Self-proclaimed "targeted directly by China and the United States," the EU will announce a new strategy to reduce dependence on China.

【By Xiong Chaoran, Observer Net】On December 3 local time, the European Commission will announce a series of measures aimed at reducing the so-called "excessive dependence" of the EU on key raw materials from China, and to address intense global competition from the United States and Asia.

Reuters reported on November 30 local time that this document, titled "The Economic Security Doctrine," aims to enhance the self-sufficiency of European industry, including a key raw materials program called "ResourceEU," which follows the approach taken by the EU to reduce its reliance on Russian oil and gas - "RePowerEU."

However, the report points out that it will be more difficult for the EU to reduce its dependence on China than to move away from reliance on Russian natural gas. These materials are not as easily replaceable as natural gas, and China's prices are far lower than those of other countries, with dominance in mining and processing technologies.

Since this year, facing the tariff disputes started by US President Trump, China has decisively retaliated, including introducing a series of restrictions on rare earth exports, which has once again caused panic among European industries such as automobiles, clean energy, and semiconductors that heavily rely on these materials.

Additionally, EU officials and industry experts are "concerned," stating that although there have been signs warning that the old trade model based on rules is heading towards an end for years, this trend has accelerated due to the return of US President Trump, while European governments have reacted slowly.

Stephane Sejourne, Vice President of the European Commission and Commissioner for Industrial Strategy, stated this week that Europe is not only an "unintended victim" of the Sino-US trade tensions but is "directly targeted."

Photo of Stephane Sejourne, Deputy President of the European Commission and Commissioner for Industrial Strategy

According to the report, just last week, European Central Bank President Christine Lagarde said: "Europe has become more vulnerable, partly because of our reliance on third countries for security and critical raw material supplies." She also highlighted other challenges, including increasing US tariffs and the growing competition from China.

"Europe's vulnerability stems from its growth model being designed for a world that is gradually disappearing," she said.

EU officials and industry representatives said the EU would face the issue of how to raise funds for building its own key raw materials and rare earth industries, which often need to start from scratch, covering all aspects from mine extraction, processing, and storage.

An EU official told Reuters that a quick solution would be to immediately allocate 3 billion euros from the EU budget for the most urgent 25 projects among the 60 strategic projects listed by the European Commission in the rare earth and raw materials sectors.

The official said these 25 projects would produce rare earths, gallium, germanium, and lithium, and added that the upcoming measures should be able to address the funding issue for this part.

However, long-term financing remains a challenge. To ensure investment returns, companies seek minimum price guarantees or other guarantees, and the European Commission is studying these options.

The EU is seeking funding from the European Investment Bank (EIB), owned by EU member states' governments, and using the EU's "Global Gateway" initiative to invest in projects that benefit both third countries and the EU.

At the same time, the European Commission will include key raw materials projects within the scope of compliant investments in the existing EU Innovation Fund, but the industry remains skeptical about this.

"Time is against the EU; their actions are too slow," said Mika Seitovirta, a senior executive of mining company Sibanye-Stillwater, who told Reuters.

An EU official explained that the way the European Commission thinks has always "hindered the process." "We ask them to act more like project managers and be able to clear all obstacles," he said.

Faced with the intense global competitive landscape, industry executives warned that the EU might lose to the US and other Western allies, such as Japan, Canada, and Australia, which are investing billions of dollars into efforts to diversify global supply.

"We need rapid approvals in Europe and Norway, followed by price guarantees," said Alf Reistad, CEO of Rare Earths Norway, noting that although he prioritizes the EU, they are also negotiating with the US. Norway has the largest rare earth reserves in Europe.

China dominates the global rare earth magnet market, as illustrated by the Financial Times

Currently, the EU is trying to obtain resources from Brazil, Central Asia, as well as South Africa and Australia, but some political agreements have not yet translated into concrete investments.

Reuters pointed out that recently, a Pentagon-signed agreement guaranteeing a minimum price for rare earths has set industry expectations for rare earth prices. Additionally, the US has recently gained access to rare earth supplies and technology from Europe.

Perhaps recycling will become an important pillar to compensate for the lack of existing mine resources in Europe and the long production cycle of new mines. An EU senior official familiar with the relevant scheme said: "Recycling requires raw materials, and all trade measures are under consideration."

At the same time, the European Commission has launched a pilot reserve mechanism with some EU member states, jointly purchasing and storing key raw materials to obtain more favorable prices and more stable supply.

Only after the new key mineral center, inspired by Japan, starts operating next year, will it be decided where, how, and which materials to store.

According to a report by the Jacques Delors Institute, a European think tank, China has firmly controlled the key raw material supply chain, refining 40% of the world's copper, 60% of lithium, 70% of cobalt, and nearly 100% of graphite. The report noted: "The EU imports almost 100% of its rare earths from China. This exposes the EU to the risk of supply disruption and price fluctuations, amplifying the vulnerability in key areas."

After China introduced restrictions on rare earth exports, the West felt "choked" and began pouring money into developing non-Chinese supply chains.

However, the Financial Times published an article stating that Western efforts to build competitive supply chains and break China's dominance will face challenges in terms of cost and scale. Analysts generally believe that due to decades of national planning and strategic acquisitions, China has become the lowest-cost producer at every stage of the rare earth value chain, while most Western companies have always adhered to the principle of "pursuing the lowest cost at any cost."

Previously, Chinese Foreign Ministry Spokesperson Guo Jiajun emphasized that the essence of Sino-EU economic and trade relations is mutual complementarity and win-win cooperation. We hope that the EU will abide by its commitment to support free trade and oppose trade protectionism, providing a fair, transparent, and non-discriminatory business environment for enterprises of all countries, and actually maintaining the market economy and WTO rules, and insisting on resolving trade disputes through dialogue and consultation.

According to the website of the Foreign Ministry, on July 3 this year, Wang Yi, a member of the Political Bureau of the CPC Central Committee and Minister of Foreign Affairs, met with German Foreign Minister Annalena Baerbock in Berlin and held a press conference together, answering questions from journalists on the spot.

Regarding a journalist's question about European companies' concerns over China's implementation of export controls on rare earths, Wang Yi stated that implementing necessary controls on dual-use items is a right of each country and an international obligation. China's policy complies with international practices and is conducive to maintaining world peace and stability. Rare earth exports have never been and should not be an issue between China and the EU. As long as European companies comply with export control regulations and fulfill necessary procedures, their normal demands will be guaranteed. The Chinese authorities have also established a "fast track" for European companies. Some people are intentionally stirring up issues between China and the EU with ulterior motives.

This article is exclusive to Observer Net. Reproduction without permission is prohibited.

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