China threatens Japan with sanctions if it restricts exports of chip production equipment

China has threatened Japan with serious economic consequences if Tokyo joins the United States in restricting the export of semiconductor manufacturing equipment. According to Bloomberg, citing sources, senior Chinese officials have repeatedly voiced this position at meetings with Japanese colleagues.

Image source: Copilot

Toyota, one of the pillars of the Japanese economy, reacted especially sharply to the situation. The company fears that the response to new sanctions from Japan could be that China restricts access to critical minerals needed to make cars. Toyota has privately communicated its concerns to Japanese officials, which could be an important factor in the decision. Along with this, the interests of Tokyo Electron, a manufacturer of semiconductor equipment, will also be affected, which will also suffer from planned export measures against China.

The United States has been trying to limit China’s technological development for a long time, putting pressure on Japan and seeking stricter export controls. Washington fears that without Japanese support their efforts will be less effective. U.S. officials are in talks with their Japanese counterparts to ensure supplies of critical minerals, especially after China restricted exports of gallium, germanium and graphite last year.

Japan’s fears are justified. For example, in 2010, China temporarily suspended exports of rare earth metals to Japan following an incident in the East China Sea, which dealt a serious blow to the Japanese electronics sector and threatened the global supply of high-power magnets produced in Japan using Chinese raw materials. As a result, shares of Japanese chip companies fell following reports of conflict between China and Japan. Tokyo Electron fell 1.9%, while Lasertec and Disco lost 2.8% and 3.3%, respectively.

Some experts in Japan have opposed the idea that the government should follow Washington’s instructions. “Japan should not tighten export controls just because the US makes a request,” said Omdia analyst Akira Minamikawa. “Japan must have its own philosophy, it must decide for itself what is best for the country and stand firm on its own.” However, the Biden administration is confident it can allay Tokyo’s concerns and reach an agreement on the issue before the end of the year.