China tightens export controls on rare earths amid trade tensions

In Hong Kong, the Chinese government announced the imposition of new restrictions on the exports of rare earth elements and associated technologies. This announcement occurred on a Thursday, significantly ahead of high-profile trade discussions between President Donald Trump and Chinese leader Xi Jinping scheduled for later this month. The new regulations, issued by the Ministry of Commerce, necessitate that foreign companies seek special approval to export products that include even minor quantities of rare earth elements sourced from China. Moreover, these controls also encompass the exporting of technologies integral to rare earth mining, processing, and recycling. China is a dominant player in the global rare earth market, accounting for nearly 70% of the world’s mining and approximately 90% of the processing of these critical minerals. Rare earths are essential for a multitude of products used in both civilian and military applications, like consumer electronics, jet engines, and radar systems. Consequently, access to these materials is a point of contention in ongoing trade negotiations between the United States and China. As the U.S. administration raises tariffs on various imports from China, Beijing has intensified its focus on regulating these strategically important minerals, which might raise concerns regarding availability for manufacturers globally. The Ministry of Commerce articulated that the aim of the new restrictions is to better protect national security and prevent sensitive technologies and minerals from being used in military applications or falling into the hands of groups that may threaten China. The regulations specify that foreign firms must obtain a license for exporting any technologies employed in rare earth mining, smelting, processing, and magnet production. The licenses will also cover the international commercial transactions of rare earths extracted or processed in China. Particular scrutiny will be applied to applications associated with military uses or defense entities, which are likely to be rejected outright. This tightening of export regulations arrived shortly after a period of limited dialogue between the two countries, which saw signs of potential cooperation amidst ongoing tensions. The new measures coincide with the U.S. expanding restrictions on certain Chinese technology firms, showcasing a broader context of confrontation. Although there have been some positive indications of communication between the two nations recently, significant tensions persist, particularly with the current focus on rare earth supply chains, placing pressure on international industrial sectors reliant on these essential materials.