China warns of fragmented supply chains as trade tensions grow

China warned that supply chains may become disconnected as key trading partners mull new measures to address growing imbalances and reduce rare earths dependencies.
“Unilateralism and protectionism are on the rise, the risk of global supply chain fragmentation is growing,” Chinese Vice Premier Ding Xuexiang said during a speech at the China International Supply Chain Expo’s opening ceremony in Beijing on Monday.

China’s growing trade surplus with key partners has come in focus in recent months, with the European Union contemplating new measures to counter the export surge. The Group of Seven countries recently agreed that no single country should supply more than 60% of their imports of rare earths by 2030 in an effort to reduce their reliance on China.


Beijing appeared to hit back on this move by imposing export controls on two US rare earth producers on Monday. Beijing dominates rare earths supply chains, critical to manufacturing modern technologies from smartphones to fighter jets. China leveraged its dominance of rare earths supply chains to retaliate against Donald Trump’s tariffs last year by restricting their exports.

Ding also pushed back on criticism of unfair subsidies and unbalanced trade by arguing that China’s competitiveness comes from its complete industrial chains and massive market.

In April, China announced it would set up a sweeping new mechanism to ensure the security of its supply chains. The rules give government agencies the authority to start security probes against foreign entities if they adopt discriminatory bans or carry out actions that harm the security of the country’s supply chains.

Any escalation in trade tensions would add to risks facing China as signs grow that its economy is coming under stress. Indicators released last week showed consumer spending and investment both falling to levels unseen since the pandemic.

The figures highlight entrenched weaknesses, even as booming exports and easing geopolitical tensions around Iran offer a temporary buffer.