Rare earths are critical materials for high-tech industries such as semiconductors, AI servers, and electric vehicles. China, which controls over 90% of global rare earth refining capacity, recently tightened its export controls again, sparking concerns over international supply chain restructuring and market volatility.
Short-Term Leverage, Long-Term Decoupling Risks
Shin-Horng Chen, Vice President of the Chung-Hua Institution for Economic Research (CIER), notes that while this move may provide China with short-term negotiating leverage, a long-term dependence on controls as a diplomatic or economic strategy could drive Western nations to expedite the development of their own independent supply chains. This, in turn, may lead to increased global industrial fragmentation and technological decoupling. Vice President Shin-Horng Chen observes that although a full-scale supply chain realignment has yet to occur, the trends of de-risking and regionalization are becoming increasingly apparent.
Taiwan’s Industry Must Prepare in Advance for “FDPR-Style” Controls
China’s new regulations are broader in scope and more stringent. They now resemble the U.S. “Foreign Direct Product Rule” (FDPR), which restricts any foreign company that uses Chinese rare earth materials or technology. Kristy Hsu, Director of the Taiwan ASEAN Studies Center (TASC) at CIER, warns that industries in Japan and Southeast Asia will inevitably be affected. Taiwanese companies, which are deeply integrated into these supply chains, must remain vigilant, conduct early risk assessments, and develop alternative strategies to maintain industrial stability.
Green Refining Technology: A Key to Breaking the Stalemate
In response to China’s tightening policies, the United States and European countries are actively promoting the localization of rare earth industries and innovation in environmentally friendly processing. As traditional rare earth refining is a highly polluting process, Western nations are shifting toward recycling technologies that use discarded electronics, wastewater, and industrial byproducts as source materials, emphasizing a “green refining” model with low carbon emissions and minimal pollution. This shift not only helps reduce the environmental burden but is also seen as a crucial opportunity to break China’s monopoly and reshape the global rare earth supply chain in the future.
Author: CIER Editorial Team
Date: October 13, 2025