China’s Export Restrictions and the Impact on Europe’s Defence Industry
China’s recent export restrictions have sparked concern among European defence industry stakeholders, who are now calling for stronger measures to ensure supply chain resilience and reduce dependence on critical raw materials. The Aerospace, Security and Defence Industries Association of Europe (ASD), representing over 4,000 companies including Airbus, BAE Systems, Saab, Thales, and Rheinmetall, is closely monitoring these developments.
The new Chinese measures, which come into effect on 1 December, impose significant restrictions on export licenses for companies linked to foreign militaries. Additionally, any applications to use rare earths for military purposes will be automatically denied. This means that China aims to prevent its rare earths and related technologies from being used in foreign defence industries.
Experts suggest that while these restrictions may not immediately halt supplies, they could still have serious implications for Europe’s defence sector. Daniel Fiott, a professor at the Brussels Centre for Security, Diplomacy and Strategy (CSDS), warned that expanded Chinese restrictions could delay ammunition production and high-tech systems reliant on critical minerals. He added that this timing is particularly concerning as Europe seeks to rearm and increase its defence spending.
Europe’s Push for Defence Autonomy
At a NATO meeting in The Hague this summer, the 32 alliance members — 22 of which are also EU countries — pledged to boost their defence capabilities and increase defence spending to 5% of GDP by 2035. The EU is also working on joint procurement strategies, aiming to reduce reliance on foreign suppliers and advance key projects like the “drone wall” and the Eastern Flank initiative.
However, analysts believe that China’s tightening of export rules on rare earths has introduced additional challenges. Joris Teer, a research analyst at the EU Institute for Security Studies (EUISS), stated that China is undermining Europe’s rearmament efforts just as Russian aggression escalates beyond Ukraine. He warned that Chinese controls could slow down military innovation across NATO and its Asian partners, affecting radar systems, quantum computing, and other high-tech defence technologies.
Dependence on Critical Raw Materials
The reliance on critical raw materials varies across different defence systems and equipment. Some companies might be more affected than others. A spokesperson for Rheinmetall mentioned that the company has “stable and secure supply chains” ensuring access to key supplies through strategic purchasing and warehousing, along with diverse global sources.
Smaller European defence firms acknowledge that the new restrictions could disrupt production schedules and increase costs. However, they believe the challenges are manageable through early securing of key components, qualifying multiple suppliers, and redesigning products to reduce reliance on rare materials.
Reducing Dependency – Easier Said Than Done
Access to critical raw materials is essential for the EU’s rearmament goals, as various defence systems rely on them. The bloc currently depends heavily on imports, with China supplying 31% of the EU’s tungsten and 97% of its magnesium metal. Demand for rare earths is expected to rise sixfold by 2030.
To address this issue, the EU passed the Critical Raw Materials Act earlier this year, aiming to boost domestic production, diversify imports, and promote recycling. By 2030, the EU hopes to meet 10% of its demand through domestic extraction, 40% through processing, and 25% through recycling. It also aims to limit reliance on any single country to no more than 65% for each material.
Despite these plans, experts caution that progress will take time. Fiott emphasized the need for bold investments in domestic refining and recycling to reduce dependency on China. He noted that this may involve environmental trade-offs, making it challenging to balance defence and climate targets.
Tensions Ahead of Key US-China Talks
The export controls also coincide with rising trade tensions between Beijing and Washington. Presidents Donald Trump and Xi Jinping are expected to meet during the APEC summit in South Korea in late October, just before the new measures take effect. Some analysts see this timing as a negotiation tactic.
In a statement, the Chinese Ministry of Commerce expressed willingness to strengthen communication and cooperation to ensure the security and stability of global industrial and supply chains. However, the European Chamber of Commerce in China warned that the move could worsen trade tensions, urging Beijing to maintain dialogue and ensure continued rare earth exports to Europe.
European Commissioner for Trade Maroš Šefčovič criticized the measures as “unjustified,” stating they further harm European companies already facing delays in Chinese export licensing. He highlighted the importance of rare earths and permanent magnets in digital components and called for a videoconference with his Chinese counterpart to discuss the issue, expected to take place next week.
