China Expands Rare Earth Export Controls Ahead of Trump-Xi Meeting

China stepped up rare earth export controls on Thursday in a rare move that could have widespread implications for global supply chains and both traditional and crypto market sentiment.

China's Ministry of Commerce announced sweeping new export restrictions on rare earth materials, processing technologies and derivative products used in semiconductors, AI systems and defence.

The new rules, set to take effect on Dec. 1, will require foreign companies exporting products containing Chinese-origin rare earth elements or related technologies – including those outside China – to obtain a dual-use license from the Ministry of Commerce (MOFCOM).

This is a major escalation as China dominates the global production of rare earths, which are essential in everything from everyday electronics to fighter jets. Potential supply chain constraints from this move could dent risk sentiment, particularly in AI stocks, and lead investors to hedge portfolios. A potential risk-off in AI stocks could spillover into the crypto market.

"China just weaponized rare earths - again, but this time globally," geopolitical strategist Velina Tchakarova said on X, referring to the new rules.

"The move effectively gives Beijing a veto power over parts of the global chip, EV, and defence supply chains, including those operating outside its territory. Licenses will be denied for military or AI-related uses, notably 14nm chips, 256-layer memory, and military-grade AI systems," She added.

According to Tchakarova, the new rules could cause supply disruptions across EVs, turbines and semiconductors, resulting in price rises.

The latest move is likely to provide Beijing with leverage in trade talks with the U.S.. It comes ahead of an expected meeting between Chinese President Xi Jinping and President Donald Trump on the sidelines of the APEC summit in South Korea later this month.