China’s rare earth control measures draw market attention

Rare earth control measures draw market attention, putting the US-China trade situation under scrutiny

Baofeng Media, October 15, 2025, 2:55 PM

On October 9, China's Ministry of Commerce announced the expansion of rare earth export controls. The following day (October 10), the US stock market experienced a significant decline. Rare earths, due to their excellent electrical conductivity and magnetic properties, have become critical materials in modern industry, and China accounts for approximately 90% of the global rare earth processing market. This export policy adjustment has created uncertainty for the European and American electric vehicle, semiconductor, and defense industries, triggering market volatility. There is widespread concern as to whether this move signals a new shift in Sino-US trade relations.

What are rare earths?

Rare earth elements are a collective term for 17 metallic elements, including the 15 lanthanides, scandium, and yttrium. These elements possess excellent electrical and magnetic properties, making them essential for the manufacture of all electronic devices. For example, an F-35 fighter jet uses approximately 417 kilograms of rare earth elements, while the average humanoid robot consumes approximately 4 kilograms.

Rare earth elements are called "rare" not because their reserves in the Earth's crust are extremely small, but rather because they are typically present in ores in a coexisting, dispersed form. Their chemical properties are similar, making efficient separation difficult using conventional methods. Extracting high-purity rare earth oxides from ores requires advanced separation and refining processes. China has long accumulated significant advantages in this field.

China's advantages in rare earths

China is a leader in rare earth processing and separation technology, and has maturely applied processes such as "step-by-step extraction (solvent extraction)". It is reported that the purity of its oxides can reach more than 99.9%, which can meet the strict requirements of high-end fields such as semiconductors, aerospace and precision electronics.

In contrast, traditional processes used in the United States and Japan typically achieve a purity of around 99%, which limits their use in advanced industries. Furthermore, some believe that China's extraction technology can simultaneously separate all 17 elements, while the US process typically only processes one at a time.

In terms of production scale, China has achieved mass production measured in tons, while the United States currently primarily produces in kilograms. This difference in scale has led to significant price competitiveness. As a result, China holds approximately 90% of the global rare earth processing market, and even rare earth ore mined in the United States is often shipped to China for processing.

In 1992, Deng Xiaoping stated, "The Middle East has oil, and China has rare earths." This statement reflects China's early recognition of the importance of rare earths as a strategic resource. This policy adjustment is also seen as a move within this strategic framework.

Specific content of China's Ministry of Commerce's rare earth control measures

Since April this year, China has implemented export restrictions on seven medium- and heavy rare earth elements (Sm, Gd, Tb, Dy, Lu, Scan, and Yttrium), as well as related permanent magnet materials. On October 9, the Ministry of Commerce further expanded its restrictions to include metals, alloys, and related products of five other elements: Europium, Holmium, Er, Thulium, and Ytterbium.

Currently, the external supply of rare earths required for integrated circuits below 14 nanometers, 256-layer and above memories and their manufacturing and testing equipment, as well as rare earths used in the research and development of artificial intelligence with potential military uses, must be strictly approved by the Ministry of Commerce of China.

Furthermore, the scope of control has expanded beyond rare earth products themselves to encompass the entire suite of technologies and equipment for refining, separation, and processing. This adjustment could even impact the global supply of unique extractants, directly impacting US demand for electric vehicles, advanced semiconductors, and defense. Notably, rare earths play a key role in the manufacture of Tesla's drive motors, Nvidia's semiconductors, and the F-35 fighter jet.