China's New Rare Earth Export Curbs
China has introduced significant restrictions on rare earth exports to strengthen its position in ongoing trade tensions with the US. These measures are particularly strategic as they coincide with an upcoming high-stakes meeting between US President Donald Trump and Chinese President Xi Jinping.
Key Points of the New Export Curbs
- Exporters of products containing even trace amounts of Chinese-sourced rare earths must now obtain an export license. This move is presented as a national security measure.
- Certain equipment and engineering technologies will also fall under these new controls.
- The regulations reflect China's intent to exercise greater control over its goods, similar to US regulations that restrict Chinese access to advanced chips and related technologies.
Strategic Implications
- China is seeking to leverage its control of approximately 70% of the global rare earth supply to strengthen its position in trade negotiations.
- Rare earth minerals are crucial for high-tech industries, including semiconductors, automotive, and defense sectors.
- These curbs could disrupt efforts by other nations, including the US, Europe, and Australia, to establish independent supply chains that don't rely on Chinese resources.
- Australia's Lynas Rare Earths Ltd. has seen a market surge, reflecting investor interest in non-Chinese sources.
Impact on US-China Trade Relations
- The move comes as part of a broader strategy to showcase China's leverage in negotiations with the US.
- China's policy includes potential restrictions on rare earth exports for defense-related applications.
- Concerns are raised that China may limit exports to chipmakers in response to foreign controls on chip sales to China.
Responses and Reactions
- Major companies like Nvidia Corp. and Taiwan Semiconductor Manufacturing Co. have not commented on the new measures.
- The US Defense Department has recently invested $400 million in MP Materials Corp. to establish a domestic plant for rare-earth magnets.
- There are concerns about the availability of Chinese-sourced technology and equipment, impacting service and supply chains.