China Plans Validated End-User System to Regulate Rare Earth Exports Amid U.S. Trade Tensions

China is reportedly preparing new measures to control the flow of rare earth elements and other critical materials to the United States, according to a report by The Wall Street Journal. The initiative aims to create a “validated end-user” (VEU) system designed to restrict exports to companies linked to the U.S. military, while facilitating shipments to civilian firms.

This policy move underscores Beijing’s strategic leverage in the global rare earth market, where China remains the world’s dominant supplier. Rare earth elements are vital for producing a wide range of products, from smartphones and electric vehicles to advanced military technologies and renewable energy equipment.

The proposed VEU system will enable China to identify and approve buyers that qualify for streamlined imports, ensuring faster access for non-military enterprises. At the same time, it will allow Beijing to tighten control over firms with both civilian and defense contracts—potentially complicating supply chains for U.S. manufacturers reliant on these materials.

The decision also aligns with Chinese President Xi Jinping’s pledge to U.S. President Donald Trump to resume rare earth exports to the American market, signaling a partial easing of trade restrictions. However, analysts suggest that the system could serve as a tool for China to maintain influence over critical supply chains while appearing cooperative on the international stage.

In response, Washington has intensified efforts to diversify its rare earth sources, securing new agreements with allied nations. Notably, Australian company Lynas Rare Earths Ltd (ASX:LYC)—the largest rare earth producer outside China—has become a key player in the U.S. strategy to reduce dependence on Chinese supply.