China tightens grip on rare earths, demands trade secrets from foreign firms

Western companies are raising alarms over China's demand for confidential business information as a condition for rare earth and magnet exports, sparking fears over potential misuse of trade secrets.

According to several firms and official guidelines, cited by the Financial Times, Beijing’s Ministry of Commerce is now requiring detailed production data and customer lists from foreign buyers as part of its tightened export approval process for critical minerals and magnetic materials, Caliber.Az reports.

China controls most of the global processing of rare earths and the production of magnets used in everything from electronics and electric vehicle motors to wind turbines and military technology, including fighter jets, giving it a powerful strategic advantage.

Frank Eckard, CEO of German magnet manufacturer Magnosphere, said Chinese authorities are explicitly requesting “confidential information” to grant export licenses. “It’s a matter of [China] getting information officially, rather than trying to steal it,” he noted.

The latest restrictions came in April, when China imposed new export controls on seven rare earth metals and related magnet materials amid escalating trade tensions with the US. The move triggered a scramble among global companies to secure raw materials vital to their supply chains.

Although Washington and Beijing recently reached a framework agreement under which President Donald Trump said China would ease rare earth constraints, the Chinese government has not announced any rollback of export controls, and it remains unclear whether the deal will affect the current approval regime.

Under China’s licensing system, foreign firms must disclose extensive data, including information on operations, workforce, production, and end-use applications. Commerce ministry guidelines also permit authorities to request images of products and facilities, as well as details of past business relationships.

Andrea Pratesi, supply chain director at Italian speaker manufacturer B&C Speakers, said his company submitted photos, videos of the production line, and redacted customer orders to obtain approvals for two shipments, with a third still pending. “We had to, otherwise they put aside all your papers and wait,” he said. “We have nothing to hide — we produce loudspeakers.”

Experts say the ministry’s demands often go beyond the official guidelines. A Chinese export control lawyer, speaking anonymously, said authorities have asked for detailed information on end users’ “production and operations, process flow.”

Matthew Swallow of UK-based Magnet Applications reported that his firm faced multiple rejections in April for “lack of end-user evidence.” To comply, they began submitting photos of magnets during production, descriptions of their final applications, and customer details. While the new approach has yielded some approvals, Swallow admitted there’s “certainly concern” about exposing client identities and advised against including trade secrets or intellectual property in applications.

Typically, export applications are submitted by Chinese suppliers on behalf of their foreign clients, heightening concerns over data security and protection of business relationships.

Jens Eskelund, chair of the EU Chamber of Commerce in China, said the level of information required makes it difficult for firms in sensitive sectors to even apply for licenses. “You need to stipulate the uses to such detail that it creates an IP concern,” he warned.

Nonetheless, many companies appear willing to comply in order to maintain access to China’s supply of rare earth magnets. As one unnamed European executive put it, “Companies are willing to do whatever China wants to get the supplies.”

By Tamilla Hasanova