U.S. and Chinese flags are seen in this illustration taken April 10, 2025. REUTERS/Dado Ruvic/Illustration

By Joe Cash

BEIJING (Reuters) -China on Thursday accused the U.S. of stoking panic over its rare earth controls and said Treasury Secretary Scott Bessent had made "grossly distorted" remarks about a top Chinese trade negotiator, rejecting a White House call to roll back the curbs.

The official newspaper of the governing Communist Party also issued a seven-point rebuttal after top U.S. negotiators suggested Beijing could avert President Donald Trump's threat to impose 100% tariffs on Chinese goods by scrapping the measures set to take effect on November 8.

While investors are relieved the world's top two economies have avoided the retaliatory tariff hikes of March and April, each exchange risks derailing a meeting between Trump and Chinese leader Xi Jinping in South Korea later this month -- a fixed point that has so far helped anchor market stability.

"The U.S.' interpretation seriously distorts and exaggerates China's (rare earths export control) measures, deliberately stirring up unnecessary misunderstanding and panic, He Yongqian, a commerce ministry spokesperson, told a news conference.

"Provided the export licence applications are compliant and intended for civilian use, they will be approved," she added.

Beijing's expanded rare earths export controls left trade negotiators and analysts the world over wondering whether China intends to require manufacturers of any product anywhere in the world containing even trace amounts of Chinese rare earths to apply for a licence to ship it to its final destination.

He Yongqian told reporters that was not the case.

U.S. Trade Representative Jamieson Greer on Wednesday called China's new measures "a global supply-chain power grab," and said that he expected Beijing not to implement them, while Bessent suggested another extension to the current 90-day tariff truce - which is set to expire around November 9 - could be possible.

U.S.-China trade relations had appeared relatively stable following a September 19 call between Trump and Xi, which came after a Madrid summit widely viewed as a success thanks to its breakthrough TikTok deal.

TRADING ACCUSATIONS

Beijing attributes the unexpected ramping up of rhetoric to the U.S. Commerce Department's surprise expansion of its "Entity List" in late September to include companies in China and elsewhere that use subsidiaries to bypass export restrictions on chipmaking equipment and other high-tech goods.

Washington pins the start to China's critical minerals move, which Trump described as "shocking."

The Chinese side maintains it not only notified Washington before announcing the new licensing regime, but that the controls are also consistent with measures long in place in other major economies.

"The United States has long overstated national security concerns and abused controls, adopting discriminatory practices against China," read one of seven infographics published by the official People's Daily. The poster added that Washington maintains a control list over 3,000 items long, compared to the 900 on Beijing's catalogue.

"Implementing such export controls is consistent with international practice," the first poster said, reiterating Beijing's stance on the measures since their announcement.

Washington has had similar rules since the 1950s, and has been using them in recent years to stop foreign semiconductor companies selling chips to China if they are made using U.S. technology.

TRADE POLICY TURNS PERSONAL

Shifting from trade policy to the personal, Bessent on Wednesday described China's chief trade negotiator Li Chenggang as "slightly unhinged" and "disrespectful", alleging that he had threatened to "unleash chaos on the global system" if the U.S. went ahead with the port fees increases, and that he had invited himself to Washington for talks in August.

"The relevant remarks of the U.S. side seriously distort the facts," He Yongqian said when asked about Bessent's remarks, adding that China was "taking the initiative to negotiate and communicate with the United States."

"Perhaps the vice minister who showed up here with very incendiary language on August 28 has gone rogue," Bessent said.

The Treasury chief added that the level of trust between Trump and Xi had prevented tensions from escalating and kept the two men on track to meet in Korea, preserving a pathway for the superpowers to come to an understanding despite the apparent disagreement between their lead negotiators.

"It is hoped the U.S. will cherish the achievements of the earlier economic and trade talks and immediately correct its wrongdoings," He Yongqian said.

(Reporting by Joe Cash; Editing by Stephen Coates and Philippa Fletcher)