China’s Commerce Ministry said on Tuesday (Feb. 24) it would suspend shipments of so-called “dual-use” goods – materials with both civilian and military applications – to 20 Japanese companies, while another 20 groups would be placed on a new “watch list”, the Chinese Commerce Ministry said. media reports.
Rare earth magnets are essential components in cars, electronics and defense systems, and global manufacturers remain heavily dependent on Chinese supply.
The immediate export freeze applies to companies involved in defense-related work at Mitsubishi Heavy Industries, Kawasaki Heavy, IHI and NEC.
Meanwhile, companies on the watchlist will face slower shipments and must pledge “that the dual-use items will not be used for any purpose that contributes to increasing Japan’s military capabilities.”
Topics covered include critical minerals such as gallium, germanium, antimony and graphite, as well as rare earth metals, magnetic materials and certain advanced manufacturing equipment.
The dispute goes back to comments from November last year by Prime Minister Sanae Takaichi, who said a hypothetical Chinese invasion of Taiwan could pose an “existential threat” to Japan and suggested Tokyo could respond with armed force.
Beijing claims sovereignty over Taiwan and has warned it could use force if Taipei continues to resist indefinitely.
The pressure also comes as Japan steps up efforts to reduce its dependence on China for rare earths. Earlier this month, Tokyo announced it had successfully extracted mineral-rich seabed sediment from nearly 6,000 meters beneath the ocean near the remote island of Minamitorishima.
The material was recovered by the deep-sea drillship Chikyu as part of a government-backed testing program assessing the feasibility of rare earth extraction.
“It is a first step toward the industrialization of domestically produced rare earths in Japan,” Takaichi said in a statement posted on X. “We will work to establish resilient supply chains for rare earths and other critical minerals to avoid over-dependence on any one country.
China has used rare earth exports as leverage before.
In 2010, following a territorial dispute in the East China Sea, Beijing halted rare earth shipments to Japan, sending prices soaring and exposing Tokyo’s heavy dependence on Chinese supply.
This episode became a turning point for Japan’s resource strategy, accelerating efforts to diversify supply and directly supporting the rise of the Australian economy. Lynas Rare Earth Elements (ASX:LYC,OTCQX:LYSDY)which has since become the largest producer of rare earths outside of China.
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Securities Disclosure: I, Giann Liguid, have no direct investment interest in any company mentioned in this article.
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