China expands export controls on Japanese defense and tech entities
12 reported
China’s Ministry of Commerce on Monday added 20 Japanese entities to an export control list and placed another 20 on a watch list requiring enhanced licensing scrutiny, escalating restrictions on dual-use goods including rare earth minerals. The blacklisted entities include four government defense research institutes — the National Institute for Defense Studies and research centers for ground, naval, and air systems — as well as units under Mitsubishi Electric and Mitsubishi Heavy Industries. The watch list includes Mitsui E&S Co., drone maker Terra Drone Corporation, nuclear fuel processors, and multiple units of OKI Electric Industry. The ministry stated that exports involving Japanese military users or applications that could strengthen Japan’s defense capabilities will not be approved. The measures are the latest in a campaign launched in January, when Beijing banned dual-use exports to Japan including rare earth elements and permanent magnets. China has increased pressure on Tokyo after Japanese Prime Minister Sanae Takaichi’s November comments that a hypothetical Chinese attack on Taiwan could trigger a military response from Tokyo. Market reactions were mixed, with Mitsubishi Electric and Howa Machinery declining while Mitsubishi Heavy Industries and Terra Drone Corp gained.
What’s reported
China blacklisted four Japanese government defense research institutes and imposed tighter export restrictions on dozens of other Japanese entities.
20 entities were added to the export control list, including the National Institute for Defense Studies and research centers for ground, naval, and air systems, plus units under Mitsubishi Electric and Mitsubishi Heavy Industries.
Another 20 entities were added to a watch list, including Mitsui E&S Co., Terra Drone Corporation, nuclear fuel processors, and units of OKI Electric Industry.
Domestic exporters and overseas organizations are prohibited from transferring Chinese-origin dual-use items to the named entities; ongoing activities must stop immediately.
The ministry said exports involving Japanese military users, military applications, or any end-use that could strengthen Japan’s defense capabilities would not be approved.
The campaign began in January when Beijing banned dual-use exports to Japan including rare earth elements, permanent magnets, and other critical minerals.
In February, China added 20 entities including subsidiaries of Mitsubishi Heavy Industries, IHI Corp., and Kawasaki Heavy Industries to the export control list, and another 20 firms including Subaru Corp., TDK Corp., and FUJI Aerospace Technology to the watch list.
China escalated pressure after Japanese Prime Minister Sanae Takaichi’s November comments that a hypothetical Chinese attack on Taiwan could trigger a military response from Tokyo.
A commerce ministry spokesperson said Japan had shown no remorse since February and had “accelerated” its push toward what Beijing calls “new-style militarism.”
Market reactions: Mitsubishi Electric declined around 1.4%, Howa Machinery declined around 4.6%, while Mitsubishi Heavy Industries gained 4.9% and Terra Drone Corp gained 1.7%.
Gracelin Baskaran of CSIS said in January that China has sought to leverage its dominance over critical mineral supply chains as a tool of deterrence.
Koki Akimoto of Daiwa Institute of Research estimated in December that a one-year cutoff of Chinese rare earth imports would reduce Japan’s real GDP by about 1.3%, or roughly 7 trillion yen ($43.3 billion).
Key figures
Sanae Takaichi, Japanese Prime Minister
Gracelin Baskaran, director of the critical minerals security program at the Center for Strategic & International Studies
Koki Akimoto, economist at Daiwa Institute of Research
Sources: CNBC
