China pledges to crack down on illicit exports of rare earths, urges US to lift more trade controls

San Francisco Chronicle​

3 days ago

BANGKOK (AP) — China's state security agency says it is cracking down on alleged smuggling of rare earths minerals that it says threaten national security, just weeks after Beijing and Washington agreed to make it easier for American firms to obtain from China those materials, which are critical for manufacturing and computer chip production.
In a report published Friday in the state-run newspaper Global Times, the Ministry of State Security said foreign 'espionage and intelligence agencies' were colluding to steal rare earths-related goods by repackaging and relabeling rare metals to hide their Chinese origin.
In some cases the minerals were falsely declared as non-controlled items, mislabeled as such things as 'solder paste,' mixed into other materials like ceramic tiles, or hidden in plastic mannequins or bottled water, it said.
It referred only to an unnamed 'certain country' that it said lacked the capacity to make and refine its own rare earths.
Investigations had found Chinese criminals were involved, exploiting shipping and delivery channels to evade controls on exports of the materials used in many high-tech applications including electric vehicle batteries, it said.
The crackdown followed a report by Reuters earlier this month detailing how rare earths were being transshipped to the U.S. via Thailand and Mexico.
China is the main source for many strategically vital rare earths and it has moved to slow exports of such minerals in retaliation for steep import duties President Donald Trump has imposed on Chinese goods since he returned to the White House and launched his crusade to overturn a global trading system he says is unfair to the United States and its workers.
That followed an earlier series of restrictions by Beijing on exports of such materials as gallium, germanium, antimony and tungsten in response to trade friction with the administration of then-President Joe Biden.
In April, Beijing imposed permitting requirements on seven rare earth elements, under a Chinese law that applies to all exports, not just those bound for the U.S. market.
With the permitting process taking 45 days, the new requirement caused a pause in shipments, threatening to disrupt production of cars, robots, wind turbines and other high-tech products in the U.S. and around the world. The U.S., meanwhile, added to restrictions on exports of advanced technologies to China.
Rare earths have remained at the center of China-U.S. talks aimed at staving off huge tariff increases that were postponed in May to allow time for negotiations on a broader trade agreement. The deadline for reaching a deal is Aug. 12.
An agreement announced in late June did not remove China's permitting requirement on rare earths, but Beijing agreed to flexibility in dialing up or down the approval process as needed.
Computer chips are another key bone of contention.
The Chinese Commerce Ministry said Friday that it had taken note of a decision by the Trump administration to lift restrictions on exports of key semiconductors used in artificial intelligence made by Nvidia and its rival Advanced Micro Devices.
In April, the Trump administration announced it would restrict sales of Nvidia's H20 chips to China — as well as MI308 chips from AMD.
But Commerce Ministry spokesman Wang Wentao said restoring healthy trade ties will require more action by Washington.
'We hope that the United States and China will meet each other halfway and correct their wrong practices through equal consultation, create a good environment for mutually beneficial cooperation between enterprises of both sides, and jointly maintain the stability of the global semiconductor production and supply chain,' he said.