[Text/Observer Network Xiong Chaoyi] After US President Trump provoked a full-scale tariff war in early April, the control of rare earth exports became one of China's many "countermeasures." Foreign media interpreted at the time that China was establishing an export licensing system, meaning that to purchase Chinese rare earths, one must first apply for an export license.

On May 18th local time, the Financial Times quoted industry exporters, trade associations, and supply chain experts as saying that after weeks of delay, some export licenses to Europe had been approved by China, but the approval speed was "too slow," far from meeting the demand. The "complaints" mentioned in the report also hyped up and claimed that this slow approval process might disrupt the global supply chain.

Wolfgang Niedermark, a member of the Executive Board of the German Industry Association (BDI), said: "The window to avoid significant damage to European production is rapidly closing." American manufacturers such as Tesla, Ford, and Lockheed Martin expressed concerns about China's new export controls during recent investor briefings. An unnamed European executive in China claimed that the current delays were "unaffordable" for foreign manufacturers.

Exporting rare earths waiting in Lianyungang, Jiangsu Province, Reuters

In early April, in response to US President Trump's insistence on provoking a tariff war, China also launched a series of countermeasures, including implementing export control measures on seven categories of medium and heavy rare earth-related items such as samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium. At the time, the Financial Times cited industry insiders as saying that China was establishing an export licensing system.

Now, the Financial Times further believes that this move highlights China's dominant position in the global critical mineral supply and the resulting geopolitical influence.

China has absolute dominance in the rare earth market. Relevant data shows that approximately 60% of the world's rare earths are mined in China, and nearly 90% are refined and processed in China before being shipped worldwide, including to the United States.

The New York Times pointed out on April 16th that among the 50 critical minerals listed by the US Geological Survey, more than half of America's critical minerals come from China, including 17 rare earth elements. Many of these rare earth elements have heat-resistant chemical properties and are often used to manufacture high-quality magnets, glass, lamps, batteries, and other products. They are also key raw materials for military equipment such as F-35 fighters, submarines, missiles, and radar systems.

The report stated that it is unclear whether China has begun approving exports to the US since the mutual tariff reduction between China and the US. After the joint statement on economic and trade talks between China and the US was released on May 12th, some American companies closely watched for any possible changes in the export control measures. Reuters cited sources as saying that China is unlikely to completely cancel export controls.

The Financial Times quoted two so-called "informed sources" as saying that at least one shipment of rare earth materials destined for Volkswagen's German operations has received "some of these (export) licenses." As of now, China has not responded to this. Some European executives also said that European companies are "unsure how to prove" that their imported rare earths will not be re-exported to the US, as doing so would violate the terms of the license.

Last month, Tesla CEO Elon Musk told investors that China had requested his company ensure that the rare earth magnets required for manufacturing industrial robotic arms would not be used for military purposes. "This is an example of a challenge, and I am confident we will overcome these issues," he said at the time.

Rajesh Jejurikar, Chief Executive Officer of Mahindra Group's automotive business, noted that the current process for obtaining end-use certification (to ensure materials are not used for weapons manufacturing) is "not clear."

A manager at Chengdu Galaxy Magnet Co., Ltd., which sells permanent magnets, stated that blocking the export of strategic materials related to military use is a key concern for China. The company is assisting customers in submitting export approval statements but clearly stated that applications related to "military purposes" will not be accepted.

It was reported that materials like permanent magnets are widely used in Lockheed Martin's F-35 fighter jets, and China's newly implemented export controls are expected to cause short-term supply problems and force long-term adjustments in the global supply chain.

Evan Scott, CFO of Lockheed Martin, told investors this week that the company has stockpiled rare earth materials to meet annual demand. Given the "importance of our projects," he expects the US government to prioritize supplying Lockheed Martin.

After two days of negotiations, China and the US issued a joint statement on May 12th, agreeing to reduce tariffs within 90 days, cutting rates by 115%. In the statement, China also promised to "take necessary measures to suspend or cancel non-tariff countermeasures against the US starting from April 2, 2025," without specifying which measures would be suspended or canceled.

This has led some in the US, who are eagerly awaiting Chinese rare earths, to discuss whether China will relax its export controls.

Notably, China's recent crackdown on smuggling strategic minerals suggests that future export controls will not be easily relaxed. A spokesperson for the Ministry of Commerce stated on May 12th in response to questions about relevant actions that since China implemented export controls on certain strategic minerals, some overseas entities have colluded with illegal individuals in the country to attempt to evade export control measures through smuggling and other means. To curb such trends, the National Export Control Coordination Mechanism Office convened a field meeting in Shenzhen, Guangdong Province on May 9th to focus on cracking down on smuggling of strategic minerals and made special deployments. There will be a series of actions in the near future.

The field meeting further clarified the tasks of various departments such as the Ministry of Commerce, the Ministry of Public Security, the National Security Bureau, the General Administration of Customs, and the State Post Bureau in this special operation, requiring all relevant departments to strengthen law enforcement cooperation, severely crack down on smuggling of strategic minerals, form a "joint management" high-pressure posture, take effective measures, and resolutely prevent illegal outflow of strategic minerals.

Regarding the question raised by foreign media about whether China plans to lift or adjust rare earth export controls, Chinese Foreign Ministry spokesperson Lin Jian stated on May 16th: "For the specific issue you asked about, I suggest you inquire with the competent authorities of China."

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

Original source: https://www.toutiao.com/article/7505993044236223027/

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