China's new restrictions on rare earth cause a supply race

China’s new restrictions on rare earthen feeds represent its first major effort to control the global flow of the important minerals it dominates, and utilizes the same tactics that enable the United States to exert an influence beyond its borders. Rules announced last week require foreign companies to obtain the approval of the Chinese government before the products containing even trace quantities be executed, which were exploited in China. This extraordinary influence represents a statement of China’s control over global supply chains for materials needed for everything from fighter aircraft to electric cars. “After decades of relentless pursuit, China finally has some real technological benefits about the United States,” Arthur Cropper and Laila Khawaja, analysts at Givingkal Research, wrote in a research note on Monday. This package with measures not only shocked the United States, but also asked it to promise it to confront it. Also read: China stretches restrictions on the export of rare earth technologies angry European reactions Danish Foreign Minister Lars Løkke Rasmussen, whose country has the rotary EU presidency, said on Tuesday: “The European Union must respond firmly.” The Economics Commissioner of the European Union, Valdis Dombrovskis, has accused China of using “mutual trade relations for political gain” while talking in Washington amid a meeting of heads of global financial institutions at the fall meetings of the International Monetary Fund and the World Bank. Although the severity of the disruption depends on the extent to which the new rules are implemented, the move encouraged businesses and policymakers to search for possible countermeasures and future alternatives to critical materials coming from China. America mobilizes to confront China. US Treasury Secretary Scott Besent said in an interview with Fox Business on Monday: “We will not allow these export restrictions and the associated controls to continue.” “They had a big blow to the supply chains and industrial base of the entire free world,” he added. He announced that he expected to receive coordinated support from Europe and India, along with other democratic countries in Asia, in a clear reference to Japan and South Korea. Dombrovskis said he expected discussions to take place at the G7 meeting in Washington this week. The zealous enforcement by China can accelerate the efforts to create alternative supply chains, which undermine China’s long-term dominance-just because US restrictions on advanced chips can send and encourage Chinese innovation. Also read: Trump and XI ignite a new trade crisis and the global economy is on fire. Australian mining companies working in major mineral projects were incredible increases in equities on Tuesday, as the shares of ‘resolution minerals’ closed by 56%, while ‘Nova Minerals’ shares rose by 56%. 16%. India is looking for alternative solutions in India, car manufacturers and parts or component providers has begun to accelerate trials of ferrite magnets, a less efficient but geopolitically safer alternative to the heavy rare earth they have relied on, according to people who are familiar with the matter. People have said they have enough stock to last until December. Also read: India is considering creating a strategic reserve of rare earthly China’s actions, represents President Xi Jinping’s adaptation of tactics previously pioneered by the United States – using dominance in critical sectors as leverage against foreign competitors. While Washington has the ability to use the dollar to exert influence beyond its borders, China is now utilizing its absolute control over the processing of rare earth and the production of permanent magnets. “The United States has unparalleled influence on financial markets, thanks to the distribution of the dollar and the importance of the centrality of the US financial system,” said Chris Kennedy, a senior geo -economic analyst at Bloomberg Economics, who previously served during the Biden and Trump administrations in the National Security Council. He added: “China has a global influence through its dominance of basic industries needed for global industrialization.” Broader restrictions on metals The inclusion of five additional rare earth on China’s list of rare earth limited for export – Holmium, Europium, Ytterbium, Thulium and Erbium – will make it difficult for companies to find alternatives for magnets included from the seven metals announced by Beijing in April. In the short term, alternatives remain limited. China controls 70% of all rare earth that has been exploited worldwide, and more than 90% of the permanent magnets of these metals. Also read: What is rare metals? Why is this at the heart of the trade war? Although companies in the European Union and the United States previously reported supply shortages and production stop during previous Chinese restrictions, determine alternative production capacity. If it is strictly enforced, this policy will be a choking that depends on Chinese technology and an impact on virtually all modern industries that rely on permanent magnets with high performance. These measures apply not only to raw materials, but also to products manufactured abroad using Chinese rare earth – even if these materials represent only 0.1% of the value of the product. Chinese security justifications: The Chinese Ministry of Trade has justified these restrictions for reasons related to national security, pointing out that rare metals with medium and heavyweight have important military applications. Officials emphasized that the measures would not completely prohibit exports, and promised to approve applications that meet the regulatory requirements. A researcher at the Chinese Academy of Social Sciences, one of the most prominent government -linked thinking tanks, expressed in a comment on Monday to control the global flow of these minerals, regardless of the intentions. Wang Ziyang, a co -researcher at the Chinese Academy of Social Sciences, said that China is moving from a mere supplier to “the controlling government in the rare nature market”, emphasizing that these measures are the military use of the elements and in the common interest of the world community. This latest move represents the culmination of years of expansion in Beijing export system. Before the XI-Trump Summit in 2020, China began building an integrated system that mimics the US control system, starting with blacklisted entities, all the way to place its influence beyond its borders on the technology of Chinese origin. It seems that the timing of the move is linked to Washington’s expansion of the list of targeted entities, which include Chinese companies working in the semiconductor sector, a move that Beijing as a violation of the bilateral concepts achieved last month in Madrid, which determined that no new restrictions would occur during the trade. These restrictions can be used as a negotiation of leverage before the expected talks between President Xi Jinping and US President Donald Trump later this month. You might be interested in: Besant: The XI-Trump meeting is still on the table and “All options are on the table.” Cropper and Khawaja said the announcement paved the way for negotiations in which China could agree to alleviate its restrictions on the export of rare earth, in exchange for similar concessions by the United States regarding restrictions on semiconductor exports. Regardless of the results of those discussions, it is unrealistic to expect the restrictions to be completely lifted, or that the situation will return to what it used to be, according to Oliver Milton, who until recently served as the US financial attachment in Beijing and is currently working as director of the Department of Chinese matters in the Rhodium group. The fight to the last breath he explained that “it is a strategic decision aimed at ensuring that the Chinese authorities have continuous and permanent influence on the United States and other countries, to avert any possible export restrictions against China in the future.” He added: “China’s policymakers are well aware that they have the ability to disrupt the production of major US businesses, in ways that double the impact on US markets, such as targeting large companies such as Apple and Tesla, for example.” The Chinese Ministry of Trade indicated its readiness for dialogue while defending his measures, and said in a statement on Tuesday that Beijing would “fight until the end if needed” while the door remained open to dialogue. Also read: The Pentagon is considering buying and storing important billion dollars minerals. A Chinese grip on rare earth. Far of the logic of revenge or negotiating tactics, these measures fall within the framework of strengthening Beijing’s broader industrial strategy. By tightening control over the processing of technologies and manufacturing equipment, China wants to harm its competitors while encouraging partnerships with Chinese companies. Rules that regulate overseas manufacturers who use Chinese rare earth or related equipment will come into effect on December 1. Applying a minimum of 0.1% of the value to any product containing Chinese rare earth can affect a wide part of the population. Intermediate goods, which are likely to cause significant delays in terms of administrative procedures and permits.