China has levied a raft of new export controls related to rare earth materials, expanding the scope of restrictions well beyond those previously imposed, as it looks to cement its near-monopoly status in the sector and fend off attempts by the United States to gain a foothold in the critical minerals supply chain.
In a flurry of activity on Thursday, the country’s Ministry of Commerce made a series of announcements outlining new limits on several varieties of products deemed sensitive to national security.
Areas covered included, most notably, the overseas transfer of technologies and equipment involved in the extraction and processing of rare earth elements – raw materials essential to the production of hi-tech goods like electric vehicles, smartphones and spacecraft.
In addition, the ministry expanded the list of critical minerals under its export control umbrella, placed restrictions on the trade of items related to battery production and imposed curbs on the shipment of selected products containing “superhard materials”.
Restrictions on the export of technologies related to the rare earth production chain – mining, smelting and separation, magnetic material manufacturing, as well as the use and recycling of rare earth secondary resources – will take effect immediately, according to a statement from the ministry.
Technologies related to the assembly, debugging, maintenance, repair and upgrading of production lines will also be restricted.
The moves represent a “major upgrade” of Beijing’s rare earth export control regime, widening the breadth of restrictions from raw materials to technology and intellectual property, which should strengthen China’s leverage ahead of crucial negotiations with the US, according to Wang Dan, China director at risk consultancy Eurasia Group.
“These restrictions will have little impact on China’s production, but will deepen foreign dependence on Chinese know-how,” she said.
In a separate notice, the commerce ministry said Beijing will require any foreign entities exporting rare earth materials that are made in China to apply for a dual-use item export permit, effective immediately. The permits are provided by the ministry as authorisation for the shipment of dual-use items, goods that have both civilian and military applications.
Rare earth products that are produced overseas but include elements or use technologies originating from China will also be subject to restrictions, though the rules will not come into effect until December 1.
Export applications involving military end users or entities on China’s export control list will in principle not be approved, the notice said, adding that applications involving the production of high-end semiconductors will be subject to case-by-case approval.
“Exporters should strengthen their compliance awareness,” the ministry said. “They must understand the primary uses of their exports and judge whether they are dual-use items.”
The announcements come as China and the US prepare for a hotly anticipated meeting between Presidents Xi Jinping and Donald Trump later this month on the sidelines of the Asia-Pacific Economic Cooperation summit in South Korea.
Beijing’s decision to introduce fresh controls was likely a strategic move ahead of the planned summit, said Wang of Eurasia Group.
“Rare earth access and controls are expected to be a central bargaining point, with China seeking to force US concessions on tariffs, semiconductors and other tech areas by tightening controls. The approach displays a new level of confidence and sophistication in using export controls as a geopolitical tool.”
Foreign businesses, especially those in the electric vehicle, advanced equipment and defence industries, would need to further strengthen their compliance and contingency plans, according to Wang.
“There has been a series of tit-for-tat measures between China and the US over the past weeks, indicating that despite progress in trade talks there are still significant issues that both sides need to talk through,” said Alfredo Montufar-Helu, managing director at Ankura Consulting’s GreenPoint Business.
“The hope is that this will remain very targeted and won’t spill over into other areas, and this is why continued engagement between both countries’ top leadership is so important.”
Rare earths have become a major sticking point in the ongoing US-China trade war, with Beijing using its influence over rare earth supplies as leverage in its negotiations with Washington.
China is the world’s leading producer of rare earth elements. The country accounts for about 70 per cent of global rare earth mining and 90 per cent of global processing capacity.
Beijing placed export controls on seven critical minerals in April, soon after Trump announced his “Liberation Day” tariffs on most US trade partners. Chinese exports of rare earth magnets slowed as tensions rose over the following months, sparking alarm among Western manufacturers.
Beijing began to speed up export permit approvals after a round of negotiations in London in June, but it retains tight controls over the rare earth supply chain and has cracked down on smuggling to prevent exporters circumventing its restrictions.
In an attempt to cut its reliance on China’s rare earths, the US has ramped up efforts to boost domestic production, adopt substitute materials and pursue strategic partnerships with third countries. The new announcements by Beijing could hamper those moves.
In addition to the new rare earth controls, the ministry also announced a series of restrictions on the trade of selected items containing superhard materials the same day.
Exporters wishing to ship these products must now apply for a licence from the Ministry of Commerce. Superhard materials, substances synthesised to possess exceptional structural stability and capacity to withstand compression or stress, can be used for cutting tools or coatings, among other applications.
In a separate online statement on Thursday, a commerce ministry spokesperson said that the scope of the rare earth-related export controls was limited and measures to facilitate the issuing of licences would be implemented.
“The Chinese government will grant licences for items that meet relevant regulations,” the spokesperson said.
“Exports for humanitarian relief, such as emergency medical treatment, public health emergencies and natural disaster relief, will be exempted from licensing requirements.”
The policy also incorporates a reasonable transition period, taking into account the practical needs of stakeholders to fulfil existing commercial contracts and meet compliance requirements, the ministry added.
