What Has Changed in China's Rare Earth Regulations? "Preemptively Blocking Supply Chain Diversification" [News Seolcham]

A Closer Look at China's Ministry of Commerce Announcements No. 61 and 62
Even 0.1% Rare Earth Content Triggers Export Controls
Blocking the Outflow of Technology and Know-How at the Source

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On October 9, China escalated its rare earth export controls, reigniting the spark of the US-China tariff war. This move goes beyond the rare earth export regulations previously announced in December 2023 and April 2025. Now, even if a product is manufactured overseas, if it contains even a trace amount of Chinese rare earth elements, it must obtain an export permit from China. Furthermore, if Chinese technology is used not only in rare earth mining but also in processing or refining, the product becomes subject to these controls. Analysts say this signals China's ambition to exert broad dominance over the global rare earth market, not merely to restrict rare earth exports.

Beyond Rare Earths: Targeting Technology Control

In the past, China's rare earth controls focused solely on supply. In 2010, amid a territorial dispute with Japan over the Senkaku Islands, the Chinese government implemented its first control policy by halting exports of key rare earth elements to Japan. In December 2023, China introduced an export licensing system for rare earth-related technologies, but limited it to extraction, refining, and permanent magnet manufacturing technologies. In April 2025, China expanded export controls to include seven types of heavy rare earth elements, such as samarium and dysprosium, which are used as raw materials for permanent magnets.

Rare earth mine in Inner Mongolia, China. Photo by Reuters and Yonhap News

The new restrictions, which will take effect on December 1, will tighten the grip on the global rare earth supply chain even further. The core of these measures lies in Announcements No. 61 and 62 released by China's Ministry of Commerce. The key points are: ▲ An export licensing system applies if a manufactured product contains 0.1% or more Chinese rare earth elements, even if produced overseas; ▲ Export controls now cover not only rare earth mining but also technologies, media, and know-how related to refining, separation, and permanent magnet material manufacturing and production.

'0.1% Rule' Echoes US Semiconductor Controls

The "0.1% rule," the centerpiece of Announcement No. 61, marks the first time China's export controls have been extended from domestically produced goods to those manufactured abroad. Starting in December, even if permanent magnet electric motors, semiconductors, or telecommunications equipment are produced in other countries, if they use even a small amount of rare earths processed in China, companies must report this to the Chinese government and obtain an export license. The export of rare earth elements for military purposes-such as weapons of mass destruction, terrorism, or military capability enhancement-is strictly prohibited.

The impact is expected to reach the major products of domestic semiconductor companies as well. The Chinese government has notified that 14-nanometer (nm) logic chips, memory chips with 256 layers or more, and related manufacturing and testing equipment will be subject to individual review by the Ministry of Commerce.

This policy closely resembles the "Foreign Direct Product Rule (FDPR)" previously implemented by the United States in the semiconductor sector. Announced by the US Department of Commerce in 2022, this rule requires that even if a semiconductor is produced overseas, if US technology or software is used in the manufacturing process, an export license from the US government is required. In effect, US export controls were expanded to cover the entire global semiconductor supply chain. China's Announcement No. 61 aims to achieve a similar effect in the rare earth market.

On this topic, Gracelin Baskaran, a fellow at the Center for Strategic and International Studies (CSIS) in the United States, commented, "This is the first time China has used the FDPR, previously employed by the US, as a tool for export controls. Moving forward, Chinese authorities will be able to review each case individually, including next-generation memory chips and semiconductor manufacturing equipment. Companies may be required to provide sensitive information, such as customer details and technical specifications, prior to export," she warned.

To verify whether foreign-made products contain Chinese rare earth elements, China's Ministry of Commerce may also request related documentation. Kim Daegwon, chief customs broker at Eum Customs Office, told Asia Economy, "All manufacturers are obligated to create and keep a bill of materials containing information on raw materials used in their products. Chinese authorities are likely to review this document before issuing export permits," he explained. "The bill of materials records all information about who supplied the raw materials and at what price, making it possible to trace the origin of rare earth elements."

Blocking Technology and Know-How Leakage at the Source

Announcement No. 62, which controls all technologies related to rare earth mining, processing, and refining, is a direct move against the rare earth supply chain. In fact, China not only has abundant rare earth resources, but also excels in refining minerals and processing them into industrial products such as permanent magnets. According to the US Geological Survey, China's rare earth reserves are about 44 million tons, accounting for only 48% of the global total. However, its refined rare earth production is around 74,000 tons per year, which is 91.4% of the world's output, effectively giving China a monopoly.

Furthermore, Announcement No. 62 explicitly states that "any form of technology transfer or provision," including intellectual property (IP) licensing, personnel exchanges, exhibitions, testing, support, education, joint research and development, employment, and consulting, is subject to control. This effectively blocks the overseas leakage of know-how from Chinese companies with superior refining and processing technologies.

Even if the United States or other countries try to establish independent rare earth supply chains to reduce reliance on China, Announcement No. 62 is likely to be a significant obstacle. For example, when MP Materials, a leading US rare earth producer, developed its Mountain Pass mine in 2017, it received support from Shenghe Resources, a Chinese state-owned rare earth company. Without the accumulated technology and know-how from China, it is difficult for overseas rare earth production facilities to scale up their output.

Baskaran commented, "Announcement No. 62 is intended to prevent the leakage of China's monopoly technology and know-how. Chinese rare earths have now become a tool with powerful economic and geopolitical impact. It will still take time for countries like the United States to develop their own rare earth supply chains, and until then, China will continue to wield significant influence."