China tightens rules for exporting important rare earths

China has tightened export controls on rare earths and other materials vital to high-tech manufacturing as trade negotiations with the United States continue.

It processes about 90% of the world’s rare earths, which go into everything from solar panels to smartphones — a key bargaining chip ahead of an expected meeting between Chinese leader Xi Jinping and his US counterpart Donald Trump this month.

Beijing had already imposed restrictions on processing technology and unauthorized foreign cooperation, but Thursday’s announcement formalized the rules.

Foreign companies now need Chinese government approval to export products containing even small amounts of rare earth elements, and must explain their purpose.

The ministry announced similar restrictions on the export of lithium batteries and some forms of graphite, which are also essential components of the global technology supply chain and are largely produced in China.

Beijing said the regulations were intended to “protect national security.” One of the main targets of these controls appears to be defense manufacturers abroad, including those in the United States, that rely on rare earth elements from China.

China added several rare earth elements and related materials to its export control list in April, as the trade war with Washington escalated, causing a major global shortage.

But the new announcement makes it clear that licenses are unlikely to be issued to weapons manufacturers and some companies involved in making chips.

The Ministry of Commerce said that even the technology used to extract and process rare earth elements, or make magnets from rare earth elements, can only be exported with permission from the government.

Chinese companies are also prohibited from working with foreign companies in the field of rare earths without obtaining permission from the government.

The latest announcement also outlines the specific technologies and processes that are restricted.

These include mining, smelting, separation, manufacturing of magnetic materials, and recycling rare earths from other resources.

The announcement added that assembly, debugging, maintenance, repair and modernization of production equipment is also prohibited from being exported without permission.

This could have a major impact in the United States, which has a large rare earth mining industry but lacks processing facilities.

The new regulations create Beijing’s version of US rules that prevent countries from selling chip-making equipment to China.

The United States has used these measures to slow China’s development of powerful chips that could be used for artificial intelligence with military applications.

Trade expert Alex Capri believes China’s new regulations are “tailored” ahead of the expected meeting between Xi and Trump later this month.

He added that Beijing targeted key vulnerabilities in the US electronics and weapons industry, mirroring America’s previous moves against the Chinese chip industry.

Rare earths are a group of 17 chemically similar elements that are essential for the manufacture of many high-tech products.

Most of them are abundant in nature, but they are known as “rare” because it is unusual to find them in pure form, and extracting them is extremely dangerous.

Although you may not be familiar with the names of these rare earth elements — such as neodymium, yttrium, and europium — you will be very familiar with the products in which they are used.

For example, neodymium is used to make powerful magnets used in speakers, computer hard drives, electric car motors, and jet engines, making them smaller and more efficient.

China has almost a monopoly on the extraction of rare earths, as well as their refining, which is the process of separating them from other minerals.

The International Energy Agency (IEA) estimates that China produces about 61% of rare earth element production and 92% of its processing.

Additional reporting by Ian Tang from BBC Monitoring