China’s New Strategic Toolkit

Export controls remain an important mechanism for preventing the proliferation of weapons and the spread of items and technologies that have both civilian and military purposes to users with hostile intent. However, over the past decade there has been an increasing number of cases of them being repurposed as strategic trade measures. This process has been happening gradually, with first the United States (US) and now China rolling out new export controls under the auspices of national security, capitalising on the fact that some goods critical to global economic competition also have potential military uses. The European Union (EU), while continuing to base its export control regime around the principles and objectives of multilateral agreements such as the Wassenaar Arrangement,[1]  is now also responding to this change.[2]   

China’s shift toward a more strategic use of export controls became clear in April 2025, when it introduced controls on the export of rare earth elements (REEs) to all countries, apparently as retaliation against the US’ ‘liberation day’ tariffs.[3]^&[4] The initial disruption this caused pushed some global supply chains to near breaking point, with many European Chamber member companies suffering as a result.[5] Then, on 9^th October 2025, China announced increased restrictions citing national security concerns: the Ministry of Commerce (MOFCOM) announced an expansion of the scope of controls on REEs, and included additional controls on lithium-ion battery technology, controls on superhard materials and export restrictions on the equipment needed for the mining and processing of REEs and magnets.[6]^{,[7],[8],[9]&[10]} Although the implementation of these measures was subsequently suspended for a year as part of an agreement with the US,[11] this announcement represented a major expansion of the country’s export control toolbox, particularly as it included extraterritorial provisions for the first time.[12]^&[13]

The 9^th October 2025 announcement can also be interpreted as a signal that China is beefing up its export controls with the hope to eventually match those adopted by the US in terms of reach and leverage. China may see this as reasonable and proportionate, particularly when viewed through the lens of the US’ willingness to weaponise its export control mechanism, but—similar to how strategic US export controls are viewed by many US allies—this is not how it is being seen by its key trading partners, including the EU.

The degree of control that China has amassed through its quasi-monopolistic hold over certain critical supply chains, and the extent to which the country has already demonstrated its willingness to leverage it over critical technologies and materials, presents Europe with fundamental economic and national security concerns. At best, this may significantly damage mutually beneficial trade between the two economies; at worst, it could trigger the development and use of proportionate policies in response.

While the MOFCOM has emphasised that “export controls are not export bans”,[14] they are effectively bans until companies obtain approval, which can take months in some cases.[15] Over the short term, the problems that many European companies encountered trying to navigate the export licence approval process for controls put in place in April 2025 resulted in significant operational and financial damage.[16] Although some have since obtained licences, there is now a recognition that China’s emerging export control regime poses a long-term business risk, given that the ability to export a particular item could be taken away at any point based on political rather than security factors. In other words, the licensing system in place today can be used as both an approval mechanism and a coercive instrument in the future. This was made apparent by the restriction of REE exports to Japan in early 2026, which China’s MOFCOM openly acknowledged as a response to remarks made by the Japanese prime minister.[17]  

For some companies, there is an added concern that the detailed technical information they are required to provide for their REE export licence applications has presented China with the opportunity to map out global critical dependencies down to the geographical, company, product and individual-component levels. This raises the possibility for export controls to be deployed in a highly targeted manner, with the potential to act against individual industries or even companies.

This challenge is compounded by the fact that China now commands control over the supply of an increasing number of products that could be weaponised. According to one analysis, EU dependencies on China as a percentage of total imports hit 12 per cent in 2022, with US dependencies even higher at 16 per cent of imports.[18] This means that, beyond REEs, a significant number of other products are at risk of being impacted by strategic export controls in the future, with the inclusion of superhard materials in China’s 9^th October export control announcement being one such example.[19]

Realistically, China’s strategic export controls announced in 2025 are not going to be abolished, but the country could adopt an approach that would still allow it to react proportionately to US escalations without disrupting trade with its key partners. This could start with a more effective export licence application process, with greater transparency and expedited timelines, but it would ultimately require a rollback in scope: while China may argue that it only imposes controls on goods likely to see military use, while ensuring protection for all other types of trade for legitimate civilian applications, in practice many of the country’s newly introduced export controls appear to have strategic aims and cast a wide net. For cases in which controls are deemed absolutely necessary, they should be implemented in a way that mitigates collateral damage.

It would also require a cancellation or rollback in scope of the extraterritorial export controls announced on 9^th October 2025. While it is feasible that in its negotiations with China the US could secure an alternative solution, or even further delay their implementation, it would not be prudent for either the EU or European companies to bet on this outcome or trust that any postponement would last.

Whatever the outcome, the ability to use export controls for strategic purposes or as a tool for trade retaliation is finite as China, the US and the EU are throwing substantial resources at reducing their respective dependencies. Meanwhile, the damage done to global supply chains may be lasting. Just like the emergence of separate technological spheres around the world, overreaching export controls will contribute to the further re-organisation and regionalisation of supply chains over time, reducing economic efficiencies and the benefits of global trade. 

The European Chamber is therefore keen to work with the Chinese authorities to find a long-term solution to the export control challenge, in the interests of maintaining a healthy and sustainable EU-China relationship, and creating a more reliable and predictable business environment. Not doing so would compel companies to work more on developing manufacturing capacity and sourcing outside of China—something many are already doing—while increasing risk for China itself, particularly as the country looks set to maintain a focus on export-driven growth. The EU’s current dependencies would see it suffer a disproportionately large amount of short-term damage if China were to implement extraterritorial export controls, but in the long run, China’s reputation as a reliable trading partner and sourcing destination would suffer significant and perhaps irreversible damage. 

Recommendations to China

• Roll back plans to implement extraterritorial export controls on EU companies.
  • Elevate the EU’s role in discussions on export controls and avoid a ‘one size fits all’ approach.
• Refrain from weaponising export controls and ensure that implementation is gradual.
  • Limit the use of export controls to genuine ‘dual-use’ items, and ensure that the controls are proportionate to risk and are not used to meet geopolitical goals or as retaliation in trade wars.
  • Ensure that additional export controls are only put in place for items likely to see military use.
  • Establish broader humanitarian exemptions to prevent disruptions to the supply of essential goods, including healthcare equipment.
• Engage regularly with chambers of commerce on export controls, ensuring that companies’ concerns are clearly understood.
• Implement export controls in a way that prevents general supply chain disruptions or mitigates them to the greatest extent possible.              
  • Communicate implementation details for new controls to businesses as early and transparently as possible.
  • Ensure that applications submitted to the MOFCOM through the European Commission’s licence monitoring platform are expedited, including shipments with an EU end user that do not move directly from China to the EU.
• Develop licence application and customs clearance processes that are clear, transparent and applicable to all legitimate applicants.
  • Shorten application processing timelines.
  • Restrict the amount of corporate information required for licence applications to only that which is strictly necessary.
  • Ensure a predictable application process in which required information only needs to be submitted once and requirements remain consistent across different localities.
  • Implement longer licence validity periods, such as for multiple years.
  • Issue licences with a broader scope, allowing the export of different products and goods to different end users.
  • Streamline customs clearance processes to prevent delays even once licences have been obtained, and ensure full transparency if goods are sent for laboratory testing.
  • Publish information about licence requirements, including general licences.
  • Provide regular updates on the status of applications during the processing period.
  • Provide contact points for European companies at local departments of commerce, the MOFCOM and the General Administration of Customs.
• Provide a mechanism for appeals when company applications are rejected.

Recommendations to the EU

• Advocate for the cancellation or modification of China’s proposed extraterritorial export controls.
• Take steps to avoid the EU becoming a passive recipient of US-led negotiations with China, asserting the need for the EU to take the lead in discussions on issues that impact it.
• Leverage EU strengths, using the trade defence toolbox when necessary.
• Map dependencies in a precise manner to understand where risk lies.
  • Prioritise addressing dependencies likely to cause significant damage to European economic and national security.
• Develop country-agnostic mechanisms to reduce dependencies.
• Develop policies that make European alternatives to critical materials from China and other non-EU countries more commercially viable.
• Maintain a constructive and results-orientated dialogue with China on export controls.
  • Continue to provide and improve the licence monitoring platform.

Recommendations to European companies with supply chains linked to China

• Understand where dependencies on China lie, even if deep within the supply chain.
  • Develop alternative options for the supply of critical inputs, even if only accounting for a small portion of supply.
• Make use of the EU’s licence monitoring platform for all licence applications for shipments destined for the EU.
• Prepare for scenarios in which China applies extraterritorial export controls.
• Engage regularly with the European Chamber to ensure that all export control challenges are clearly understood so they can be communicated to relevant stakeholders.

Note: The European Chamber released its latest report Exporting Control: China’s New Strategic Toolkit on 14^th April 2026. The report can be downloaded in full here: https://www.europeanchamber.com.cn/en/exporting-control-chinas-new-strategic-toolkit or by scanning the QR.

[1] The Wassenaar Arrangement: On Export Controls for Conventional Arms and Dual-Use Goods and Technologies, The Wassenaar Arrangement, updated 17^th June 2025, viewed 23^rd January 2026, <https://www.wassenaar.org/>

[2] Szczepański, M., Dual-use export controls as tools of EU economic security: From coordination to a proactive EU approach, European Parliament, 17^th October 2025, viewed 19^th January 2025,<https://www.europarl.europa.eu/thinktank/fr/document/EPRS_BRI(2025)777960>

[3] Jackson, L., Lv, A., Onstad, E., and Scheyder, E., China hits back at US tariffs with export controls on key rare earths, Reuters, 5^th April 2025, viewed 23^rd January 2026,<https://www.reuters.com/world/china-hits-back-us-tariffs-with-rare-earth-export-controls-2025-04-04/>

[4] Chow, A.R., How Rare Earths are Playing a Pivotal Role in the U.S.-China Trade War, Time, 9^th April 2025, viewed 23^rd January 2026, <https://time.com/7275818/rare-earth-china-tariffs-metals-minerals/>

[5] European Chamber Survey Finds One in Three Looking to Divert Sourcing Away from China to Mitigate Impact of Export Controls, European Chamber, 1^st December 2025, viewed 12^th February 2026, <https://www.europeanchamber.com.cn/en/press-releases/3757/european_chamber_survey_finds_one_in_three_looking_to_divert_sourcing_away_from_china_to_mitigate_impact_of_export_controls>

[6] Announcement No. 58 of 2025 by the Ministry of Commerce and the General Administration of Customs Decision to Implement Export Controls on Items Related to Lithium Batteries and Artificial Graphite Anode Materials, MOFCOM, 9^th October 2025, viewed 16^th October 2025,<https://www.mofcom.gov.cn/zcfb/blgg/art/2025/art_aacba813b5b04e79a530aee7223b74a0.html>

[7] Announcement No. 62 of 2025 by the Ministry of Commerce Decision on the Implementation of Export Controls on Rare Earth-related Technologies, MOFCOM, 9^th October 2025, viewed 16^th October 2025, <https://www.mofcom.gov.cn/zcfb/blgg/art/2025/art_45be37e549f44e91a2c2b2f16389687a.html>

[9] Announcement No. 56 of 2025 by the Ministry of Commerce and the General Administration of Customs Decision to Implement Export Controls on Certain Rare Earth Equipment and Related Raw and Auxiliary Materials, MOFCOM, 9^th October 2025, viewed 16^th October 2025,<https://www.mofcom.gov.cn/zcfb/blgg/art/2025/art_9ee7af86f4274dc1ad16d6d6a5e47245.html>

[8] Announcement No. 55 of 2025 by the Ministry of Commerce and the General Administration of Customs Decision on the Implementation of Export Controls on Items Related to Superhard Materials, MOFCOM, 9^th October 2025, viewed 16^th October 2025, <https://www.mofcom.gov.cn/zcfb/blgg/art/2025/art_333950798cb04c7a8c517cdecf9c564c.html>

[10] Announcement No. 57 of 2025 by the Ministry of Commerce and the General Administration of Customs Decision on Implementing Export Controls on Certain Medium and Heavy Rare Earth-related Items, MOFCOM, 9^th October 2025, viewed 16^th October 2025,<https://www.mofcom.gov.cn/zcfb/blgg/art/2025/art_1ace3f9f948845758206ad0be6869161.html>

[11] Announcement No. 70 of 2025 by the Ministry of Commerce and the General Administration of Customs Announcement of the Decision to Suspend the Implementation of Announcements Nos. 55, 56, 57, and 58 of 2025 by the Ministry of Commerce and the General Administration of Customs, and Announcements Nos. 61 and 62 of 2025 by the Ministry of Commerce, MOFCOM, 7^th November 2025, viewed 12^th February 2026,<https://www.mofcom.gov.cn/zcfb/blgg/art/2025/art_2ec8b9f2c6404a56b311abc82d87f486.html>

[12] Ma, J., China announces export control measures on technologies related to rare earths, Global Times, 9^th October 2025, viewed 23^rd January 2026, <https://www.globaltimes.cn/page/202510/1345279.shtml>

[13]  Davidson, H., China steps up control of rare-earth exports citing ‘national security’ concerns, The Guardian, 9^th October 2025, viewed 23^rd January 2026,<https://www.theguardian.com/world/2025/oct/09/china-steps-up-control-rare-earth-exports-national-security-concerns>

[14] Spokesperson for the Ministry of Commerce Responds to Journalists’ Questions Regarding China’s Recent Trade and Economic Policy Measures, MOFCOM, 12^th October 2025, viewed 16^th October 2025 <https://www.mofcom.gov.cn/xwfb/xwfyrth/art/2025/art_98a53fdad5f847ed8cab0f93f4f4bf7a.html>

[15] European Chamber Survey Finds One in Three Looking to Divert Sourcing Away from China to Mitigate Impact of Export Controls, European Chamber, 1^st December 2025, viewed 12^th February 2026, <https://www.europeanchamber.com.cn/en/press-releases/3757/european_chamber_survey_finds_one_in_three_looking_to_divert_sourcing_away_from_china_to_mitigate_impact_of_export_controls>

[16] Ibid.

[17] Spokesperson for the Ministry of Commerce Responds to Journalists’ Questions Regarding Enhanced Export Controls on Dual-use Items to Japan, MOFCOM, 6^th January 2026, viewed 20^th January 2026,<https://www.mofcom.gov.cn/xwfb/xwfyrth/art/2026/art_1f25cb39adfa4561b34b4ea46d2bcee7.html>

[18] The author defines a product as dependent when a country: “has a significant trade deficit in that good, as a result of imports being at least twice as high as exports; it has a significant bilateral supplier that accounts for at least 30 per cent of imports of that good; and if there are relatively few suppliers around the world, with the good’s total exports scoring 0.25 or higher on the Herfindahl-Hirschman Index of market concentration.” See: Chimits, F., Growing asymmetry: Mapping the import dependencies in EU and US trade with China, MERICS, 1^st October 2024, viewed 4^th February 2026,<https://merics.org/en/report/growing-asymmetry-mapping-import-dependencies-eu-and-us-trade-china>

[19] Superhard materials are generally considered to be manmade materials with a diamond-like or greater level of hardness. China’s announcement of export controls on superhard materials list more specific technical specifications on what is included. See: Superhard materials, Taylor & Francis, viewed 10^th February 2026, https://taylorandfrancis.com/knowledge/Engineering_and_technology/Materials_science/Superhard_materials>; Announcement No. 55 of 2025 by the Ministry of Commerce and the General Administration of Customs Decision on the Implementation of Export Controls on Items Related to Superhard Materials, MOFCOM, 9^th October 2025, viewed 10^th February 2026,<https://www.mofcom.gov.cn/zcfb/blgg/art/2025/art_333950798cb04c7a8c517cdecf9c564c.html>