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China has unveiled sweeping export controls on rare earths and related technologies, as it boosts its leverage over critical minerals ahead of an expected meeting this month between President Donald Trump and Xi Jinping.
Under the new rules, foreign companies will need Beijing’s approval to export magnets that contain even trace amounts of Chinese-sourced rare earth materials, or that were produced using the country’s extraction methods, refining or magnet-making technology.
The restrictions announced on Thursday by the commerce ministry will for the first time create a Chinese version of the US foreign direct product rule, a measure Washington has used to block semiconductor-related exports to China from third countries.
A White House official said the US government was “closely assessing any impact from the new rules”. He said the Chinese move appeared to be an “effort to exert control over the entire world’s technology supply chains”.
Rare earth minerals and magnets are critical to technologies from smartphones to electric vehicles and fighter jets.
“If enforced, and the US doesn’t respond strongly, Beijing could have complete control over the entire advanced semiconductor supply chain. Even US AI chips made in a US fab sent to a US AI lab would need Beijing’s permission,” said Jimmy Goodrich, an expert on semiconductor supply chains at the UC Institute on Global Conflict and Cooperation.
Goodrich said no chip company with business in China would risk non-compliance with the new rule.
Beijing first introduced rare-earth export restrictions in April in retaliation for tariffs imposed by the Trump administration. The move helped push Washington to the negotiating table, as the shortage of Chinese rare earths began to hit production in the US auto supply chain.
Since then, US shortages of the minerals have featured in several rounds of trade talks between the two countries. China’s latest controls come as Xi prepares to meet Trump in Gyeongju, South Korea, this month.
“The timing of this new policy is strategic,” said Gracelin Baskaran, a critical minerals expert at the Center for Strategic and International Studies. “China just put some new negotiation pawns on the table.”
China controls about 70 per cent of rare earth mining, 90 per cent of separation and processing, and 93 per cent of magnet manufacturing, according to a Financial Times analysis.
China’s commerce ministry said the new measures were intended to “protect its national security and interests” and prevent the “misuse of rare earth materials in military and other sensitive sectors”.
The ministry added that some overseas companies had significantly harmed China’s security by transferring Chinese-origin rare earth materials and technology to others for military use.
The new licensing regime will cover foreign-made rare earth magnets and certain semiconductor materials that by value contain at least 0.1 per cent Chinese-origin heavy rare earths.
The ministry said the rules would be phased in from December 1 with most export licences for military users to be denied. It said exports to manufacturers of semiconductors and related equipment would be examined on a case-by-case basis.
Dai Menghao, a trade compliance partner at law firm King & Wood Mallesons, said China had put in place rules that closely mirror the US export-control regime.
“It’s a systematic, comprehensive response to the US,” Dai said, noting it would take China some time to build up enforcement mechanisms to fully match the US.
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The news buoyed shares in China’s large state-owned rare earth groups. China Northern Rare Earth’s shares rose 10 per cent in Shanghai while Rising Nonferrous Metals Share stock was up more than 6 per cent.
Beijing’s commerce ministry and customs administration also announced expanded export controls on some battery anodes and on lithium cathodes and precursors, among other materials in the China-dominated global battery supply chain.
It was not clear how strictly the controls would be implemented. CATL and BYD, the world’s two biggest battery makers, did not immediately comment.
China’s expanding rare earth controls have forced Washington to roll out significant state support for American and allied countries’ rare earth miners and magnet makers in attempt to break Beijing’s chokehold. The G7 group of advanced economies is also exploring how to build up a non-China supply chain.
“The new directive is a clear effort to hinder development of industrial base capabilities in the United States and its allies,” said Baskaran.
Additional contributions by Edward White in Shanghai and Wenjie Ding in Beijing
This story has been amended to clarify the meeting this month between Donald Trump and Xi Jinping will take place in Gyeongju, not Seoul
