Germany’s possible restriction on semiconductor chemicals exports to Beijing would undermine the positive direction of China-EU ties: experts
Published: Apr 28, 2023 06:58 PM


Germany is reportedly considering restricting exports of chemicals to China that are used to produce semiconductors, a move which experts said would disrupt the positive direction of China-Europe relations and represent a "severe blow" to the country's industrial base, further hurting an economy that is already suffering from economic blows linked to the Ukraine crisis.

According to a report by Bloomberg, Germany may place implement restrictions as part of the government's efforts to reduce its economic exposure to China. The report cited sources as saying that the move was still "in the early stages of discussion."

German chemicals giants Merck and BASF could be affected by the export curbs if implemented, the report said.

The move would constitute a belligerent move if it is pushed ahead at a time when China and Europe's relations are showing positive signs with more frequent bilateral visits between government officials and company executives.

Chinese Foreign Ministry spokesperson Mao Ning said during a press conference on Friday that economic and trade cooperation is mutually beneficial, and China is an important global semiconductor market. Some countries' practice of implementing export controls against China under the guise of "reducing dependence" is not constructive, and ultimately will only harm others and themselves, as well as affect the stability of the global industrial and supply chains, Mao said.

"China urges these countries to respect the laws of the market economy…and work together with China to maintain the international economic and trade order to promote the construction of an open global economy," she said.

Experts have attributed the issue to Germany facing pressure from the US to pick sides, as well as the fact that some German politicians are seeking to use trade protectionism to prop up domestic industries.

Ma Jihua, a veteran tech analyst, told the Global Times on Friday that some of the EU's traditionally strong industries have seen a widening gap with China, citing electric cars as one example. This is triggering a sense of crisis and prompting some German politicians to turn to trade protectionism as a solution, Ma said.

However, experts warned that if Germany really places restrictive measures on semiconductor related products to China, the action will result in tremendous harm to China-German or China-EU relations which have only recent shown signs of improving.

"It is to be expected that Germany's restrictive measures, if implemented, might trigger objections and dissatisfaction from China, which will harm the two countries' strong business ties," Hong Yong, a research fellow with the Chinese Academy of International Trade and Economic Cooperation, told the Global Times on Friday.

He also noted that if German companies are forced to cut supply to China, it may trigger flow on effects across Europe's semiconductor and related supply chains, such as rising costs, interrupted production and economic losses.

Ma Jihua also said that many of German industries focus on downstream sectors, which means they need to import a large number of raw materials and equipment parts from other countries including China. Therefore, if they take action to harm business relations with China, that would cause serious backfire on their own industries.

"Not only might they face countermeasures from China, their business partners from other countries will look at Germany trade policy through a different lens, which will also impact the country's economy," Ma said.

Both experts urged Germany to cherish business ties with China which bring a lot of opportunities and business benefits to German companies.

China and Europe have shown signs of more connected relations over the recent past, with government leaders holding meetings and executives from European industrial giants visiting China.

On Thursday, Wang Wentao and German Vice Chancellor Robert Habeck met in Berlin on Thursday to exchanges views on issues such as deepening bilateral cooperation and implementing the economic and trade consensus between the two countries' leaders. Wang also expressed concern over export restrictions being contemplated by Germany, the statement said.

One day earlier, Wang met with the head of the German federal chancellery Wolfgang Schmidt. Earlier in April, China's president also met with European Commission President Ursula von der Leyen in Beijing.

Hong suggested that the two countries should increase strategic communication and coordination via meetings and government calls. They should also actively advance negotiations on the China-Europe investment agreement, he said.

Global Times