China tightened rare earth export controls on Thursday in a rare move that could have widespread implications for global supply chains and traditional and crypto market sentiment.
China’s Ministry of Commerce announced sweeping new restrictions on the export of rare earth materials, processing technologies and derivative products used in semiconductors, artificial intelligence and defense systems.
The new rules, which will 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, which are essential in everything from everyday electronics to fighter jets. Potential supply chain constraints arising from this move could impact risk sentiment, particularly in AI stocks, and lead investors to hedge portfolios. A potential risk aversion in AI stocks could spill over into the cryptocurrency market.
“China just weaponized rare earths, again, but this time on a global level,” geopolitical strategist Velina Tchakarova said 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, particularly 14nm chips, 256-layer memory and military-grade AI systems,” he added.
According to Tchakarova, the new rules could lead to disruptions in the supply of electric vehicles, turbines and semiconductors, leading to price increases.
The latest move is likely to give Beijing leverage in trade talks 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.
