China’s economic influence is shifting from traditional reliance on rare earths to a broader control over intermediate goods, strengthening its leverage through monitoring, licensing, and export restrictions in key global markets.
China’s leverage is no longer confined to rare earths
The debate over Beijing’s economic leverage has often centred on rare earths, but the case for looking wider is growing stronger. In a discussion on the Trivium China podcast, Gerard DiPippo of Eurasia Group argued that rare earths remain China’s cheapest coercive tool, yet they are only part of a broader architecture of control that is being built deeper in the supply chain. Dinny McMahon and Cory Combs agreed that the more durable pressure points are increasingly found in intermediate goods: inputs that are less visible to consumers, harder for foreign governments to map and often too numerous for any one country to replace quickly.
One reason export controls matter so much, DiPippo said, is that China’s licensing regime does more than ration supply. It also gives Beijing visibility into who needs what, where stockpiles might be forming and how supply chains are organised. That data can then be used to tighten or relax pressure as needed. He described this as a combination of surveillance and enforcement, one that helps China prevent workarounds and makes retaliation more flexible. Combs added that the key threshold is not whether Beijing can use a tool, but whether it can continue to use it without imposing too much damage on its own industrial base.
That is why rare earths remain such an attractive lever. They are strategically important but relatively low in dollar value, which means China can use them without taking a major direct hit. By contrast, batteries, chemicals and pharmaceuticals sit much further along the value chain and would be far costlier to restrict. Combs noted that China’s battery exports alone were worth far more than the entire rare earth sector, while DiPippo warned that the further controls move into commercially valuable intermediate goods, the more complicated Beijing’s reaction function becomes. A restriction that hurts Chinese firms, or that is too visible to consumers, is harder to sustain.
The more sensitive issue for policymakers is China’s potential to extend restrictions beyond goods made inside its borders. DiPippo described the shelved extraterritorial element of China’s October controls as a Chinese version of the foreign direct product rule, under which foreign-made products containing Chinese-origin inputs could also come under pressure. That provision, now paused under the Busan truce, has not yet been fully tested, but he said the data collected through licensing could make it easier to deploy later. Combs said the same logic applies further down the chain: once Beijing has a licensing system in place, the direction of travel is one-way, even if the intensity of enforcement rises and falls.
Both men argued that the next frontier lies in intermediate goods with substantial global market share, rather than in dramatic bans on consumer-facing products. DiPippo pointed to hundreds of HS6 trade categories where China already holds at least 50% of global share, a number he said has grown sharply since 2022. Combs singled out tungsten, magnesium and selected semiconductor-related inputs as areas to watch, while also noting that pharmaceuticals and batteries are more politically and economically sensitive. The broader point, they said, is that China is not just building export controls as a defensive measure. It is also creating future leverage in plain sight, in markets that are big enough to matter but obscure enough to be underestimated.
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