Analysts say that China's increased export control over rare earths on the 9th is a retaliatory measure targeting the U.S. It is a response to the U.S. measures to strengthen export controls last month and a kind of "nervous war" to increase negotiating power ahead of the U.S.-China summit in Gyeongju, where the Asia-Pacific Economic Cooperation (APEC) summit will be held later this month.
On the same day, China's Ministry of Commerce announced a "decision on export control of rare earth materials related to overseas" and a "decision on export control of rare earth-related technologies" aimed at strengthening exports of rare earths and related technologies. The measure expands the scope of issuance of export licenses for dual-use items previously designated by the Chinese Ministry of Commerce, and its main goal is to block rare earths from China and related technologies that have been used indirectly overseas even though they are subject to export control.
In particular, some analysts say that the move is intended to expand China's mid- to long-term influence on the semiconductor and artificial intelligence (AI) industries by using rare earths as a strategic means amid intensifying competition for technological hegemony between the U.S. and China.
China's Ministry of Commerce also announced that it will separately review applications for rare earth exports to be used for system semiconductors (logic chips) of 14nm or less, memory semiconductors of 256 layers or more, and rare earth exports for AI R&D that potentially have military uses.
Since July, China has previously implemented the "New Mineral Resources Act," which weighs on the security of key minerals. Through this law, China is continuously expanding its policy to expand government support for key minerals, which are essential raw materials for high-tech industries.
China's firing is seen as a willingness to continue supporting high-tech industries and not to be pushed back in the power struggle with the United States in the tariff war. The Chinese Ministry of Commerce's announcement of the measure after the end of the eight-day National Day "Golden Week" from October 1 adds to the analysis that it is retaliation targeting the U.S. announcement last month. On the 30th of last month (local time), the U.S. Department of Commerce's Industrial Security Administration announced a new regulation that automatically includes companies with 50% or more of their shares on the export control list (blacklist).
Previously, even if the parent company was included in the sanctions list, transactions could be made if the subsidiary was not designated separately. For example, China's Huawei was able to import technology through its subsidiary after creating a subsidiary to bypass U.S. sanctions. However, the U.S. measures to expand export controls have blocked such detours. At the time, China's Ministry of Commerce strongly criticized the move, saying, "The nature of this measure is very malicious," and that "China firmly opposes it." "This regulation is another typical example of the United States indiscriminately expanding the concept of national security and abusing export control," he pointed out. "China plans to take necessary measures to firmly protect the legitimate rights and interests of Chinese companies," he said, hinting at the possibility of retaliatory measures.
China has used its control of the rare earth industry as a means of trade war and diplomatic leverage. The 2010 rare earth dispute with Japan is considered the first case in which China "weaponized" rare earths. At that time, China stopped exporting rare earths to Japan in retaliation for the territorial dispute over the Senkaku Islands (Chinese name: Diaoyudao). However, at that time, Japan responded by finding other suppliers such as the United States and Southeast Asia and developing usage reduction technologies. In 2012, he filed a complaint against China with the World Trade Organization (WTO) along with the United States and the European Union (EU) and was found to be in violation of the 2014 agreement.
When the Joe Biden administration blocked exports of high-tech semiconductors to China in 2022, China responded by blocking exports of rare earths, not semiconductors. In August 2023, Chinese authorities implemented export controls on gallium, germanium, and graphite in response to U.S. export controls on semiconductors. This year, it has also started to control exports of five minerals, including tungsten, and seven rare earths, including dysprosium.
The automobile and defense sectors were immediately hit, with U.S. automaker Ford shutting down its Chicago plant for a week in May, shortly after export controls. China has obtained permission from the Trump administration to export Nvidia's H20 chips for AI through export controls to the U.S.