China starts work on easing rare earth export rules but short of Trump hopes, say sources

BEIJING – China has begun designing a new rare earth licensing regime that could speed up shipments, but it is unlikely to amount to a complete rollback of restrictions as hoped by Washington, industry insiders said.

The Ministry of Commerce has told some rare earth exporters that they will be able to apply for new streamlined permits in the future, and outlined in industry briefings the documents that will be required, two sources familiar with the matter said.

Export curbs have become Beijing’s most potent source of leverage in its trade rivalry with Washington, as China produces more than 90 per cent of the world’s processed rare earths and rare earth magnets – vital in products ranging from cars to missiles.

Following the agreement reached between US President Donald Trump and Chinese leader Xi Jinping, China said last week that it

would pause for one year

the restrictions it imposed in October.

But China’s Commerce Ministry has said nothing publicly about a broader round of controls introduced in April that rattled global supply chains.

The White House said on Nov 1 that China had agreed to introduce general licences, characterising such permits as the de facto end of China’s rare earth export controls.

In private, Chinese officials have said they are working on the licences, three other sources briefed on discussions said, although one said it could take months.

But other industry insiders said the new licences do not mean that China’s wide-ranging rare earth export controls introduced in April have been removed.

China’s Ministry of Commerce did not immediately respond to questions from Reuters.

The new licences would be valid for a year and probably allow larger export volumes, the first two sources said. Companies are preparing documents that will require more information from customers, they added.

The sources said they expect more clarity by the end of the year.

Some Chinese rare earth companies said they have not yet been informed of the change.

General licences will likely be harder to acquire for users associated with defence or other sensitive areas, some industry sources said.

All sources spoke on condition of anonymity given the sensitivity of the matter.

Introduced in April and expanded in October, Beijing’s rare earth rules require exporters to obtain licences for every cargo – an onerous and lengthy process that customers say is holding up exports. The restrictions created shortages in May that brought parts of the auto industry to a halt.

Of the 2,000 applications submitted by European Union firms since April, just more than half have been approved. REUTERS