June 2025, the global rare earth market once again stirred up waves. China played the card of rare earth control, originally a countermeasure against the US tariff war, but the EU, who was watching from the sidelines, became increasingly concerned. Automobile manufacturers suspended production due to interruption of rare earth supply, and European parts factories also shut down production lines for the same reason. At the same time, the issue of rare earths became a focus in the US-China trade negotiations. It can be said that in the past, we often said that China had an advantage in rare earths, but it has never been as dominant in negotiation power as today. Foreign media, The Diplomat, claimed: Why have the international community's efforts to break this monopoly been so ineffective over the decades?
China controls about 70% of global rare earth mining and 90% of refining capacity, which gives Beijing an advantage in geopolitical games. In 2010, China suspended rare earth exports to Japan due to maritime disputes, causing panic in Japan's related industries, and the price of rare earths soared tenfold. In April 2025, China imposed export restrictions on seven rare earth elements and related magnets as a response to the US tariff war, further highlighting the power of rare earths as a geopolitical weapon.
The White House recently stated that if China eased its rare earth exports, the US might make concessions on semiconductor export controls. However, China has not yet lifted the export license for high-performance rare earth magnets, and the export license period for US manufacturers is limited to six months. These series of actions indicate that China is using rare earth resources to exert precise pressure, forcing Western countries to compromise in trade negotiations.
China's rare earth hegemony did not happen overnight; it is the result of decades of careful strategic planning. Here are the three pillars behind its success:
First, the technical barriers in rare earth mining and processing are extremely high. Although rare earth elements are not scarce in the Earth's crust, their separation and purification processes are complex and costly. Since the 1980s, after introducing advanced processing technology from France, China has continuously invested in R&D, building a world-leading rare earth processing system. The "Twelfth Five-Year Plan" in 2011 further clarified the priority development direction of downstream rare earth industries (such as magnets, phosphors, and hydrogen storage materials). From 1950 to 2019, China applied for nearly 26,000 rare earth-related patents, far exceeding Japan (13,920) and the United States (9,810), establishing an absolute technological advantage.
Second, rare earth processing is a highly polluting industry. Western countries gradually exited this field due to strict environmental regulations, while China's relatively lenient environmental policies in the early years allowed it to develop the rare earth industry on a large scale. In the mid-1970s, American mines closed due to environmental pressures, paving the way for China's rise as the leading producer. Non-Chinese companies also outsourced high-pollution rare earth refining to China due to cost or regulatory constraints. This enabled China to establish its global dominance in rare earth production in the 1990s.
Third, through strong national control, China achieved centralized management of the rare earth industry. After 2011, the Chinese government integrated more than 100 rare earth companies into six state-owned enterprises. In 2022, it further merged them into China Rare Earth Group, controlling 30-40% of the global rare earth supply. These state-owned enterprises, directly supervised by the State Council, effectively control global rare earth prices through production quotas and export restrictions. For example, China provided generous credit support to rare earth companies, investing ahead of time to cause oversupply and thus lower global prices, hindering market entry for other countries. The 20% drop in NdPr prices from January to July 2024 is an example of this strategy.
Despite significant investments by the US, Japan, and Australia to break China's rare earth monopoly, the results have been limited. The reason is that China has built an insurmountable competitive barrier through low-price barriers and technological advantages. For example, in 2011, Hitachi Metals established a rare earth magnet factory in North Carolina, USA, but due to much higher production costs compared to China, it eventually closed in 2020. Australian companies, although achieving heavy rare earth production in May 2025, still struggle to compete with China due to oversupply and low prices, making profitability difficult.
The situation in the United States is particularly severe. Currently, there is only one operating rare earth mine in the US. Due to strict environmental regulations, opening a new mine may take as long as 29 years. Even though the US Department of Defense proposed a comprehensive supply chain goal from "mine to magnet," the lengthy approval process and China's possible strategy of increasing exports to lower prices still make these efforts economically unsustainable.
Through technological leadership, relaxed regulations, and state-led industrial integration, China has built an unbreakable rare earth advantage. This advantage is not only reflected in the economic aspect but also serves as a weapon in geopolitical games. Future geopolitical competition will increasingly depend on the博弈 of national industrial policies. The success of China's rare earth strategy shows that a country can shape global dependence in key areas through resource concentration and long-term planning, thereby gaining the initiative on the international stage. For Europe and the US, the road to breaking China's rare earth advantage remains long.
Original article: https://www.toutiao.com/article/7522794063200879140/
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