China Cracks Down on Rare Earth and Graphite Smuggling
China has penalized at least 11 companies in 2025 and 2026 for illegally exporting restricted rare earths and critical minerals, marking a significant escalation in Beijing’s enforcement of its strategic resource controls. The crackdown, which includes fines, criminal indictments, and the launch of a multi-agency anti-smuggling task force, signals that China is moving beyond simply enacting export restrictions to actively policing them — with serious implications for global high-tech supply chains.
According to Caixin Global, the latest action came on May 28, when superhard material producer Monte-Bianco Diamond Applications Co. Ltd. was fined 910,000 yuan ($133,914) for exporting state-controlled dysprosium in April 2025 without a required export license. Dysprosium is a heavy rare earth element essential for high-performance permanent magnets used in electric vehicles and defense systems.
A Wave of Enforcement Actions
The Monte-Bianco case is just one of several high-profile enforcement actions. In a particularly significant case, Puyang Refractories Group Co. Ltd., a listed Chinese company, was indicted by the Yingkou City People’s Procuratorate for smuggling 1,243.55 tons of natural flake graphite to its US subsidiary between April 2024 and March 2025. As the ITTC Network reported, the company falsely declared the shipments under a different HS code to bypass export licensing requirements. Chairman Qi Changsheng and two executives have been arrested.
A subsidiary of JA Solar Technology Co. Ltd. was fined 1.3 million yuan for shipping unlicensed graphite parts to Vietnam in early 2026, while three additional companies were fined 700,000 yuan for falsely declaring graphite product exports to India. The breadth of these cases — spanning rare earths and graphite, involving companies large and small — demonstrates that no sector of the critical mineral supply chain is being overlooked.
Institutionalizing the Crackdown
Perhaps the most telling development is the institutional response. In early May 2026, seven government bodies — including the Ministry of State Security and the Supreme People’s Court — launched a coordinated anti-smuggling task force in Shenzhen, China’s tech manufacturing hub. This follows a February 2026 statement from Du Xueyi, Director of the Economic Crime Prosecution Department at the Supreme People’s Procuratorate, who said authorities would “crack down on smuggling crimes in accordance with the law” and “strengthen supervision and guidance over major and sensitive cases such as rare earth smuggling.”
The CTIA.com.cn report on Du’s remarks emphasized that the goal is to “more forcefully safeguard national sovereignty, security, and development interests” — language that frames the enforcement push as a matter of national security, not just trade compliance.
The Export Control Architecture
China’s export control regime has evolved rapidly since 2023. Natural flake graphite was added to the dual-use export control list in December 2023 due to its military applications in missile nose cones and aerospace components. In April 2025, the Ministry of Commerce issued MOFCOM Announcement No. 18, imposing licensing requirements on seven heavy rare earth elements: samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium. As TechTimes confirmed, these controls have never been suspended.
A second, more sweeping wave of controls announced in October 2025 — covering five additional elements and extraterritorial provisions — was suspended until November 10, 2026 as part of the US-China trade truce. But the April 2025 controls remain fully in force, creating a layered system where some materials are restricted, others are suspended, and the overall framework continues to tighten.
Market Impact and Global Exposure
The impact has been dramatic. According to CSIS research cited by TechTimes, yttrium exports from China to the United States fell from over 333 metric tons in the eight months before the April 2025 controls to just 17 metric tons in the eight months after — a decline of approximately 95%. Aerospace manufacturers, which rely on yttrium for turbine blade coatings, have reported shortages and rationing.
The International Energy Agency estimates that $6.5 trillion in annual economic output outside China could be at risk if the full suite of controls is reimplemented. China’s dominance in the sector is overwhelming: it holds 48.89% of global rare earth reserves, accounts for 69.23% of global production, and controls approximately 90% of global processing capacity.
Strategic Implications
The EU Chamber of Commerce in China has warned that Beijing’s export controls have been “repurposed as strategic trade measures,” undermining China’s credibility as a reliable supplier. Gracelin Baskaran, who directs the Critical Minerals Security Program at CSIS, offered a sobering assessment: “The U.S. still has to tread carefully in its relationship with China to avoid those disruptions, given how long it takes to transform rare-earth announcements, funding, and partnerships into actual supply.”
Western efforts to diversify supply are accelerating — MP Materials produced a record 2,599 metric tons of neodymium-praseodymium oxide in 2025, and Lynas Rare Earths became the first non-Chinese company to produce commercial dysprosium oxide — but these projects remain years away from meaningfully challenging China’s dominance.
What to Watch
The November 10, 2026 deadline for the suspension of the October 2025 controls looms large. If the suspension is not extended, the extraterritorial provisions — requiring export licenses for any product worldwide containing Chinese-origin rare earth content at a 0.1% threshold — would automatically resume. The May 2026 Trump-Xi Beijing summit produced no publicly confirmed commitment to extend the suspension, leaving manufacturers and supply chain managers in a precarious position.
For now, the message from Beijing is clear: China’s strategic minerals are not for the taking, and the enforcement machinery to protect them is fully operational.