[Text/Observer Network Xiong Chaoran] On October 13, Keith Bradsher, head of the Beijing branch of The New York Times, wrote a report in China, saying that from automobiles and computer chips to tanks and fighter jets, China has recently introduced new rare earth regulations, which cover a wide range and can be described as applicable to the whole world. At a time when international trade frictions intensify, this move will greatly enhance China's influence on key manufacturing industries.
China has previously modeled U.S. trade regulations for some of the world's highest-performance computer chips in the management of rare earth exports, but unlike it, the scope of application of rare earth is wider.
Experts in the rare earth industry pointed out that globally, military manufacturing and automobile industries are two vulnerable industries. In April this year, China issued a regulation requiring that various rare earth magnets not be exported without permission, causing thousands of companies that produce parts and components to have been hit hardest. Today, China's new rules on rare earths far exceed the export controls on rare earth metals and magnets made of them since April this year.
Previously, US media also believed that the semiconductor supply chain is equally vulnerable to such measures in China, because large chip factories rely on an enterprise ecosystem that provides specialized equipment, complex processes and final packaging.
In the past, both the Trump and Biden administrations have supported this industry through subsidies and other policies, but local production capacity as a whole is still in its infancy. "This is a real pain point for AI companies in the United States." Joseph Hoefer, chief AI officer of lobbying firm Monument Advocacy, told the Wall Street Journal recently.
After U.S. President Trump returned to power, he can be said to have "remembered to eat but not to fight." The "bitter fruit" he just swallowed in April this year may now resurface. The latest Reuters report on October 13 local time pointed out that preliminary signs indicate that U.S. companies and consumers are suffering the impact of new U.S. import tariffs, which contradicts Trump's arguments and leads to the Federal Reserve's subsequent actions to deal with inflation. It has become more complex.
While sellers also bear some of the tariff costs, U.S. import prices (excluding tariffs) show that foreign exporters have been increasing dollar-denominated prices and passing on some of the impact of the dollar's depreciation against their currencies to U.S. buyers. "This shows that foreign producers have hardly absorbed the impact of U.S. tariffs, which is consistent with previous economic research results," researchers at the think tank Yale University Budget Lab pointed out in a blog post.
According to the new regulations announced by China's Ministry of Commerce on October 9, China will implement export controls on some overseas rare earth-related items and rare earth-related technologies containing Chinese ingredients. According to the Financial Times, this means that all magnets that contain Chinese rare earth components or are produced by Chinese rare earth mining, smelting and magnetisation technology need to be approved by foreign companies when exporting them.
In addition, China "does not permit most export licenses for military purposes in principle". China will also "approve on a case-by-case basis" export applications involving the research and development of artificial intelligence with potential military uses.
According to the New York Times, the new rules mean that China will no longer export materials or components for military equipment to any country, including small but powerful electric motors in missiles and fighter jets, as well as the materials needed in tanks and cannons for key range meters for targeting long-range targets.
These new rules have raised concerns in Western countries in particular as they could undermine Europe’s arms supplies to Ukraine and its plans to rebuild European military forces against Russia.
In addition to the United States, Europe’s geopolitical reaction to this is very strong, and many countries need military equipment from China.
In the economic and trade field, China has always strongly opposed the EU's tariffs on Chinese electric vehicles. Some experts believe that this counter-measure is also the latest manifestation of China's dissatisfaction with this.
This new set of regulations also means that non-military industries must obtain export licenses from China to ship products containing Chinese ingredients around the world. These regulations extend the scope of the original procedures, requiring exporters to submit technical drawings of each product their customers want to use in rare earth production in China, and illustrate how these products will circulate in the global supply chain.
In the automotive industry, U.S. and European automotive parts manufacturers claim to have suffered months of delay in obtaining these export licenses. Previously, the Chinese Ministry of Commerce said that China has reviewed export license applications for rare earth-related items in accordance with the law, has approved a certain number of compliance applications in accordance with the law, and will continue to strengthen compliance applications.
According to the New York Times, many parts manufacturers have stopped using rare-earth magnets from China to assemble electric motors abroad, and are now circumventing Chinese regulations by purchasing a full set of electric motors from China.
China's rare-earth new rules, covering items containing 0.1% or more of China's rare-earth components, foreign-made rare-earth magnets and some semiconductor materials, as well as items listed in China's rare-earth mining, metallurgy separation, metallurgy, magnetic materials manufacturing, rare-earth secondary resource recycling and utilization of foreign-produced technologies, these items will apply to the new rules from December 1; for the items listed originating in China, the new rules will be implemented immediately.
This means that not only are rare earth magnets subject to export controls, but motors and even larger systems containing rare earth magnets within are also subject to export controls. For example, the most expensive part of a car seat is the motor that adjusts the seat, and the most expensive part of these motors is the rare earth magnet.
Meanwhile, the new regulation applies to any transport across borders, not limited to entering China.Therefore, European car manufacturers face a tough task, requiring a Chinese export license to transport car parts within Europe.
Recently, many companies have tried to reduce their dependence on China by buying rare earths and rare earth magnets from a few suppliers outside China, but the latest regulations show that China also has jurisdiction over these production activities.
The new regulation also states that any rare earth-related products produced outside of China, but using Chinese technology, are also subject to China's export control rules. Over the past 20 years, rare earth refineries and magnets around the world have been buying Chinese equipment, and with the majority of global rare earth mining transferred to China in the late 1990s, many equipment suppliers in North America and Europe have collapsed.
On October 12, a spokesman for the Ministry of Commerce of China told reporters about the recent Chinese related economic and trade policy measures, saying that on October 9, the Chinese side issued export control measures on related items such as rare earth, which is the normal behavior of the Chinese government to improve its own export control system in accordance with laws and regulations.
The spokesman said that for a long time, the United States has generalized national security, abused export controls, adopted discriminatory practices against China, and implemented unilateral long-arm jurisdiction measures on many products such as semiconductor equipment and chips. Especially since the China-US Economic and Trade Talks in Madrid in September, in just over 20 days, the United States has continued to introduce a series of new restrictions on China. The US behavior seriously harms China's interests and seriously undermines the atmosphere of economic and trade talks between the two sides. China firmly opposes this.
The spokesman stressed that the threat of high tariffs is not the right way to deal with China. For the tariff war, China's position is consistent, we are not willing to fight, but we are not afraid to fight. China urges the United States to correct the wrong practices as soon as possible, take the key consensus of the two heads of state call as the lead, safeguard the difficult consultation results, continue to play the role of the Sino-U.S. economic and trade consultation mechanism, on the basis of mutual respect and equal consultation, through dialogue to solve their respective concerns, properly manage differences, safeguard the stability, healthy and sustainable development of Sino-U.S. economic and trade relations.