On October 9, 2023, China announced significant changes to its rare earth export controls, intensifying restrictions on processing technology and limiting unauthorized overseas cooperation. These measures are part of a broader strategy to regulate exports to foreign defense and semiconductor industries. The announcement from the Ministry of Commerce aims to clarify and expand upon the extensive restrictions initially imposed in April, which previously led to notable global shortages before agreements with Europe and the United States allowed for resumed shipments.
China is responsible for over 90% of the world's processed rare earths and rare earth magnets. These 17 essential elements are integral to a plethora of modern technologies, including electric vehicles, aircraft engines, and military radar systems. The latest export controls will expand existing restrictions on the technology required to manufacture rare earth magnets, impacting a broader range of products.
The recent announcement specifies that some components and assemblies containing restricted magnets will now also be subject to export limitations. Furthermore, equipment used in the recycling of rare earth materials will require a license for export, adding to the comprehensive list of processing technologies already controlled. This move solidifies China's position as a leader in rare earth technology.
For the first time, the Ministry of Commerce has detailed the specific targets of these restrictions. Licenses will not be granted to overseas defense users, while applications related to advanced semiconductor manufacturing will be reviewed on a case-by-case basis. This announcement follows recent calls from U.S. lawmakers for broader bans on exporting chipmaking equipment to China.
Despite a steady increase in China's rare earth shipments over the past few months, as the government has issued more export licenses, many users continue to voice concerns about their ability to obtain these crucial materials. In recognition of these challenges, the Ministry of Commerce stated that the new restrictions would be limited in scope and that various facilitation measures would be implemented to ease licensing processes.
Additionally, the new rules prohibit Chinese companies from collaborating with foreign entities on rare earth projects without prior permission from the Ministry. Manufacturers outside of China that utilize any components or machinery sourced from China must also apply for licenses to export these controlled items. This regulation further tightens the grip on international cooperation in the rare earth sector.
This latest development in China's rare earth export policy highlights ongoing tensions in global supply chains and the strategic importance of these materials in modern technology and defense industries. As countries navigate these new regulations, the implications for the global market and technology sectors will continue to unfold.
