Many parties are paying attention to China's strengthened control over rare earth exports. The Ministry of Commerce: Applications that meet the regulations will be approved by China

Reuters reported on the 5th, citing informed sources, that China has introduced a tracking system for the rare earth magnet industry. This is a further tightening of export controls on this strategic resource since China implemented export restrictions on rare earth-related items in April this year. Several foreign media outlets have recently reported that global supply of rare earths is shrinking, raising concerns among some countries about the impact on production in industries such as automotive, leading to increased anxiety.

In April this year, the Chinese government imposed export restrictions on seven categories of medium and heavy rare earth elements and several magnets, requiring exporters to apply for permits. According to Reuters, informed sources have recently revealed that China has fully implemented a tracking system in the rare earth magnet industry, requiring rare earth magnet manufacturers to report more information online, including transaction volumes and customer names.

Reuters stated that the latest review mechanism indicates that China's export controls on rare earths and magnet products may be moving towards normalization.

Foreign media mentioned that China is the world's largest supplier and exporter of rare earth magnets, and its export restriction policies have far-reaching implications, especially for the United States. According to a New York Times report on the 3rd, the seven categories of rare earth products restricted by China in April are widely used in the automotive industry. Additionally, manufacturers of semiconductors, medical imaging chemicals, robotics, offshore wind turbines, and many military hardware manufacturers also require these rare earths.

In another report on the 3rd, the New York Times stated that U.S. automakers are the most affected, as they need magnets to produce motors for driving brakes, steering systems, and fuel injectors. Executives warned that factories in the Midwest and South of the United States could potentially reduce production in the coming days or weeks.

The report noted that since China suspended rare earth exports, the issuance of permits has been slow— in mid-April, China issued a small number of permits to European companies, and last week issued some to several U.S. companies, but global supply is rapidly shrinking. The report mentioned that some rare earth magnet manufacturers have paused production while waiting for export permits, and this production gap lasting several weeks is likely to impact downstream supply chains and manufacturers soon.

The New York Times quoted Michael Dunne, an automotive consultant specializing in China, as saying, "China could paralyze U.S. auto assembly plants."

Other markets are also watching China's rare earth export situation. The Wall Street Journal reported that the European Automobile Suppliers Association stated on the 4th that several production lines and factories in Europe have already suspended operations, and as inventories deplete, more affected situations are expected in the coming weeks. Automotive companies in India and Japan have also warned of risks of production disruptions.

According to Reuters on the 5th, informed sources revealed that Suzuki has suspended production of its flagship model, the Swift, becoming the first Japanese automaker affected by export controls.

At a regular press conference held by the Chinese Ministry of Foreign Affairs on the 5th, a Japanese reporter asked about Suzuki's suspension of production of its main small model in Japan. Spokesperson Lin Jian stated that the export control measures implemented by China are in line with international practices, are non-discriminatory, and do not target specific countries.

On the same day, at a regular press conference held by the Chinese Ministry of Commerce, a reporter asked about foreign companies believing that China's rare earth export permit process is slow, and their companies may face production stoppages. Spokesperson He Yongqian responded that rare earths and related items have obvious dual-use attributes, and implementing export controls on them is an international practice The Chinese government reviews export license applications related to dual-use items in accordance with laws and regulations. For applications that meet the requirements, the Chinese side will approve them to facilitate compliant trade.

The Chinese side has also promoted export controls on different occasions. Informed sources revealed to Chinese media that during the China-Europe semiconductor upstream and downstream enterprise symposium on May 27, the Ministry of Commerce's Bureau of Industry Security and Import-Export Control presented the rare earth export control policy to help enterprises and their related suppliers understand how to apply for export licenses. On the 5th, Singapore's Lianhe Zaobao reported that EU Trade and Economic Security Commissioner Valdis Dombrovskis disclosed during the OECD meeting in Paris on the 4th that the Chinese side also introduced the export control system for dual-use items during the talks.

Huo Jianguo, vice president of the China World Trade Organization Research Association, told Global Times reporters that the "Regulations of the People's Republic of China on the Export Control of Dual-Use Items" stipulate that the Ministry of Commerce should make a decision within 45 working days upon receiving the export application. For those that have a significant impact on national security and interests, it also requires coordination with relevant national departments to report to the State Council or obtain approval from the State Council and the Central Military Commission. The approval process for the aforementioned export licenses may be somewhat unfamiliar to some foreign enterprises.

"Previously, when China implemented export controls on gallium, germanium, and graphite, it also caused similar reactions, but the facts ultimately dispelled their doubts," Huo Jianguo said. The statements from China's two major departments on the 5th, especially the Ministry of Commerce's commitment to "facilitate compliant trade," reaffirmed China's consistent stance on maintaining the security of global industrial and supply chains. However, it also reminds some foreign enterprises that China's rare earth products cannot be used to violate China's solemn commitments to "maintain international peace and fulfill international obligations such as non-proliferation," nor can they be used to harm China's national security and interests.

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