Beijing Blacklists 5 US Entities — Rare Earth Supply Chain Impact
On June 26, China’s Ministry of Commerce (MOFCOM) added five US rare earth mining and processing companies to its “unreliable entities list” — effectively blocking them from importing, exporting, or investing in China. The move targets US-based processors of rare earth elements (REEs) critical to EV motors, wind turbines, and defense systems.
The five blacklisted firms include MP Materials’ China-linked operations and several smaller processors in the REE supply chain. China controls roughly 60% of global rare earth mining and 90% of processing capacity. By restricting access to Chinese feedstocks and processing services, Beijing can squeeze US rare earth supply chains without imposing a formal export ban.
The “unreliable entities list” mechanism, created in 2020 and rarely used before 2025, has now been deployed against 12 foreign entities. Companies on the list face a five-year prohibition on any trade or investment activity in China. Renewal is possible after review. This follows Beijing’s broader efforts to reshape foreign investment access, detailed in our earlier analysis of China’s 15-Point Plan to Woo Foreign Capital.
New Overseas Investment Rules Take Effect July 1
Separately, the NDRC’s new “Regulations on the Administration of Outbound Investments by Enterprises” take effect July 1. The rules streamline approval for outbound investments in Belt and Road infrastructure and green energy projects while tightening scrutiny on semiconductor, AI, and quantum computing deals.
Key changes under the new framework:
- Approval thresholds raised: projects under RMB 300 million (≈US$42 million) in non-sensitive sectors now require only filing, not approval
- Sensitive sectors expanded: AI training infrastructure, advanced chip design, and quantum computing added to the restricted list
- Reporting requirements tightened: quarterly compliance reports now mandatory for all outbound investments exceeding RMB 100 million
- Penalties increased: unauthorized outbound investments now face fines up to 10% of the total project value
The new rules apply to all Chinese entities — including foreign-invested enterprises (FIEs) registered in China that make outbound investments. Joint ventures with Chinese partners should review their outbound investment plans before July 1 to avoid triggering the new restrictions. For context on how FTZ-level data regulations are evolving, Tianjin’s pilot offers a revealing parallel.
Commerce Minister Heads to Brussels
Commerce Minister Wang Wentao is scheduled to travel to Brussels this week for high-level EU-China trade talks. The agenda includes the EU’s ongoing anti-subsidy investigation into Chinese EVs (which could result in retroactive tariffs), China’s proposed price undertaking mechanism, and negotiations on critical minerals supply chain cooperation.
The EU investigation, launched in October 2024, has already imposed provisional duties of 17-36% on Chinese EV imports. Wang’s visit suggests both sides are seeking a negotiated outcome before definitive duties take effect later this year.
RMB Depreciation Adds Urgency: The offshore renminbi (CNH) traded at 7.28 per dollar as of June 28, down 3.2% year-to-date. A weaker RMB makes Chinese exports more competitive but raises costs for foreign-invested enterprises importing components or repatriating profits. For manufacturers operating in China, the combined impact of rare earth blacklists, tighter outbound investment rules, and RMB depreciation creates a three-front planning challenge. Finance teams should model cash flow scenarios at 7.00, 7.30, and 7.50 RMB/USD to stress-test their 2026-2027 China operations.
EU Trade Talks — What’s at Stake: The Brussels meeting will test whether the EU and China can negotiate a price undertaking mechanism for Chinese EVs. Under such a mechanism, Chinese automakers would voluntarily set minimum export prices and volume caps to avoid retroactive anti-subsidy duties. A precedent exists: the EU’s 2013 solar panel agreement with China, which set minimum prices and annual volume limits on Chinese solar imports for 5 years. If replicated for EVs, it would cap Chinese EV market share in the EU at roughly 15-18%, up from 12% in 2025 but well below the 25% domestic brands fear.
What You Should Do
- If your business relies on rare earth supply from China, assess whether your suppliers are affected by the blacklist and identify alternative processing routes
- FIEs with outbound investment plans — review whether your intended destination or sector falls under the expanded sensitive list before July 1
- EU-based importers of Chinese EVs — monitor the Brussels talks closely. A price undertaking deal could avoid the worst-case tariff scenario
One Data Point
The number to remember: 12 — the total number of foreign entities now on China’s unreliable entities list in 2026, up from just 2 at the end of 2024. The pace of enforcement is accelerating.
— China Gateway 360 —
Remote China market entry support, built around execution.