China on Thursday tightened export controls on rare earths, a rare move that could have widespread implications for global supply chains and traditional and crypto market sentiment.
China’s Ministry of Commerce announced drastic new export restrictions on rare earths, processing technologies and derived products used in semiconductors, AI systems and defense.
The new rules, expected to take effect on December 1, will require foreign companies exporting products containing rare earth elements of Chinese origin or related technologies – including those outside China – to obtain a dual-use license from the Ministry of Commerce (MOFCOM).
This is a major escalation as China dominates global production of rare earths, essential in everything from everyday electronics to fighter jets. Potential supply chain constraints resulting from this move could shake risk sentiment, particularly in AI stocks, and lead investors to hedge their portfolios. Potential risk aversion in AI stocks could spill over into the crypto market.
“China has just used rare earths as a weapon – again, but this time on a global scale,” said geopolitical strategist Velina Tchakarova on X, referring to the new rules.
“The move effectively gives Beijing veto power over parts of the global chip, electric vehicle and defense supply chains, including those operating outside its territory. Licenses will be denied for military or AI-related uses, including 14nm chips, 256-layer memory and military-grade AI systems,” she added.
According to Tchakarova, the new rules could cause supply disruptions in electric vehicles, turbines and semiconductors, leading to higher prices.
This latest move is expected to give Beijing leverage in trade negotiations with the United States. It comes ahead of an expected meeting between Chinese President Xi Jinping and President Donald Trump on the sidelines of the APEC summit in South Korea later this month.
