Critical Raw Materials How China's Export Controls Can Impact German Companies

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China adds more Japanese companies to export control and watch lists. Formally, the measure is targeted at Japan, but it can also be relevant in Germany. Export controls increasingly follow not only national borders but also materials, technologies, end customers, and supply chains.

China expanded its domestic export controls on Japanese companies and institutions at the end of June 2026, as reported by the German Raw Materials Agency (DERA). According to the information, China's Ministry of Commerce (MOFCOM) added more Japanese institutions to control and observation lists on June 29, 2026. DERA interprets this as a further tightening and expansion of Chinese export controls.

Reuters reports that China now lists a total of 40 Japanese entities on an export control list for dual-use goods. Chinese companies are no longer allowed to supply these entities without prior approval. Affected entities include subsidiaries and organizations from the defense and high-tech sectors, including those related to Mitsubishi Heavy Industries, Mitsubishi Electric, and Kawasaki Heavy Industries. An additional 40 Japanese entities have been placed on an observation list, requiring exporters to submit additional risk assessments and assurances regarding the end use.

According to the Chinese Ministry of Commerce, the measures are intended to prevent Chinese dual-use goods from contributing to the strengthening of Japan's military capabilities. Dual-use goods are items, software, or technologies that can be used for both civilian and military purposes. Particularly noteworthy is a provision that extends beyond China and Japan: not only Chinese exporters are affected. Foreign organizations and individuals are also prohibited from passing on dual-use goods of Chinese origin to the listed entities.

No Direct Supply Stop, but a Supply Chain Risk

This does not result in a supply stop for German companies, as the current measure is directed against Japanese entities. However, it shows how export controls are now affecting global value chains. The key factors are no longer just who exports from which country but also where pre-products come from, to whom they are delivered, and for what purpose the goods are ultimately used.

For German developers and manufacturers, this can have several implications. Those integrating Chinese materials, magnets, electronic components, machine parts, or software into their products must more carefully determine whether these goods are subject to export control regulations. Companies supplying Japanese customers or international corporations with ties to Japan must check whether listed end users, controlled goods, or Chinese-origin components are affected. Additionally, those manufacturing in China or involving Chinese subsidiaries in the supply chain may face additional licensing, documentation, and end-use verification requirements when exporting to third markets.

Rare Earths as a Strategic Lever

The current measures are also part of a broader context of China's raw materials and export control policies. As early as April 2025, China introduced export controls for certain medium and heavy rare earths. The MOFCOM announcement specifically mentions samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium, as well as metals, alloys, oxides, compounds, mixtures, and permanent magnet materials based on these elements.

These materials are relevant for many high-tech applications like electric motors and power electronics. Dysprosium and terbium, in particular, are used to make high-performance magnets more temperature-stable. Thus, export controls affect not only raw materials in the strict sense but also pre-products deeply embedded in industrial systems.

For German companies, this is particularly sensitive because many critical dependencies are not visible on the first level of the supply chain. A developer might see a motor, a sensor package, a magnet module, or an assembly in the design. However, the export control-relevant dependency may lie several levels deeper – in the magnetic material, the rare earth element, the coating, the software, or the manufacturing technology.

Bosch Example Shows How Far Export Controls Can Extend

How costly such risks can become is illustrated by another case: Bosch had to pay a fine of around 36 million dollars in the U.S. because two non-U.S. subsidiaries delivered MEMS sensor products and automotive software worth more than 72 million dollars to Huawei and Huawei subsidiaries between September 2020 and September 2024. According to U.S. authorities, the goods were subject to the U.S. Export Administration Regulations due to the Foreign Direct Product Rule and would have required a U.S. license.

Violation of US Export Controls

Bosch Pays a $36 million Fine for Huawei Deliveries

The case involves U.S. law and Huawei, not Chinese export controls. However, it is relevant as a cautionary example: export control regulations can also apply when shipments go through foreign subsidiaries, when products are manufactured outside the country of origin, or when the critical linkage lies in technology, software, or pre-products. Bosch voluntarily disclosed the violations and cooperated with authorities; nevertheless, the agreed penalty amounted to 36.18 million dollars.

For German companies, the lesson is not so much that every delivery to China or Japan is risky. Rather, the key point is that origin, technological linkage, end customer, and end use must be systematically reviewed. Export control thus becomes a cross-functional task: development, procurement, sales, compliance, and logistics must share the same information. Four practical questions arise from this: Do products or assemblies contain Chinese dual-use goods or Chinese-origin components? Do shipments go directly or indirectly to listed end users or security-related applications? Can suppliers reliably document the origin of critical materials and components? And are bill of materials, software components, and technical data maintained in such a way that export control checks don’t only start shortly before shipping?