After the US announced a US$2.2 billion arms sale to Taiwan that includes tanks and Stinger missiles, China retaliated by declaring that it would “impose sanctions on US companies that participate in the arms sale.”
Asked about concrete details of the sanctions, Chinese Ministry of Foreign Affairs spokesperson Geng Shuang (耿爽) said he was not at liberty to reveal them.
More precisely, China does not know what to do. Since the Tiananmen Square Massacre in 1989, the US has joined the EU in an arms embargo on China for its repression of human rights. During this time, the US has never wavered, despite numerous Chinese appeals.
The latest call came from the Chinese Ministry of National Defense in 2016, when the US lifted its war-era ban on arms sales to Vietnam, saying that Washington “should get rid of the Cold War mentality and stop such outdated practices.”
As anticipated, the appeal had no effect.
This was not the first time, as Beijing has said it will impose sanctions on US companies involved in selling arms to Taiwan whenever Washington has announced deals. Still, there is no way China can impose sanctions, as the US’ arms embargo against China remains unchanged and there is no trading between weapons manufacturers in the two countries. The only effect of such proclamations are political, and what they really do is show China’s urgent hope to obtain arms from US weapon dealers to bridge the generational arms gap between the two nations, a goal that China is working hard to achieve.
However, this does not necessarily mean that there is nothing it can do about US companies involved in the latest sale, because China still has an ace up its sleeve: rare earth elements, raw materials that are necessary for many cutting-edge weapons. China’s output of rare earths accounts for more than 70 percent of the global total and 80 percent of the US’ imports.
This explains why US President Donald Trump has never raised tariffs on rare earths. Aiming at the soft spot, the Chinese government has in recent months constantly threatened to ban exports of rare earths to the US as a counterstrike in the trade spat. Still, China never acted on this threat, which might have something to do with previous failures using such tactics.
In 2009, China had 97 percent of the global supply of rare earths. In economics, this amounts to a monopoly, where the seller has absolute power to determine the price.
China attempted to dominate prices by imposing export restrictions. Quite contrary to China’s wishes, it turned out that the restrictions only accelerated other countries’ exploration of rare earths and since then China’s market share has never reached the same heights.
The essence of trade is based on mutual interests and benefits. Imposing export bans on goods is a double-edged sword. This card will not be played until the last minute and Chinese President Xi Jinping (習近平) will certainly not look for trouble with the temporary truce reached in the trade dispute at the G20 summit in Japan last month.
Yang Chung-hsin is a researcher of China affairs.
Translated by Chang Ho-ming
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