Latest Export Control Measures by China’s Ministry of Commerce Target 10 U.S. Companies: Three Key Threads Affecting the Stock Market, Explained
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Latest Export Control Measures by China’s Ministry of Commerce Target 10 U.S. Companies: Three Key Threads Affecting the Stock Market, Explained
There remains opportunity in the downstream segment of the rare earth sector.
Navigating Web3 tides with focused insightsAuthor: David, TideFlow Research
On June 22, China’s Ministry of Commerce (MOFCOM) issued Announcement No. 23 of 2026, adding 10 U.S. entities—including Aviorx, Red Cat Holdings, and MP Materials—to its export control list, prohibiting the export of dual-use items to them. On the same day, an additional 46 U.S. companies were placed on a government procurement restriction list.
(Author’s note: Dual-use items refer to goods, technologies, and services with both civilian and military applications—or those that enhance military potential.)
This marks yet another round in the ongoing normalization of China’s rare-earth countermeasures since October 2025. The 10 U.S. firms named are concentrated primarily in three sectors: defense industry, drones, and rare earths.
The two most conspicuous names on the list are MP Materials and USA Rare Earth—both flagships of the U.S. rare-earth industry. China’s move against them triggered an immediate market reaction: A-share rare-earth stocks rallied, as investors interpreted the action as boosting domestic firms’ scarcity and value amid tightened foreign competition.
But here’s the question: Rare-earth prices have surged since last October, and upstream leaders are already trading near their yearly highs. Is this rally already late?
If so, where should capital flow next?
MOFCOM’s control list doesn’t affect only the rare-earth sector. Even if the rare-earth upstream is fully priced, further catalysts may still lie ahead—and overlooked, underfollowed segments may remain undervalued.
We’ve mapped out potentially impacted sectors and plotted them on price charts for your reference.
Key Takeaways
① A-share rare-earth upstream stocks are fully priced; this control measure is not a new catalyst.
Northern Rare Earth trades at RMB 52.9 per share—just ~20% below its one-year high of RMB 63.6. Guangsheng Nonferrous (RMB 115) and Shenghe Resources (RMB 33.6) are also near their one-year highs. These upstream resource stocks have risen steadily since October last year—the “beneficiary-of-rare-earth-countermeasures” narrative has been largely priced in. This latest control action serves more as confirmation of an existing trend than as a fresh upward trigger for the upstream segment.
② Rare-earth magnet manufacturers (mid- and downstream) and the drone supply chain remain relatively underpriced.
Within the same rare-earth value chain, mid- and downstream valuations lag significantly behind upstream peers:
Dadi Xiong (RMB 30.7) and Zhenghai Magnetic Material (RMB 13.7) remain near the lower end of their one-year trading ranges—far behind upstream gains. Meanwhile, the drone sector—linked to Red Cat and Teal Drones named on the list—is even less followed: China UAV is trading near its one-year low, with minimal market attention. Pricing reactions across different segments of the same event remain uneven.
③ Named U.S. stocks aren’t necessarily unilaterally bearish—market opening will provide clarity.
MP Materials and USA Rare Earth are core pillars of the U.S. domestic rare-earth supply chain; MP Materials, notably, counts the U.S. Department of Defense among its shareholders.
For such firms, Chinese export controls coexist with U.S. policy support—potentially offsetting or even neutralizing negative impacts. All three U.S. stocks were not trading at lows prior to the announcement. Since the notice was released on Monday—before U.S. markets opened—their true pricing response remains pending market validation.
Investors holding related positions should closely monitor opening-day price action.
Why does export control benefit China’s domestic rare-earth sector?
Many find this counterintuitive at first glance: If exports are banned, doesn’t that reduce business for Chinese firms—so why is it seen as positive?
The key lies in the *direction* of the restriction. This ban prohibits Chinese exporters from selling rare-earth-related items to those 10 U.S. firms—it cuts off *their* supply sources, not Chinese manufacturers’ raw material procurement.
China maintains the world’s most complete rare-earth supply chain—from mining and separation to magnet production—operating largely self-sufficiently without reliance on U.S. inputs. In other words, this announcement does not disrupt upstream Chinese suppliers’ operations: they continue producing and exporting as usual.
What’s truly constrained is the U.S. side.
Firms like MP Materials and USA Rare Earth aim to build independent supply chains—but still depend heavily on China for separation technology, equipment, and certain intermediate materials. Choking off their access effectively elevates Chinese producers’ scarcity and pricing power within the global rare-earth landscape—this is the real reason markets interpret the move as bullish for A-share rare-earth stocks.
Rare-earth upstream is fully priced—capital hasn’t yet flowed downstream
Let’s first map the value chain. Rare earths are mined, then refined and separated into oxides like praseodymium-neodymium—this is the upstream segment, dominated by Northern Rare Earth, Guangsheng Nonferrous, and Shenghe Resources.
Those oxides are further processed into neodymium-iron-boron (NdFeB) permanent magnets and integrated into motors—this constitutes the mid- and downstream segment, where Jinli Permanent Magnet, Zhenghai Magnetic Material, and Dadi Xiong operate.
Upstream sells raw materials; downstream sells finished magnets.
In this rally, capital has overwhelmingly favored upstream players. Northern Rare Earth (RMB 52.9), Guangsheng Nonferrous (RMB 115), and Shenghe Resources (RMB 33.6) all trade near their one-year highs. The logic is straightforward: each time rare earths’ strategic importance is underscored, upstream firms—with proven reserves and smelting capacity—benefit first. Their scarcity is tangible and visible.
We view this control action as supportive for upstream players—but pricing has already absorbed much of that upside. Entering now resembles taking over at the top, offering suboptimal risk-reward.
Downstream magnet makers, however, lag noticeably in pricing progress.
Among the three magnet leaders, Jinli Permanent Magnet (RMB 7.7 billion in revenue, net profit doubled YoY) rose over 90% in 2025—its valuation is no longer cheap. Zhenghai Magnetic Material and Dadi Xiong, however, remain anchored near the bottom of their one-year price ranges, failing to keep pace with upstream gains.
An often-overlooked context:
Since H2 2025, China has actually eased export restrictions on magnet manufacturers selling to the U.S.—e.g., Jinli Permanent Magnet’s U.S. sales reached RMB 500 million, up 40% YoY; Zhenghai and Dadi Xiong both secured U.S. export licenses. This latest addition of 10 firms to the control list reflects a targeted approach—“allowing commercial trade with general customers while cutting off specific defense-related entities”—not blanket export bans.
Thus, financial impact on magnet makers is limited.
The 10 sanctioned U.S. firms weren’t major customers to begin with. Jinli Permanent Magnet and Zhenghai Magnetic Material derive most revenue from EV and robotics motors—not U.S. defense exports.
This control action therefore offers more of a sentiment boost to magnet stocks than concrete order upside. That said, the rare-earth downstream segment most directly aligned with this event’s defense theme deserves closer scrutiny.
In that regard, Dadi Xiong fits best.
A smaller player—RMB 1.6 billion in 2025 revenue, RMB 57.4 million net profit—Dadi Xiong is China’s leading supplier of defense-grade magnetic materials. Public data shows it commands over 40% market share in this niche, supplying magnets for aircraft engines and missiles—directly matching the defense and drone firms named on the control list. This makes it the most thematically relevant link to the current event.
Yet thematic alignment doesn’t guarantee safety: Its gross margin stands at just 18%, and its debt ratio approaches 60%—weaker profitability and financial resilience than peers. Its small size also means sharper price swings—upside can be rapid, but downside equally steep.
Suitable for investors tolerating volatility and prioritizing “purest thematic exposure,” not as a portfolio anchor.
Zhenghai Magnetic Material represents another profile. Its 2025 net profit more than tripled—outpacing Dadi Xiong’s rebound—but its growth stems from humanoid robots and EV motors, with little connection to the defense list. Its current low valuation reflects underpricing of the robotics story—not defense linkage.
So across the rare-earth chain, upstream and downstream face divergent conditions.
Upstream holds tangible resources and scarcity—but pricing has run its course; entry now is late-stage接力. Downstream magnet makers remain cheap: Dadi Xiong aligns tightly with the defense list—but carries higher risk due to scale and balance-sheet constraints; Zhenghai is cheaper, yet thematically distant.
Drones: The list names this sector—but no direct upside
Red Cat Holdings and its subsidiary Teal Drones specialize in U.S. military reconnaissance and strike drones—the very type the U.S. aims to scale up to replace Chinese imports.
Markets naturally connect this to A-share military drone stocks—but the bullish logic differs from rare earths. This action won’t generate new orders for any Chinese drone maker. Instead, it spotlighted “U.S.-China rivalry in military drones,” prompting renewed focus on the strategic value and arms-export competitiveness of domestic military drones.
Tracing this thread to A-share equivalents, the most directly aligned firm is China UAV.
China UAV is China’s leader in large-scale military drones. Its flagship Wing Loong series of surveillance-and-strike UAVs account for over 90% of its core revenue—delivered mainly via arms exports, making it China’s premier military drone export platform.
In terms of business alignment, it competes head-to-head with the U.S. drone firms named on the list—the highest thematic relevance along this entire chain.
Trading at RMB 44, it sits near its one-year low—but this level reflects a pullback from prior highs, not pre-movement inertia.
2025 financials show explosive growth driven by arms-export orders: Q1–Q3 revenue surged over 300% YoY, pushing its share price briefly to RMB 48. Current weakness appears more like post-rally consolidation than early-stage opportunity.
Note: Arms-export revenue hinges heavily on infrequent, large-value contracts. In 2024, revenue plunged 70% YoY, pushing the firm into loss; 2025 saw a sharp rebound. This “boom-bust” pattern renders simple price-based valuation unreliable—the real variable is timing and execution of future arms-export contracts. Valuation-wise, its P/E ratio consistently trades in the double digits—no deep-value signal.
Export restrictions don’t automatically translate to U.S. stock downside
This is the top concern for holders of these U.S. equities—and the answer may defy intuition: Not necessarily.
MP Materials and USA Rare Earth—the heaviest weights on the list—are central to U.S. efforts to decouple from Chinese rare earths. MP Materials is the sole vertically integrated U.S. rare-earth producer at scale—and received DoD investment in 2025, cementing its status as a national strategic priority. This dual identity creates countervailing forces:
While China restricts its access to Chinese dual-use items, U.S. supply-chain security concerns could spur greater government orders and subsidies.
Pre-announcement pricing supports this view. MP Materials, USA Rare Earth, and Red Cat Holdings were not trading at lows before the news broke—markets hadn’t preemptively sold off on “sanction risk,” nor priced them simply as victims.
Still, final direction awaits market opening. The announcement dropped on Monday—U.S. markets hadn’t opened yet. Whether the market reads this as a net negative—or sees U.S. policy support offsetting the blow—will become clear only once trading resumes.
Note: This article synthesizes publicly available information and presents analytical views. All mentioned stocks, ratings, and target prices are sourced from public disclosures and reflect time-sensitive data. This does not constitute investment advice. Markets carry risks; decisions are the reader’s sole responsibility.
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