[Source/Observer Network, Liu Chenghui] China is merely implementing rare earth regulation based on internationally accepted practices, yet Western countries are now lamenting their plight and have lost their former overbearing demeanor.
In order to ensure that the regulatory measures are effectively enforced, foreign media once reported that China "introduced a tracking system" requiring producers to provide additional information such as end customers. This move has once again drawn complaints from a small group of Western enterprises, which want to purchase China's rare earth products but do not wish to accept Chinese management, and even unjustifiably worry about the leakage of trade secrets.
However, more companies choose to comply with Chinese regulations. Facing an increasingly depleted rare earth inventory, most companies are too preoccupied with securing supplies to concern themselves with so-called "security concerns"—they are willing to do whatever China requires to obtain supplies.
A June 12 report by the UK Financial Times stated that according to some Western enterprises, China is asking for "sensitive" commercial information as a condition for approving rare earth magnet exports, which has raised concerns about the potential "abuse of data" and "leakage of trade secrets."
Multiple companies and official guidance documents show that China requires the provision of production details and customer lists in the export approval process for key minerals and magnets.
In response to the rare earth issue, China's Ministry of Commerce responded today (June 12) that, as a responsible major country, China fully considers the reasonable needs and concerns of all countries in the private sector. It legally reviews applications for export licenses related to dual-use goods and has already legally approved a certain number of compliant applications, while continuously strengthening the approval work for compliant applications.
Yunnan Rare Earth Mine, Visual China
Frank Eckard, CEO of German magnet manufacturer Magnosphere, said that China is asking companies to disclose "confidential information" about their products and business to obtain export permits. He described this as China "acquiring information through official channels rather than theft."
The report states that under the current rare earth export permit system, China requires foreign enterprises to submit detailed data regarding company operations, employees, end uses, and production information. China's Ministry of Commerce guidelines on dual-use goods exports indicate that companies may also be required to provide images of products and facilities, as well as details of past business collaborations.
"They ask for a lot, really a lot," said Andrea Pratesi, supply chain director of Italian speaker manufacturer B&C Speakers. The company submitted images of production lines, videos, market information, customer lists, and some customer orders, but the names of the customers were blurred. "We have no choice; if we don't do this, they will set aside all your documents until you complete what they require." Pratesi added that two orders had been approved, and a third was still awaiting review by Chinese authorities.
"We have nothing to hide; we're just a speaker manufacturer," he added.
A Chinese export control lawyer who wished to remain anonymous said that Chinese authorities often require companies to provide information involving terminal users' "production and operation processes and technological flows."
Matthew Swallow, product manager at British magnet producer Magnet Applications, said that his company was rejected several times in April due to a lack of "final user evidence."
"Now we provide photos of magnet production, detailed information about the final use, and client information of the final user, which helps us obtain several export permits," he said.
Rare earth exports are typically submitted by local suppliers on behalf of clients to the local commerce bureau. Swallow said there were indeed concerns about the disclosure of client information. He suggested that clients should not include trade secrets or intellectual property in the application materials.
Jian Ci, chairman of the EU Chamber of Commerce in China, said that the detailed information requested by China makes it difficult for sensitive industry companies to comply and apply for export permits.
"For some applications, you need to specify the purpose very clearly, which raises concerns about intellectual property rights," Jian Ci said.
However, another European executive who wished to remain anonymous said that for now, most companies are too preoccupied with meeting the demand for rare earth magnets to worry about so-called "long-term security concerns."
These companies stated, "As long as they can secure supplies, businesses are willing to do whatever China asks them to."
China has repeatedly emphasized that rare earths and related items have obvious dual-use attributes, and implementing export controls on them is an international practice. The Chinese government legally reviews applications for export licenses related to dual-use goods and will approve compliant applications, promoting convenient and compliant trade.
On April 2, the Trump administration in the United States imposed so-called "reciprocal tariffs" on the world, with tariffs on China reaching 145%.
Following this, China immediately implemented a series of targeted countermeasures, including increasing tariffs and imposing export controls on seven categories of heavy rare earth-related items, including samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium. At the time, the Financial Times cited industry insiders reporting that China was establishing an export permit system. In December last year, China also announced strict controls on exports of gallium, germanium, antimony, superhard materials, graphite, and other dual-use items to the United States.
On June 4, Reuters quoted multiple sources as saying that China released a high-level plan last June to establish a rare earth product tracking system, but it was only mentioned again recently. The report suggests that this additional review indicates that China's export controls on rare earths and related magnets may become long-term policies, and China is almost monopolistic in these areas of production.
To support the implementation of the control measures, on May 9, the National Office for Export Control Coordination Mechanism organized a meeting involving different departments to launch a special operation against the smuggling of strategic minerals. This had already attracted international attention at the time.
Hong Kong's English-language media, South China Morning Post, reported on the same day that analysts believed that China's move aimed to strengthen the enforcement of previous export control measures targeting critical minerals, which are crucial for the U.S. defense industry.
A new report from a U.S. think tank showed that affected by China's export controls, the U.S. defense industry has only three months of rare earth reserves, while over 90% of global rare earth processing capacity remains firmly in China's hands.
What worries the West is not just China's rare earths.
An article published by the Financial Times on August 8 pointed out that China also holds a dominant position in the production of new ultra-strong magnets, transistors, batteries, new chips, and software. It has built a "strong industrial ecosystem" in electric vehicles, autonomous driving cars, drones, robots, sensors, smartphones, and corresponding semiconductor, battery, and artificial intelligence technologies.
"The balance of leverage is quickly tilting in China's favor. Trump and his team are only beginning to realize this fact," analysts said.
This article is an exclusive contribution by Observer Network and cannot be reprinted without permission.
Original article: https://www.toutiao.com/article/7514999436582404646/
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