China’s decision to tighten control over its rare earth exports marks a major escalation in its use of economic leverage, with far-reaching implications for global technology supply chains.

The new export licensing rules introduced by Beijing require companies worldwide to obtain approval if their products contain even 0.1 percent of Chinese-origin rare earth materials by value. This move effectively extends China’s control beyond direct exports, influencing international manufacturing processes in sectors dependent on its raw or refined materials.

Kristy Hsu, director of the Taiwan ASEAN Studies Centre at the Chung-Hua Institution for Economic Research, warned that Taiwan could be among the hardest hit.

Taiwan’s advanced technology, electronics, and semiconductor industries rely heavily on components and semi-finished products from Japan, many of which use materials sourced or processed in China. Any disruption in this flow could ripple across critical manufacturing chains, particularly those tied to chip making and electronics assembly.

The new restrictions go well beyond simple export limits. They introduce a complex case-by-case licensing process that now applies to industries connected to semiconductors, artificial intelligence, and defence systems.

By making access to rare earth supplies contingent upon political and economic considerations, Beijing is positioning itself to exert influence over nations heavily dependent on these materials for high-end technologies.

Experts have compared China’s policy to the U.S. “Foreign Direct Product Rule” (FDPR), which controls the use of American-origin technology in foreign products. However, analysts note that China’s move is broader and more universally applied. It represents a “strategic escalation” designed to deter adversaries from restricting its own tech exports and to remind the world of its economic weight.

If Beijing fully enforces these regulations, the global consequences could be substantial. Economies dependent on rare earths—essential for manufacturing magnets, batteries, and advanced defence electronics—may experience sharp price increases. Major industrial nations might begin stockpiling these materials to mitigate shortfalls, further driving up prices and destabilising the supply balance.

According to the U.S. Geological Survey, China produced around 270,000 tons of rare earth oxides in 2024, representing roughly 70 percent of global output.

Even more striking, China controls about 90 percent of the refining capacity worldwide, giving it near-total dominance in processing critical materials for modern electronics and clean energy technologies.

This resource monopoly provides Beijing a uniquely powerful geopolitical tool. While countries like the United States, Japan, and Australia are investing in developing alternative refining and mining capacities, replicating China’s scale and efficiency will take years. Until then, global industries—from consumer electronics to missile guidance systems—remain vulnerable to China’s policy shifts.

The uncertainty surrounding the enforcement scope of these new rules leaves global markets on edge. If applied rigorously, they could signal a new phase in the global technology conflict—where access to critical minerals becomes a strategic weapon, reshaping alliances and supply chains worldwide.

Based On ANI Report