In late 2020, Chinese officials from various technology, trade, and defense agencies held secret meetings in Beijing to address the US restrictions on selling computer chips to Chinese companies. In response, Beijing imposed restrictions on the exports of gallium and germanium, key metals used in the production of electric vehicles, microchips, and military weapons systems. This move showcased China’s control over critical minerals essential to both the economy and national security, demonstrating its potential geopolitical leverage.
China’s dominance in the clean technology supply chain is comparable to Saudi Arabia’s influence in the oil market. The country is responsible for about 90% of the world’s rare earth elements, at least 80% of solar panel production, 60% of wind turbines and electric car batteries, and has close to 100% market share in some battery materials. This control poses a significant competitive threat to western manufacturing industries and adds to growing geopolitical competition, making the global fight against climate change more complicated.
Western governments are now scrambling to catch up with China’s position in critical minerals and renewable energy supply chains. The US and Europe have started deploying massive subsidies to develop their own industries. However, it remains uncertain how long it will take for the west to reduce its reliance on China or if it can be achieved at all. Deepening ties with Beijing may be necessary for Europe to meet its climate change goals, while the US will face considerable challenges in building a clean tech supply chain that excludes China.
China’s stranglehold on the supply chain extends beyond raw materials. It has made significant equity investments in overseas mining operations and is set to surpass its previous record of overseas metals and mining investments this year. The west faces its biggest challenge in competing with China in materials processing and refining, where China is the leading producer for 35 out of 54 mineral commodities critical to the US. China’s dominance is particularly evident in industries like gallium production and graphite processing, as well as wind turbines, where it holds majority market shares.
Overall, China’s control over the clean technology supply chain has far-reaching implications for the global economy and geopolitics. Western countries must act swiftly to develop their own industries and reduce dependence on China, but achieving this goal remains uncertain and challenging.
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