U.S. Treasury Secretary Yellen visits China

U.S. Treasury Secretary Janet Yellen embarked on a three-night-four-day visit to China on Wednesday. Secretary Yellen will meet her Chinese counterparts, including Premier Li Qiang, Vice Premier He Lifeng, and other influential figures in the Chinese economic sphere, and address pressing issues between the United States and China, covering a range of topics including the U.S.’s “de-risking” approach involving regulatory measures imposed by the United States on Chinese technology, investment, and high customs taxes.

Ms. Yellen’s visit to China takes place against a backdrop of intensifying tensions between the two nations, which stemmed from the U.S.’s increased scrutiny of technology exports, including banning the export of semiconductor devices to China and adding Chinese tech firms to an export blacklist. In response, China has retaliated by banning U.S. chip giant Micron and imposing export restrictions on two rare elements crucial for semiconductor manufacturing, gallium, and germanium. Secretary Yellen’s visit carries the hope of alleviating the economic tension between the two countries, yet, thus far, there are no visible signs of a breakthrough.

Other export bans are anticipated in the coming months as the ongoing tech war between the United States and China intensifies. A former high-ranking Chinese government official recently remarked that the restrictions on the export of chipmaking metals have just begun, suggesting that further measures are yet to come. Meanwhile, the U.S. has significantly reduced its semiconductor exports used in artificial intelligence and reviewing imposing restrictions on cloud services offered by Amazon and Microsoft to Chinese firms. Critics are concerned that these actions may trigger a vicious cycle of one retaliatory measure after another.

If America continues to impose restrictions on China and China responds with retaliatory actions, South Korea will likely face significant consequences. China’s weaponization of raw materials, such as rare-earth elements and essential minerals, may pose a detrimental threat to South Korea, which relies heavily on China as a crucial supplier. South Korea imports 97% of the manganese and cobalt required for electronic vehicle batteries and over 80% of graphite and lithium. Even if South Korea manages to establish an alternative supply chain for these materials, it will almost certainly incur increased production costs.

Many countries are already engaged in fierce competition to secure raw materials. South Korea must proactively diversify its import sources and reduce its dependence on China. This can be achieved by closely monitoring the supply of essential minerals and progressively expanding its reserves of raw materials. Collaboration with ASEAN, Australia, and South American nations should be actively sought. Additionally, South Korea should leverage the Minerals Security Partnership (MSP) established with resource-rich countries. The public-private partnership should be fostered to preemptively address potential disruptions in the supply chain, as witnessed in the incident of the resolution shortage.