China says reviewing export licenses after US eases chip tech controls

China's Ministry of Commerce is reviewing export licenses for controlled items, including rare earths and related magnets, while acknowledging the U.S. has lifted restrictions on chip technology and jet engine component exports to China. This reciprocal easing of controls follows a framework trade agreement reached in May, signaling an ongoing effort to reduce trade tensions and foster cooperation between Beijing and Washington.

Analysis

A significant de-escalation in U.S.-China trade tensions is underway, marked by reciprocal easing of export controls. China's Ministry of Commerce is reviewing export licenses for strategic materials, including rare earths and related magnets, directly following the U.S. lifting its own restrictions on the export of chip design software and jet engine components. This tit-for-tat relaxation is a direct implementation of a framework trade agreement reached in May, signaling a move from confrontation to cooperation. The actions reverse key measures from the recent trade war, where China leveraged its dominance as the world's largest rare earth producer and the U.S. tightened controls on technology exports. The issuance of new export licenses to three major Chinese rare earth producers in June, combined with the latest U.S. concessions, suggests a tangible normalization of critical supply chains, reducing geopolitical risk for industries reliant on these inputs and technologies.

Key Decisions for Investors

• Investors should re-evaluate U.S. semiconductor and aerospace companies, as the lifting of export restrictions on chip technology and jet engine components to China may unlock significant revenue streams.
• Consider the positive impact on industries dependent on rare earths, such as EV and electronics manufacturers, as China's normalization of export licenses could stabilize input costs and reduce supply chain volatility.
• The broader trend of easing U.S.-China trade friction reduces the geopolitical risk premium, warranting a review of portfolio allocations to sectors that were previously discounted due to trade war concerns, such as global technology and industrial supply chains.