China’s Rare Earth Export Restrictions Strain European Businesses

China’s Rare Earth Export Restrictions Strain European Businesses

Beijing continues to restrict foreign access to rare earth minerals vital for technology and manufacturing, according to the European Chamber of Commerce in China (ECCC). This ongoing limitation has resulted in significant financial losses, with at least one European company reportedly losing millions of euros.

Rare earth elements are essential components in a range of products from electric vehicles to semiconductors. China dominates the global rare earth market, accounting for over 69% of mine production in 2024 and nearly half of the world’s reserves, per the U.S. Geological Survey.

Export Controls Tighten Amid Trade Tensions

Since late 2024, China has intensified export restrictions on rare earths, imposing stringent conditions such as requiring proof that shipments will not be used for military purposes. Following a trade truce with the U.S. in May, China began issuing single-use export licenses, complicating supply chain reliability.

The ECCC highlighted that while there was a temporary increase in license approvals during June and July, European companies have faced mounting difficulties obtaining these permits recently. Even when granted, export licenses do not guarantee consistent access to rare earths, amplifying uncertainty for businesses reliant on these materials.

Impact on European Industry and Supply Chains

Volkswagen, a major German automaker, stated that its supply of rare earth-containing parts remains stable and that suppliers are actively securing necessary export licenses. However, the broader European business community remains concerned, given that nearly half of the EU’s rare earth imports came from China last year, with Russia and Malaysia as secondary sources.

The ECCC plans to brief European Union policymakers in Brussels soon to discuss these challenges and has issued recommendations urging Beijing to address systemic issues such as overproduction and to allow greater private sector involvement in key industries.

Broader Economic Context and Outlook

These export challenges add to the difficulties foreign businesses face in China, including reduced confidence following pandemic disruptions, a sluggish domestic economy, and structural industrial overcapacity. The American Chamber of Commerce in Shanghai recently reported record low business confidence and increased investment diversion from China to Southeast Asia.

China’s upcoming leadership meeting in October to outline its 2026–2030 development goals will be closely watched by European companies. The ECCC’s president Jens Eskelund emphasized the significance of China’s five-year plans, noting that current trade and industrial challenges largely stem from prior policy decisions.

With China remaining the EU’s second-largest trading partner, valued at €732 billion in 2024, the trajectory of China’s rare earth policies will be critical for European industry and global supply chains moving forward.

— Reporting by CNBC, with contributions from Sam Meredith.