China has sanctioned ten American companies close to the United States armed forces: this is a mirror response to the recent decision by the Pentagon to include several Chinese companies – including tech giants Alibaba, Baidu, and Byd – on a list of entities risky for American national security.
CHINA’S VERSION
The Beijing Ministry of Commerce explained that Chinese companies, for national security reasons, will not be able to export “dual-use” goods – that is, usable in both civilian and military contexts – to the ten sanctioned American companies. The ban applies, with immediate effect, also to companies and individuals based in third countries but trading products made in China.
The Chinese Ministry of Finance then added that public entities will be prohibited from purchasing products from forty-six American companies, including Lockheed Martin, Raytheon, and General Dynamics, active in the defense sector.
AND NOW?
Like the Pentagon’s decision, Beijing’s sanctions have primarily symbolic value, since the ten US companies – being part of Washington’s military-industrial complex – were already disconnected from the Chinese supply chain and had no contracts with government agencies.
THE TEN SANCTIONED AMERICAN COMPANIES
The ten American companies subject to trade restrictions by China are:
- Aveox, based in California: deals with components for the aerospace sector;
- Red Cat Holdings, in Utah: defense drones;
- Teal Drones, in Utah: defense drones;
- Imsar, in Utah: radar technologies;
- Jaia Robotics, in Rhode Island: aquatic robots;
- Bell Aerospace & Technologies, in Colorado: spacecraft and components;
- Oshkosh Defense, in Wisconsin: military vehicles;
- L3Harris Maritime Services, in Virginia: technologies for military vessels;
- Mp Materials, in Nevada: extraction and processing of rare earths;
- Usa Rare Earth, in Oklahoma: extraction and processing of rare earths.
THE ROLE OF RARE EARTHS IN THE COMPETITION BETWEEN AMERICA AND CHINA
Among the companies subject to controls are two – Mp Materials and Usa Rare Earth – that are contributing to the emancipation of the United States from China for rare earths, a group of seventeen elements used in many critical sectors, from defense to energy, from electronics to automotive.
Currently, China controls approximately 60 percent of global rare earth extraction, 90 percent of their refining, and nearly 95 percent of their transformation into permanent magnets. Beijing has often exploited this dominant position by applying export restrictions aiming to obtain political concessions or to respond to the trade policies of the Donald Trump administration.
Mp Materials is a very significant company because it manages the only active rare earth mine in the United States – the Mountain Pass mine in California – and is working to develop refining capacity. Last year it received a $400 million investment from the US Department of Defense, which became its largest shareholder with a 15 percent stake.
The Department of Commerce, instead, invested $1.6 billion in Usa Rare Earth, an emerging rare earth producer: it is developing a mine in Texas, intends to open a magnet production plant in Oklahoma, and has acquired the Swiss group Serra Verde, thus securing access to the Pela Ema complex in Brazil.
