[Text/Observer Network Zhang Jingjuan] Although China's control of rare earth exports is a precise counterattack on Trump's tariff, it has caused quite a few Western companies to feel the pain.

According to Nikkei Asia, the China EU Chamber of Commerce warned on the 28th that China's control measures could lead European manufacturers to face production shutdown crises within days. However, the latest policy briefing from the Ministry of Commerce has sent signals that there may be some relaxation in chip exports to Europe.

Jens Eskelund, secretary general of the China EU Chamber of Commerce, told members and journalists in Beijing that Europe now faces a situation where some companies will run out of materials needed for production this week.

"Therefore, this is an issue that needs to be resolved as soon as possible," Eskelund said, adding that if no solution is found, it will cause "European manufacturers to pay a huge price."

On April 2, the Trump administration announced "reciprocal tariffs" on Chinese goods. Just two days later, China introduced a series of measures to counterattack precisely, including increasing tariffs and implementing export controls on seven categories of medium and heavy rare earth-related items such as samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium. In December last year, China had announced strict controls on exports of gallium, germanium, antimony, superhard materials, graphite, and other dual-use items to the United States.

China emphasized that the current government's legal implementation of export controls on related items aims to better safeguard national security and interests, fulfill international obligations such as non-proliferation. These items have both military and civilian applications, and their export control is an international practice.

Previously reported by the Financial Times, China's export controls focus on medium and heavy rare earths, which can produce high-performance heat-resistant magnets, such as dysprosium, terbium, and samarium, which are crucial for military fighter jets, missiles, drones, as well as rotors, motors, and gearboxes for electric and hybrid vehicles.

Although rare earth metals are relatively common in the earth's crust, extracting them at low cost and in an environmentally friendly way is difficult. China is almost monopolistic in processing heavy rare earths. According to International Energy Agency data, about 90% of refined rare earths came from China in 2023.

Earlier this month, both China and the United States agreed to suspend tariff measures for 90 days and reduce rates by 115%, but China still strictly controls rare earth export controls and launched a licensing system for rare earth exports. Licenses are granted according to the "one batch per license" rule, meaning each batch of exported rare earth must have a separate license, and exporters must fill in end-user information in their application to further block loopholes.

Eskelund said that there seems to be a "large backlog" in the application process currently.

On May 11, 2024, at the China Brand Expo, China Northern Rare Earth (Group) High-Tech Co., Ltd. exhibited various types of rare earth materials, rare earth metals, and rare earth oxides. Visual China

Adam Dunnett, secretary general of the chamber, said that the relevant issues were mentioned at the China-Europe Semiconductor Companies Roundtable held on the 27th. The Chinese Ministry of Commerce official attending the meeting said they were working hard to cope with the surge in approval requests.

Dunnett said that the sudden announcement of the export control measures left little transition period, leaving companies unable to plan ahead and also unable to "avoid potential crises facing current European production."

As an independent official representative agency for more than 1700 member companies of the EU in China, the China EU Chamber of Commerce is one of the members of the European Business Community. Since its establishment 25 years ago, the China EU Chamber of Commerce has established branches in nine cities in China.

After the symposium on upstream and downstream enterprises in the China-Europe semiconductor industry was held, the Ministry of Commerce issued a statement saying that both China and Europe hold important positions in the global semiconductor supply chain, and strengthening cooperation serves the interests of both sides. Given the complex and severe international situation with increasing unstable and uncertain factors, China will continue to expand high-level opening-up, provide enterprises with fair, stable, transparent, and predictable policy environments, support China-Europe semiconductor enterprises in fully utilizing their complementary advantages, cooperate lawfully and compliantly, firmly oppose unilateralism and hegemonism, and strive to maintain the safety and stability of the global semiconductor supply chain.

China Daily learned from multiple informed sources that the Department of Industrial Security and Export Control under the Ministry of Commerce delivered a briefing on the rare earth export control policy at the meeting to help companies and their relevant suppliers understand how to apply for export permits.

The informed sources said that this move implies that China may relax the rare earth export controls targeting the supply chains of China-Europe semiconductor enterprises to better maintain the stability of the global industrial chain.

This year marks the 50th anniversary of the establishment of diplomatic relations between China and the EU, and high-level economic and trade interactions between the two sides are intensively unfolding.

During the World Trade Organization (WTO) Ministerial Conference to be held next month in Paris, France, China's Minister of Commerce Wang Wentao will also meet with Maros Sefcovic, the EU Commissioner for Trade and Economic Security. The China-EU Leaders' Summit will be held in July in China.

This article is an exclusive piece by Observer Network and cannot be reprinted without permission.

Original source: https://www.toutiao.com/article/7509698848483312169/

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