China tightens grip on rare earths with strict enforcement rules

China has tightened its control on rare earth production by strengthening its oversight on the sector, a move that further reinforces Beijing’s grip on the supply of minerals underpinning the world’s advanced technologies.

A draft document published by the Ministry of Industry and Information Technology (MIIT) has outlined a new framework that entails administrative penalties for China’s rare earth producers for certain violations.

These include breaches of production quotas in mining and smelting as well as unauthorized separation activities. A company that breaches the quota by less than 10% could receive fines of up to five times its “illegal gains”, for example.

In more serious cases (such as producing more than 30% above quota), business licenses may be revoked—underscoring the China’s intent to seek “total control” over its rare earth sector.

In addition to fines, companies could see their products and equipment confiscated by the government. They may also be punished for selling illegally mined or processed materials and not properly reporting their product flows.

Authorities are now seeking public comment on these proposed guidelines, MIIT said in a statement.

Enforcement push

The framework, the MIIT says, is aimed “to better implement the regulations, standardize law enforcement in the rare earth sector, and strengthen law-based governance.”

The latest enforcement push builds on a long-standing framework of production quotas, environmental controls and industry consolidation in China, by far the world’s largest producer of rare earths.

These 17 minerals—which are essential to build permanent magnets, wind turbines and electronics—have become a focal point of China’s strategic planning and a bargaining chip in trade negotiations.

China currently accounts for more than two-thirds of the global mine production and has a near monopoly on the minerals’ refining. Last year, Beijing weaponized that supply chain dominance by restricting exports on seven rare earth minerals as retaliation for US tariffs imposed by President Donald Trump.

The MIIT draft framework comes just two weeks before Trump’s scheduled meeting with his Chinese counterpart Xi Jinping, in what would be his first visit to Beijing in nearly a decade. While it remains to be seen what will be discussed during the summit, many expect rare earths to come up in conversations given their strategic importance.

Bloomberg Economics estimates that about $1.4 trillion of America’s economy is linked to industries that use these minerals.