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Japan Condemns China’s Dual-Use Export Ban as Rare Earth Curbs Loom

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Japan on Wednesday condemned China’s ban on dual-use exports to its military as “absolutely unacceptable,” warning that the move could be followed by broader restrictions on rare earth exports, escalating tensions between Asia’s two largest economies.

Dual-use items include goods, software, and technologies with both civilian and military applications, such as critical minerals used in drones and semiconductor manufacturing. Tokyo’s criticism came after Beijing announced a ban on exports to Japanese military users or for any purposes that could enhance Japan’s military capabilities.

Japan’s top government spokesman, Chief Cabinet Secretary Minoru Kihara, said the measure deviates sharply from international norms and unfairly targets Japan. He declined to specify which industries might be affected, noting that the scope of the restrictions remains unclear.

The dispute traces back to comments made late last year by Japanese Prime Minister Sanae Takaichi, who said a Chinese attack on democratically governed Taiwan could pose an existential threat to Japan. China considers Taiwan part of its territory, a claim Taiwan rejects. Beijing has demanded Takaichi retract the remarks, which she has refused to do, prompting a series of retaliatory measures.

Japanese markets reacted negatively, with the Nikkei 225 falling about 1% on Wednesday. Shares of major defense contractors Kawasaki Heavy Industries and Mitsubishi Heavy Industries were among the biggest decliners, each dropping around 2%.

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RARE EARTH CURBS IN FOCUS
Chinese state-backed newspaper China Daily reported on Tuesday that Beijing is considering tighter restrictions on rare earth exports to Japan, a move that could have far-reaching consequences for Japan’s manufacturing sector, particularly automobiles. Despite efforts to diversify supply since China curtailed rare earth exports in 2010, Japan still sources about 60% of its rare earth imports from China. For certain heavy rare earths used in electric and hybrid vehicle motors, dependence on China is nearly total, analysts say.

Japanese automaker Subaru said it is closely monitoring the situation, while Toyota Motor and Nissan Motor did not immediately comment.

According to Takahide Kiuchi, an economist at Nomura Research Institute, a three-month halt in Chinese rare earth exports could cost Japanese businesses 660 billion yen ($4.2 billion) and reduce annual GDP by 0.11%. A year-long ban could shave 0.43% off economic output.

Supply chain consultancy Tidalwave Solutions said Japan is unlikely to remain passive if the curbs expand. “If Japanese civilian or commercial entities are targeted, you could see retaliation,” said Cameron Johnson, a senior partner at the firm, adding that Tokyo could respond by restricting materials China needs for its own high-end manufacturing.

Adding to the strain, China on Wednesday launched an anti-dumping investigation into Japanese imports of dichlorosilane, a key chemical used in semiconductor production, according to China’s commerce ministry.

The standoff has already led Beijing to discourage travel to Japan, halt imports of Japanese seafood, and cancel bilateral meetings and cultural exchanges. Analysts say the dispute could drag on, drawing parallels to the 2012 row over disputed islands that froze high-level talks for more than two years.

China’s foreign ministry reiterated its demand that Japan retract the Taiwan-related remarks. “We urge the Japanese side to confront the root cause of the issue, reflect on its mistakes, and retract the erroneous remarks,” spokesperson Mao Ning said.

Netherlands Struggles to Resolve Nexperia Standoff With China as Carmakers Warn of Shortages

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The Netherlands is locked in a tense dispute with China over chipmaker Nexperia BV, as high-level talks between Dutch Economy Minister Vincent Karremans and China’s Commerce Minister Wang Wentao failed to produce a breakthrough on Tuesday. The impasse is deepening concerns among European carmakers, who rely heavily on Nexperia’s chips for production.

The standoff began after the Dutch government seized control of Nexperia last month, citing national security risks tied to its Chinese parent company, Wingtech Technology, which is listed in Shanghai. In retaliation, Beijing blocked exports of Nexperia’s finished chips from China, effectively freezing the company’s supply chain and alarming automakers already facing global component shortages.

Karremans said both sides discussed “further steps toward reaching a solution acceptable to all parties,” but China’s response was sharply critical. The Chinese commerce ministry accused the Netherlands of “overstretching the concept of national security,” warning that the seizure “has seriously affected the stability of global supply chains.”

The fallout is hitting the automotive sector hardest. Germany’s VDA auto industry association warned that production could soon face “considerable restrictions or even stoppages” if the chip flow is not restored quickly. Nexperia’s components, while not high-end, are vital for mass-market electronics and car manufacturing, and both sides of its operations — European production and Chinese packaging — are struggling to find alternatives.

The dispute comes amid escalating global trade frictions, including U.S. import tariffs and Chinese export curbs on rare earth materials, compounding pressures on Europe’s already fragile industrial supply lines.

China tightens port checks on Nvidia AI chips to enforce U.S. export curbs

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China has ramped up inspections on imported U.S. semiconductors, including Nvidia’s artificial intelligence chips, as part of a broader effort to strengthen oversight and promote domestic chip production, the Financial Times reported Friday.

Customs officials have reportedly been dispatched to major ports to scrutinize semiconductor shipments more closely. The inspections initially focused on Nvidia’s H20 and RTX Pro 6000D models — chips specifically designed to comply with U.S. export restrictions — but have since expanded to all advanced semiconductor products that could breach those controls.

Neither Nvidia nor China’s customs agency has commented publicly on the report, and Reuters said it could not independently verify the claims.

The move reflects Beijing’s deepening response to Washington’s tightening export rules, which have cut Chinese access to high-end chips used in artificial intelligence and supercomputing. The FT previously reported that over $1 billion worth of Nvidia’s top AI processors had been smuggled into China in just three months this year.

In recent months, Chinese authorities have also accused Nvidia of antitrust violations and ordered local tech giants to suspend chip purchases. While Huawei and other domestic firms have advanced their semiconductor capabilities, engineers within China’s tech sector acknowledge Nvidia’s chips remain unmatched in performance.

The heightened inspections come amid a geopolitical tug-of-war over AI leadership, with U.S. President Donald Trump signaling in August that he might loosen some restrictions on Nvidia’s exports to China — a move that could reshape the delicate balance in the global chip race.