Chinese officials try to ease global concerns over rare earth export curbs

Chinese officials tried to ease concerns over its shock escalation of rare earth curbs while traveling in Washington, attempting to soften an international backlash while trade negotiations with the US proceed. 

Chinese delegates told their global counterparts that tightened export controls will not harm normal trade flows, in discussions on the sidelines of the International Monetary Fund’s annual meetings this week, according to people familiar with the matter.

 

The officials said China sought to build a long-term mechanism with the measure, and it was introduced as a response to US provocations such as the expansion of sanctions to capture subsidiaries of blacklisted companies, according to the people, who asked not to be named because the exchanges were private.

 

China’s unprecedented move on rare earths sparked a global pushback over the past week, as officials from Europe and Japan voiced concerns over supply chain stability. The increased tensions gave the US an opportunity to rally its allies, marking a setback for Chinese efforts to build relationships on the world stage.

 

The message sent by Chinese officials in the Washington meetings echoed recent public statements by the Ministry of Commerce, which said the controls were not a ban on exports, and qualified applications for civil use can be approved. Commerce Minister Wang Wentao had also blamed the recent escalation in trade tensions with the US on American actions. 

 

In Washington, Vice Finance Minister Liao Min held bilateral meetings with at least seven countries including the US, the UK and Germany this week as well as other organizations, while People’s Bank of China Governor Pan Gongsheng met with officials from at least nine nations. Official statements on their meetings didn’t elaborate what was discussed beyond an exchange of opinions on the economic and financial environment.

 

China’s commerce and foreign ministries didn’t immediately provide comment when reached outside of regular business hours.

 

Following a loud chorus of opposition, some countries appear to be taking a wait-and-see approach on the rare earth issue as they observe how an expected meeting in coming weeks between US President Donald Trump and his Chinese counterpart Xi Jinping will go before taking action. Group of Seven nations — all advanced industrialized democracies — failed to produce a joint statement or concerted actions against China following a meeting in Washington this week.

 

Japanese Finance Minister Katsunobu Kato struck a tone of caution, even as he criticized China’s latest moves and called on G-7 nations to unite and respond. “If our actions were to trigger a cycle of retaliation, that could have adverse effects on the global economy and markets,” he said earlier this week.

 

The US also took actions to deescalate tensions this week after Trump’s threat to impose 100 per cent tariffs and call off a meeting with Xi.

 

Treasury Secretary Scott Bessent spoke to Vice Premier He Lifeng Friday evening and they will meet in Malaysia next week to prepare for the leaders’ meeting. Trump also expressed optimism that talks with Chinese officials could yield an agreement to defuse the trade tensions.

 

“I think things have de-escalated,” Bessent said Friday during a White House event. “I am confident that President Trump, because of his relationship with President Xi, will be able to get things back on a good course.”

 

While China justified its latest curbs as a response to an expansion of US controls, the measures demand even foreign exporters to get permits to ship products anywhere in the world containing traces of certain Chinese minerals.

 

“China is trying to define this action as defensive in nature, but in reality, it’s creating additional supply chain vulnerabilities for virtually any country with the manufacturing dependence upon rare earths,” said Logan Wright, director of China markets research at Rhodium Group. “The key decision to weaponize elements of the supply chain is more concerning.”