Germany is considering regulating China's chip chemical exports due to potential security risks. This could have a major impact on the global chip industry and the Chinese economy.

China’s chip chemical exports may be regulated by Germany

In an effort to lessen its economic vulnerability to the Asian economic giant, Germany may restrict the shipment of chemicals to China used in the production of semiconductors, according to a Thursday Bloomberg news story.

The proposal was still in the early stages of discussion, but according to the newspaper, which cited people familiar with the situation, officials involved in the talks were aware that such a move may harm commercial ties with Beijing.

German government ministries did not immediately corroborate the Bloomberg article, and the Chinese embassy in Berlin did not respond to a request for comment.

It would be the most recent action Germany is considering as it evaluates its relations with China. The coalition government of Chancellor Olaf Scholz pushes for fairer market access to its biggest economic partner but is also growing more cautious of Beijing as a strategic adversary.

Two big German chemical companies that would be impacted by the export restrictions, Merck KGaA (MRCG.DE) and BASF (BASFn.DE), declined to comment. After the report, shares of Merck KGaA decreased by 0.5%.

According to one of the persons quoted in Bloomberg’s story, adding the relevant items and services to Germany’s national dual-use list would be the quickest and most feasible way to enforce the export prohibitions.

Germany would be following partner nations that have taken action to shut China off from certain sources for building microchips if it moved forward with the limitations.

The government of the Netherlands, where ASM International (ASMI.AS) and ASML Holding (ASML.AS), two manufacturers of semiconductor equipment, are based, announced plans last month to further restrict the export of semiconductor technology in order to safeguard national security, joining the U.S. attempt to limit chip exports to China.

In order to keep Germany’s technological advantage, German Economy Minister Robert Habeck had indicated in March that Berlin could impose export restrictions to China.

At the time, a government spokeswoman stated, “Export controls with regard to technology must be constantly checked, constantly expanded, and constantly updated.”

A strategy paper on China is being developed by Scholz’s administration and will be released later this year. By providing subsidies, Germany and the European Union as a whole are encouraging efforts to increase domestic chip manufacture.

The largest chipmaker in the world, Taiwan, is in discussions to establish its first European facility in Germany, while Intel Corp. of the United States revealed last year that it had chosen the German town of Magdeburg as the location for a massive new 17 billion euro chipmaking complex.

The Chinese premier was invited to Germany for talks in June, and Scholz was the first G7 leader to visit Beijing since the COVID-19 epidemic in November.


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