OPINION | How China is flipping the supply chain warfare script

China has recently announced more expansive export control restrictions on rare earths targeted not just at the U.S., but the entire world

Supply chain warfare between major powers has just turned full circle with China reportedly limiting the involvement of European telecom giants like Nokia and Ericsson in the country’s domestic network. Nearly a decade ago, it was the targeting of Chinese telecom players like ZTE and Huawei during the first Donald Trump administration that ignited ongoing supply chain warfare between the US-led West and China. But it is not just telecom where China is trying to flip the script. From semiconductor chips to rare earths, China has demonstrated its intention to weaponise interdependence, use supply chain security concerns to target foreign suppliers, and fuse economic-logic driven supply chains with national security.

Telecom and 5G: Genesis of supply chain warfare

In September 2024, when Israel exploded pagers in Lebanon and the U.S. proposed banning connected car tech linked to China, there was a major shift in the central principle guiding supply chains — from efficiency and resilience to security. But the shift to supply chain security considerations itself began a few years earlier when the U.S. began targeting China’s Huawei in the battle for 5G supremacy during Trump’s first term.

The U.S., Australia and Japan were among the first to ban Huawei from their telecom networks. While the European Union has so far not banned Huawei, it has released some guidelines on inclusion of high-risk telecom suppliers. In addition, European countries such as Britain, Estonia, Denmark, France, Germany, Italy, Latvia, Lithuania, Portugal, Romania and Sweden have announced or instituted restrictions on Huawei.

The backdoor anxiety

What began with telecom soon spread to other tech sectors such as semiconductors. In December 2023, concerned about legacy chips supplied by China, the US launched a review of the semiconductor supply chains in critical industries. The primary issue, not unlike the telecom sector, was the possibility of a hardware backdoor that could be potentially inserted in the design, fabrication, or assembly, testing, marking, and packaging stages.

Parallely, the Biden administration also restricted the sale of cutting-edge chips developed by Nvidia in the Chinese market. In his final days in office, in January 2025, the Biden administration released the AI diffusion framework that further targeted China by placing it in tier 3, thereby subjecting the country to stringent export control restrictions on AI chips and models.

While Trump in his second term has rescinded the AI diffusion rules and has eased the export control restrictions on Nvidia chips flowing to China, his administration had earlier this year even banned the designed-for-China downgraded H20 Nvidia chips to China.

How China is flipping the script

When the U.S.-led West was targeting China’s companies and tech progress, the latter was not sitting idle. As Henry Farrell and Abraham Newman in their recent essay for the Foreign Affairs explain, ‘China stole a page from the American playbook’ and in 2020 instituted an export control law that helped Beijing construct ‘a bureaucratic apparatus to turn chokepoints into practical leverage’. China demonstrated that it could weaponise interdependence using the American playbook when it started placing controls on the exports of rare earths in April 2024.

While China has been trying to flip the script for the past few years, the country has accelerated the efforts in recent months. On the chip front, China is trying to develop a domestic semiconductor ecosystem while at the same time discouraging domestic players from buying Nvidia’s H20. China has also reportedly taken this discouragement a step further by instituting a crackdown at customs targeting Nvidia’s chip imports.

But it is by targeting the telecom sector that China has turned the circle. By requiring telecom contracts Chinese entities enter with Sweden’s Ericsson and Finland’s Nokia to be reviewed by the Cyberspace Administration of China — which may take a few months — China is ensuring that the ‘lengthy and uncertain audits often leave them at a disadvantage to Chinese rivals that face no such scrutiny’, according to a Financial Times report.

M&A is also in China’s crosshairs

On rare earths too, China has recently announced more expansive export control restrictions on rare earths targeted not just at the U.S., but the entire world more generally.

Going a step beyond restricting the outflow and inflow of technology and materials, China is also borrowing a leaf from the U.S.’s regulatory ecosystem by weaponising the State Administration for Market Regulation for targeting mergers and acquisitions of US tech companies such as .Nvidia and Intel.

From the first term of Trump to that of Biden, the U.S.-led West was devising export controls and technological restrictions while China was at the receiving end. But China’s multi-pronged counterattack during Trump’s second term is set to alter how the U.S.-led West engages in supply chain warfare with states that threaten their geotech dominance.

(Lokendra Sharma is a staff research analyst with the Takshashila Institution’s High-Tech Geopolitics Programme.)

Views are personal, and do not represent the stance of this publication.