Two chemical elements hidden deep in the periodic table have become key driving forces in world politics. On July 3, the Chinese Ministry of Commerce and Chinese Customs announced that they would impose export controls on gallium and germanium products (including compounds) from August 1. The move, which Chinese officials say is intended to "protect national security and interests," has sparked global panic. across industries, governments and the media.
While these two rare metals account for only a few hundred million dollars in global trade—a figure that pales in comparison to the chip manufacturing industry's value of over $600 billion—they are critical strategic resources in the defense and high-tech sectors. Without them, infrared optics, fiber-optic communication, solar cells and composite semiconductors are impossible. Thus, any interruption in the supply of these metals will cause instability in the global markets, valued in trillions of dollars.
The concern is exacerbated by China's dominance in global supplies of these metals. In 2022 alone, China produced 90 percent of gallium-related products and 68 percent of germanium-related products. Chinese authorities maintain that export restrictions on products containing these metals are standard international practice and are not targeted at any particular country.
China's role in the technological competition with the United States is like that of a student who learns from his teacher, using his superiority in critical technologies or resources. It appears that China is pursuing a "bottleneck strategy": China's strategic use of these minerals is a compelling narrative. In response to the challenges Beijing is facing in its supply chain for chip manufacturing due to limited access to critical technologies (a gap it could close on its own over the next five to eight years), a potential disruption in the supply of rare metals could put The United States and its allies are at an impasse, especially when it comes to advances in defense and high-tech manufacturing.
At its core, the bottleneck strategy uses monopoly. This allows those who control a critical technology, resource, or transport route to influence their opponents without war. With a monopoly on the gallium and germanium supply chains, China can enforce export controls without incurring a significant economic backlash.
The Chinese government's restrictions on the export of these rare metals are unlikely to cause significant economic damage to the country. First, a significant portion of these products is consumed by the Chinese economy. Second, the total export revenue of these metals — 240 million yuan from gallium and 360 million yuan from germanium in 2022 (less than $100 million in total) — is negligible compared to China’s spending on semiconductors. Finally, given the unique and non-renewable nature of these rare metal products, surplus production can be subsidized and stockpiled indefinitely, preventing significant economic losses for China.