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European Companies Face Mounting Rare Earth Shortages
Foreign businesses operating in China are feeling the strain as Beijing continues to impose tight restrictions on the export of rare earth minerals — a move that has already cost at least one European firm “millions of euros,” according to the European Chamber of Commerce in China (ECCC).

The chamber, which represents over 1,700 companies across China, revealed that the affected firm is not alone: many other members report confusion over how to consistently obtain the licenses needed to access rare earth supplies. These materials are essential for manufacturing electric vehicles, wind turbines, semiconductors, smartphones, and other advanced technologies.

China’s Rare Earth Dominance and Strategic Leverage
China holds extraordinary influence over the global rare earth market. According to the U.S. Geological Survey, it produced more than 69% of the world’s rare earths in 2024 and controls nearly half of the known reserves.

This dominance gives Beijing powerful leverage in international trade negotiations. Since late 2023, China has tightened its export rules, demanding that companies prove rare earths won’t be used for military purposes. Even after a mid-May trade truce with the U.S., Beijing began issuing only single-use export licenses — adding bureaucratic layers and slowing shipments.

Licensing Bottlenecks Hit European Supply Chains
While some approvals picked up briefly in June and July, European firms report that obtaining export licenses has become increasingly difficult again. The ECCC noted that even when licenses are granted, they do not ensure predictable or long-term access to the minerals.

German automaker Volkswagen stated that its current rare earth supply chain remains stable, but other manufacturers are less fortunate. Nearly 50% of the European Union’s rare earth imports came from China last year, followed by Russia and Malaysia, making the bloc highly vulnerable to Beijing’s policy swings.

Economic Fallout and Declining Investor Confidence
These restrictions add to broader challenges already weakening foreign business sentiment in China. Since the COVID-19 pandemic disrupted supply chains, international confidence has eroded amid a sluggish domestic economy weighed down by real estate crises and industrial overcapacity.

A recent American Chamber of Commerce in Shanghai survey revealed that nearly half of U.S. firms operating in China — the highest percentage on record — have redirected planned investments to Southeast Asia and other regions. Business confidence in China’s five-year outlook has now dropped to historic lows.

Fears of an Approaching Rare Earth Shortage
European and U.S. businesses are warning that a rare earth shortage could hit as early as the third quarter of this year, compounding production delays experienced earlier in 2024. The ECCC plans to meet EU policymakers in Brussels next week to present updated data on supply chain disruptions and to press for coordinated action to secure critical materials.

Policy Uncertainty Ahead of China’s New Five-Year Plan
Beijing’s upcoming 15th Five-Year Plan, covering 2026–2030, looms large over these concerns. The current 14th plan, launched in 2021, ends this year. ECCC President Jens Eskelund emphasized that access to rare earths has dominated recent discussions with China’s Commerce Ministry, noting that such state-driven policies shape the business environment for years to come.

China is the EU’s second-largest trading partner, with bilateral trade reaching €732 billion in 2024. European businesses will be watching Beijing’s October policy meetings closely to see whether the government will open access to critical materials or double down on its current strategy of control and restriction.

Call for Structural Reforms
In its annual position paper released this week, the ECCC urged Beijing to tackle root causes of overproduction, reduce state dominance in industries like healthcare, and give the private sector a stronger role in shaping industrial development.

Eskelund noted that many of the current obstacles stem from previous policy decisions such as the “Made in China 2025” initiative, warning that “these plans truly matter — they set the direction for the entire business environment.”

For now, European firms are bracing for further disruptions as China tightens its grip on the world’s most strategic minerals.