Rare Earths Under Lockdown: China's New Export Controls Shake Global Tech Industry
China has escalated its export controls on essential rare earths and other critical materials that are pivotal for advanced technology manufacturing, amid ongoing trade negotiations with the United States. With China processing nearly 90% of the world’s rare earths, these resources are integral to the production of various technologies, from solar panels to smartphones. The recent measures come just before a highly anticipated meeting between Chinese leader Xi Jinping and US President Donald Trump.
The tightened regulations require foreign companies to seek approval from the Chinese government for exporting any product that contains even minimal amounts of rare earths, necessitating a detailed disclosure of their intended use. The latest announcement also extends restrictions on the exports of lithium batteries and specific forms of graphite, both of which are vital components in the global tech supply chain and predominantly produced in China. The Chinese government framed these protective measures as necessary to “safeguard national security.”
One of the apparent aims of these rules is to affect foreign defense manufacturers, particularly those in the US who are heavily reliant on Chinese rare earths. In a prior move in April, China had already added several rare earths and associated materials to its export control list, contributing to a substantial global shortage amid the escalating trade conflict.
The latest regulations explicitly limit the issuance of licenses to certain companies, especially those involved in arms manufacturing and certain sectors of the chip industry. Additional restrictions encompass various technologies, including those for mining and processing rare earths, manufacturing magnets, and recycling these crucial materials. Even the assembly and maintenance of production equipment fall under these new controls, now requiring government approval for export.
This policy shift closely mirrors the US regulations that seek to obstruct countries from selling chip-making equipment to China, a strategic move aimed at impeding China’s advancements in powerful chip technology potentially applicable in military contexts.
According to trade analyst Alex Capri, these directives from Beijing seem to be strategically timed ahead of the Xi-Trump meeting, targeting the vulnerabilities in US electronics and weapons manufacturing similarly to America’s prior restrictions against China’s chip industry.
Rare earths, a category of 17 chemically similar elements, are critical for making numerous high-tech products. Though these elements are generally abundant, they are labelled as “rare” due to the difficulty in finding them in pure forms and the hazardous nature of their extraction process. Elements like neodymium, used in powerful magnets for electric vehicles and consumer electronics, illustrate the broad impact of these materials. The International Energy Agency estimates that China currently dominates the global market, accounting for about 61% of rare earth production and 92% of processing.