China's Threat of Rare Earth Export Controls Could Return ‘Anytime,’ Researcher Says
Although China agreed to temporarily suspend its sweeping rare earth export restrictions, the threat of those controls returning appears likely, said Jude Blanchette, director of the Rand China Research Center.
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“This new agreement between the U.S. and China doesn't solve that issue,” Blanchette said during an event this week hosted by the Center for Strategic and International Studies. “The loaded gun is on the table.”
The U.S. earlier this week said Beijing agreed to grant general licenses for U.S. suppliers and their end users, which will effectively exempt them from needing to apply for an export license with China’s Ministry of Commerce each time they want to ship an item that may be captured by the rare earth controls (see 2510300024). The U.S. made a host of concessions to secure those general licenses and other measures from Beijing, including agreeing to suspend the Bureau of Industry and Security's new 50% rule, lifting certain tariffs and more (see 2511030005).
Beijing recognizes the leverage that it has with its rare earth controls, Blanchette said. “Anytime that Beijing is upset, misunderstands or finds frustrating something we do in a totally different domain, this can immediately come back to the fore.”
China was using those controls and other restrictions over rare earths as “hostage taking,” Blanchette said. “You can target specific firms by basically delaying, dragging or denying a license.”
But he also said Beijing “got way over its skis here,” especially because it didn’t appear to have the resources to review an influx of license applications. Others have questioned how Beijing would enforce the new controls, including how and whether its Ministry of Commerce planned to begin sending export compliance officers to other countries in the region to check that the controls weren’t being violated (see 2510100022).
China “surged through a new export control restriction, which placed massive new bureaucratic pressure on the Ministry of Commerce” without it “having built up the requisite team to process these licenses,” Blanchette said. He said he traveled to Beijing over the summer to meet with American companies, and they said they couldn’t get an answer on where their licenses stood.
According to Blanchette, those companies said they're “running out of stockpiles for these, and we're going to have to start making some very difficult production decisions if we don't get a free flow of some of these magnets.”
He added that the Trump administration knows that the suspension agreed to in South Korea “is not a permanent solution and that the Chinese at any point could renege on their side of the deal, and we're back to square one.”