The flag of China is placed next to the elements of Gallium and Germanium on a periodic table, in this illustration picture taken on July 6, 2023.
The regulations cover seven medium to heavy rare earth elements and several magnets, mandating that exporters obtain licenses. Delays in securing these licenses have disrupted supply chains for industries such as automotive and semiconductor manufacturing, with some global automakers halting production lines due to depleted reserves.
Plans for the tracking system were first announced by Beijing in June 2024, but no further details emerged until its recent implementation, one source noted. The system aims to enhance oversight of the rare earth sector, where China holds a dominant position as the world’s leading supplier and exporter of rare earth magnets.
The increased scrutiny indicates that China’s export controls on rare earths and magnets may become a long-term policy. Tim Zhang, founder of Singapore-based Edge Research, commented: “Our current hypothesis is that China would continue its export control mechanism on rare earths, as it’s an ace card for China to hold.”
While some in the U.S. and other regions hoped the restrictions might be lifted following a trade agreement in Geneva last month, the new system suggests otherwise. Historically, when China has imposed export limits on metals, exports have gradually resumed as licenses are granted.
A fourth source indicated that Beijing’s broader goal is to monitor the entire rare earth production chain, beyond just magnets. This includes strengthening oversight to address issues like smuggling, illegal mining, and tax evasion. The tracking system is part of efforts to maintain control over this critical industry, which supports global manufacturing needs.
The introduction of these measures has impacted international markets, as China’s near-monopoly on rare earth magnet production affects industries reliant on these materials. The system’s long-term effects on global supply chains remain under observation, with industries awaiting clarity on license approvals and production timelines.
