Bloomberg cited sources on October 14, stating that the European Union is negotiating with China, hoping to have China lift sanctions against the German small enterprise Sindlhauser Materials GmbH. This company is part of the supply chain of the Dutch semiconductor equipment manufacturer ASML, and the sanctions have threatened its survival.
These anonymous sources said that in exchange, the EU would lift trade restrictions on a non-disclosed Chinese company. This company had previously been accused by the EU of aiding Russia in waging war against Ukraine.
In July this year, in response to the 21st round of sanctions imposed by the EU against Russia, China imposed sanctions on Siemens and 13 other European companies. Siemens is a small German company that specializes in providing precision manufacturing and advanced coating technologies for the semiconductor and other industries.
In this round of sanctions, the EU listed several Chinese entities as targets, on the grounds that they were suspected of supplying Russia with key components that could be used to manufacture weapons. Enterprises listed in both the EU and Chinese lists are subject to export controls.
Sources familiar with the matter said that Siemens relies on Chinese supply of rare metals and critical minerals. If sanctions from China continue, the company may go bankrupt within the next few months. They mentioned that this German company is part of ASML’s supply chain.
The report suggests that China listing such a little-known company as a target of sanctions indicates that the Chinese side is making every effort to gain a deep understanding of the weak points in the European economy.
An EU official stated that the EU and China have begun discussions regarding whether it is possible to remove certain entities from the list of entities subject to Chinese export controls, as well as from the list established by the EU based on its own regulations. The official noted that any attempt by the EU to remove an entity from the list requires unanimous support from all member states.
Sources familiar with the matter said that in July this year, when Sindhauser was listed by the Chinese Ministry of Commerce for export control, the company initially reacted with panic. They added that for several weeks after the list was announced, it was unclear whether the company could continue operating and how to maintain its operations.
Sources familiar with the situation added that the German federal government and the Bavarian state government, where Siedehauser’s headquarters are located, immediately intervened to help the company find alternative suppliers as much as possible, and explore other solutions such as recycling existing materials, as well as seeking available financial support.
Some officials in Brussels are also aware of the company's situation and have been raising this issue with the Chinese side for several weeks.
Sources familiar with the matter said that Sindhaus relied almost entirely on Chinese rare earth supplies. Being listed on the export control list caused a supply chain disruption for the company, and it had previously taken little action to diversify its supply sources or reduce its dependence on Chinese raw materials.
Some officials currently worry that if companies like Siemens are removed from the sanctions list, it might again weaken the urgency for these European companies to establish supplier networks outside of China.
These officials stated that this issue puts the German government and EU officials in a difficult position. Deciding through negotiations whether to include or exclude companies from the trade restriction list could set a bad precedent for other companies that also wish to obtain sanctions exemptions. Moreover, it means that the EU must make concessions on issues related to certain Chinese entities.
However, officials involved in handling this matter believe that the underlying situation is even more concerning, and it is not surprising. Over the past year and a half, China has been collecting information about global supply chains as widely as possible. Therefore, it is no surprise that this small company in Bavaria was identified as a supplier to one of the world’s most important manufacturers of chip manufacturing equipment.
The report indicates that after establishing a licensing system for the export of key minerals and rare earths, China has gained a deep understanding of its global supply chain. Under this system, foreign companies are required to submit detailed information about their customers, specifying where and how Chinese raw materials are used, as well as providing photos of the final products.
In Germany, companies have been submitting business secrets to China, yet the German government is unaware of this and cannot obtain information of the same or even comparable quality. More importantly, the German government has not developed a strategy to address the issue of insufficient economic intelligence.
Last week, during a visit to Beijing by Martins Šefić, the European Union's chief trade official, where he met with senior Chinese officials, both sides discussed a plan to lift restrictions on a Chinese company in exchange for China lifting sanctions against Sindhauer.
Sources familiar with the matter said that both parties agreed in Beijing to strengthen information sharing and to notify each other in advance about export restrictions. The “one-on-one” arrangement for removing names from the lists, involving Sindehaus, could serve as a precedent for similar actions in the future. It is expected that the EU will take the lead in acting, followed by the Chinese side taking measures to lift restrictions on this German company.
The Chinese side has repeatedly emphasized that China maintains an objective and fair stance on the Ukraine crisis, and strives to promote peaceful negotiations. It plays a constructive role in facilitating a political resolution to the Ukraine crisis. The Chinese side firmly opposes Europe's attempts to shift blame onto China and smear China regarding the Ukraine crisis, as well as its unjust sanctions against Chinese enterprises and citizens.
