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EU businesses are lobbying Beijing to set up a special channel to fast-track Chinese approval of rare earth export licences for “reliable” companies, as China’s strict controls on shipments of the critical minerals threaten supply chains worldwide.
The proposal was made at a meeting between European companies and China’s ministry of commerce officials, according to three people briefed on the matter, and comes as European officials warn that their factories are at risk of shutdowns owing to the Chinese measures that were originally aimed at the US.
“Companies during the meeting proposed a clean channel — a white list,” said one European executive briefed on the meeting, which took place last week.
“Mofcom [the ministry of commerce] took our concerns seriously,” he said, adding that the Chinese officials at the meeting said they were working on “innovative tools” to speed up the process.
Officials and businesses also discussed the possibility of the government granting multiple licences to companies for rare earth exports so that they did not have to apply for each shipment, he said.
China dominates the global supply of rare earths and its export control regime — introduced in April after the start of US President Donald Trump’s “liberation day” trade war — is creating chaos in supply chains not only in America and Europe but also as far afield as India and Japan.
Trump has accused Beijing of reneging on a truce in their trade war agreed on May 12, when the US agreed to reduce additional tariffs from as high as 145 per cent in return for China relaxing its tariff and non-tariff measures.
Washington is increasing pressure on Beijing to expedite rare earth shipments by retaliating with supply chain measures of its own, including cutting off Chinese groups from chip design tools and halting ethane exports.
European trade commissioner Maroš Šefčovič said on Wednesday that he had pressed Chinese commerce minister Wang Wentao about the shortage of the vital components, which was slowing deliveries for manufacturers of everything from cars to washing machines.
A second person familiar with the meeting said so-called “white lists” of known companies were normal practice for export and customs controls. “It’s very common with customs clearance all over the world and also in China that if you are considered a reliable company that has a good track record, then your inspection ratio will drop down.”
Chinese bureaucracy was so deluged with applications from across the world for the rare earth export licences that it was difficult for them to single out the applications for rapid approvals, said a third person briefed on the meeting.
“That’s why . . . they [businesses] wanted to create this special line for them,” the person said, referring to the white list proposal.
The people briefed on the meeting said that little progress had been made since then. One exporter that normally ships 2,000kg a year had so far received permission for just 75kg, one person noted.
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Chinese officials at the meeting had referred to negotiations with the Japanese and South Korean governments, which the people present understood to mean they might use rare earth shortages as leverage in these talks. Beijing is keen to deter the US from striking bilateral trade deals with other countries that are unfavourable to Chinese interests.
China’s commerce ministry on Thursday said it lawfully reviewed export licence applications for dual-use items such as rare earths as was common international practice.
“For applications that meet the requirements, China will grant approval to promote and facilitate compliant trade,” said spokesperson He Yongqian.
Additional reporting by Andy Bounds in Brussels
