China‘s New Restriction on Rare Earths: What They Cover and Why They Were Made？

On the first workday after the National Day holiday, China rolled out a series of countermeasures targeting the U.S., grabbing widespread attention.

MOFCOM’s Security and Control Bureau, either alone or with the General Administration of Customs, issued seven major announcements, significantly tightening export controls on the entire rare earth supply chain, lithium battery-related supply chains, superhard materials, and adding 14 foreign entities, including counter-drone tech companies and TechInsights, to the Unreliable Entity List.

Specifically, these measures include:

1. MOFCOM and Customs Announcement No. 56 of 2025 (effective November 8, 2025): Imposes export controls on equipment and raw materials across the rare earth production chain, covering over 20 key types of equipment and components for mining, smelting, separation, crystallization, and permanent magnet manufacturing, as well as rare earth ores and critical chemical extractants.

2. MOFCOM and Customs Announcement No. 57 of 2025 (effective November 8, 2025): Applies export controls to various medium and heavy rare earth elements (including holmium, erbium, thulium, europium, ytterbium), their metals, alloys, compounds, targets, and related products (e.g., permanent magnets, optical fiber materials).

3. MOFCOM Announcement No. 61 of 2025: Marks China’s first practical implementation of Article 49 of the Dual-Use Items Export Control Regulations, introducing extraterritorial controls on rare earth-related items. This covers:

• Items manufactured abroad containing, integrating, or mixed with specific amounts of China-origin rare earth materials;

• Items produced abroad using China-origin rare earth production technologies;

• China-origin rare earth items.

Implementation is phased: controls for the first two categories start December 1, 2025; controls for the third start October 9, 2025.

Announcement No. 61 draws on the U.S. de minimis rule’s value threshold but tweaks it in its own way, splitting it into two categories:

• If a product contains controlled heavy rare earth elements (HREEs), you must apply for an export license, no matter how small the amount. This is like the U.S. de minimis rule’s 0% threshold for China, where even a tiny bit triggers control.

• For products that don’t directly contain HREEs but include permanent magnets or target materials made from them, you need a license if the value of the HREEs accounts for 0.1% or more of the total value of those magnets or targets.

In other words, China’s threshold is based on the value of rare earth elements relative to the permanent magnets or target materials, while the U.S. version measures the value of U.S.-origin items or technology relative to the chip or equipment.

The U.S. has a three-tier system: 25% for most countries (if U.S. components are below 25% of the total value, they’re exempt), 10% for China (0% for some military tech, meaning any trace triggers control).

Here, the initiative likely lies with China. While the exact grams of HREEs in permanent magnets or targets are trade secrets with no public data, the quantity is probably fairly stable. However, the price per gram is in China’s hands. If the price is low, the value might fall below 0.1%, but China can jack up the price to push it over the threshold. This will definitely spur overseas research into reducing or substituting rare earths in supply chains, but that’s easier said than done in the short term.

4. MOFCOM Announcement No. 62 of 2025 (effective October 9, 2025): Imposes export controls on technologies related to rare earth mining, smelting, separation, metal refining, magnet production, and secondary resource recycling, further defining what constitutes “export” behavior.

5. MOFCOM and Customs Announcement No. 58 of 2025 (effective November 8, 2025): Applies export controls to high-performance lithium-ion batteries, cathode materials (e.g., lithium iron phosphate, ternary precursors, lithium-rich manganese-based materials), graphite anode materials, and key equipment and technologies for their production.

6. MOFCOM and Customs Announcement No. 55 of 2025 (effective November 8, 2025): Imposes export controls on specific superhard materials, including synthetic diamond micropowder, single crystals, wire saws, grinding wheels, and DC arc plasma chemical vapor deposition (DCPCVD) equipment and related technologies for diamond production.

7. Unreliable Entity List Mechanism (2025) No. 10 (effective October 9, 2025): Adds foreign entities, including counter-drone technology companies and TechInsights along with its affiliates, to the Unreliable Entity List, with corresponding countermeasures.

As expected, China’s Announcement No. 61, implementing Article 49 of the People’s Republic of China Dual-Use Items Export Control Regulations to impose export controls on foreign-produced rare earth items, has grabbed the world’s attention.

This rule, dubbed China’s version of the FDPR (Foreign Direct Product Rule), requires foreign organizations and individuals to obtain an export license from MOFCOM when exporting rare earth-related items to countries outside China, sparking global fears of supply chain disruptions.

ASML is bracing for impact, particularly due to a clause mandating foreign firms to seek China’s approval for re-exports of products containing its rare earths, according to a source familiar with ASML who spoke anonymously about private matters and noted that ASML is lobbying Dutch and U.S. allies for alternatives. The company declined to comment.

This system, rooted in Article 49 of the Export Control Regulations, was introduced alongside the regulations on October 19, 2024. The next day, I wrote an article, likely the first in the English-speaking internet to dive into the rule’s details and its pros and cons.

As I noted in that piece, this rule draws inspiration from the U.S. FDPR. Its scope for controlling rare earth-related items closely mirrors the U.S. EAR Section 734.3, with China’s MOFCOM formally applying a FDPR and “de minimis rule” to the rare earth sector, significantly expanding the scope of controlled items.

China’s export controls on rare earths primarily target: 1) rare earth elements; and 2) rare earth magnets or target materials made from these elements. Previously, even there’re already extraterritorial provision in the Export Control Regulation, these controls in practice only apply to exports of these items from China to foreign countries.

China’s version of FDPR also targets these two categories but specifies:

1. Even if controlled rare earth elements are already overseas, if they originated in China (mined and transferred out), foreign companies or individuals selling them to a third country must apply for a license from China.

Compare to EAR 734.3(a)(2): Any U.S.-origin item.

2. If rare earth elements, magnets, or target materials are manufactured outside China but use China-controlled rare earth technologies, selling these to other countries requires a license from China.

3. If rare earth elements, magnets, or target materials are manufactured outside China but use China-controlled rare earth technologies, selling these to other countries requires a license from China.

Compare to EAR 734.3(a)(4) and (a)(5) (Foreign Direct Product Rule): If a foreign-produced item is a direct product of specific U.S. technology/software, or is produced by a foreign facility or major facility components that are themselves direct products of specific U.S. technology/software, such foreign-produced items are subject to EAR controls.

4. If products are made outside China and contain rare earth magnets or target materials, which are themselves made outside China but use Chinese-origin rare earth elements as raw materials, and the value of those elements accounts for 0.1% or more of the magnets or target materials’ total value, selling these products to other countries requires a license from China.

Compare to EAR 734.3(a)(3) (de minimis rule): A foreign-produced item incorporating, bundling, or commingling specific U.S.-controlled items, where the value of the U.S.-controlled items exceeds a certain value threshold.

Based on different end-users and end-uses, Announcement No. 61 establishes a tiered licensing review policy:

A “presumption of denial” policy applies to export applications for three types of end-users and uses: foreign military users; importers and end-users (including their subsidiaries or branches with 50% or greater ownership) listed on the export control list; and importers and end-users (including their subsidiaries or branches with 50% or greater ownership) on the watch list.

For export applications involving sensitive uses like semiconductors and artificial intelligence (AI), a case-by-case review policy is applied, targeting “logic chips at 14nm or below, memory chips with 256 layers or more, and AI with potential military applications.” It’s no surprise that these technical nodes and descriptions are almost identical to the core elements of BIS’s semiconductor and AI export controls on China in recent years.

The items listed in Annex 1 of Announcement No. 61 include several types of medium and heavy rare earths, rare earth permanent magnets, and target materials under China’s export controls. These rare earth items are critical in advanced chip manufacturing. For example, dysprosium is used to enhance the Curie temperature and demagnetization resistance of magnets, ensuring magnets in lithography machines and ion implanters remain strongly magnetic in high-heat environments. Yttrium oxide (Y2O3) and yttrium fluoride (YF3) are commonly used as lining materials in plasma etching machine chambers to withstand fluorine plasma corrosion, extending equipment lifespan. Some semiconductor manufacturing equipment relies on critical permanent magnet materials like samarium-cobalt (SmCo) alloys.

According to a MOFCOM spokesperson, these key items were chosen due to their clear dual-use (military and civilian) nature. For some time, certain foreign organizations and individuals have directly or indirectly transferred or supplied China-origin controlled rare earth items, after processing, to relevant entities for use in sensitive fields like the military.

Contrary to what many believe, this is not China’s first activation of its version of the FDPR. According to South Korean media reports, following rare earth export controls in April this year, the Chinese government quickly sent letters to South Korean manufacturers in the transformer, battery, display, electric vehicle, aerospace, and medical device sectors that rely solely on Chinese-origin rare earth metal imports. The letters demanded they stop exporting any equipment containing Chinese heavy rare earths to U.S. military contractors or the U.S. military. The letters also warned that violations could trigger sanctions or other regulatory actions, though the nature of the penalties was not specified.

According to President Trump’s Truth Social post, the Chinese government seems to have massively expanded the scope of sending such letters.

They are becoming very hostile, sending letters to countries worldwide, stating they want to impose export controls on every element of production related to rare earths, and pretty much anything else they can think of, even if it’s not made in China. Nobody has ever seen anything like this, but essentially, it would “clog” the markets and make life tough for nearly every country in the world, especially for China.

However, it’s clear that China’s FDPR has a strictly defined scope and isn’t an outright embargo that many U.S. experts have claimed. It targets only three types of entities:

1) military enterprises (no surprise here, as the U.S. also doesn’t sell controlled items to Chinese military firms);

2) companies on China’s sanctions lists (like the export control list); and

3) advanced semiconductors and AI with potential military applications (areas where the U.S. also chokes China).

In other words, China’s measures are largely tit-for-tat, mirroring U.S. sanctions against China.

It’s without doubt that there’s a key difference: unlike the U.S., which groups countries into different tiers with varying licensing strictness, China’s approach doesn’t differentiate. This means European and other global companies—like ASML in the Netherlands, Tokyo Electron in Japan, Samsung in South Korea, and potentially firms in Germany, France, Belgium, or even Southeast Asia involved in advanced semiconductors and AI—could face direct jurisdiction. These companies will need to navigate MOFCOM’s case-by-case approval process to resolve this.

Beyond Announcement No. 61, Announcement No. 62, which deals with export controls on rare earth technologies, is also grabbing major attention.

China already included rare earth extraction and separation technologies in the Catalog of Technologies Prohibited or Restricted from Export, a system separate from the Export Control Law-based regime, grounded instead in the Foreign Trade Law. This aims to protect China’s technological competitiveness by banning or restricting the export of certain civilian technologies in tech trade. Specifically, technologies like rare earth extraction and separation processes, rare earth metal and alloy preparation, and samarium-cobalt and neodymium-iron-boron magnet manufacturing are banned from export, while ionic rare earth ore mining (leaching) processes are restricted (requiring a license).

This time, the aforementioned technologies have been shifted from the Catalog of Technologies Prohibited or Restricted from Export to the Dual-Use Items and Technologies List.

According to Article 6 of the Administrative Measures for Import and Export Licenses of Dual-Use Items and Technologies, any import, export, transit, transshipment, or through-shipment of dual-use items and technologies listed in the Management Catalog requires obtaining a dual-use item and technology import or export license. As “The Rare Earth Observer” rightly pointed out:

The big difference is that these items were moved from the technology export restricted list to the dual-use list. The dual-use list works both ways—covering both export AND import, as MOFCOM explained. Consequently, foreign rare earth producers may not be able to sell the 12 rare earth elements (REEs) on the Chinese market without a dual-use license. Given that every rare earth project outside China inevitably overproduces due to the inherent imbalance in rare earth supply, this licensing requirement poses a significant obstacle. For instance, companies like Lynas, which relies on China for half its revenue, will no longer be able to offload their products there easily.

Announcement No. 62 focuses on export controls for key technologies supporting the rare earth industry. Controlled technologies not only require a license when exported from China but are also considered upstream technologies under the “Foreign Direct Product Rule” in Announcement No. 61, meaning specific rare earth products produced abroad using these technologies are also subject to China’s export controls. Controlled technologies include:

• Technologies and their carriers related to rare earth mining, smelting and separation, metal refining, magnet production, and secondary resource recycling;

• Technologies for assembling, debugging, maintaining, repairing, and upgrading production lines for rare earth mining, smelting and separation, metal refining, magnet production, and secondary resource recycling.

Announcement No. 62 also includes a “catch-all clause”: even if the items, technologies, or services you’re exporting aren’t on the control list, if you know they’ll be used abroad for rare earth mining, smelting, metal processing, magnet production, or waste recycling, you still need to apply for a license. This clause is based on Article 12 of the Export Control Law, which states that even items not on the control list require a license if their export could threaten national security or interests.

Announcement No. 62 further clarifies that technology transfers involving intellectual property licensing, joint R&D, employment, or consulting are also considered “exports.” Companies, especially joint ventures, must conduct rigorous due diligence when engaging in collaborative tech development, sharing, consulting, or hiring personnel.

Similar to the Biden administration’s export controls banning “U.S. persons” from supporting China’s semiconductor manufacturing, Article 7 of Announcement No. 62 prohibits Chinese citizens, legal entities, or organizations from providing any material assistance or support to foreign rare earth mining, smelting and separation, metal refining, magnet production, or secondary resource recycling without a license. Violators will face penalties under China’s export control regulations. In other words, this establishes personal jurisdiction over activities related to rare earth production.

In an interview with Zhengzhijian (政知见), a media outlet with an official Chinese background, Cheng Hui, a researcher at the Chinese Academy of International Trade and Economic Cooperation, explained the necessity of controlling rare earth technologies: China has built a global lead in green mining technologies, high-purity smelting and separation processes, and high-performance rare earth permanent magnet manufacturing. These technologies are not only key to keeping China at the top of the global value chain but also critical foundations for the independent development of domestic industries like new energy, high-end equipment manufacturing, and defense. Strengthening export controls is a necessary step to ensure supply chain autonomy in these key sectors.

On 12 October, the MOFCOM Spokesperson provides a comprehensive and detailed explanation on these measures. Both MOFCOM and the Chinese Embassy in the U.S. quickly reposted this Q&A.

MOFCOM Spokesperson Responds to Questions on Recent Chinese Trade Policy Measures

Question: On October 9, the Ministry of Commerce and the General Administration of Customs issued announcements imposing export controls on certain rare earth items. What considerations prompted these actions?

Answer: China has introduced export control measures on rare earths and related items as a legitimate step to refine its export control system in accordance with laws and regulations. Given the current global instability and recurring military conflicts, China recognizes the significant military applications of medium and heavy rare earths. As a responsible major country, China implements these export controls to better safeguard global peace and regional stability while fulfilling international obligations, such as non-proliferation. These controls do not ban exports; applications meeting regulations will be approved. Prior to the announcements, China notified relevant countries and regions through bilateral export control dialogue mechanisms. China is open to enhancing dialogue and cooperation on export controls to maintain the security and stability of global industrial and supply chains.

Question: We’ve noticed recent MOFCOM announcements strengthening export controls on rare earths and related items. How will these be implemented going forward?

Answer: As a responsible major country, China is committed to safeguarding its national security and international collective security, adhering to fair, reasonable, and non-discriminatory principles while implementing export controls prudently. China conducted a thorough assessment of the potential impacts on industrial and supply chains and believes these effects are minimal. Before announcing the measures, China informed relevant countries and regions via bilateral export control dialogue mechanisms. Moving forward, the Chinese government will conduct licensing reviews in accordance with laws, approving compliant applications and considering facilitative measures like general licenses and exemptions to promote legitimate trade. I emphasize that China’s export controls do not prohibit exports; civilian-use applications that comply with regulations will be approved, so companies need not worry. China will continue to work with other countries to maintain global peace, regional stability, and the security of global supply chains.

Announcements No. 55 and No. 58, which impose controls on “superhard materials” and specific lithium batteries, key battery materials (anodes and cathodes), and related production equipment and technologies, are also noteworthy. Superhard materials are widely used in critical industries like photovoltaics, semiconductors, and precision machining.

U.S. and European automakers like Tesla, Ford, and Volkswagen have significant demand for lithium batteries, key materials, and their production equipment and technologies. Similar to rare earth technologies, China has long included these in the Catalog of Technologies Prohibited or Restricted from Export. I’ve provided detailed explanations on this topic, available here and here.

According to the latest data from BloombergNEF (BNEF), Chinese grid-scale lithium batteries accounted for about 65% of U.S. imports in the first seven months of 2025. The AI boom has driven a surge in U.S. energy demand, with data center electricity consumption more than doubling between 2017 and 2023. Large-scale batteries can store power and release it when needed, helping to mitigate blackouts and enhance grid stability. Although U.S. domestic battery manufacturing capacity has grown in recent years, production materials remain constrained by China, which controls approximately 96% of global cathode material capacity and 85% of anode material capacity.

The 14 foreign entities added to the Unreliable Entity List are:

• Dedrone by Axon

• DZYNE Technologies

• Elbit Systems of America, LLC

• Epirus, Inc.

• AeroVironment, Inc.

• Exelis Inc.

• Alliant Techsystems Operations LLC

• BAE Systems, Inc.

• Teledyne FLIR, LLC

• VSE Corporation

• Cubic Global Defense

• Recorded Future, Inc.

• Halifax International Security Forum

• TechInsights Inc. and its affiliates:

  1. TechInsights Inc.

  2. TechInsights Europe Limited

  3. TechInsights Europe Sp zo.o

  4. TechInsights Japan KK

  5. TechInsights USA Inc

  6. TechInsights Korea Co. Ltd.

  7. TechInsights Market Analysis Limited

  8. SARL Strategy Analytics

  9. Strategy Analytics GmbH Market Research and Management Consulting

  10. SARI Strategy Analytics Private Limited

China has previously placed foreign companies on the Unreliable Entity List, mostly defense-related entities, but this time, it included TechInsights, a global leader in semiconductor intelligence. Founded in 1989 and headquartered in Ottawa, Canada, TechInsights uses reverse engineering (teardown) to analyze chips and electronics, providing deep insights into competitors’ structures, innovations, and supply chains for tech companies, investors, and governments. In recent years, it has dissected Huawei and other Chinese chips to reveal their internal structures, process nodes, and supply chain secrets, exposing China’s progress in tech self-reliance and loopholes in U.S. export controls.

• 2023: Kirin 9000S (Mate 60 Pro): TechInsights’ teardown showed Huawei’s Kirin 9000S, China’s first 7nm processor made by SMIC, marking Huawei’s 5G phone comeback despite U.S. bans. The report noted performance catching up to Qualcomm but relying on local optimization, revealing China’s “semi-mature” semiconductor ecosystem. This was seen as evidence of U.S. ban failures, triggering a Washington investigation.

• 2024: Ascend 910B AI Processor: TechInsights’ analysis of Huawei’s Ascend 910B, a popular AI chip in Chinese data centers, found components from TSMC, Samsung, and SK Hynix, violating U.S. export bans. The unpublished report was shared with TSMC, leading to a U.S. Commerce Department probe and a potential $1 billion fine for TSMC. It showed Huawei bypassing bans via third parties but still heavily reliant on foreign supply chains.

• Other Chinese Chips: TechInsights also analyzed SMIC’s 7nm/5nm test chips and Huawei’s HiSilicon series, often highlighting China’s struggles with EUV lithography alternatives and “hidden reliance” on U.S., Japanese, and Korean supply chains.

Due to being listed on China’s Unreliable Entity List, TechInsights and other named companies are barred from engaging in “import and export activities related to China” or making new investments in China. Additionally, Chinese organizations and individuals are prohibited from conducting transactions, collaborations, or activities with these entities, especially transferring data or providing sensitive information to them.

Beyond rare earth countermeasures, on October 10, China introduced shipping-related measures, imposing special port fees on U.S. vessels starting October 14. To lay the groundwork, China revised its Maritime Law on October 8.

On the same day, the State Administration for Market Regulation announced an investigation into Qualcomm for failing to report its acquisition of Israeli chip designer Autotalks, alleging a violation of China’s Anti-Monopoly Law.

On October 13, SAMR unexpectedly issued a lengthy explanation regarding this matter. Notably, in previous cases targeting U.S. companies, the agency only released brief announcements.

Qualcomm Faces Investigation, SAMR Provides Details

Recently, the head of the Anti-Monopoly Bureau II of the State Administration for Market Regulation (SAMR) responded to reporters’ questions regarding the investigation into Qualcomm for violating the Anti-Monopoly Law of the People’s Republic of China (hereinafter referred to as the Anti-Monopoly Law).

The SAMR official stated that this is a routine enforcement action conducted under the Anti-Monopoly Law.

In May 2023, Qualcomm announced its acquisition of Autotalks. Following a report, SAMR conducted a comprehensive assessment of the transaction and determined that, although it did not meet the declaration threshold, there was evidence suggesting it had or could have the effect of eliminating or restricting competition.

On March 12, 2024, SAMR issued a written notice to Qualcomm under Article 26 of the Anti-Monopoly Law, requiring the company to file for declaration and prohibiting implementation of the transaction without approval. On March 14, 2024, Qualcomm sent a letter to SAMR stating it would abandon the transaction.

In June 2025, without filing a declaration or communicating with SAMR, Qualcomm completed the acquisition of Autotalks. After receiving a report, SAMR verified the facts, and Qualcomm admitted to the relevant details. With clear facts and solid evidence, SAMR has initiated an investigation into Qualcomm’s illegal implementation of the concentration of undertakings through the acquisition of Autotalks.

Moving forward, SAMR will continue to advance the investigation in accordance with laws and regulations, adhering to principles of objectivity and fairness.

And according to the Financial Times, over the past few weeks, Chinese customs authorities have mobilized stringent inspections of semiconductor shipments at major ports to ensure local companies stop ordering NVIDIA’s China-specific chips, following guidance from Chinese regulators to block such purchases.

Interestingly, if you dig into these Chinese measures, beyond the FDPR, you’ll notice they heavily mimic U.S. actions against China.

For example, Announcement No. 61 stipulates that licensing restrictions on entities listed on the export control and watch lists automatically apply to their subsidiaries or branches with 50% or greater ownership, regardless of location. Doesn’t that sound like the BIS’s recent “50% rule”?

Another example: exports of rare earths used in producing “logic chips at 14nm or below, memory chips with 256 layers or more, or AI with potential military applications” require a license. These tech nodes and descriptions are nearly identical to BIS’s core semiconductor and AI export controls on China in recent years.

China’s method of notifying countries about its rare earth FDPR rules also clearly copies the U.S.’s “is informed letter” approach.

Most Chinese policy observers aren’t surprised by these aggressive countermeasures. After the Madrid talks, China likely expected both sides to maintain a truce, but the U.S., in their words, kept making “small moves” (小动作):

Entity List: The U.S. BIS repeatedly updated its Entity List, adding Chinese entities to restrict their access to U.S. technology, products, and services, mainly targeting drone, smart tech, and dual-use companies. On September 12, BIS added 32 entities, 23 of which are in China (effective same day). On September 16, it revised the list, adding 11 more Chinese entities. On October 8, five additional Chinese entities were added.

Fees on Chinese Ships: The USTR imposed special port service fees on ships built or operated by China to reduce reliance on Chinese shipbuilding and protect U.S. industries. Fees will escalate: starting at $50 per net ton, rising to $80 in 2026, $110 in 2027, and $140 in 2028. For Chinese-built ships, fees are $18 per net ton or $120 per container (whichever is higher), increasing to $33 and $250 by 2028. Non-U.S.-built car carriers (roll-on/roll-off ships) face $14 per net ton. Announced around October 7, this takes effect October 14, 2025 (first-phase rates).

Sanctions on Iranian Oil Purchases: On October 9, the U.S. Treasury targeted Chinese independent refineries (“teapot refineries”) and related oil terminals, sanctioning about 100 individuals, entities, and vessels, including Shandong Jincheng Petrochemical Group and Rizhao Shihua Crude Oil Terminal in Lanshan Port. Sanctions freeze their U.S. assets, ban U.S. transactions, and restrict dollar financing.

Airline Policy: On October 9, the U.S. DOT proposed banning Chinese airlines from flying over Russian airspace on U.S.-China routes, citing “unfair advantages” (e.g., shorter flight times and lower fuel costs). If finalized, the ban could take effect as early as November, forcing Chinese airlines to reroute and significantly increasing operating costs.

The issuance of the “50% rule” seems to have thoroughly enraged the Chinese government. About an hour after the rule was announced, the MOFCOM spokesperson issued a strongly worded statement condemning it.

Reporter: On September 29, 2025 (Eastern Time), the U.S. Department of Commerce issued an export-control piercing rule that extends the same export restrictions and sanctions to subsidiaries more than 50% owned by entities listed on the U.S. “Entity List,” etc. What is China’s comment on this?

Answer: China has noted this matter. This rule is yet another blatant example of the U.S. overusing national security pretexts and abusing export controls. It is extremely egregious, severely harms the legitimate rights and interests of affected enterprises, disrupts the international economic and trade order, and seriously undermines the security and stability of global industrial and supply chains. China firmly opposes it. China urges the U.S. to immediately correct this wrongful practice and stop its unreasonable suppression of Chinese companies. China will take necessary measures to resolutely safeguard the legitimate rights and interests of its enterprises.

The timing and impact of the “50% rule” shocked me, and I speculated on several possibilities:

The timing is highly sensitive. Since the London talks, U.S.-China trade negotiations have been active, covering tariffs and tech restrictions (with the U.S. pressing China to ease rare earth export controls and China seeking rollbacks on U.S. tech restrictions). During these talks, the U.S. reportedly held off on new tech restrictions—some outlets even claimed the White House instructed Commerce not to roll out new measures to avoid derailing talks.

After the Madrid talks, both sides reported progress. U.S. Treasury Secretary Scott Bessent reportedly said the U.S. wouldn’t lift existing tech restrictions but promised no new ones—“the promise of things that won’t happen.” So how does Bessent reconcile that pledge with the 50% rule? Is this a case of U.S. agencies working at cross-purposes, or is something else at play? It’s puzzling.

This situation echoes what happened after the Geneva talks, as reported by media but never verified: just when a framework seemed stable, Commerce unexpectedly issued guidance targeting Huawei’s Ascend chips and other domestically produced advanced computing chips, triggering a cascade of escalations.

Hu Xijin, a well-known Chinese hawkish commentator on U.S. affairs, believes that China’s latest countermeasures are tied to the U.S.’s “50% rule”:

Looking at the timeline of events, this round of U.S.-China tensions began with the U.S. Department of Commerce issuing an 50% rule on September 29, which extends the same export restrictions and sanctions to subsidiaries owned more than 50% by entities on the U.S. “Entity List,” directly targeting Chinese companies. This is widely seen as the U.S. creating new leverage for the next round of U.S.-China talks.

The U.S. has been relentlessly plugging every gap in the global flow of chip technology to China. The new rule on September 29 is the latest move to intensify those efforts. Objectively speaking, all export controls have some loopholes in the vast network of the global economy, but the U.S. is not only leading the charge to seal every gap aimed at China but doing so with increasing ruthlessness.

Ren Yi, better known as Chairman Rabbit (tù zhǔxí), published a post on his influential WeChat blog analyzing why China reacted so fiercely:

The Madrid trade talks took place on September 14-15. TikTok was a key issue, and China adopted a pragmatic, proactive, and constructive stance to work with the U.S. to resolve issues, taking concrete steps. On September 19, the leaders of China and the U.S. spoke by phone, agreeing to establish more consultation mechanisms to build trust, find common ground, reduce differences, maintain relations, and properly handle bilateral ties. China explicitly urged the U.S. to avoid unilateral trade restrictions that could undermine the progress made through multiple rounds of talks.

This was a basic consensus and direction reached by the two leaders, a prerequisite for advancing U.S.-China relations. The talks also set the stage for more summits. From China’s perspective, U.S.-China relations are the world’s most critical bilateral relationship, a stabilizer, anchor, and driver for international and geopolitical economic security.

The global community hopes the two superpowers can manage their relationship well. China wants to contribute to this effort. But given the anti-China consensus in U.S. politics, it’s less about promoting relations and more about managing and maintaining them: not expecting instant improvement but preventing further deterioration and avoiding conflict escalation. For China, the immediate need is a favorable international environment to focus on its own development. Yet, these U.S. measures against China came after the Madrid talks—when things seemed to be going well, the U.S. pulled these stunts with unilateral sanctions. This is a betrayal of the talks, a gross disrespect to China, and a “moral insult.” Naturally, China had to counter.

As the saying goes, “Open the door wide for talks; fight to the end if attacked.” (谈，敞开大门；打，奉陪到底)

Ren Yi further argues that China’s fierce countermeasures aim to shape how the U.S. handles relations with China moving forward, ensuring no unilateral sanctions are imposed during ongoing talks:

If we assume U.S. harassment is driven by bureaucratic systems in a “bottom-up” manner, China’s countermeasures are likely “top-down,” coordinated, and planned. It’s clear now that export controls (e.g., on rare earths/critical minerals) require a comprehensive legal, policy, institutional, and technical framework—an “infrastructure” that can’t be built overnight. It’s a gradual process of development and refinement. Ideally, you don’t use it, but if you need to, it must be ready.

In response to the Trump administration’s continuous provocations since late September, China has delivered a powerful counter. I see this as a kind of “training” for the U.S. Think of it like this: How does a child learn to fear hot things? Like fire, hot food, or scalding objects—they get burned once and learn to be cautious. Or, “Once bitten by a snake, they fear ropes for a decade.” Then there’s “Pavlov’s dog”—the Russian scientist who rang a bell before feeding dogs, so they’d salivate at the sound. That’s conditioned reflex.

That’s the effect China wants: when the U.S. schemes to harass China, it instinctively recalls the consequences of China’s countermeasures and thinks twice before acting. At the very least, it should make Trump realize he needs to rein in the bureaucracy, prevent rogue agencies from acting alone, and avoid being dragged into trouble by technocrats.

That’s the essence of “open the door for talks; fight to the end if attacked.” The benefits of “talking” and the costs of “fighting” are starkly clear. That’s the philosophy and art of “struggle.”(斗争的艺术)

On 12 October, MOFCOM reacts to President Trump’s statement that the U.S. will impose a 100% tariff and export control on all key software.

Question: On October 10, Eastern Time, the U.S. announced that in response to China’s export controls on rare earths and related items, it will impose 100% tariffs on China and export controls on all critical software. What is MOFCOM’s comment on this?

Answer: China has noted the situation. On October 9, China introduced export control measures on rare earths and related items, a routine action to refine its export control system in accordance with laws and regulations. As a responsible major country, China is committed to safeguarding its national security and international collective security, adhering to fair, reasonable, and non-discriminatory principles while implementing export controls cautiously. The U.S. statements reflect a typical double standard. For years, the U.S. has overgeneralized national security, abused export controls, and imposed discriminatory unilateral long-arm jurisdiction measures on numerous products like semiconductor equipment and chips. The U.S. control list includes over 3,000 items, while China’s has just over 900. The U.S. has long used the de minimis rule, sometimes as low as 0%. These U.S. measures severely harm enterprises’ legitimate rights, disrupt international trade order, and undermine global supply chain stability.

Since the U.S.-China Madrid trade talks in September, within just over 20 days, the U.S. has introduced multiple new restrictions, adding Chinese entities to its export control Entity List and Specially Designated Nationals List, arbitrarily expanding the scope of controlled entities through piercing rules affecting thousands of Chinese firms, and ignoring China’s concerns and goodwill by implementing Section 301 measures against Chinese maritime, logistics, and shipbuilding industries. These actions harm China’s interests and disrupt the atmosphere of bilateral trade talks, and China firmly opposes them.

Threatening high tariffs is not the right way to engage with China. Our stance on tariff wars is consistent: we don’t want to fight, but we’re not afraid to. China urges the U.S. to correct its wrongful practices, adhere to the consensus reached during the leaders’ call, preserve consultation outcomes, leverage the U.S.-China trade consultation mechanism, address concerns through dialogue based on mutual respect and equality, manage differences appropriately, and maintain a stable, healthy, and sustainable trade relationship. If the U.S. persists, China will take resolute measures to safeguard its legitimate rights and interests.