China Tightens Export Controls on Rare Earths Ahead of US Talks

China has announced new restrictions on the export of rare earth elements and related technologies, heightening tensions with the United States ahead of a key meeting between President Donald Trump and Chinese leader Xi Jinping later this month. The regulations, revealed on October 5, 2023, require foreign companies to obtain special approvals for exporting products containing even trace amounts of rare earth elements sourced from China.

These new measures come as China seeks to impose stricter controls over the mining, smelting, recycling, and magnet-making technologies associated with rare earths, which are critical to a variety of industries. The Ministry of Commerce indicated that these changes are intended to “better safeguard national security” and prevent the use of rare earths in sensitive fields, such as the military.

China is a dominant player in the rare earths market, accounting for nearly 70% of global mining and roughly 90% of processing. This significant control over essential materials adds complexity to ongoing trade negotiations between Washington and Beijing, especially as Trump has implemented tariffs on numerous imports from China.

The announcement of these new curbs raises concerns among manufacturers in the US and other countries about potential shortages of these vital materials. Rare earth elements are integral to many products, including jet engines, radar systems, automotive components, and consumer electronics like smartphones and laptops.

As global trade tensions escalate, the Ministry of Commerce cited instances where unnamed “overseas bodies and individuals” have transferred rare earth elements and technologies from China for military purposes, causing “significant damage” to its national security. The new export policies reflect China’s broader strategy to leverage its rare earth dominance in international negotiations.

The timing of the announcement is crucial, as Trump and Xi are scheduled to meet at the Asia-Pacific Economic Cooperation (APEC) forum in South Korea later this month. According to George Chen, a partner at The Asia Group, “Rare earths will continue to be a key part of negotiations for Washington and Beijing.” He noted that while both sides seek stability, negotiations will likely involve considerable back-and-forth before any final agreements are reached.

In April 2023, China had already imposed export curbs on seven rare earth elements shortly after Trump introduced his steep tariffs on various trading partners, including China. Despite these uncertainties, the Chinese government has recently approved some export permits and stated its intention to expedite the approval process for rare earth exports.

As these developments unfold, the global market will be closely monitoring how China plans to enforce these new policies and their potential impact on international supply chains. The outcome of the upcoming leaders’ meeting could significantly influence future relations between the two largest economies in the world.