As German firms wrestle with China’s export controls on rare earths, they are handing Beijing sensitive supply chain information it could potentially use to squeeze manufacturers or shut down production lines in Europe’s biggest economy.
“The information gathered could lock in dominance for Chinese companies and allow them to extract better conditions for their presence and investments in Europe. From Beijing’s perspective, having a say on how these industrial supply chains are built is an enormous advantage.”
Now foreign companies must submit granular, confidential data to obtain a 6-month import license for rare earth minerals. The forms are extraordinarily detailed, requesting product photos showing mineral placement, manufacturing diagrams and customer details. In some cases, the application requests annual production data for the last 3 years and projected data for the next 3 years.
The information could help Beijing map out Germany’s vulnerabilities — showing which firms have only one Chinese supplier, for instance, or which have low supply stockpiles.
German firms don’t have much choice — 95% of their rare earth minerals come from China, far surpassing any other EU country.
Hoping to speed license approvals, the German embassy in Beijing gave China a priority list. This “white list” did help bigger firms get sign offs, but it left behind smaller companies without lobbying operations.
It also inadvertently gave China more visibility into Berlin’s economic chokepoints.
There are fears Beijing will not just disrupt Germany’s economy, but the entire European supply chain — a troubling prospect for the continent’s massive rearmament plans as Russia saber rattles.
“With all the information they are in the process of collecting, the Chinese authorities are likely also getting a picture of defense industrial bases in NATO countries and how intertwined they are with each other.”
Licensing delays are starving European companies of essential inputs, causing production stoppages.
Thus far in Germany, the shutdowns have affected mostly small- and medium-sized firms.
Conversely, bigger firms, including Germany’s automakers and other manufacturing heavyweights, are getting their licenses fast enough to keep production running. But they have all but given up on emergency stockpiling.
Beijing has signaled that anyone ordering more than their production needs will be suspected of smuggling the goods for military purposes or to the US.
The US has for years weaponized China’s dependence on American products, and Beijing is now following suit — destabilizing major economies around the world that, like Germany, tethered their economies to Chinese supplies.
Berlin is awakening to the problem. Yet even as German companies divulge commercial secrets to China, their own government is flying blind. While Chinese officials demand detailed information before they approve exports of rare earth elements, Berlin has no such leverage over its own companies, and no immediate strategy to tackle the problem.
The German economy ministry sent out questionnaires to companies to better understand what China was collecting and to obtain similar information. Those went unanswered. It then summoned business leaders to the ministry to discuss the issue. That also yielded little information.
China likely sees its maximalist approach as a way to extract concessions. Beijing has already proposed rolling back some limits if Germany also loosens high-tech export restrictions.
China is also discussing the controls with the EU as the bloc’s executive arm readies retaliatory options. Beijing has indicated it prefers bilateral negotiations with Chancellor Friedrich Merz over an EU dialogue, adding extra pressure on Merz’s team. Merz’s advisers say he won’t continue Berlin’s lax China policies, but his leverage is limited given supply chain swaps can add costs.
https://bloomberg.com/news/articles/2025-10-25/german-firms-hand-over-secrets-that-china-could-use-for-leverage…
Chancellor Friedrich Merz over an EU dialogue, adding extra pressure on Merz’s team. Merz’s advisers say he won’t continue Berlin’s lax China policies, but his leverage is limited given supply chain swaps can add costs.
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