Taiwan faces risk from China's rare earth rules

INDUSTRY: Beijing’s latest export measures go beyond targeting the US and would likely affect any country that uses Chinese rare earths or related tech, an academic said

• Staff writer, with CNA

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Taiwanese industries could face significant disruption from China’s newly tightened export controls on rare earth elements, as much of Taiwan’s supply indirectly depends on Chinese materials processed in Japan, a local expert said yesterday.

Kristy Hsu (徐遵慈), director of the Taiwan ASEAN Studies Center at the Chung-Hua Institution for Economic Research, said that China’s latest export measures go far beyond targeting the US and would likely affect any country that uses Chinese rare earths or related technologies.

With Japan and Southeast Asian countries among those expected to be hit, Taiwan could feel the impact through its reliance on Japanese-made semi-finished products and components that often involve Chinese-sourced rare earths or refining processes, Hsu said.

Beijing on Thursday announced sweeping new export restrictions requiring companies worldwide to obtain export licenses if their products contain more than 0.1 percent of Chinese-origin rare earth materials by value.

The measures also place semiconductor, artificial intelligence and defense-related technologies under strict case-by-case review.

The scope of Beijing’s latest rules closely mirrors the US’ foreign direct product rule, which Washington uses to regulate the global use of US technologies, Hsu said.

China’s move is a major escalation from previous restrictions, as it is broader in scope and has far greater potential reach, she said.

If fully enforced, the measures could trigger sharper price surges and more aggressive stockpiling in the global market, she added.

Unless China later adjusts its policies, the overall impact would be substantial, although it remains unclear how rigorously Beijing intends to implement the new rules, she said.

China produced 270,000 tonnes of rare earths last year, accounting for about 70 percent of global output, far ahead of the 45,000 tons produced by the US, which made up about 11 percent of the total, US Geological Survey data showed.

China controls nearly 90 percent of global rare earth refining capacity, and has significant leverage in the global market, business insiders said.