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Finbarr Bermingham

The European Union is “worried” by China’s move to tighten restrictions on rare earth minerals, with senior figures saying the controls will compound the deterioration in trade relations that have only “worsened” since a summit in July.
On Thursday, China’s Ministry of Commerce announced a sweeping “upgrade” of rare earth licensing requirements that have been in place since April, expanding them to cover the export of technologies used to process the minerals.
The move also tightens licensing requirements for products containing even traces of rare earths produced in China, which has a near-monopoly on the market for the ingredients used in critical military and hi-tech goods.
There are fears in Europe that this could harm efforts to rearm and militarily support Ukraine since a lot of advanced arms and military equipment are reliant on these minerals.


“Retaliatory measures are hitting us as collateral damage, and the best example of that is the export control measures of the Chinese government on rare earths that are hitting and hurting our companies, which have been even worsened today,” Jorge Toledo, the EU’s ambassador to China, said in an address to a conference in The Hague.
The main outcome from July’s summit in Beijing, which was attended by EU and Chinese leaders, was supposed to be a new system to help galvanise the flow of rare earths. But this has not happened, with European businesses complaining about the slow pace of licence approval.
The EU Chamber of Commerce said that by September 9, only 19 of 141 applications for rare earth export licences had been approved, with some 121 in process. This had led to seven instances of halted production in August, with 46 expected in September.
“Unfortunately, we have seen not much progress since [the summit], so we need to start working with our Chinese friends to start making progress. And as you can see, the news does not seem to be very good for the moment,” Toledo said.
At the Reconnect China conference hosted by the Clingendael institute, a Dutch think tank, a senior EU trade official said the issue would be escalated in coming talks with the Chinese government, scheduled for November in Beijing.
Joanna Szychowska, director for Asia trade in the European Commission, said she did not believe the upgraded licensing requirements would change “what we intended to do and what we have been doing for the past several months”.
“There is an upcoming export controls dialogue that has been upgraded at the summit, which is an opportunity to bring it to the attention of those who are responsible in Beijing,” she said.
Szychowska said the commission was trying to “understand the gist of the proposal”.
“Will it change [things] to the extent that will be satisfactory? It’s a very hard question … we are very worried. This is part of this very aggressive standing, what I would call retaliatory reactions, but I don’t think per se this changes what we think we should be doing, including in this area.”
Observers and business figures suggested Europe should prepare for Beijing to ramp up this economic lever.
“Once you have a licensing system, you build the bureaucratic capacity to operate it and this is where China is going, one step at a time,” said Mathieu Duchâtel, director of the Asia programme at the Institut Montaigne, a French think tank.
“I expect enforcement of the military end-user criteria to be systematic. European companies will need to obtain licences. China is expected to use it diplomatically to try [to] obtain an easing of our own export controls targeting their military end users.”
The effect on Ukraine will be front of mind for many in Europe, with the bloc set to support Kyiv’s efforts to repel Russia’s invasion as the United States threatens to wind down its efforts. Sources in the Ukrainian capital said they were studying Beijing’s announcement for signs that it could affect their military.
Toledo said China’s relationship with Moscow had become the “most important issue in our systemic rivalry”.
“We have evidence of [Chinese] material support to the Russian military machine. We have evidence that 80 per cent at least of all EU sanctions circumvention – which bans our exporters, our companies in Europe, from exporting dual-use materials and products that could be used by the Russian military machine – 80 per cent of this sanctions circumvention is done through China,” he said.
He added that China had not responded well to Europe’s requests for an “unconditional ceasefire” in Ukraine.
“When we ask them to support this unconditional ceasefire and to influence their Russian partners to stop the war, now they say, ‘well, we understand different things for ceasefire’, so they are not, again, cooperating,” Toledo said.
“The Chinese government is always asking us to respect their red lines – the red line, the reddest line, Taiwan – which we respect. We have our EU one-China policy, but they don’t seem to pay any heed to our red lines.”


In The Hague, meanwhile, EU businesses threw their support behind a tougher trade policy towards China while insisting that Brussels continue to engage with Beijing.
“The language that China [understands] is the language of power and being much more transactional,” said Elena Suárez Sanchez, who covers China at BusinessEurope, a coalition of chambers of commerce in Brussels.
“If China does not change trajectory … I think we need to continue to use the full toolbox we have at our disposal,” she said.
“The problem, of course, is that this will also trigger retaliation from China. We need to be ready to stand up for that and assume the consequences.”


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On Thursday, China’s Ministry of Commerce made a series of announcements outlining new limits on several rare earth products deemed sensitive to national security. Photo: AP

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China dominates the global supply chain of rare earths. Photo: Reuters

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China

Diplomacy

Observers and business leaders suggest Europe should prepare for Beijing to ramp up this economic lever


Observers and business leaders suggest Europe should prepare for Beijing to ramp up this economic lever.


China’s rare earth clampdown deepens EU anxiety on industry and Ukraine support

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Observers and business leaders suggest Europe should prepare for Beijing to ramp up this economic lever

Observers and business leaders suggest Europe should prepare for Beijing to ramp up this economic lever