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Germany in talks to limit the export of chip chemicals to China

Germany may limit the export of chemicals to China that are used to manufacture semiconductors as part of the government’s efforts to reduce its economic exposure to the Asian economic superpower, Bloomberg news reported on Thursday.

The move was still in the early stages of discussion but officials taking part in the talks were aware that such a step could damage business ties with Beijing, the report said, citing those familiar with the matter.

There was no immediate confirmation from German government ministries of the Bloomberg report.

China’s foreign ministry spokesperson Mao Ning, in response to a question on Friday about the potential German curb, said it was “not constructive for some countries to impose export controls on China in the name of reducing dependence”.

Mao said it would only hurt others and destabilise the global industrial supply chain, urging countries planning curbs to respect the laws and regulations of the market economy, and “work with China to safeguard the international economic and trade order”.

The move would be the latest in steps under consideration by Germany as it reassesses ties with China. Chancellor Olaf Scholz’s coalition government is pressing for fairer market access to its largest trading partner but is also increasingly wary of Beijing as a strategic rival.

Merck KGaA (MRCG.DE) and BASF (BASFn.DE), two German chemicals majors who could be affected by the export curbs if implemented, declined comment. Merck KGaA shares slipped 0.5% after the report.

The quickest and most practical way to implement the export controls would be to put the respective goods and services on Germany’s national dual-use list, one of the people in Bloomberg’s report said.

If Germany pressed ahead with the curbs, it would be following partner countries that have taken steps with a view to cut China off from certain supplies for micro-chip making.

The government in the Netherlands, home to semiconductor equipment makers ASM International (ASMI.AS) and ASML Holding (ASML.AS), last month laid out plans to further restrict exports of semiconductor technology to protect national security, joining the U.S. effort to curb chip exports to China.

German Economy Minister Robert Habeck had in March suggested that Berlin could impose export restrictions to China to prevent Germany from losing its technological edge.

“Export controls with regard to technology must be constantly checked, constantly expanded and constantly updated,” a government spokesperson added at the time.

Scholz’s government is working on a strategy paper on China that will be rolled out later this year. Germany, and the European Union as a whole, are pushing efforts to bring more chip production on home soil by offering subsidies.

Taiwan chipmaker TSMC, the world’s largest, is in talks to open what would be its first European plant in Germany, while U.S. chipmaker Intel Corp announced last year had picked the German town of Magdeburg as the site for a huge new 17-billion euro chip-making complex.

Germany has invited the Chinese premier for talks in June and Scholz in November became the first leader from the Group of Seven countries (G7) to visit Beijing since the COVID-19 pandemic. Reuters

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