Paul A. Huang*

On July 9, 2025, China’s Ministry of Commerce, citing “national security and non-proliferation obligations,” announced for the first time that it would impose export controls on eight Taiwanese entities. The action was taken under the authority of the Export Control Law of the People’s Republic of China and the Administrative Measures on Export Control of Dual-Use Items. The targeted entities include: Aerospace Industrial Development Corporation (AIDC); GEOSAT Aerospace & Technology Inc.; National Chung-Shan Institute of Science & Technology (NCSIST); JC Technology Inc.; CSBC Corporation, Taiwan; Jong Shyn Shipbuilding Co., Ltd.; Lungteh Shipbuilding Co., Ltd.; and Gong Wei Co., Ltd.[1] (See Table 1 for details).

The items designated as “dual-use” (military and civilian) by the Beijing authorities fall into ten major categories: special materials and related equipment; chemical products; microorganisms and toxins; processing materials; electronics; computers; telecommunications and information security; sensors and lasers; navigation and avionics; ships; aerospace and propulsion systems; and other related items. Following China’s announcement of export restrictions on these eight Taiwanese companies, any ongoing export activities were immediately halted. In the future, if these companies wish to obtain high-end electronic components or rare earth materials produced in China—classified as dual-use items—they will be required to apply for special permission from the Chinese government. Without such approval, exports to Taiwan will be entirely prohibited. In other words, China may increasingly use an integrated mechanism of control, licensing, and monitoring over these items to constrain the development of Taiwan’s dual-use technologies.

Given that these eight companies are at the core of Taiwan’s defense technology development, China’s recent announcement of export restrictions represents a deliberate attempt by Beijing to disrupt Taiwan’s access to critical materials essential for advancing its military technologies. Since dual-use technologies are intrinsically linked to the growth of the defense industry—and given the heavy reliance of advanced military equipment on rare earth elements—such materials occupy an irreplaceable position in military-industrial applications. As the majority of these materials originate from China, rare earths have become a central focus of China’s regulatory measures against Taiwanese firms.

Strictly speaking, Taiwan’s current development in military technology poses only a limited threat to China. Besides, the immediate economic impact of placing these eight defense-related Taiwanese entities on China’s export control list is likely to be minimal. However, the strategic significance of this move lies in Beijing’s intention to use export controls as a political signal—conveying a clear warning that cross-Strait relations have substantially deteriorated. Therefore, the implications of these Chinese export control measures for Taiwan’s national security merit close examination.

Table 1: Overview of the Eight Taiwanese Entities Subject to China Export Restrictions

Source: Compiled from publicly available information, including: AIDC, https://www.aidc.com.tw/en/; GEOSAT Aerospace & Technology Inc., https://www.geosat.com.tw/TW/investors-financial-reports.aspx;NCSIST, https://www.ncsist.org.tw/eng/csistdup/main/Default.aspx; JC Technology Inc., https://www.jctech.tw/en; CSBC Corporation, Taiwan, https://www.csbcnet.com.tw/English/; Jong Shyn Shipbuilding Co., Ltd., https://www.jongshyn.com/; Lungteh Shipbuilding Co., Ltd., https://www.lungteh.com/; Gong Wei Co., Ltd., https://www.twincn.com/item.aspx?no=29006502.

Against the backdrop of the U.S.-China trade war, Beijing’s decision in July to place eight Taiwanese companies on its export control list is closely linked to Taiwan’s earlier move in June to impose restrictions on China’s Huawei and Semiconductor Manufacturing International Corporation (SMIC). In response to national security concerns such as preventing weapons proliferation, ROC Ministry of Economic Affairs (MOEA) has, since 2021, been implementing the “Strategic High-Tech Commodities (SHTC) Entity List” to review the export destinations and end-uses of certain high-tech goods. In the updated version released on June 10, 2025—authorized under Article 13 of Foreign Trade Act of ROC—Taiwan added 601 entities from countries involved in proliferation-related activities, including China, Russia, Pakistan, Iran, and Myanmar. Notably, Huawei and SMIC from China were both added to the list.[2] As a result, Taiwanese companies seeking to export advanced semiconductor manufacturing technologies, equipment, or materials to these entities must first obtain prior government approval.

Huawei and SMIC are two of China’s most important companies in the development of advanced semiconductor technology, with Huawei also playing a central role in the country’s pursuit of artificial intelligence. To prevent Chinese companies from illicitly acquiring U.S. critical chip technologies, strategic materials, and related products that could be used for military purposes, the U.S. has placed Huawei and SMIC on its export control entity list since 2018.[3] In alignment with U.S. policy, Taiwan followed Washington’s lead and added Chinese tech firms to its own control list just before the Trump administration officially announced its tariff measures. This move was widely seen as a strategic gesture of support for the U.S. position in the trade and technology dispute. In response, China’s Taiwan Affairs Office accused Taiwan of “relying on foreign powers to seek independence,” while the Ministry of Commerce of China retaliated by legally placing eight Taiwanese defense-related enterprises on its own export control list.[4]

t is worth noting that in response to the United States’ imposition of high tariffs on China on April 2, 2025, Beijing quickly retaliated by announcing, on April 4, export controls on rare earth-related items aimed at counterbalancing U.S. tariff measures. Between 2014 and 2017, approximately 80% of U.S. rare earth imports originated from China. According to The Central News Agency, China is currently the world’s largest producer and exporter of rare earths, with reserves estimated at 44 million metric tons—around 40% of the global total. It also holds approximately 85% of the world’s rare earth refining and separation capacity and controls nearly 70% of the global rare earth supply chain.[5]

As rare earth elements are essential raw materials in the production of advanced defense systems, China’s export controls are likely to impact the U.S. military technology sector, potentially constraining the research and production of high-tech defense products. Given Taiwan’s longstanding reliance on the U.S. and European countries for military-industrial cooperation, its defense industry may also be indirectly affected by China’s restrictions.

Although the eight Taiwanese companies listed in China’s export control announcement have publicly stated that the impact is limited, the reality is that if Western countries lose access to rare earth materials from China, Taiwan’s defense industrial development could face significant constraints. This is likely one of the strategic reasons behind Beijing’s decision to target these eight companies. However, the full extent of the impact on Taiwan’s defense industry remains to be seen.

China’s imposition of export controls on Taiwanese defense companies coincided with Taiwan’s annual “Han Kuang 41” military exercises. This move not only serves as an economic signal to Taiwan’s government—warning against promoting “independence through military buildup” under the banner of “Taiwanese independence”—but also functions as a form of political pressure on both the government and related industries, reaffirming Beijing’s hardline stance on the Taiwan issue.

Even if this measure may further strain cross-Strait relations, many Taiwanese scholars and industry leaders believe that its actual impact on Taiwan’s defense supply chain will be limited. This is because Taiwan’s defense industry primarily collaborates with partners from the U.S., Europe, Japan, and Israel, and the eight targeted entities have minimal reliance on Chinese suppliers. Moreover, Taiwan government has long prohibited the use of Chinese-made components in sensitive defense sectors. Ironically, China’s announcement aligns with Taiwan’s broader effort to reduce dependence on Chinese supply chains—commonly referred to as the “de-Sinicization” of the defense industry—which may further weaken future industrial linkages between Taiwan and China in sensitive military domains.

In terms of civilian applications, Taiwan’s affected defense-related enterprises have responded differently to China’s export control measures, but they generally believe the actual impact to be limited. For instance, the AIDC noted that the export restrictions may have some effect on their civilian operations. The Lungteh stated that most of the Chinese-sourced raw materials and components used in their civilian projects are easily replaceable. The CSBC, also released a statement affirming that the supply chains for submarine construction and Coast Guard vessels primarily rely on European and American sources, with only a minimal portion of commercial shipbuilding materials originating from China.[6] Though the current round of export controls is expected to have limited impact on Taiwan’s overall economy and trade, it may accelerate efforts by these defense enterprises to seek de-Sinicized supply chains or alternative sources for key components and raw materials in the global market.

In the military domain, Taiwan strictly prohibits the use of Chinese components, materials, or supply chain products in all defense-related operations involving military technologies and weapons systems. As such, China’s export control measures do not directly affect Taiwan’s defense sector. However, it is undeniable that any disruption in the supply of rare earth materials could impact the development of Taiwan’s military equipment and systems—for instance, components such as missile guidance motor modules, microwave elements for electronic warfare systems, and propulsion or avionics modules for unmanned aerial vehicles (UAVs).

According to The Global Views Monthly, a large portion of Taiwan’s imports in 2024—including rare earth metals, mixed rare earth compounds, rare earth magnets, and cerium compounds—originated from China and accounted for a significant share of total imports (see Table 2).[7] While it is highly unlikely that the eight listed defense enterprises directly procure rare earths from China, some of these materials may be sourced indirectly through third-party importers or intermediaries.

Looking ahead, if China were to impose stricter rare earth export controls on Taiwan, the Taiwanese government would likely prioritize sourcing these materials from alternative suppliers to meet the needs of its national defense industry. Therefore, the overall impact on the military sector would remain limited. By contrast, Taiwan’s civilian high-tech industries—including semiconductors, consumer electronics, green energy, and aerospace manufacturing and R&D—would likely experience short-term disruptions, although a longer-term shift toward non-Chinese rare earth supply chains can be expected.

Strictly speaking, China’s announcement of these export control measures is a deliberate attempt to interfere with Taiwan’s defense planning and to induce a state of supply chain anxiety among affected enterprises. In essence, this represents the weaponization of trade measures against Taiwan. By applying pressure on the Taiwanese government and its associated defense firms, Beijing is conducting a form of “pressure testing” to assess the extent and scope of its impact, with the aim of identifying vulnerabilities within Taiwan’s defense industrial supply chain. Accordingly, it cannot be ruled out that China may pursue more targeted actions in the future to undermine the development of Taiwan’s defense industry. Such actions would be intended to erode public confidence in the country’s defense self-sufficiency, provoke internal divisions, and generate public pressure through heightened political discourse.

Table 2: Share of Taiwan’s 2024 Rare Earth Imports Sourced from China

Source: ROC Ministry of Finance Customs Import-Export Statistics, ROC; The Global Views Monthly.

The Taiwanese defense enterprises listed under China’s export control list—particularly the NCSIST and other state-owned corporations—have long recognized the risks associated with reliance on the Chinese supply chain. In alignment with the government’s “de-Sinicization” industrial policy, these entities have, for years, actively diversified their sources. As a result, many critical military technologies and high-end components are now primarily imported from countries such as the U.S., the U.K., Germany, France, Israel, Japan, etc.[8] These include missile guidance and seeker modules, radar and sensor modules, advanced military-grade chips, fiber-optic inertial navigation systems, electronic warfare and jamming modules, aerospace composite materials and thermal protection components, and ISR systems for unmanned platforms.

By contrast, components imported from China have largely consisted of general-purpose, low- to mid-end, and easily substitutable items or non-critical technology modules—such as industrial screws, washers, basic electronic resistors, aluminum alloy housings, CNC-machined parts, non-military-grade sensors, solder, and plastic fittings. Therefore, in the short term, China’s export control measures are unlikely to have a substantial impact on the core operations of these eight enterprises. Nevertheless, the national security implications of this move remain significant. It clearly signals Beijing’s intention to impose targeted sanctions on specific sectors of Taiwan’s defense industry, thereby escalating the strategic pressure on Taiwan’s self-reliant defense.

China’s recent export controls on Taiwan primarily target ten broad categories of dual-use items. The wide scope of these categories complicates Taiwan’s efforts to identify and assess which materials and components will be affected. Many foundational technological materials, general-purpose electronic parts, and communication equipment products possess dual-use characteristics, compelling Taiwan’s defense industry to adopt a more cautious approach in evaluating all procurement sources and seeking alternative suppliers. Strategies such as promoting rare earth recycling and diversified sourcing, as well as encouraging domestic manufacturers to enhance independent production capabilities and establish backup material technologies, are likely to be emphasized.

Furthermore, this event will accelerate the diversification and localization of Taiwan’s defense industry supply chains. Even enterprises with initially low dependence on China will become increasingly vigilant in reviewing all potential risks. In the long term, these developments will contribute to strengthening the resilience of Taiwan’s defense industrial supply chain, reducing reliance on single sources, and aligning with Taiwan’s strategic goal of advancing self-reliant defense development.

However, it is noteworthy that while Taiwan is actively excluding the “red supply chain” and pursuing international cooperation, it should also cautiously assess the infiltration and influence of China’s red industrial chains within the global defense industry. Although Taiwan’s defense industry partners are primarily like-minded countries in Europe, the United States, and Japan, inadvertent use of China-designated controlled items in certain collaborative projects or production processes could potentially affect export approvals or the progress of international cooperation. This serves as a reminder for Taiwan and the international community to remain vigilant about potential risks associated with red supply chains when engaging in defense technology collaborations.

For Taiwan government, China’s recent export control measures targeting specific defense-related enterprises primarily aim to obstruct or delay Taiwan’s development and manufacturing of military and high-tech equipment. However, this action seemingly only reinforces the necessity for Taiwan to advance its policies on strengthening defense self-reliance and diversifying supply chains. Moreover, international cooperation—particularly with countries such as the U.S., Japan, and European nations—becomes increasingly vital, as they can provide technological support and serve as backup supply chain partners.

The security implications of China’s control measures on Taiwan can be summarized as follows:

1. Building resilience and diversification in the defense industry supply chain

Taiwan should strengthen cooperation with key defense technology source countries such as the U.S., Japan, Germany, and Israel, and promote the management of a “critical technology localization” list to accelerate domestic development of chips, sensors, power modules, and other key components.

2. Enhancing defense technology legislation to improve information security

Enact legal frameworks such as the “Critical National Defense Technology Protection Act” to clearly regulate risks of information leakage and technology transfer, and reinforce corporate information security as well as oversight of joint ventures and procurement activities involving China.

3. Implementing international cooperation in the defense industrial sector to reduce supply risks

Within the framework of the U.S. Indo-Pacific security architecture, Taiwan should actively pursue inclusion in international “non-red” industrial chains, while advocating for like-minded democratic partners such as the U.S., Japan, and European countries to recognize Taiwan’s defense industry as a subject of secure technology exchange and support. Collaborative efforts should focus on developing alternative raw materials, technological self-reliance, and resource integration.

4. Building societal resilience and public communication

In response to China’s hostile measures against Taiwan, the government needs to transparently communicate the limited impact of these events to the public, preventing panic or misjudgment, and jointly with industry and military stakeholders, explain countermeasures and future transformation pathways.