China on Nov. 7 told traders to report real-time export information of rare earths as part of its latest efforts to control the supply chain of critical minerals amid tensions with the West.
Exporters of rare earth minerals will be mandated to immediately disclose details such as the destination, quantity, shipping particulars, and other transaction information, according to a statement published on the website of China’s Ministry of Commerce. The new restrictions were enacted on Oct. 31 and will last for two years.
The new rules are Beijing’s latest efforts to tighten its grip on rare earths, a group of 17 elements used in many things from commercial technology like electric cars to military equipment. China, a monopoly supplier of rare earths worldwide, required exporters to obtain permits to ship the critical material.
The mandate of real-time reporting for rare earths is part of the commerce ministry’s decision to revise its import and export regulations of bulk commodities that were published two years ago.
However, rare earth minerals are the only products being added to the export list. Other items named in Tuesday’s document are on the import list, including crude oil, iron ore, copper concentrate, and potassium fertilizers.
Chinese Monopoly
It’s not immediately clear how China’s new reporting rule will play out and to what extent it will affect global trade.China dominates the global supply chain of rare earths. In 2022, China accounted for 70 percent of global rare earth mined protection, up from 59 percent in 2021, according to data compiled by the United States Geological Survey (USGS).
At the processing level, China accounted for 85 percent of the global capability to transform the mined minerals into usable materials for manufacturers, according to a 2019 research by Adamas Intelligence, a consultancy firm.
The United States imported most rare earths from China, though that reliance has eased in recent years. From 2018 to 2021, China was responsible for 74 percent of rare earths imported to the United States, down from 80 percent between 2014 and 2017, the USGS data shows.
A cyclist wears a protective face mask while riding along a dusty road where dozens of factories process rare earths, iron, and coal in a dusty, no-man's land-type area near Baotou city in China's Inner Mongolia. Frederic J. Brown/AFP/Getty Images
The European Union, meanwhile, sourced almost all (98 percent) rare earths from China, spurring the top leaders of the 27 member states to rethink their dependence amid tensions with Beijing over trade and its support of Russia amid the invasion of Ukraine. The European Commission has presented plans to diversify supply chains earlier this year.
Wake-up Call
There have been growing concerns that the Chinese Communist Party (CCP) uses its monopoly in rare earths and other critical materials as bargaining chips, especially in trade competitions with the United States. China has designated rare earths as a strategic material since 1990.Indeed, the Chinese authorities temporarily blocked the export of rare earths to Japan in 2010 as tensions between the two Asian powers escalated over disputed islands following the arrest of a captain of a Chinese ship.
In 2019, China’s powerful state planning agency threatened to limit the sale of rare earths to the United States after then-U.S. President Donald Trump blacklisted Huawei, a Chinese telecom giant with close ties to the CCP’s military.
With tensions simmering between communist China and the United States, Beijing’s dominance in critical materials is under renewed scrutiny.
In July, the Chinese commerce ministry unveiled a plan to curb exports of two rare metals for manufacturing semiconductors—gallium and germanium—in apparent retaliation for the United States and other Western countries over their efforts to limit China’s access to advanced chips.
China accounts for 80 percent of the gallium production in the world and 60 percent of germanium, according to the Critical Raw Materials Alliance.
Although Beijing’s export controls may not cause immediate disruptions in U.S. supply chains, experts advise that they should serve as a wake-up call for the West, warning that Beijing is seeking to gain leverage in the trade competition with Washington.
Tuesday’s announcement from China’s commerce ministry precedes meetings between U.S. Treasury Secretary Janet Yellen and her Chinese counterpart, He Lifeng, in San Francisco this week. It remains uncertain whether China’s export controls—one of the contentious issues in bilateral relations—will be discussed during their two-day talks.
The U.S.–China relationship has been strained over various issues, including the CCP’s military aggressions in the Taiwan Strait and the South China Sea, as well as U.S. export controls and investment restrictions on advanced technologies to counter the regime’s military modernization.
The Yellen-He meeting will take place ahead of the Asia-Pacific Economic Cooperation (APEC) summit, which starts on Nov. 11. U.S. President Joe Biden and Chinese leader Xi Jinping are expected to meet on the sidelines of the APEC gathering, which would mark the two leaders’ first in-person engagement in a year. However, Beijing has yet to confirm whether Xi will travel to Washington for the summit.
