Chinese analysts expect the US to soften Sept. 29 export rules

Trade observers in China believe the United States might soften recent restrictions on technology exports to Chinese companies when the two nations’ leaders sit down for talks later this week in South Korea.

Senior trade officials from both countries announced a preliminary agreement on Sunday that still needs final approval from presidents Xi Jinping and Donald Trump. The framework addresses several contentious issues between the two economic powers, including import duties, shipping costs, the fentanyl crisis, and limits on technology sales.

US Treasury Secretary Scott Bessent told reporters he expects Beijing will hold off on implementing its newest constraints on rare-earth minerals “for a year.” China’s official communications have not spelled out what concessions it might receive in exchange for this move.

Some researchers tracking US-China relations believe Washington could soften a rule put in place on Sept. 29 that dramatically widened limits on advanced computer chip sales to offshoots of Chinese corporations already facing American sanctions.

Speaking in Malaysia on Sunday, Bessent stated there had been “no changes” to American export restrictions. Trump, while traveling to Japan by plane, refused to discuss specifics of the arrangement, noting that terms could still shift.

Beijing’s expected counter-offer

Hutong Research, a firm based in Beijing that tracks policy developments, wrote in their analysis that China seems to have negotiated a trade-off during discussions in Kuala Lumpur. As mentioned in a Bloomberg’s report, they believe Beijing wants the United States to suspend what experts call the “affiliates rule” in return for postponing its rare-earth export limitations. The research group did not say where they obtained this information.

The consultancy predicted the Trump government would “first pause enforcement before formally deregulating it.” They added that Beijing plans to use its “delayed enforcement as both leverage and insurance against US backtracking.”

Wu Xinbo, who leads the Center for American Studies at Fudan University in Shanghai, said he thinks China will secure “more than tariff relief” from the current negotiations. “Export controls, technology controls, as well as the BIS 50% rule released on Sept. 29,” he noted when describing potential areas where progress might occur. BIS refers to the US Bureau of Industry and Security.

If Xi walks away from Thursday’s meeting with Trump having gained little beyond tariff reductions, these predictions could prove overly optimistic. Rare earths represent China’s strongest bargaining tool in trade disputes, which means any relaxation would likely demand an equally substantial give from the American side.

Impact on major tech players

The much-anticipated BIS regulation states that companies at least 50 percent controlled by blacklisted entities face identical restrictions as their parent organizations under sanctions. This makes it much tougher for firms like Huawei Technologies Co., China’s leading artificial intelligence chip maker, to obtain restricted American products through subsidiary companies.

The rule arrived just days after American and Chinese officials held trade discussions in Madrid. Beijing saw this action as breaking the agreed-upon system for managing relations between the countries. Soon afterward, China announced extensive regulations claiming worldwide authority over shipments that contain even tiny amounts of its rare-earth elements.

These minerals are essential for American manufacturing operations, supporting production of items ranging from computer chips to automobiles. Earlier this year, when China halted supplies of certain magnets due to trade friction, multiple US production facilities had to stop working.

A similar deal happened before. In June, once China agreed to resume rare-earth shipments to America, the Trump administration backed away from threats to limit sales of chip design software, aircraft engine components, and nuclear materials., showing a change in approach.