China blockades artificial diamonds, and the tools to make them

Bullets:

China has a monopoly on the production of artificial diamonds, producing 95% of the world's total.

The lab-grown diamond industry is booming, and transforming precision manufacturing, semiconductors and computing, aeronautics and aerospace, and energy industries.

China's Ministry of Commerce has effectively "blockaded" the sale of artificial diamonds, or the equipment and tools to make them, for industrial and especially dual-use purposes.

Chinese diamond suppliers are still legally allowed to supply global jewelry markets with lab-grown stones. But high-end manufacturing and especially defense contractors are faced with an existential problem: buy finished products from China, or go without, or build the entire industry from scratch.

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Report:

Good morning.

Almost nobody was paying attention to the rare earth metals problem two years ago. Now everyone is aware. China and their friends across the Global Majority countries have near-monopolies on them, and have banned the exports of them for any dual-use application, that’s one that’s used in civilian or military purposes.

Today that problem informs everything -- from President Trump’s idea to annex Greenland, or the absurd fantasy that Ukraine has huge deposits of commercially viable rare earths, to the trade agreements signed between the United States and other countries here in Asia, which look like they’re already doomed just a few weeks after the fact. All to say that two years ago very few people foresaw any of this, and today the rare earths problem is all-consuming.

That in mind, nobody is paying attention to this one now, but soon enough, everyone will be. Some background first. China’s Commerce Ministry issued a series of rules over the past several years, which tightened the use of rare earth metals and magnets produced here, in China. But these recent regulations went much further, and seemed to have been inspired by the same US law that purportedly gives American authorities the right to restrict the sale of, for example, lithography equipment from ASML to China.

The US law is called the Foreign Direct Product Rule. This is from Reuters, October 2022. If a product was made using American technology, the US government can stop it from being sold, even if the products were made in a foreign country. It was first applied against suppliers of Huawei in 2020, and here in 2022 they were shutting down everyone else selling chipmaking gear to China. “China will have to develop the manufacturing technologies themselves”, so it could take China until 2027 or 2032, then, to catch up to where Western chips were in 2022. They actually believed that, and gave Reuters permission to quote them saying so, that if the Chinese get busy and get lucky, they may be only 5-10 years behind, instead of where we are today—in 2025, and the CEO of Nvidia is telling our top people now that the Chinese have already caught up and his company will be out of business if he can’t sell his chips here.

Moving on. Our point is that the precedent was established there, with the Foreign Direct Product Rule, that Country A may legally restrict product sales by other foreign countries, if a product contains technology or parts developed in or by Country A.

China’s Ministry of Commerce did the same thing here, for rare earths, paragraph 2, regardless of whether they originate in China. And export controls on rare earth technologies, covering mining, smelting, manufacturing, magnets, and recycling. These are just more nails in the coffin as far as Pentagon contractors are concerned:

But this supplemental regulation here is going to cause big problems in a big hurry. The Ministry of Commerce imposes new export controls on superhard materials, including artificial diamonds, wire saws, and grinding wheels made of artificial diamonds, and any equipment and technologies related to the manufacture of artificial diamonds:

This is the official announcement for that new requirement, dated 9 October. Chinese exporters will be held responsible, again, to ensure that Chinese artificial diamonds, or superhard materials, are not intended for dual-purpose use.

Reuters explains in their piece, from the same day, that Beijing’s control over high-tech manufacturing chains just got strengthened, again. Diamonds are critical in manufacturing, for semiconductors, quantum devices, and in advanced electronics. They are heavily used in military applications, building bombs and radar equipment.

The United States is the third largest buyer of diamond powders, and the third largest buyer of the grinding wheels.

China’s artificial diamond industry is putting DeBeers out of business. The US is the world’s largest market, and over half of couples buy engagement rings with artificial stones. Insiders expect the industry worldwide to triple in size in the next seven years. But that’s not because three times more people are going to get married; it’s because of what’s happening in diamond demand from industrial users. Semiconductors, aerospace, quantum computing. Rockets. Satellites, electric cars. The jewelry industry is tiny compared to the ones that will need artificial diamonds to build next-generation products.

Just one example, Chinese scientists have recently discovered how to make diamonds that can conduct electricity, by combining them with graphene. That new composite shows toughness, can conduct heat and electricity, and is therefore ideal for space engines. China makes 95% of the world’s artificial diamonds, and Henan province is the source of most of those. A new $140 billion hub is planned there, a superhard materials cluster, which will open this year.

That 95% number means China builds more artificial diamonds than the rest of the world, combined, times 19. Previously China shut off exports of the large capital equipment necessary to make lab-grown diamonds, and these new rules take the export restrictions down to the finishing wheels, saws, and the diamonds themselves. It’s “a blockade.” Other countries can learn how to do it themselves, but they will need to start completely over. And for these most advanced manufacturing industries who are just now realizing the benefits of using artificial diamonds, they find themselves in the same position Huawei was in a few years ago, for semiconductors. They need to figure out how to produce artificial diamonds at industrial scale, and fast. Or, they’ll just buy all the finished products from China, except for the guys building stuff for the Pentagon, who won’t get them at all.

Be good.

Resources and links:

Chinese scientists produce diamond with highest electrical conductivity
https://www.scmp.com/news/china/science/article/3254485/chinese-scientists-produce-diamond-highest-electrical-conductivity

Greenland’s mineral and oil riches and their draw on President Trump
https://news.oilandgaswatch.org/post/trumps-desire-for-greenland-vs-the-islands-oil-minerals-and-independence

Expert on Arctic politics explains Greenland’s strategic appeal
https://dornsife.usc.edu/news/stories/why-trump-finds-greenland-strategically-appealing/

Explainer: What is 'FDPR' and why is the U.S. using it to cripple China's tech sector?
https://www.reuters.com/technology/what-is-fdpr-why-is-us-using-it-cripple-chinas-tech-sector-2022-10-07/

商务部 海关总署公告2025年第55号 公布对超硬材料相关物项实施出口管制的决定
https://www.mofcom.gov.cn/zwgk/zcfb/art/2025/art_949f47563b834dad95b0010f375a892c.html

China announces artificial diamond export curbs set to take effect day before US tariff truce deadline
https://www.reuters.com/sustainability/boards-policy-regulation/china-announces-artificial-diamond-export-curbs-set-take-effect-day-before-us-2025-10-09/

China to Require Licenses for Artificial Diamond Exports Starting November 8
https://blog.coleintl.com/tradenews/china-to-require-licenses-for-artificial-diamond-exports-starting-november-8

As China churns out artificial gems, is a diamond still forever?
https://www.scmp.com/economy/china-economy/article/3330244/china-churns-out-artificial-gems-diamond-still-forever

China Rolls Out Export Control Measures Targeting Diamonds, Rare Earth Materials, and Lithium Batteries
https://www.cirs-group.com/en/chemicals/china-rolls-out-export-control-measures-targeting-diamond-rare-earths-and-lithium-batteries

China imposes extraterritorial jurisdiction and a 50% Rule for export controls on rare earth elements and other items
https://www.whitecase.com/insight-alert/china-imposes-extraterritorial-jurisdiction-and-50-rule-export-controls-rare-earth

Explainer: What is 'FDPR' and why is the U.S. using it to cripple China's tech sector?
https://www.reuters.com/technology/what-is-fdpr-why-is-us-using-it-cripple-chinas-tech-sector-2022-10-07/