In a move that may redefine the geopolitical landscape of critical minerals, China has unveiled sweeping export controls targeting rare earths and related technologies. The newly introduced licensing regime requires government approval for any export involving even trace amounts of Chinese-origin rare earth materials or Chinese-based refining and manufacturing techniques.
The timing of this policy is no coincidence. It precedes a high-level diplomatic meeting between President Xi Jinping and U.S. President Donald Trump, and aligns with rising tensions over technology trade and national security concerns.
Dominance in a Critical Sector
China currently dominates the global rare earth market. It accounts for approximately:
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70% of rare earth mining
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90% of processing
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93% of rare earth magnet manufacturing
These materials are essential for the production of smartphones, electric vehicles, wind turbines, and military applications, including fighter jets and missile systems.
With the new regulations, China effectively mirrors the U.S. Foreign Direct Product Rule — a policy tool Washington has used to block semiconductor-related exports to China. Now, Beijing is adopting similar tactics to limit foreign access to its rare earths and to prevent unauthorized technology transfers.
Export Restrictions Explained
Starting December 1st, foreign companies must apply for a license if their exports involve:
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Rare earth magnets containing more than 0.1% of Chinese heavy rare earths by value
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Any product made using Chinese extraction or processing technologies
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Materials intended for military or sensitive applications, which are likely to be denied outright
This applies even if the product is manufactured outside of China.
The rule adds complexity to global supply chains and increases compliance burdens on manufacturers in semiconductors, defense, and battery production.
Market Response and Economic Impact
The policy announcement immediately impacted financial markets. Shares in China Northern Rare Earth rose by over 7%, while Rising Nonferrous Metals Share surged more than 4%.
At the same time, Washington has stepped up support for its domestic rare earth miners and magnet makers. Initiatives are underway to reduce reliance on Chinese materials through public investment and international cooperation — including among G7 nations, who are now actively exploring alternative supply chains.
China’s move may also accelerate the global race to secure rare earths from emerging players like Australia, Vietnam, and African nations, but replacing China’s scale and technical dominance will take years.
Strategic Goals and Industry Implications
Beijing’s rationale centers on national security and the prevention of technology leakage. Authorities claim that overseas transfers of rare earth-based technology have harmed China’s interests — particularly in defense applications.
The policy not only strengthens China’s bargaining power in ongoing trade disputes, but also signals a long-term shift in how critical mineral exports are treated. Industries that rely heavily on rare earths — especially in automotive, aerospace, and advanced electronics — must now reassess sourcing strategies, compliance procedures, and geopolitical risk exposure.
As export licensing begins to roll out, the extent of enforcement will become clearer. Leading Chinese battery makers such as CATL and BYD have yet to respond publicly, while legal analysts suggest this is only the first phase of a broader control framework.
For international businesses, this is a wake-up call. Supply chain strategies based on cost and efficiency are giving way to those prioritizing resilience, sovereignty, and political alignment.