China is showing a more assertive response to American economic warfare, particularly in the ongoing trade war. In the past, China's restrictions on exports were sporadic and targeted, but now they seem to be part of a deliberate strategy. Chinese leaders, including President Xi Jinping, are calling for regulators to fight back against Western coercion and are enacting new laws to create a framework for a stronger response to America's commercial warfare.
These new laws include an "unreliable entities" list that punishes companies undermining China's interests, an export-control law, an anti-sanctions law, a foreign-relations law, and an anti-espionage statute. Additionally, China has tightened data and cyber-security rules. These laws have already been used to target Western companies. For example, Lockheed Martin and Raytheon were placed on the unreliable-entities list for shipping weapons to Taiwan, and Micron, an American chipmaker, faced an investigation and had its chips banned from critical infrastructure.
The vague wording of these laws makes it difficult for Western companies to assess their potential impact on their business in China. Foreign law firms in China have been asked to evaluate the risks of being investigated. China's new laws also create uncertainty for foreign buyers of minerals and components, such as Western manufacturers of green-energy technologies. The restrictions on two chip metals, gallium and germanium, could pose strategic problems for America, as China produces 98% of the world's raw gallium.
However, China needs to be cautious in its approach. Prohibitions on exports could harm Chinese firms that rely on finished products made abroad using rare earths. It could also prompt the West to build its own production capacity and seek substitutes, weakening China's position in the long term. So far, the implementation of these laws has been led by relatively pragmatic ministries, but there is concern that more hardline agencies may take over, potentially escalating the tech war.
The consequences of this economic warfare between China and America are significant, not just for CEOs but for the global economy as a whole. It remains to be seen how China's more assertive response will play out and what further actions will be taken by both sides.