China widens export curbs on rare earths ahead of critical Xi-Trump meeting

China has unveiled broad new curbs on its rare earth exports, as Beijing moves to shore up its trade war leverage ahead of a high-stakes meeting this month between Donald Trump and Xi Jinping.

 

Overseas exporters of items that use even traces of certain rare earths sourced from China will now need an export licence, the Ministry of Commerce said in a statement Thursday, citing national security grounds. Certain equipment and engineering technology will also be subject to controls, according to a separate release.

 

While it’s unclear how Beijing plans to enforce the sweeping rules, they mark an escalation in China’s campaign to wield extraterritorial controls over the nation’s goods. The curbs mirror Washington’s own export regime, which bans Chinese companies from accessing cutting-edge chips and the tools to make them. 

 

 

 

The provocative move comes as the US and Chinese presidents prepare to sit down at a summit in South Korea to hammer out a trade deal between the world’s biggest economies. Beijing is dangling a huge investment package in talks, people familiar with the matter previously said, as well as showing its trade cudgels.

 

China has used its control of the rare earth sector — it accounts for about 70% of global supply — as leverage in negotiations. The minerals have an array of applications that make them vital to high-tech industries including semiconductors and autos as well as the military. Beijing has also held back on purchases of US soybeans in recent months, as it seeks to strengthen its position.

 

“This is to raise the stakes and demonstrate China has leverage and cards to play,” according to Dylan Loh, associate professor at Nanyang Technological University. “It’s done to put them in the strongest possible position in trade negotiations with the US.” 

 

What Bloomberg Intelligence says 

 

The latest policy explicitly states that exports of listed rare-earth materials for defense use will be broadly denied — sharpening prior language that merely required licensing.

  Eric Zhu, analyst

 

 

If enforced, the new curbs could frustrate efforts by the Trump administration — and governments from Europe to Australia — to wean themselves off Beijing’s magnets by building their own supply chains, which still largely rely on Chinese raw materials and processing. 

 

Australia’s Lynas Rare Earth’s Ltd., which already has processing plants in Malaysia and Australia, jumped 6% on the news and is up more than 220% this year as investors try to take advantage of the market turmoil brought by China’s tighter control. 

 

Beijing also appeared to take aim at the US semiconductor sector with its latest curbs, saying some rare earth items used to research and develop certain computer chips will be reviewed on a case-by-case basis.  

 

“The implicit threat is that Beijing could throttle rare-earth exports to chipmakers in retaliation for foreign export controls on chip sales to China,” said Christopher Beddor, deputy China research director at Gavekal Dragonomics. 

 

Rare earth exports for research on artificial intelligence that could have military use will be similarly affected, according to the statements. Days earlier, Washington expanded its sanctions controls to target a broader range of Chinese firms.  

 

Nvidia Corp. declined to comment. Apple Inc. did not immediately respond to an emailed request for comment outside of office hours. Their go-to chipmaker Taiwan Semiconductor Manufacturing Co. did not immediately respond to an emailed request for comment. 

 

China’s exports of rare earth products, including magnets, had recovered in recent months after Beijing threatened a disruptive global shortage by crimping supplies to demonstrate its leverage over the US.  

 

But certain overseas organizations had allowed shipments to flow to firms in sensitive fields including defense, according to the ministry. “Such actions have had a negative impact on international peace and stability,” it added.

 

The new regulations could unnerve companies that had recovered from those disruptions — and cast doubt over the US government’s own investments. The Defense Department this year announced a $400 million equity investment in MP Materials Corp. to fund a major new plant making rare-earth magnets.

 

“It’s the picks and shovels that worry many,” said Wade Senti, president of Advanced Magnet Lab Inc., a company producing magnets in the US. “Anyone that is sourcing equipment from China might not get it — which happened before — and also if you’ve got tech or equipment from China you might not get service requests answered.”