[Source/Observer Network, Liu Chenghui] After the breakthrough in US-China trade negotiations, a number of US companies that rely on Chinese imports breathed a sigh of relief. However, due to the lack of clear lifting of China's export controls on rare earths, American buyers are becoming increasingly anxious.

The Hong Kong English-language media South China Morning Post noticed on May 16 that rare earth control is a "trump card" in China's negotiation arsenal, and the US will find it difficult to break free from its reliance on Chinese rare earths in the short term. American companies purchasing rare earth magnets from China are concerned that, with strict export approval controls by China, their material inventories for production lines may run out, leading to supply chain disruptions and catastrophic financial impacts.

According to the report, despite the easing of trade tensions this week, as the world's largest producer of key components for consumer electronics, electric vehicles, and defense systems, China continues to crack down on rare earth smuggling and strengthen supply chain supervision.

An American company, which claims to produce "non-sensitive commercial use" audio equipment, expressed concerns to the South China Morning Post. This company procures magnets containing trace-controlled elements for its factories in Europe and Latin America. Due to the current export approval process taking at least 45 working days and China requiring a guarantee letter stating that "the product does not contain controlled elements," its overseas assembly lines are facing inventory depletion.

The company stated in a statement, "The delay in export approvals will disrupt our production and have adverse effects on the production plans of downstream automotive manufacturers, including possible production halts," "Long-term unresolved issues will cause catastrophic financial impacts, including plunging revenue and supply chain chain disruptions."

Rare earth minerals Visual China

Since China implemented rare earth restrictions, this unnamed American equipment manufacturer has reportedly sent representatives to China to follow up on the permit approval process. The company even requested support from US officials to contact China to resolve the issue of delayed product transportation.

Reuters disclosed earlier this week that since the implementation of the restrictions last month, China has issued export licenses to at least four rare earth magnet producers, including suppliers to Volkswagen.

A Beijing-based consulting firm Trivium China analyzed in a briefing on the 14th that the market "misunderstood" the recent significance of the licenses. These approvals were granted before the agreement between China and the US was reached and therefore do not reflect policy changes triggered by reduced tariffs. Moreover, the licenses only cover clients in Europe and Vietnam.

This American manufacturer also mentioned that an application submitted by one of its suppliers in Beijing in early April has been approved for single-batch transportation. "Approved permits are for exports to Europe. At least we know (China) is processing applications and going through the procedures," the company said.

However, sources familiar with the company said that the complexity and restrictiveness of the approval process mean that even if approved, the process could still be quite lengthy. "The challenge lies in each license being applicable only for a single batch of transportation," an anonymous source said. "In just the past two weeks, we've had dozens of batches."

The company disclosed in internal documents that, to ensure inventory levels, it resorted to desperate measures. "One of our suppliers once tried air freight to export without obtaining the necessary permits and successfully cleared customs," "However, subsequent sea freight was detained by customs for inspection. Given that the magnets indeed contain 'controlled critical minerals,' the supplier has stopped trying, and the inspection results are pending."

On May 16, Foreign Ministry spokesperson Lin Jian presided over a regular press conference. A Reuters reporter asked, "This week, US Trade Representative Greer told American media that China has agreed to lift export countermeasures imposed after April 2, including export controls on rare earth minerals and magnets. China has announced modifications to several non-tariff countermeasures but has not modified the restrictions on rare earths. Is China planning to lift or adjust the export controls on rare earths?"

In response, Lin Jian said, "For the specific questions you raised, I suggest asking the relevant Chinese authorities."

A May 12 report by Fortune magazine mentioned, "After the suspension of tariffs by the US and China, rare earth exports have now become a focal point."

"Dominance in this field may be one of China's most important means of exerting influence on the US," believes Dexter Roberts, a non-resident senior fellow at the Atlantic Council. He thinks China is unlikely to relax export controls. "Now they punish the US with rare earth export controls, and they won't give up this part of their economic arsenal."

China's recent special operation targeting the smuggling of strategic mineral resources also seems to indicate that future export controls will not be easily relaxed. In response to related actions during a press conference on the 12th, a spokesperson for the Ministry of Commerce stated that since China implemented export controls on some strategic minerals, some foreign entities have colluded with illegal individuals within China to attempt to circumvent export control measures through smuggling and other methods. To curb such trends, the National Export Control Coordination Mechanism Office convened a meeting in Shenzhen, Guangdong Province, on May 9, focusing on cracking down on the smuggling of strategic minerals, and made special deployments. There will be a series of actions organized in the near future.

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

Original source: https://www.toutiao.com/article/7505205918884250138/

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