China is tightening regulations on rare earth elements in the face of growing global competition

Is the growing number of rare earths projects in Australia and elsewhere starting to push China into the background?

The likes of Lynas (and an expanded product line from 2025), Iluka, Northern Minerals and Arafura (Nolans) are starting to make their presence felt around the world, alongside projects in the US, Canada, southern Africa, Sweden and Norway.

Chinese interests tried to smuggle out the takeover of Northern Minerals before it was stopped by the Australian government last month.

China is clearly starting to feel the heat and has responded defensively by restricting exports of some rare minerals, such as germanium and gallium. Now the controls are being expanded.

For a country under tight control and rule by the Communist Party, it is strange that it has never been clearly established who owns such a crucial mineral.

The Chinese government on Saturday released a list of regulations on rare earth elements aimed at protecting their stockpiles in the name of national security.

The new rules, which come into effect on October 1, will cover the mining, smelting and trading of rare earth elements used to make products ranging from magnets in electric vehicles to consumer electronics.

Regulations issued by the State Council or the Cabinet stipulate that rare earth resources belong to the state and that the government will supervise the development of the rare earth industry.

We are talking about a group of 17 minerals, of which China has become the world leader in production in recent years, accounting for almost 90% of global refined extraction.

Their global industrial importance is so great that, under a law that came into force in May, the EU set ambitious targets for 2030 for domestic production of minerals key to the green transition – particularly rare earth elements due to their use in permanent magnets that power electric vehicle engines and wind energy.

The EU predicts demand will increase sixfold in the decade to 2030 and sevenfold by 2050.

China’s new regulations stipulate that the State Council will establish an information system to trace the origin of rare earth products.

Enterprises engaged in the extraction, smelting, separation and export of rare-earth products will be required to set up a product flow accounting system, “reliably” record the flow and enter it into the traceability system, the State Council said in a statement on Saturday.

China last year imposed restrictions on exports of germanium and gallium, commonly used in the chip sector, citing the need to protect national security and national interests.

The export of technology for the production of rare-earth magnets was also banned, and a ban was imposed on technologies for the extraction and separation of rare-earth metals.

The regulations have fueled fears that restrictions on the supply of rare earth elements could increase tensions with the West, particularly with the United States, which accuses China of using economic coercion to influence other countries. Beijing denies these claims.

China’s rare earths rules come as the EU prepares to impose temporary tariffs on Chinese electric vehicles on July 4 to protect the 27-nation bloc from what it says is a flood of electric vehicles produced with unfair state subsidies. Both sides have said they will hold talks on the proposed tariffs.