China has escalated its control over global supply chains of strategic materials by imposing a new export licensing system on mid-to-heavy rare earth elements—essential inputs for military technologies, green energy systems, and high-performance electronics. While framed as a routine regulatory measure, the policy represents a powerful new lever in Beijing’s growing arsenal of economic statecraft.

The Ministry of Commerce’s April directive—Announcement No. 18—requires Chinese firms to obtain export licenses for critical rare earths such as dysprosium, terbium, samarium, and others. These elements are vital to producing rare-earth magnets used in everything from F-35 jet fighters and missile guidance systems to electric vehicles and wind turbines. The move replaces a previously quota-based system with a more flexible, discretionary tool.

Pentagon at the Crosshairs

U.S. officials and defense analysts see the licensing regime as a direct challenge to the Pentagon’s industrial resilience. Each F-35 jet alone contains around 50 pounds of samarium. In May, Chinese exports of related products fell by 74% compared to the same month last year, prompting warnings from the Wall Street Journal that the issue had moved to “center stage” in U.S.–China tensions.

Unlike past bans, the licensing system avoids outright restrictions—thus shielding China from World Trade Organization disputes—while giving authorities power to approve or deny shipments based on “national security” or “nonproliferation” grounds. Chinese officials insist the system is non-discriminatory, but analysts say it offers Beijing precise control over which industries and countries face bottlenecks.

A Tool of Strategic Escalation

The policy shift is widely seen as a response to U.S. export controls on Chinese tech firms. In effect, China is mimicking Washington’s own playbook—embedding strategic deterrence into customs bureaucracy. Real-time tracking, end-use declarations, and case-by-case approvals now give Chinese regulators deep visibility into foreign supply chains.

Commentators on state-linked platforms have described the licensing regime as a “countermeasure in the trade war” and a way to pressure U.S. military contractors and allied industries. Temporary licenses have been granted to ease immediate concerns—for example, to U.S. automakers—but the system allows for rapid tightening or loosening as geopolitics evolve.

Europe Offered Reassurances, Not Exemptions

China has signaled greater leniency toward European buyers, offering a “green channel” to expedite license applications for EU-bound exports. However, even this remains under full Chinese discretion. Officials say the aim is to promote “international cooperation” while safeguarding national interests.

The model has already inspired talk of broader applications—including potential future restrictions on materials used in semiconductors, aerospace alloys, and biotechnologies. The CSIS notes that China still dominates 99% of global capacity for many of the rare earths targeted by the new policy.

A New Phase of Economic Coercion

The shift from quotas to licensing marks China’s transition from broad-stroke disruptions to fine-tuned economic leverage. It allows Beijing to pressure companies, industries, and governments without triggering formal trade retaliation.

In essence, the system turns rare earths into a strategic faucet—opened or closed based on foreign behavior. For Washington and its allies, the message is clear: critical mineral access will increasingly depend on political alignment.