Beijing has expanded its export control campaign against Japan, blacklisting four government defence research institutes and tightening restrictions on dozens of Japanese entities.
China’s Ministry of Commerce added 20 entities to its formal export control list, including the National Institute for Defense Studies and research centres for ground, naval, and air systems.
Several units under Mitsubishi Electric (6503.T) and Mitsubishi Heavy Industries (7011.T) were also named, deepening the restrictions already imposed on the two industrial giants earlier this year.
Domestic exporters and overseas organisations are prohibited from transferring Chinese-origin dual-use items to the blacklisted entities, with any ongoing activities required to stop immediately.
A separate watch list added another 20 entities subject to enhanced licensing scrutiny, including Mitsui E&S Co., drone maker Terra Drone Corporation, nuclear fuel processors, and multiple units of OKI Electric Industry (6762.T).
The ministry stated that exports involving Japanese military users, military applications, or any end-use that could strengthen Japan’s defence capabilities would not be approved under the tighter regime.
The moves represent the latest escalation in a pressure campaign Beijing launched in January, when it banned dual-use exports to Japan including rare earth elements, permanent magnets, and other critical minerals required for defence technologies.
In February, China added subsidiaries of IHI Corp. and Kawasaki Heavy Industries to its export control list, alongside firms including Subaru Corp. and TDK Corp. (6762.T) on the watch list.
Beijing ramped up pressure on Tokyo after Prime Minister Sanae Takaichi suggested in November that a hypothetical Chinese attack on Taiwan could trigger a military response from Japan.
A ministry spokesperson said Japan had shown no remorse since the February listings and had instead “accelerated” its push toward what Beijing characterises as “new-style militarism,” including deploying offensive weapons and launching missiles overseas.
Beijing urged Japan to “turn back from the wrong path,” while insisting the measures would not affect normal bilateral economic and trade activities and that “law-abiding Japanese firms have no reasons to worry.”
Market reactions were mixed following the announcement, with Mitsubishi Electric (6503.T) and Howa Machinery declining around 1.4% and 4.6% respectively, while Mitsubishi Heavy Industries (7011.T) and Terra Drone Corp gained 4.9% and 1.7%.
Gracelin Baskaran, director of the critical minerals security program at the Center for Strategic and International Studies, has argued China is leveraging its dominance over critical mineral supply chains as a tool of deterrence against political behaviour it opposes.
Countries that have expressed support for Taiwan remain particularly exposed to this strategy, Baskaran noted, as Beijing continues to use supply chain control as a geopolitical instrument.
Japan has invested in domestic refining since 2010 to reduce rare earth dependence on China, but remains deeply entangled in supply chains relying on China and Vietnam across mining and permanent magnet manufacturing.
Koki Akimoto, an economist at Daiwa Institute of Research, estimated that a one-year cutoff of Chinese rare earth imports combined with sustained component supply constraints would reduce Japan’s real GDP by approximately 1.3%, or roughly 7 trillion yen ($43.3 billion).