China could retaliate against threats to critical metal security: analysts

China’s new Mineral Resources Law, which took effect this week, could give the Asian giant a formal legal basis to fight against foreign restrictions threatening its mineral security, analysts say.

The new law represents the most comprehensive overhaul of the country’s mining regime since the law was introduced in 1986, BMO Capital Markets analyst Helen Amos said in a note on Wednesday.

The regulations introduce “provisions on import and export management and countermeasures against activities that may threaten China’s mineral resource security and related industrial and supply chain stability,” Ministry of Natural Resources official Yan Bo said, according to China’s state-run newspaper Global Times. He didn’t specify the countermeasures.

Overall, the new law refines a strategic mineral reserve system built around products, capacity and origin, Yan added.

Formalizing supply strength

The new law marks a more assertive strengthening of the framework around critical metal supply chains controlled by China, which already dominates global supply and processing.

Many Western governments, including in Canada and the United States, have created policy frameworks for building supply chain independence from China. Those include Ottawa’s Critical Minerals Strategy and Washington’s Inflation Reduction Act, both introduced in 2022.

While Global Times didn’t explicitly mention foreign governments, Rare Earth Exchanges, an industry analysis website, said the regulations could provide a basis for Chinese countermeasures against foreign restrictions affecting mineral supply chains.

Political leverage

Beijing already uses its critical mineral supply chain strength as geopolitical leverage in political conflicts, as Japan has experienced twice since 2010. In both cases, China restricted rare earth exports to Japan amid disputes over territorial and Taiwan issues.

The new legislation also prioritizes China’s mineral security as much as mineral development, allowing the state to define and update a list of “strategic minerals” based on economic importance, supply scarcity and import dependence, Amos noted. 

She also noted the law now gives the state power to directly organize mining and requisition resources during crises, though Global Times gave no specifics. 

The regulations institutionalize a vertically integrated strategic mineral command structure designed for long periods of geopolitical competition, Rare Earth Exchanges said.

“For the US and Europe, the message is blunt: China is not merely defending its mineral advantage. It is hardwiring that advantage into law.”