China may ban rare earth technology exports on security concerns

The Chinese city of Baotou. (Image by Matthew Stinson)

China may ban the export of rare-earths refining technology to countries or companies it deems as a threat on state security concerns, according to a person familiar with the matter.

The Chinese government is currently conducting a review of its rare-earths policy. Officials view the technology needed to refine and purify the raw materials as a more powerful weapon in protecting state interests than the actual minerals, and is looking at banning sales of the technology to some countries or companies, according to the person, who asked not to be identified because the information isn’t public.

While China has no plans to restrict shipments of rare earths to the U.S., it is keeping the plan in its back pocket should a trade war break out again, the person said.

Officials view the technology needed to refine and purify the raw materials as a powerful weapon in protecting Chinese interests.

The Asian nation is also exploring a ban on rare earths as part of its sanctions on some individual companies, including Lockheed Martin Corp., which violated China’s core interest over arms sale to Taiwan, the person said.

China’s Ministry of Commerce didn’t immediately respond to a fax seeking comment.

China controls most of the world’s mined output of rare earths, a broad group of 17 elements that are used in everything from smartphones to fighter jets, and has a stranglehold over processing. Its dominance would leave overseas industries with few avenues to immediately secure supply if curbs were to be put in place.

The minerals have previously been touted as a possible weapon in the U.S.-China trade war, with Beijing readying a plan in 2019 to restrict shipments to hurt the American economy. The U.S. imports about 80% of its rare-earth compounds and metals from the Asian nation, according to government data.

Those curbs were never adopted, though it spurred the U.S. and Europe to seek out ways to cut their reliance on a single supplier. While rare earths are relatively abundant, mine-able concentrations are less common than other ores and countries face hurdles including high costs and environmental concerns in setting up domestic industries.

Donald Trump last year signed an executive order aimed at expanding domestic output of rare-earth minerals, a year after the Department of Defense was ordered to spur the production of magnets. The U.S. has also been awarding contracts and signing investment agreements aimed at establishing its own processing capabilities.

Earlier this week, the Financial Times reported that China is exploring whether it can hurt US defense contractors by limiting supplies of rare-earth minerals that are critical to the industry.

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