China is designing a new export-licensing system that would allow it to fast-track shipments of rare-earth magnets and other sensitive materials to civilian buyers while blocking access to companies linked to the U.S. military.
The Wall Street Journal (gated) carried the latest on this. In brief:
According to people familiar with the plan, Beijing’s “validated end-user” (VEU) scheme would mirror U.S. export-control procedures and give pre-approved firms general authorisation to import controlled materials without having to apply for a licence each time. The aim is to honour President Xi Jinping’s recent pledge to President Trump to ease the flow of restricted goods following their late-October trade truce — while maintaining tight control over where such materials ultimately end up.
Rare-earth magnets are essential for both civilian and defence applications, powering electric-vehicle motors, passenger jets, fighter aircraft and drones. Under the proposed system, Chinese authorities would streamline exports to firms that can demonstrate purely civilian end-use but exclude any company with military or dual-use ties.
Officials have yet to detail which companies would qualify for general licences or how long approvals would last, leaving uncertainty for dual-use industries such as aerospace and automotive manufacturing. The Ministry of Commerce has not commented.
The VEU concept draws directly from the American model, under which Chinese firms have been able since 2007 to import certain U.S. goods under general authorisation in exchange for allowing on-site compliance inspections. Beijing’s version, however, would flip the arrangement, enabling China to control sensitive outbound flows and leverage its near-monopoly over rare-earth processing to maintain strategic advantage.
Since April, China has used curbs on high-powered rare-earth magnet exports as a bargaining chip in trade talks. Despite promises to issue more general licences after the Trump-Xi truce, Beijing appears intent on keeping some restrictions intact. Uncertainty over eligibility and enforcement means many multinational firms may still look for non-Chinese suppliers of critical materials.
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The plan underscores China’s strategic leverage in rare-earths and could squeeze supply chains for defence and dual-use industries in the U.S., Japan and Europe. Automotive and aerospace firms with military contracts may face higher compliance costs or seek non-Chinese sources.
This article was written by Eamonn Sheridan at investinglive.com.