On Thursday, China’s Ministry of Commerce announced new restrictions on the export of rare earth minerals. These minerals are crucial for the production of semiconductors, electric vehicles, green energy technologies, and other significant advancements.
Analysts view this decision as preparation for an impending trade discussion between Xi Jinping and Donald Trump.
China is a dominant player in the rare earth market, holding most of the 17 recognized elements in this group. The country produces roughly 70% of the world’s rare earth supplies and controls about 90% of processing capabilities.
Mining and processing rare earths is no small feat—it’s expensive and complicated. China has leveraged its position in the market to maintain a competitive edge that’s hard for others to rival. If China decides to develop more mines or processing facilities overseas, it could flood the market, causing prices to drop and making it difficult for competing projects to survive.
Unfortunately, few countries can really compete. The environmental impact of opening new rare earth mining operations makes it more appealing for many to outsource to China, which has its own detrimental effects on the ecosystem.
The Chinese government established a system of market control by tightening rules after the chaotic mining practices of the 1990s and early 2000s. This included implementing strict production quotas and export limitations that revealed the true value of rare earth minerals. Such regulations have now allowed China to potentially weaponize this sector for geopolitical leverage. Currently, a consortium of six state-owned enterprises manages the global supply.
Countries in the free world are increasingly aware of the risk posed by China’s near-total hold over critical supply chains. Still, efforts to lessen this dependence have been moving slowly.
Earlier this year, in a show of strength, China completely halted rare earth exports to the U.S., only to later ease some of those restrictions. Now, however, they have tightened regulations again, enforcing stricter licensing for the export of technology linked to rare earth refining and placing additional limitations on battery technology exports to maintain their advantage in electric vehicles.
According to reports, “The latest rules require case-by-case approval for the export of rare earths used in the design and manufacture of advanced semiconductors, including specific types of logic and memory chips.” This is a significant change.
Additionally, the list of restricted rare earth minerals has expanded to include holmium, erbium, thulium, europium, and ytterbium; previously, only seven were subject to restrictions.
From a geopolitical standpoint, this will likely enhance Beijing’s influence before the upcoming meeting between Trump and Xi in South Korea later this month, as noted by an analyst.
The anticipated meeting between President Trump and President Xi is to take place during the Asia-Pacific Economic Cooperation (APEC) summit in Korea at the end of October.
China’s Ministry of Commerce mentioned that the new rules aim to “better safeguard national security” and protect their rare earth technologies from being exploited by certain overseas entities in military or sensitive sectors.
On the same day, tensions escalated as China added 14 foreign military and tech organizations to its “untrusted entities” list, limiting their business operations with Chinese firms. Most affected were U.S. and Canadian companies that collaborated with Taiwan or made critical remarks about China.
