On Monday afternoon, China’s Ministry of Foreign Affairs announced that Beijing would be placing sanctions on a number of US firms and linked individuals over arms sales to Taiwan, with Washington having approved a record sale worth around $5 billion to the island the previous week.
The listed companies included Lockheed Martin, Boeing Defense and Raytheon, striking at the heart of what is often referred to as ‘America’s Military Industrial Complex’. However, what the specific measures mean, how they will be implemented and what their impact might be remains to be seen.
At first glance, these sanctions look symbolic; such military firms do not pursue business in China, and do not have market traction in America. One exception is Boeing’s civilian wing, which stated in an email it was still committed to the Chinese market.
On the other hand, this is not to say that such sanctions will not have strategic implications. First of all, China has an overwhelming dominance on the ‘rare earth’ materials required for US defence manufacturing, and should these sanctions really look to bite, they could have a major impact on the supply chain.
Secondly, even if the measures are only symbolic, it is nonetheless a warning shot from Beijing that it may retaliate further against US actions in the future.
What are ‘rare earths’? And why do they matter? The name refers to 17 elements which are used primarily in the manufacture of all kinds of items, including electronics, vehicles and of course military equipment.
Naturally, these resources form the bedrock of many supply chains around the world. China has a near total monopoly over this industry; a study found that the country “produced roughly 85 percent of the world’s rare earth oxides and approximately 90 percent of rare earth metals, alloys, and permanent magnets”. In 2018, up to 80 percent of America’s own rare earth imports came from China; Washington knows this and is scrambling for contingencies.
The strategic implications of this are quite clear; the US military relies deeply on materials imported from China to manufacture its equipment. If Beijing wanted, these sanctions could hammer the supply chains of the impacted firms.
