The German government denied reports of plans to ban the export of chemicals used in the manufacturing of semiconductors to China. Bloomberg’s report suggested that Germany was considering such a move to reduce the country’s exposure to the Asian economic superpower.
Officials who were reportedly involved in the talks were aware of the potential damage it could cause to business ties with China. However, a spokesperson from Chancellor Olaf Scholz’s office confirmed that the government had no plans to implement such restrictions at present. Talks with foreign partners are confidential, and the spokesperson declined to provide further details.
Potential Business Implications
Two German chemical majors, Merck KGaA and BASF, could be affected by the export curbs if implemented. However, both declined direct comment on the matter. A Germany-based chemical industry source said that the proposed move would not make sense since the majority of the semiconductor chemicals value chains of Merck and BASF did not involve Germany or Europe geographically. In many cases, it would only prevent German companies from moving materials between sites in China. The source also warned that German reliance on Chinese imports into Germany would be exposed in a retaliatory cycle if curbs were put in place.
China’s Response
China’s foreign ministry spokesperson, Mao Ning, said that it was “not constructive for some countries to impose export controls on China in the name of reducing dependence.” He added that it would only hurt others and destabilize the global industrial supply chain. He urged countries planning curbs to respect the regulations of the market economy and “work with China to safeguard the international economic and trade order.” Beijing’s response comes amid growing tensions between the two countries over issues of trade, human rights, and other geopolitical concerns.
Germany’s Reassessment of Bilateral Ties
Germany is increasingly wary of China as a strategic rival, despite it being its largest trading partner. It has considered a series of steps to reassess bilateral ties, including the possibility of implementing export controls. German Economy Minister Robert Habeck had suggested in March that Berlin could impose such restrictions to prevent Germany from losing its technological edge. Scholz’s government is also working on a strategy paper on China to be rolled out this year. The country, along with the European Union as a whole, is pushing efforts to bring more chip production onto home soil by offering subsidies.
Possible Implications of Export Controls
The easiest way for Germany to implement export controls would be to put the respective goods and services on its national dual-use list. The Netherlands, home to semiconductor equipment makers ASM International and ASML Holding, recently laid out plans to further restrict exports of semiconductor technology to protect national security, joining the US effort to curb chip exports to China. However, if Germany presses ahead with curbs, it could lead to a retaliatory cycle and damage business ties with China.
Conclusion
The German government has denied reports of plans to ban the export of chemicals used in the manufacturing of semiconductors to China. While Germany reassesses its bilateral ties with China, it is unlikely to implement such restrictions, given the potential damage it could cause to business ties with the Asian economic superpower.
The move could also affect German companies, such as Merck KGaA and BASF. As China responds to the proposal with calls for cooperation and respect, tensions between the two countries continue to mount, with both looking to reduce their dependence on each other.
