China Tightens Rare-Earth Export Controls

Beijing’s Announcement No. 61 imposes new export restrictions that expand control over rare earth elements and permanent magnets, with potential impacts across technology and defense supply chains.

The rules apply a Foreign Direct Product Rule in reverse: products containing Chinese-origin rare earths or processing technology could fall under Beijing’s export jurisdiction. China already controls roughly 70% of rare earth mining, about 90% of separation, and more than 90% of magnet manufacturing, amplifying the leverage of any curbs.

Enforcement may be selective. While the language enables denying licenses to entities tied to foreign militaries, reviews have historically been case-by-case and used for diplomatic or commercial leverage. Limits on magnet exports also help secure domestic feedstock for booming EV and defense industries, blending industrial policy with geopolitical strategy.

The U.S. midstream remains underdeveloped: Mountain Pass’s heavy-rare-earth line is not fully commissioned and Stillwater’s magnet plant is pre-revenue, leaving full mine-to-magnet independence likely years away despite government funding and partnerships.

Investors should watch enforcement scope and timing, Western ability to finance midstream projects, and whether China exercises extraterritorial controls. The shift raises urgency to scale separation, metallization, and magnet production outside China to strengthen supply-chain resilience.