China’s recent and ongoing export controls on rare earth materials don’t just benefit global Chinese firms that have been spurring significant growth among domestic magnet manufacturers. Each of these measures directly aims to improve the regulation of critical materials. In doing so, they’ve changed the magnet industry landscape in the country forever. What’s more, the impact of these changes goes beyond the home turf, creating a level playing field for local companies and international challengers alike.
In recent years, China has imposed tough limits on rare earth element exports. These elements are important for high-tech applications including electronics and renewable energy technologies. These controls have created an industry for which we now—for the most part—have a booming and independent domestic industry. Local manufacturers are taking advantage of the barriers to these materials for foreign competition. In fact, they are rapidly increasing their manufacturing capacity and winning sales handily.
These export controls arrive at an important time. Global demand for magnets, particularly in the fast-growing electric vehicle and wind turbine markets, is booming. As nations around the globe increasingly commit themselves to accelerating the development and adoption of greener technologies, the demand for reliable and efficient magnets has skyrocketed. China’s restrictions laid the groundwork for their manufacturers to be in a strong position to serve this new demand, driving tremendous growth and pace of production output.
The trend is underscored by the Chinese government’s support. Continued investment in R&D has played a critical role in our current innovation-driven growth. By providing unique opportunities to local businesses, we’ve helped create a healthy climate for innovation and creativity. This smart, strategic investment creates good, American jobs while boosting the domestic economy. It also creates uncertainty for foreign companies dependent on Chinese rare earths.
Foreign manufacturers have become more challenged as they look to compete in a market that is largely defined by the growing Chinese magnet industry. Their inaccessibility due to the scarcity of rare earth elements outside of China keeps them from truly competing. Most interestingly, many are actively looking for new sources of supply and experimenting with new technologies. Yet, these transitions require time and monumental investments.
In addition, the outside effects of China’s export controls are more than just collateral damage. For countries that are heavily dependent on rare earth element imports, the answer is rethinking their supply chains and strategizing ways to produce them domestically. In the long run, this shift would open up the global market to greater diversification. For Beijing, it could heighten geopolitical tensions between China and its main economic partners.