Highlights

• China strategically relaxes rare earth export restrictions.
• Expedited licensing granted to European and Chinese semiconductor firms.
• U.S., Taiwanese, and South Korean tech companies remain excluded.
• Highlights geopolitical tensions in global supply chains.
• Move signals China's diplomatic approach to maintain European goodwill.
• Maintains economic leverage against rivals.

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China is selectively easing its rare earth export restrictions—but only for European and Chinese semiconductor firms, leaving U.S., Taiwanese, and South Korean tech companies out in the cold. The policy shift, reported by Reuters (opens in a new tab) and Chinese state media, follows a high-level meeting this week between Chinese officials and the European Union Chamber of Commerce in Beijing.

Previously, exporters of rare earth magnets and alloys faced months-long approval delays under new curbs introduced in April. The updated rules now grant expedited licensing for European firms, whose chip and auto supply chains were at risk of collapse. “Many European production lines will come to a halt” without these changes, warned Jens Esklund, Chamber President.

Material Impact:

• EU firms win temporary breathing room to secure dysprosium, neodymium, terbium, and related magnet materials critical for semiconductors and electric motors.
• U.S., Taiwan, and South Korea remain excluded, amplifying strategic pressure on their defense, aerospace, and computing sectors.
• Chinese multinational firms also benefit from reduced customs clearance friction.

A Critical Review

China has signaled a selective relaxation of its new rare earth export restrictions, offering relief primarily to European and domestic semiconductor firms, as cited by Tom’s Hardware (opens in a new tab).

In April 2025, Beijing had added seven medium and heavy rare earth elements and related magnet alloys to its export control list, mandating that all exports undergo a lengthy licensing process. This regime, introduced amid a trade spat with the U.S., is not an outright ban but has effectively slowed shipments: only a few export licenses have been granted so far, and complex paperwork has caused confusion at customs, as cited by Rare Earth Exchanges.

By late May, European industries were warning that production lines could grind to a halt within weeks due to a shortage of crucial inputs,  highlighting the curbs’ disruptive impact on sectors from automotive to microelectronics.

Chinese officials hosted a high-level roundtable with European semiconductor and electronics firms in Beijing on May 27, where industry representatives – including members of the EU Chamber of Commerce in China – pressed for expedited rare earth approvals, as reported by Chinese state media and Reuters. In the wake of this meeting, state media (China Daily) reported that Beijing “could relax” export controls for the supply chains of Chinese and European chip companies.

European executives emphasized the urgency of faster licensing, noting that many factories (from Bosch’s auto-parts suppliers to Infineon’s chip production) were on the verge of shutdown without key rare-earth magnets and alloys (opens in a new tab). No explicit concessions by the EU were announced publicly, but the gesture comes amid a broader thaw in China-EU trade relations. Beijing has been keen to court the EU as a partner, emphasizing mutual supply-chain “cooperation” and joint opposition to “unilateral” trade practices, cited in the Global Times (opens in a new tab) in China, even as it remains locked in a tariff and tech war with the United States.

Observers note that China’s outreach is one-sided: reports did not indicate any immediate EU policy give-back for this favor,  suggesting the move is a strategic bid to maintain European goodwill and differentiate EU businesses from other foreign firms under the curbs.

Selective easing of the export controls would have tangible impacts on Europe’s tech and automotive sectors while excluding others. For example, German automakers like Volkswagen have already secured a handful of licenses for magnet suppliers after lobbying Beijing, and the proposed policy tweak would ensure that European companies, such as STMicroelectronics and Infineon, can continue to receive critical rare-earth inputs for production.

USA and Asian Allies Excluded

In contrast, U.S., Taiwanese, and South Korean firms remain largely barred from expedited access – initial export permits in April were reportedly issued only for customers in Europe (and Vietnam) per Reuters. This disparity underscores China’s geopolitical calculus: prioritizing “friendly” markets to blunt the economic fallout (even India’s car industry is warning of imminent shutdowns after receiving zero licenses), while maintaining leverage over rivals.

In the near term, China’s partial reprieve should stabilize rare earth supply for European manufacturers like Bosch (auto components), which noted serious bottlenecks under the new rules. However, the episode has also highlighted Western vulnerability and galvanized efforts to boost midstream resilience. Western nations are investing in alternative, rare-earth supply chains. Still, new mining, separation, and magnet manufacturing projects outside China will take years to fully ramp up as REEx has continuously reported.

By using export licenses as a diplomatic tool, Beijing is testing the West’s dependence and unity. The rare earth curbs have become both a market shock and a strategic signal, prompting Europe to seek accommodation. At the same time, the U.S. doubles down on sourcing critical minerals elsewhere, according to the mineral experts at CSIS. (opens in a new tab)

This calibrated policy shift thus carries far-reaching implications for global rare earth markets and the drive for supply-chain security in advanced industries.

At the same time, is this move more a tactical recalibration, as opposed to a full policy reversal? China is reinforcing bilateral leverage with the EU while continuing its export squeeze on geopolitical rivals. What, if anything, the EU has offered in return remains unclear—but the asymmetry with U.S. access is stark.

REEx is actively validating license volume changes and customs clearance timelines in affected Chinese ports and elsewhere.

Stay tuned for full analysis and verification updates at REEx and discuss at the Forum (opens in a new tab).