China Tightens Rare Earth Export Controls, Poses Major Risks for Taiwan’s Tech Sector

China Implements Stricter Rare Earth Export Rules

China has introduced new export licensing regulations requiring companies worldwide to obtain approval if their products contain more than 0.1% Chinese-origin rare earth materials by value. The rules cover industries critical to semiconductors, artificial intelligence, and defense systems, mandating case-by-case evaluation for exports, according to reports by Focus Taiwan.

The move represents a significant escalation in Beijing’s economic influence, with experts warning that it could impact global manufacturing and technology production.

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Taiwan Could Face Serious Disruptions

Kristy Hsu, director of the Taiwan ASEAN Studies Centre at the Chung-Hua Institution for Economic Research, warned that Taiwan may be particularly vulnerable. Many Taiwanese tech firms rely on semi-finished goods and electronic components imported from Japan, which in turn depend on Chinese rare earths and refining processes.

Hsu noted that while the restrictions are not explicitly targeted at Taiwan, the island’s deep integration in high-tech supply chains makes it susceptible to collateral effects.

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Strategic Economic Implications

Experts have likened China’s policy to the US Foreign Direct Product Rule (FDPR), which controls the international use of American technology. Hsu emphasized that China’s approach is broader in scope, affecting global markets and signaling a strategic escalation in economic coercion.

If fully enforced, the regulations could lead to:

• Rising rare earth prices globally

• Stockpiling by major economies to avoid shortages

• Supply chain disruptions for semiconductors, AI, and defense sectors

The ultimate impact will depend on the extent of China’s enforcement, which remains uncertain.

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China’s Dominance in Rare Earths

According to the US Geological Survey, China produced approximately 270,000 tons of rare earths in 2024, accounting for nearly 70% of global output. Additionally, it controls about 90% of the world’s refining capacity, giving Beijing substantial leverage over global technology supply chains and strategic materials.