“Beijing is further tightening export conditions for rare earth elements. Many industries are highly dependent on these metals.
China has introduced new rules for the export of important technologies and raw materials. The focus is on rare earth elements and the technologies needed for their processing. The restrictions threaten to strain relations between the US and China. However, the regulations also hit German industry hard, as many sectors depend on supplies from China.
The development shows that "our economy is under pressure and increasingly dependent on the goodwill of individual states," government sources in Berlin said on Thursday. To reduce strategic dependencies, Germany and the European Union need "greater efforts to secure raw materials." The Federation of German Industries also views the development with great concern.
"German industry is in danger of becoming a victim of a great power conflict," Stefan Steinicke, the association's raw materials expert, told the F.A.Z. "The move is hardly surprising." "Since the export controls were implemented in April, this sword of Damocles has been hanging over German industry."
The arms and semiconductor industries, in particular, are affected by the new restrictions on some of the 17 metals that fall under the category of rare earth elements.
Some of these rules are taking effect immediately, while others will be implemented by December.
With these measures, China is significantly expanding its control over global supply chains in industries that use rare earth elements. According to the new regulations, companies will often require an export license from the Chinese Ministry of Commerce even when exporting goods manufactured abroad to a third country. This applies even if the Chinese materials listed by the Ministry of Commerce constitute at least 0.1 percent of the product's value or if they were mined or processed using Chinese technologies. "This is a new dimension of extraterritoriality," Jost Wübbeke, founder of the China consulting firm Sinolytics, told the Frankfurter Allgemeine Zeitung.
The mechanism is reminiscent of the US measures in the case of semiconductor production, when, for example, the Dutch company ASML was prohibited from exporting its most advanced production equipment to China.
China effectively holds a monopoly on the processing of many rare earth elements. In April, the country introduced export restrictions in response to Trump's tariffs, which brought deliveries to a standstill for weeks. As a result, production lines in some German factories also came to a halt. The European Chamber of Commerce in China complained in September that deliveries were still insufficient and had resulted in millions of euros in costs. Politicians in Brussels and Berlin have been alarmed ever since. The EU Commission has set up an online portal where companies experiencing supply shortages can report them and is attempting to mediate with Beijing. Measures are also being developed to build alternative supply chains.
China is now trying to thwart Western efforts to break free from this dependence. In the future, licenses will be required to export technologies needed to extract or process rare earth elements: to extract, process, or recycle them, or to manufacture magnets from them. "China has a head start in these technologies," says Dominic Köstner, a partner at the law firm Graf von Westphalen in Shanghai. "China wants to keep the supply chain within the country and expand its leverage." Köstner deals with these licenses on a daily basis, helping many German companies export rare earth elements from China. On the other hand, China also wants to prevent Chinese experts from being poached by Western companies or other institutions. "Chinese citizens are not permitted to provide any significant assistance or support for the mining, smelting, or separation of rare earth elements [...] abroad without authorization," states a notice from the Ministry of Commerce.
With this announcement, the Ministry of Commerce also expanded the list of sanctioned raw materials, which will now include superhard materials and other rare earth elements such as holmium, which is used in magnets for electric cars or wind turbines, lasers, and in nuclear energy. New restrictions have also been introduced for the semiconductor industry.
Furthermore, Beijing is limiting access to rare earth elements for the global arms industry. This move also jeopardizes rearmament efforts in Europe, as hardly any military equipment can be produced without these raw materials. Export applications for foreign military purposes would "generally not be approved," the statement says.
This applies to companies on Chinese sanctions lists, as well as their subsidiaries.
On Thursday, the Ministry of Commerce added 14 more companies, primarily American ones, to this list. China accused foreign organizations of circumventing existing export regulations. These organizations had exported rare earth elements from China and "passed them on or made them available for direct or indirect use in sensitive areas such as military operations," a Ministry of Commerce spokesperson said. The share prices of the partially state-owned Chinese rare earth companies rose sharply. The share price of China Northern Rare Earth Group gained 10 percent, reaching its daily maximum.
For many companies, this will certainly be expensive. "We are already seeing price increases, as with other critical raw materials," said BDI representative Steinicke regarding the price developments for rare earth elements since the spring. Whether delivery delays will again lead to production stoppages cannot be assessed at this time. Justus Brinkmann from the purchasing consultancy Inverto also expects rapid price increases. In the summer, Inverto conducted a survey on raw materials among its client companies. Brinkmann was surprised that among those surveyed, the concern about supply disruptions for chemicals or steel was greater than for rare earth elements. "Too many managers still underestimate the threat and are dealing with it negligently." As a short-term measure, he recommends that industrial companies bring the greatest possible transparency to their supply chains. Even if suppliers are often reluctant to reveal their cards, it is important to know where dependencies on suppliers exist in order to look for alternatives.” [1]
1. Der nächste Schock aus China für die Industrie. Frankfurter Allgemeine Zeitung; Frankfurt. 10 Oct 2025: 26. Von Sven Astheimer, Frankfurt, und Gustav Theile, Shanghai
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