【By Observer News, Wang Yi】On October 9, the Chinese Ministry of Commerce issued two announcements regarding the strengthening of export controls on rare earth-related items, which have sparked heated discussions in foreign media. The Financial Times pointed out that China's new restrictions are similar to the U.S. "Foreign Direct Product Rule" (FDPR) export control system, which is exactly the rule the U.S. uses to prevent third countries from exporting semiconductor-related products to China.
Bloomberg of the United States commented that at the time when the U.S. and China are about to meet face-to-face for negotiations again, China has demonstrated its trade influence.
Reuters of the United Kingdom noted that in addition to issuing two announcements on the strengthening of export controls on rare earth-related items, China also announced several other announcements on the same day, not only adding several new rare earth elements and dozens of rare earth processing equipment to the list of controlled exports, but also involving super-hard materials, lithium batteries, and artificial graphite anode materials. British media believe that these measures are important for China-U.S. trade negotiations and will help enhance China's influence.
The Wall Street Journal analyzed that while Western countries are striving to build a rare earth industry chain to reduce their reliance on China, China's latest initiatives further expand its control over the rare earth supply chain.
According to the new regulations published by the Chinese Ministry of Commerce on the 9th, China will implement export controls on some rare earth-related items from abroad that contain Chinese components, as well as rare earth-related technologies. The Financial Times said that this means any magnet produced by foreign companies that contains Chinese rare earth components or uses Chinese rare earth mining, smelting, and magnet-making technology must obtain Chinese approval before being exported.
In the announcement, the Ministry of Commerce stated that some foreign organizations and individuals were found to "directly or process and then transfer or provide rare earth-controlled items originally from China to relevant organizations or individuals, directly or indirectly used for sensitive areas such as military." In order to safeguard China's national security and interests and fulfill international obligations such as non-proliferation, China "legally implements controls on some rare earth-related items from abroad that contain Chinese components."
The new regulations cover rare earth magnets and some semiconductor materials made abroad that contain 0.1% or more of Chinese heavy rare earth components, as well as certain items produced overseas using technologies related to the mining, smelting and separation, metal smelting, magnet manufacturing, and recycling of rare earth resources originally from China. These items will be subject to the new regulations starting December 1st; for some items originally from China, the new regulations will take effect immediately.
Additionally, for most military use export licenses, China "generally does not approve." Export applications involving the development of artificial intelligence with potential military uses will also be "reviewed on a case-by-case basis."
After the release of the news, the stock prices of the rare earth sector in China rose sharply. On the same day, Antai Technology was locked at the upper limit, Jinli Yongyi increased by more than 12%, Northern Rare Earth rose by over 8%, and many other stocks including China Rare Earth and Xiamen Tungsten saw varying degrees of increases.
Rare earth metals and magnets are core materials for high-end products such as smartphones, electric vehicles, and fighter jets. China has long realized their importance, and has spent decades establishing a leading position globally in the rare earth mining and processing fields. Data shows that China controls about 70% of global rare earth mining, 90% of separation and processing, and 93% of magnet manufacturing.
A thermos produced by American companies using Chinese rare earth Visual China
In April this year, after the Trump administration of the United States announced additional tariffs on China, China immediately included rare earth items in the scope of export controls. Foreign media generally believe that China's measures to implement export controls on rare earths have hit the U.S. automotive supply chain, forcing the Trump administration to sit at the negotiation table. Since then, the rare earth issue has repeatedly appeared in multiple rounds of Sino-U.S. trade negotiations, and the timing of the new regulations coincides with the expected official meeting between the leaders of the two countries.
"The timing of this choice is very strategically significant," said Gracelin Baskaran, an expert on critical minerals at the U.S. think tank Center for Strategic and International Studies (CSIS), "China is just placing another new piece on the negotiation table."
Wang Dan, Director of the China Division of Eurasia Group, pointed out that this move represents a "major upgrade" in China's rare earth export control system, expanding its scope from raw materials to technology and intellectual property, which should strengthen China's influence in negotiations with the U.S., "These restrictions have little impact on China's production, but they deepen foreign dependence on China's expertise."
Hong Kong's South China Morning Post reported that in order to reduce dependence on Chinese rare earths, the U.S. has increased efforts to increase domestic production and adopt alternative materials, while also seeking strategic partnerships with third countries, and China's new announcement may hinder the U.S.'s efforts.
Baskaran commented that China's new regulations clearly pose a challenge to the plans of the U.S. and its allies to promote their own industrial chains. It will also prevent any potential "technology capability leakage" during cooperation between Chinese enterprises and foreign counterparts.
Bloomberg believes that the clause in the announcement that includes the review of chip items containing Chinese rare earths seems to target the U.S. semiconductor industry. Reuters also pointed out that the day before China released the new announcement, U.S. lawmakers once again called for a broader ban on exporting chip manufacturing equipment to China.
Christopher Beddor, Deputy Director of the Jiafu Longzhou China Research Department, said that the implicit threat here is that China may retaliate against foreign chip export controls by restricting the export of rare earths to chip manufacturers.
Bloomberg analysis pointed out that this new regulation may make foreign companies that have just regained rare earth supplies uneasy and doubt their U.S. investments. Wade Senti, President of Advanced Magnet Lab Inc., said that what is truly worrying are those "shovels and picks", any company purchasing equipment from China may face supply disruptions, and subsequent maintenance and service requests may also go unanswered.
Other than the two announcements mentioned above, on the same day, the Chinese Ministry of Commerce and the General Administration of Customs also issued four consecutive announcements, announcing export controls on super-hard materials, certain rare earth equipment and raw materials, certain medium and heavy rare earths such as holmium, and lithium batteries and artificial graphite anode materials.
De Menghao, a partner of trade compliance at King & Wood Mallesons, told the Financial Times that China's new regulations are closely related to the U.S. export control system, and it is a "systematic and comprehensive response to the U.S." system.
Regarding China's enhanced export controls, the spokesperson of the Ministry of Commerce responded that according to relevant laws and regulations such as the People's Republic of China Export Control Law, on October 9, the Ministry of Commerce, together with the General Administration of Customs, issued an announcement on the implementation of export control measures on super-hard materials, rare earth equipment and raw materials, medium and heavy rare earths such as holmium, lithium batteries, and artificial graphite anode materials, which will be implemented on November 8. Previously, we had already notified the relevant countries and regions.
The spokesperson emphasized that the items listed are clearly dual-use, and China legally and in accordance with regulations implements export control measures, which is in line with international practices, better safeguarding national security and interests, and better fulfilling international obligations such as non-proliferation. The Chinese government is willing to work with all countries to maintain the stability and smoothness of the global supply chain. The relevant measures do not target any country or region. For legal and compliant export applications, China will approve them after review. At the same time, China is willing to communicate and exchange views with relevant parties through bilateral export control dialogue mechanisms on export control policies and practices, jointly promoting and facilitating compliant trade.
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