China has introduced a new set of rare earth regulations aimed at protecting its supplies for national security. The regulations, issued by the State Council on Saturday, establish stringent rules on the mining, smelting, and trade of these critical materials. Rare earth elements are essential in producing a range of products, from magnets in electric vehicles to consumer electronics.
The State Council's regulations state that rare earth resources belong to the state, and the government will oversee the industry's development. China has become the world's dominant producer of rare earths, accounting for nearly 90% of global refined output.
The EU, recognizing the industrial significance of rare earths, enacted a law in May setting ambitious 2030 targets for domestic production of minerals crucial to the green transition. This includes rare earths due to their use in permanent magnets that power motors in electric vehicles (EVs) and wind energy. EU demand is projected to increase sixfold by 2030 and sevenfold by 2050.
The new Chinese regulations, effective from October 1, will see the State Council establish a rare earth product traceability information system. Enterprises involved in rare earth mining, smelting, separation, and export must create a product flow record system, "truthfully" record the flow, and enter it into the traceability system.
Last year, China introduced restrictions on exports of germanium and gallium, widely used in the chip-making sector, citing the need to protect national security. The country also banned the export of technology for making rare earth magnets and the technology for extracting and separating rare earths.
These measures have heightened concerns that restrictions on rare earth supplies could escalate tensions with the West, particularly the United States, which accuses China of economic coercion. Beijing denies these allegations.
China's rare earth regulations coincide with the EU's move to impose provisional tariffs on Chinese EVs starting July 4, aiming to protect the 27-state bloc from what it claims is a surge of EVs produced with unfair state subsidies. Both sides have expressed intentions to discuss the proposed tariffs.
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