Rethinking technology export controls | The weekly recap

When most people think of China's export controls, they think of dual-use controls – the dramatic, headline-grabbing restrictions on critical mineral products like gallium, graphite, and most famously, rare earths.

• Beijing has famously deployed these levers as retaliatory weapons in its tech war with Washington.

But there's a parallel, less headline-grabbing export control system that rarely makes the news. 

• And new research from some of China's top state scientists suggests that Beijing's senior technical advisors are fundamentally rethinking how China manages its industrial technology exports.

The details: The paper – titled “Framework and Empirical Study on the Selection Framework of Export-Restricted Technology in the China-US Technology Landscape” – was published in March by researchers from four of China's leading government-affiliated science and engineering institutes.

• The South China Morning Post brought public attention to it in a June 1 report.

To be clear, this is a technical research paper; it is not official government policy. 

• But in China's Political system, research like this doesn't get published unless leadership wants options on the table. 
• We therefore expect it to directly inform the highest levels of debate on export control strategy.

To understand why this matters, it helps to understand the distinct purposes that China’s parallel export control systems serve.

The first system is the one that makes headlines: The dual-use export control system, established under the 2020 Export Control Law. 

• This is the mechanism Beijing has used to impose retaliatory restrictions on critical minerals and materials amid US-China trade tensions – a tool of economic statecraft deployed in pursuit of geopolitical objectives.

The second is far less well known: The industrial technology restriction system, which has been quietly operating since 2001. 

• Governed by a document called the Catalogue of Technologies Prohibited or Restricted from Export, this system manages civilian technologies – process know-how, licensing, and technical transfers – wherever they are relevant to China's industrial competitiveness.
• Think advanced cathode production, high-value crop breeding techniques, and cutting-edge metallurgy. 
• Critically, most technologically advanced economies, including the US, have similar mechanisms.
• This is routine industrial policy, not economic warfare.

The new research focuses entirely on the second system – and its diagnosis is blunt. 

• China's management of the Catalogue is, in the authors' own words, "weak."
• The system is opaque, slow, and more reactive than strategic.
• That was perhaps acceptable when China was still catching up technologically. But it is no longer acceptable now that China has become a global leader in frontier technologies – and faces what the authors describe as "systemic suppression" and "comprehensive containment" from the West.

The solution the researchers propose is a structured, three-test framework for deciding which technologies should be restricted – explicitly modelled on how the US manages its own technology export controls.

Under the proposed framework, a technology earns a place on the restricted list only if it clears all three tests. 

• Necessity: Is the technology strategically important to China, and does China genuinely lead the world in it? Both must be true. 
• Feasibility: Is the technology mature enough to actually control, and can buyers not easily source it elsewhere? Again, both must hold.
• Impact: Would restricting it cost China more than its rivals in lost innovation, jobs, or trade? 

It is a rigorous framework that prioritizes leverage over reflexive protectionism. A technology only gets restricted if China actually leads in it, if the restriction is enforceable, and if the costs to China are manageable. 

• That last test is a built-in check against the kind of overreach that would harm China's own innovators and exporters.

In a pilot implementation, the researchers identified 63 technologies where China either leads or is contending for global leadership.

• Technologies were categorized into three tiers: "urgent" candidates for near-term restriction, "forward-looking" technologies worth monitoring, and "reserve" technologies not yet ready for controls. 

So could the results of this pilot indicate how Beijing will govern future industrial technology export controls, as it looks to lock in future industrial advantages?

• Well, maybe – but there are important caveats.

First, the pilot was incomplete. 

• Recall that the three-test framework requires each technology to clear three hurdles: necessity (strategic importance to China plus Chinese global leadership), feasibility (technological maturity plus limited substitutability elsewhere), and impact (net cost to China of imposing controls). 
• In the pilot, the researchers could not assess substitutability or impact due to time and data limitations. 
• That means the 63 technologies identified are not a rank-ordered menu of proposed new controls, even by the authors' own standards. 

Second, it’s critical to note that the logic under which the researchers propose this framework – preserving China's industrial competitive advantages – is fundamentally different from the logic that drives China's retaliatory dual-use controls on critical minerals. 

• Those latter controls are geopolitical weapons, and their use is assessed on the basis of a given material's strategic importance to other countries, often as a form of retaliation. 
• That means anyone trying to predict what comes next in China's retaliatory toolkit should not be reading this research as a guide.

But what the research does tell us is something genuinely important: China's approach to protecting its industrial technology base is being rethought from the ground up.

• The framework being proposed openly reverse engineers the US's own approach, and may signal that Beijing intends to be far more systematic and forward-looking about where it draws the line for industrial tech export controls.

That means, while this research is not a list of controls to come, it is a serious public signal that the governance logic underpinning China's industrial technology export controls is changing – and that the 63 technologies identified by China's own experts as areas of strength are exactly where foreign companies and governments should be paying attention.

Cory Combs, Head of Supply Chains and Critical Minerals Research, Trivium China

What you missed

US-China

On May 30, US Defense Secretary Pete Hegseth delivered a speech at the Shangri-la Dialogue (SLD) in Singapore.

• Beijing couldn’t have asked for a more gratifying speech: Hegseth’s language on stability mirrored Xi Jinping’s own rhetoric on US-China relations and his non-mention of Taiwan suggests Trump is taking China’s concerns seriously.

On Tuesday, the office of the US Trade Representative (USTR) announced the results of its Section 301 investigation into the alleged failure of 60 US trade partners to prevent the import of products made with forced labor – with China being subject to a 12.5% tariff rate as a result.

• China’s foreign ministry didn’t mention potential Chinese countermeasures, likely due to the understanding Beijing reportedly reached with Washington about maintaining tariff rates at or below the levels agreed at the Busan meeting in October.

Foreign affairs

On Thursday, EU Trade Commissioner Maroš Šefčovič met with China’s top trade negotiator Li Chenggang in Paris.

• Šefčovič said that the EU planned to engage in “meaningful discussion” with Beijing to address “what is becoming an unsustainable trade deficit with China.”

On Tuesday, British Foreign Secretary Yvette Cooper kicked off a three-day visit to China.

• Anglo-Chinese relations had a breakthrough back in January when British Prime Minister Keir Starmer paid a visit to Beijing – Cooper’s visit was more about making sure the ice stays broken rather than major deliverables.

Econ and finance

Beijing is massively underestimating the scale of local government hidden debt.

• Huaxi Securities estimated that by March 2023, total interest-bearing debt of local government financing vehicles (the main holders of hidden debt) stood at RMB 54.7 trillion – 3.8 times the hidden debt level recognized by Beijing.

In May, local governments issued RMB 141 billion worth of infrastructure special-purpose bonds (SPBs), down 59.1% y/y, marking the third consecutive month of decline.

• The continued slump in infrastructure SPB issuance does not bode well for the Q2 infrastructure investment print, adding another downside risk to an economy already reeling from the Iran war.

Corporates

SAIC – China’s second-largest automaker – is building a EUR 200 million auto plant in Galicia, Spain.

• The plant  is expected to produce up to 120,000 vehicles annually under the MG brand when it comes online in 2028.

Business environment

China’s listed firms are being forced to pay back taxes – so far in 2026, 69 listed companies have disclosed that they owe back taxes, totaling over RMB 4.9 billion.

• Cleaning up the myriad local government tax breaks will help weed out the unproductive overcapacity that bedevils many sectors.
• However, a government retroactively demanding money from firms will not help business confidence.

China has established its first comprehensive national framework for overseeing outbound direct investment (ODI), replacing a patchwork of lower-level ministerial rules.

• The rules explicitly authorize Beijing to take countermeasures against discriminatory foreign restrictions on Chinese investment, as well as against foreign organizations or individuals that “unreasonably” restrict their legitimate overseas investment rights.

Agriculture and rural affairs

The State Council published the 15th Five-Year Plan (FYP) for Accelerating Agricultural and Rural Modernization on Tuesday.

• The plan calls to “significantly improve the level of self-reliance in agricultural science and technology and make major breakthroughs in developing new agricultural productivity” by 2030.

Politics

On Tuesday, the Party’s disciplinary commission (CCDI) announced that Li Xiaohong, former head of the office of the Central Leading Group for Inspection Work, is under investigation for “serious violations of discipline and law.”

• As former head of the office of the CCDI, Li ran the machine that drove then-CCDI head Wang Qishan’s anti-corruption campaign between 2012 and 2017.
• Our question: Is the net closing in on Wang Qishan himself?

As always, it was a busy week in China.

• Thank goodness Trivium China is here to make sure you don’t miss any of the developments that matter.