Core Viewpoint - The European Union is facing a crisis due to China's strict export controls on rare earth elements, which are essential for various industries, including defense and renewable energy. The EU's reliance on China for these materials has led to significant operational risks for European manufacturers [1][4]. Group 1: Export Control and Approval Rates - The approval rate for rare earth export licenses in China is around 20%, with less than a quarter of approximately 140 applications being approved, indicating stringent controls [3]. - The export control measures were not sudden; they were announced in April 2025, coinciding with the U.S. imposing tariffs on China, showcasing a strategic response from China [3]. Group 2: Strategic Importance of Rare Earths - The seven categories of rare earths under control are critical for manufacturing high-temperature magnets, which are widely used in military applications, electric vehicles, and electronics [4]. - The EU is entirely dependent on imports for these resources, and any tightening of supply from China could severely impact its industrial framework [4]. Group 3: China's Dominance in Rare Earths - China holds 40% of the world's rare earth reserves, produces over 70% of the total output, and possesses 90% of the processing capacity, giving it significant leverage in the market [5]. - Other countries may have rare earth deposits but rely on China's refining technology, which is complex and costly to replicate [6]. Group 4: EU's Strategic Missteps - The EU's dual approach of aligning with U.S. pressure while expecting stable rare earth supplies from China is seen as contradictory and self-defeating [3][6]. - The EU's attempts to sanction Chinese and Indian companies for aiding Russian oil trade, while simultaneously complaining about rare earth shortages, reflect a lack of coherent strategy [6]. Group 5: Recommendations for the EU - The EU is advised to reconsider its approach towards China, as historical lessons indicate that the U.S. has not shown leniency towards the EU, and China has maintained a willingness for dialogue [14]. - The potential for the Chinese market is vast, and the EU risks missing out on development opportunities if it continues to act as a pawn for U.S. interests [14].