China Tightens Rare Earth Export Controls, Confiscates Passports

China has intensified its restrictions on the export of rare earth metals, implementing measures that include requesting detailed lists of technical employees with sensitive knowledge and, in some cases, confiscating their passports. This move is part of a broader effort to maintain China's dominance in the rare earth industry, which produces roughly 90% of the world’s rare-earth magnets used in high-tech and defense applications globally.

China's Ministry of Commerce has instructed rare earth companies to provide comprehensive data on employees with technical expertise. The information requested includes the employees’ areas of specialization, educational backgrounds, research experience, and other personal details. This measure aims to create a national registry of individuals with rare-earth knowledge to prevent the unauthorized disclosure of trade secrets to foreign entities. The government’s inquiry applies to all personnel involved in processing the raw minerals and the professionals who work on converting the rare earths into high-performance magnets, which are vital components in electric vehicles, drones, wind turbines, and advanced weapons systems.

Some employees have already been told to hand over their passports to their companies or local authorities. This move is similar to the existing rules for government officials and workers at state-owned enterprises, who must apply for approval before traveling abroad. The focus on personnel with privileged information is due to concerns in Beijing over foreign espionage and economic sabotage. Last September, China’s Ministry of State Security announced that a Chinese citizen had been sentenced to 11 years in prison for selling information about the country’s rare-earth stockpiles to unnamed foreign interests. The ministry warned that such leaks could “put China at a disadvantage in international strategic competition.”

China’s dominance in the rare earth industry has become a problem for Western governments who are seeking to reduce their reliance on Chinese supply chains. The U.S., EU, Australia, and others have launched initiatives to revive domestic rare-earth production, but progress has been slow. One of the key obstacles remains the lack of technical expertise outside China, which seems to be precisely the gap Beijing is determined to keep wide.

Months ago, China rolled out a new licensing system for rare earth and rare-earth magnet exports, which has so far disrupted global supply chains and raised concerns among Western manufacturers. Some companies in the U.S. and Europe, heavily reliant on Chinese exports, have already reported slowdowns and temporary shutdowns due to difficulties in sourcing materials. For years, China’s rare earth dominance stemmed in part from its ability to undercut international competitors on cost. However, due to mounting geopolitical concerns, the country seems to be adjusting its approach to focus on long-term technological advantage over short-term trade volume.

Processing rare earths is technically complex, as it involves the separation of chemically similar elements from raw ore. Chinese scientists have developed advanced, proprietary methods to achieve this, and so it’s understandably protected. The concerns aren’t unwarranted as China’s dominance in the sector has become a problem for Western governments who are seeking to reduce their reliance on Chinese supply chains.