, a resource.

According to the International Energy Agency, China's rare earth production accounts for about 61% of the global total, and in rare earth refining, it accounts for about 92%. BBC

Strategic Retaliation: The Isolated U.S.

Ironically, it is the U.S. itself that has caused its isolation. By striving to exclude China from the global technological network, it has prompted China to impose restrictions on the supply chains that the U.S. once took for granted. China has adopted a gradual and measured strategy: first limiting the exports of gallium and germanium in 2023, and now expanding to rare earth technologies and the graphite sector. Each step taken by China demonstrates restraint and capability: China can decide when, where, and how to turn the tap.

For the U.S., this is far more than just an economic inconvenience; it is a geopolitical humiliation. A country that once boasted itself as a fortress of democracy now has to rely on the industrial capacity of the very country it tried to weaken.

Europe and the Global South: Seeking Opportunities in Turmoil

While Washington is preoccupied with dealing with this, other parties are actively positioning themselves to benefit from this divided situation.

For a long time, the EU has been caught between pressure from the U.S. and its reliance on Chinese raw materials. If the EU can launch appropriate countermeasures, demonstrate political sensitivity and institutional flexibility, and possess the necessary resources such as funds, equipment, and technology, this crisis could provide an excellent opportunity for the EU's reindustrialization—frankly, I am very skeptical about the premises of this assumption.

The EU can take some measures to promote investment in rare earth refining and magnetic material production. For example, Sweden, Finland, and France have already begun developing their own domestic rare earth refining capabilities. China's export restrictions have created a sense of urgency for the EU and provided it with negotiation leverage.

Indeed, the EU has gained some influence over Washington as a result. The U.S. may be forced to turn to Europe to obtain certain high-tech cooperation. Brussels could use this support for the U.S. as a bargaining chip to gain concessions from the U.S. on subsidies, tariffs, and technology sharing. At the same time, Europe can adopt a more pragmatic approach—diversifying supply chains without decoupling from China—on one hand, trying to maintain the Chinese supply chain, and on the other hand, working to establish its own risk-resistant capabilities.

Essentially, Europe can leverage the U.S.'s weaknesses to gain strategic benefits, while using the slogan of "strategic autonomy" to consolidate its industrial base. However, it is uncertain whether the current leadership in Brussels is willing to do so.

For some resource-rich countries in the Global South, this moment has the potential to be transformative. Countries like Indonesia, Chile, Brazil, and the Democratic Republic of the Congo have already been leveraging resource nationalism to develop localized resource product processing and value-added production. China's industrial model provides an alternative to the U.S.-led model—China offers investment, technology, and infrastructure, and does not engage in geopolitical lecturing. The problem with the U.S. model is that funding comes with conditions, and the funding is limited and slow to arrive, making it difficult for the U.S. to compete with China.

This time, countries in the Global South indeed have some cards to play. Some countries in the Global South possess resources essential for the economy of the 21st century. They can choose to export these resources to China, collaborate with China or Europe, or implement some strategic resource export restrictions.

Unavoidable Settlement

The U.S. is gradually realizing that, to impose sanctions on the world, it must have the ability to avoid being sanctioned itself. However, the U.S., which once had the industrial strength that commanded global admiration, has now experienced industrial decline due to decades of financialization, outsourcing, and short-termism.

China's new export control measures reveal the inherent asymmetry in the global economic structure: China dominates the actual production of goods, while the U.S. dominates the production of narrative. The objective laws of real products and economic operations will eventually expose the economic illusion composed of capital and fantasy. Although the U.S. may still dominate in financial, media, and military power projection, if it cannot obtain the raw materials necessary for the implementation of advanced technologies, these advantages will gradually disappear.

Washington has been desperately trying to isolate Beijing. However, this move has instead put the U.S. itself in an isolated situation. It is expected that leaders of China and the U.S. will meet during the Asia-Pacific Economic Cooperation (APEC) meeting held in South Korea in late October. At that time, we may hear a very interesting dialogue.

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Original text: https://www.toutiao.com/article/7561604301391446567/

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