China unveiled sweeping new restrictions on overseas exports of rare earths to include goods produced abroad, strengthening its dominance in the critical minerals supply chain amid an already fraught trade dispute with Washington.
The new regulation by China’s Ministry of Commerce on Thursday clarifies and expands sweeping curbs first announced in April, causing massive shortages around the world before a series of deals with Europe and US resumed shipments.
China is, for the first time, creating its own version of the US foreign direct product rule, which Washington has used to curb semiconductor exports to China from third countries.
Under the new rules, overseas exporters of items that contain even a trace amounts of rare earths sourced from China or manufactured using its rare earth extraction or refining technology, will need to get an export license from the country’s Ministry of Commerce.
The new requirements are "to safeguard national security" and interests as well as to prevent “misuse of rare-earth materials in military and other sensitive sectors”.
The commerce ministry said it had identified overseas companies that had seriously threatened China’s security by passing Chinese-origin rare earth materials and technology to others for military purposes.
Rare earths are vital materials in products from electric vehicles to aircraft engines and military radars. They have emerged as a major sticking point in crucial trade negotiations between China and the US to ease tensions after Donald Trump imposed record tariffs on Beijing.
China accounts for about 60 per cent of global mine production and 90 per cent of processed and permanent magnet output. Beijing has used its control of the sector as leverage in negotiations with the US administration.
It comes ahead of Mr Trump and China's president Xi Jinping’s expected meeting later this month.
“Certain overseas organisations and individuals have been directly or indirectly transferring or supplying China-origin rare earth controlled items, either in their raw form or after processing,” the ministry said, underscoring that such items have been used in sensitive areas like defence.
“Such actions have had a negative impact on international peace and stability,” it said.
It said that restrictions on exporting the technology to make rare earth magnets will be expanded to more types of magnets.
Equipment used to recycle rare earths will now also require an export licence, joining the growing list of restricted rare earth processing technologies.
The announcement clarified, for the first time, some of the targets of China’s controls.
Overseas defence users will be denied licences, while applications related to advanced semiconductors will be considered on a case-by-case basis.
Chinese companies operating abroad are also prohibited from collaborating on rare earths with foreign firms without ministry approval. It would mark China’s first expansion of Beijing’s jurisdiction over its materials used abroad.
