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Laurie Chen and Lewis Jackson
BEIJING (Reuters) – A small team of China’s Commerce Department is deciding the fate of a global automotive industry, a rare Earth magnet export license in a clumsy gray building east of Tiamman Square in Beijing.
China took rare earth magnets, a key component of electric vehicle motors, to a near monopoly and added them in April as part of a trade war with the United States, forcing all exporters to apply for licenses from Beijing.
It belongs to the Industrial Security Bureau, the Bureau of Import and Export Control – part of China’s Ministry of Commerce – to review the export licenses for rare earth magnets, which is crucial for automotive cars, wind turbines and even U.S. F-35 fighters.
Dozens of licenses have been issued since late April, but executives, lobbyists and diplomats say automakers, semiconductor companies and aerospace companies around the world have flooded a small number of applications since the introduction of stricter export controls.
Washington said the delay in issuing export permits shows that China is violating commitments made in trade talks in Geneva last month and has retaliated against export restrictions on plane engine parts and other equipment.
U.S. President Donald Trump and Chinese President Xi Jinping held talks by phone Thursday as disputes on China’s rare earths continue to escalate, threatening to derail a fragile trade truce between the two superpowers.
When new rare-earth magnet measures came in, the Bureau of Export Control had only 30 employees in total, although the two sources briefed a meeting between the ministry and Chinese and European semiconductor companies last week.
“We thank Mofcom for adding resources to address needs, and they work hard on these issues,” said Adam Dunnett, secretary general of the European Chamber of Commerce in China.
“But the reality is that it has a huge impact on all kinds of departments. It could have been better planned and launched,” he said.
According to personnel records released to the Ministry of Commerce website in June 2024, only three senior officials in the bureau can approve export licenses.
The Ministry’s website lists the office hours of the Export Licensing Bureau: working days, 8:30-11:30 AM, 14:00-17:00 PM
Reuters cannot determine the current staffing level, or more officials are now able to approve the application.
The Ministry of Commerce did not answer Reuters’ questions on this question.
chokepoint
Global alerts on shortages underscore China’s huge leverage, near-monopoly of production through its rare earth. It also reveals a complex bureaucratic process that has shifted from checkpoint to chokepoint.
A spokesman for German engineering and technology multinational Bosch said: “The process of suppliers applying for export licenses for various rare earths… has been complex and time-consuming since April, partly due to the need to collect and provide a large amount of information.”
The Ministry’s Chinese guide to the process, published in late March, contains nearly 14,000 Mandarin characters.
Since early April, European auto suppliers alone have filed hundreds of requests, with only about a quarter of approvals. Depending on the source of the request or a brief introduction, these applications can range from dozens to hundreds of pages.
Public firm guidelines require information, including technical product descriptions, signed contracts. Descriptions of production facilities and product photos are also encouraged.
What China said was to ensure that dual-use items do not end up in military equipment, but officials are often too cautious, although many applications clearly state commercial use.
“The other problem we hear from some companies is that they are being asked to provide sensitive and excessive information, which is part of their intellectual property, which has led to delays in their applications,” Dunnett added.
The application should be processed within 45 working days, but the ministry said that applications related to national security will take longer without defining how long it takes.
“Strategic excuse”
Cory Combs, head of key minerals and supply chain research at policy research group Trivium China, said it was unclear whether the delays were due to bureaucratic inertia or intentional weaponization.
“We do want these applications to U.S. end users to review with other countries and approved without military use,” he said. “The question here is, is the Trump administration confident that Beijing has not violated the Geneva agreement, which is fast enough?”
Some American industry insiders believe that the backlog of bureaucracy is a “strategic excuse.”
“China can work at the pace they want,” said a source in the U.S. rare earth industry.
In public, Chinese officials said export controls apply to all countries, meaning they do not see the Geneva agreement as a specific U.S. countermeasure.
Foreign Ministry spokesman Lin Jian said on May 30 that the export control of rare earth is “non-discriminatory and not targeted at any particular country.”
However, during the Geneva talks, China privately acknowledged that export control of rare earths was eligible as a non-TV countermeasure.
The person said the rare earth is still a core part of the ongoing US-China discussion.
The Chinese Foreign Ministry did not immediately respond to a request for clarification.
Chinese scholars publicly admit that rare earth export control is retaliation against the US chip curb.
“This is a short-term leverage that will not hurt China because the currency value of the rare earth in question is relatively low,” said Zhu Junwei, an international relations scholar at the Chinese think tank Grandview Institution.
(Reported by Laurie Chen and Lewis Jackson in Beijing; other reports from the Beijing Newsroom; Edited by David Clarke)
