China Tightens Rare Earth Export Controls... Prolonged US-China Conflict Could Directly Hit SMEs

[Financial News] As China further strengthens its export controls on rare earth elements (REE), tensions are rising across domestic industries. While most analysts believe the immediate impact on Korean companies will be limited, there are growing concerns that SMEs and mid-sized companies could be hit hard if the US-China conflict drags on.
According to industry sources on the 13th, China's Ministry of Commerce has regulated exports of seven types of REE since April, in what is widely seen as a move targeting the United States. As customs procedures for some items have lengthened and import schedules have become unstable, Korean companies have responded by securing stockpiles. Recently, China expanded its controls to include five more types of REE and related products, further heightening uncertainty amid ongoing US-China tensions.
SMEs are particularly vulnerable to supply chain disruptions, making them highly sensitive to the impact of the US-China power struggle. REE are essential raw materials used across advanced industries, including electric vehicle motors, semiconductors, smartphones, and wind turbines. Since Korea relies heavily on imports from China, any supply disruptions are likely to affect SMEs and mid-sized companies supplying parts and materials before impacting large manufacturers of finished products.
So far, there have been no visible damages reported among SMEs. Choo Moon-gap, head of the Economic Policy Division at the Korea Federation of SMEs (KBIZ), stated, "This measure is related to trade agreement issues targeting the United States. While smaller players may get caught in the crossfire, it is still too early to conclude that there has been any real damage."
Experts acknowledge the concerns but say it is premature to discuss actual losses. Minsun Noh, a research director at the Korea Small Business Institute (KOSBI), noted, "It is too soon to definitively say whether there has been any damage. If the US-China conflict escalates into tariff issues, the supply chains for key materials such as REE and lithium could be affected, which may impact Korea as well. For now, however, the effects appear to be limited."
The government is closely monitoring the situation. The Ministry of Trade, Industry and Energy (MOTIE) is assessing the potential impact of China's actions on domestic industries. A representative from the Ministry of SMEs and Startups commented, "We have not yet received any reports of import difficulties related to REE, but we are keeping a close watch on developments."
stand@fnnews.com Seo Ji-yoon Reporter