China has a new weapon in the trade war. It will do what the US did

Industry executives and analysts say that while China is slowly moving to accept more exports of key elements, it will not dismantle its new system.

China follows the United States in export control

Beijing’s U.S.-style export licensing system gives it unprecedented insight into supplier bottlenecks in areas ranging from engines for electric vehicles to flight-control systems for guided missiles.

“China originally drew inspiration for these export control methods from the comprehensive U.S. sanctions regime,” said Zhu Junwei, a researcher at the Grandview Institution, a Beijing-based think tank focused on international relations. “ China has since been trying to build its own export control systems, which are intended to be used as a last resort .”

After speaking with Xi Jinping on Thursday, Trump said the two leaders were “straightening out some points, mainly on rare-earth magnets and a few other things.” He did not say whether China had committed to speeding up the issuance of rare-earth magnet export licenses, after Washington restricted exports of chip design and jet engine software to Beijing in response to perceived slow licensing.

China is a near-monopoly of rare earth magnets

China has a near monopoly on rare-earth magnets, a key component of electric motors . In April, it added some of the most advanced types to a list of export controls in its trade war with the United States, forcing all exporters to apply for licenses in Beijing. That has turned a once-obscure department of China’s Commerce Ministry, staffed by about 60 people, into a global manufacturing bottleneck.

Several European auto suppliers have shut production lines this week as they run out of stock. China’s April restrictions on raw material exports coincided with a broader package of retaliatory measures against Washington’s tariffs.

China extracts about 70 percent of the world's rare earth elements and has a virtual monopoly on refining and processing.