China expands rare earth export restrictions ahead of possible Trump-Xi meeting

China has banned its citizens from participating in unauthorized mining abroad while tightening export controls on rare earth elements and related technologies, adding new challenges to a sector that is central to its geopolitical influence.

Foreign entities now must obtain a license from Beijing to export products containing more than 0.1% locally sourced rare earths or produced using China’s extraction, refining, magnet-making or recycling technology. Ministry of Commerce announced on Thursday.

To prevent “misuse” of rare earth minerals in the military and other sensitive sectors, companies affiliated with foreign militaries or on export control or monitoring lists will be denied permits. Ministry of Commerce in question. Applications for items that could be used in weapons, terrorism or other military purposes will also be rejected.

Dan Wang, Eurasia Group’s China director, said the latest move was a “major upgrade to rare earth export control”, extending restrictions from just raw materials to intellectual property and technologies. China added a large number of rare earth elements and related materials to its export control list in April.

Wang added that these restrictions could further deepen other countries’ dependence on Chinese know-how and support Beijing’s efforts to move its own industries up the value chain.

Chinese citizens are also prohibited from supporting overseas activities related to rare earth extraction and magnet production without Beijing’s approval.

New rules on the export of rare earth materials come into force on December 1, while those related to technology and labor will also come into force immediately. to official statements.

The ministry said applications for the export of rare earths used in the production of semiconductors below 14 nanometers, advanced memory chips, semiconductor manufacturing or testing equipment, or artificial intelligence with potential military applications will be reviewed on a case-by-case basis.

George Chen, partner at The Asia Group, said the measures mainly target the defense sector as part of Beijing’s efforts to overshadow US defense capabilities.

Rare earths are critical to high-tech industries including automobiles, defense and semiconductors. Restricting access to rare earths has disrupted international supply chains, which have been caught in the US-China crossfire this year.

“Beijing has realized that it has influence in this sector and is clearly not shy about using it,” said Wendy Cutler, senior vice president of the Asia Society Policy Institute and a former U.S. trade negotiator. The move could pressure Washington to make more concessions in ongoing talks, such as tariff cuts or loosening of U.S. export controls.

Chinese Accounts for approximately 70% of global supply and has repeatedly used critically needed minerals as a bargaining chip in trade disputes.

The latest restrictions come just weeks before a potential meeting between US President Donald Trump and his Chinese counterpart Xi Jinping. The two leaders are expected to meet in person on the sidelines of the Asia-Pacific Economic Cooperation forum to be held in Gyeongju, South Korea, in the last week of October.

While China remained silent on future meetings, Trump also said he would visit China early next year and Xi would come to the US at a later date.

The Asia Group’s Chen said the new announcement could be seen as “a series of negotiations” that Beijing wants to make even before the next round of major trade talks.

“The Chinese side is becoming more and more experienced in dealing with its counterparts and knows what its American friends want,” Chen added.

Since late last year, China has tightened restrictions on rare earth exports and demanded proof that they will not be used for military purposes. Beijing began issuing single-use export licenses following a trade truce with Washington in May.

While China’s official data shows rare earth magnet exports have picked up in recent months, progress has been uneven. Beijing’s tight grip has cost at least one member “millions of euros”, the European Chamber of Commerce said in a survey published last month, while other members noted inconsistent procedures for obtaining export approvals.

A spokesman for the Chinese ministry on Thursday said there would be certain exemptions under the new rules, including exports for medical emergencies or disaster relief. A “transitional period” would also allow businesses to honor existing contracts and meet compliance requirements.

Eurasia’s Wang said the transition window would likely ease some short-term impacts for companies, adding, “Similar to how the US ban on technology exports to China left room for American tech companies to lobby and apply for approval – most of them received approval.” he said.

“This will give China more power than an outright ban,” Wang said.

— CNBC’s Evelyn Cheng contributed to this story.