In the ever-evolving long-term competition between the United States and China, it can be easy to lose sight of the quieter but more enduring risks that lie beneath the headlines.
Case in point: China’s new sweeping export controls on rare earth magnets and related technologies, tightening its grip on critical inputs for everything from EVs to fighter jets. Under the new rules, any magnet containing even trace amounts of Chinese-sourced rare earths — or made using Chinese methods — now requires Beijing’s explicit approval for export. This marks a significant development in China’s export controls and should be understood as the debut of a Chinese version of the “Foreign Direct Product Rule,” a signature tool Washington has used for decades to exert power and control and most relevant to China, to choke off semiconductor supplies to Huawei and other Chinese firms.
But the latest rare earths move is about much more than that. As attention turns to the anticipated Trump-Xi meeting on the sidelines of the Asia-Pacific Economic Cooperation Summit in South Korea later this month— or to flashpoint issues like Taiwan, the TikTok deal, tariffs, or semiconductor competition — the deeper structural tensions shaping the U.S.-China long-term relationship, and the rest of the international system, risk falling into the background.
Amid these high-profile developments and the churn of short-term tactical deals, a more subtle but profoundly consequential trend is underway that deserves sustained attention from boardrooms, CEOs, investors, and policymakers: the expanding use of what is commonly referred to as “lawfare.” Deliberate, strategic deployment of laws, compliance regimes, and regulatory norms are being increasingly used by China to assert power, shape global behavior, and entrench long-term advantages for itself and its companies around the world.
It is not merely the laws themselves that pose a challenge. Many would also be right to point out that the United States and Europe have done these things for decades. The risk lies in the lack of serious understanding about what China is doing, and little in the way of curiosity or forward-looking scenario planning in U.S. boardrooms and C-suites. Too often, executives are unprepared for situations in which compliance with U.S. laws — once routine — now conflicts with obligations under China’s expanding legal and regulatory regime. These are no longer edge-case occurrences.
And if China’s regulatory framework is relatively new compared to the U.S. or Europe, it is increasingly effective in advancing its geopolitical goals. Any nation with China’s level of state capacity, agency, and ambition would use its legal system to extend influence, even extraterritorially. The timing of the latest rare earth restrictions are no coincidence. With a Trump-Xi meeting expected in Seoul this month, China is showing it is fully capable of adapting its legal toolkit to ensure that it is fit for purpose and willing to use law and regulation to maximum effect, both to secure short-term negotiating leverage and longer-term national interests.
China’s growing ‘legal arsenal’
The same strategic logic is evident in China’s use of a broader legal arsenal.
Beijing has used its Anti-Monopoly Law to launch retaliatory probes — like an antitrust investigation into Nvidia following U.S. chip export controls. It has wielded the Anti-Foreign Sanctions Law to sanction defense firms such as Raytheon and Lockheed Martin over arms sales to Taiwan, even banning their executives from China.
China’s Unreliable Entities List (UEL), once seen as a theoretical threat, is now a working tool. In 2025, U.S. firms, including Calvin Klein owner PVH Corp. and Illumina, were listed for alleged discriminatory practices, followed by a wave of U.S.-based drone companies, including Skydio and Brinc.
The message is clear: compliance with U.S. law alone can now trigger punishment from Beijing. And that scope widened further this week. On Thursday, China added 14 more Western entities to the UEL, many tied to the defense, intelligence, and semiconductor ecosystem. Among them is TechInsights, a Canada-based leader in semiconductor intelligence, reverse engineering, and market analysis. Beijing’s Ministry of Commerce barred Chinese entities and individuals from engaging in any trade, cooperation, or data sharing with the listed firms.
This latest addition to the UEL list signals a new frontier in China’s lawfare strategy, targeting not only physical goods and technologies, but the information infrastructure and analytical capabilities that underpin supply chain transparency, compliance assessments, and competitive forecasting. It’s a sharp reminder that data is now a contested domain, and Beijing is willing to sever flows of insight as aggressively as it once did flows of minerals or equipment.
Other statutes, such as the Data Security Law and Personal Information Protection Law, have been used to restrict data flows and discipline firms operating across jurisdictions. Didi Chuxing’s delisting and LinkedIn’s China exit illustrate how regulatory pressure can be exerted swiftly and unilaterally to great effect.
But it is China’s Export Control Law, applied in recent years to gallium, germanium, and now rare earth magnets, that has become its central economic lever. By imposing strict licensing requirements on outbound shipments of these chokepoint materials, China is deliberately slowing the global flow of inputs essential to advanced manufacturing, clean energy, and defense supply chains. This law is no longer a back-office technicality of benign license application processes and approvals — it is an open and active instrument of statecraft.
This legal web is complex and sometimes vague and overlapping, giving Beijing the flexibility to apply pressure when and where it chooses. China now wields over 20 such laws and regulatory statutes — spanning cybersecurity, foreign investment screening, maritime safety, the corporate social credit system, and even anti-food waste and religious activity — creating a dense framework designed to compel, retaliate, and reward in service of national objectives.
Chinese statecraft and the power of ‘paper tigers’
There is also an even quieter, long-term battle that China is winning: global standards setting.
Through its China Standards 2035 initiative, and strategic placements in key international bodies like the International Telecommunication Union (ITU), the International Organization for Standardization (ISO), and the International Electrotechnical Commission (IEC), China aims to define the technical norms that will govern the future of 5G telecommunications, artificial intelligence (AI), smart cities, and other emerging and advanced technologies. Standards determine what scales, who profits, and which governance models get encoded into global systems.
Chinese firms like Huawei and Hikvision are aggressive participants. U.S. firms are often left to fight it out alone. American regulators, by and large, are absent. If this continues, U.S. firms and consumers will increasingly operate under rules shaped in Beijing, not Washington.
These may not be the sexy issues. And they likely won’t be on the agenda of the Trump-Xi meeting on the margins of APEC. But they are critical issues just the same. This is not necessarily about choosing geopolitical sides. It is about building a plan to navigate an adversarial and fragmented global legal environment. The real challenge lies in how global firms respond. Does a company know its full exposure? Does it have red lines — scenarios in which it is clear which legal regime to obey, and are U.S. corporations prepared to make that decision and explain it to shareholders and regulators?
These are not platitudes. They are the foundation of a strategic framework businesses need to build, refine, and rehearse now before the next time they have to choose between obeying U.S. law and remaining viable in China’s market. These are not easy questions to answer, nor are the tradeoffs comfortable to make. But ignoring them — or pining for the good old days — is not an option. As Chairman Mao might have said, they are not “paper tigers.” They are real, active tools used to pressure, compel, and shield Chinese firms from foreign competition — while also placing Beijing’s national interest at the center of the global regulatory ecosystem.
—By Dewardric McNeal, Managing Director and Senior Policy Analyst at Longview Global, and a CNBC Contributor
