In June 2023, the Chinese Ministry of Commerce announced export controls on gallium and germanium — two obscure metals most consumers had never heard of. Within days, semiconductor stocks fell across Asia and Europe, and defense contractors in Washington called emergency procurement meetings. The episode previewed something the global business community can no longer afford to ignore: China’s command over the rare earth and critical mineral supply chains that power virtually every advanced technology on earth.
Rare earths are not geologically rare. The 17 elements in the group — including neodymium, dysprosium, terbium, lanthanum, and cerium — appear throughout the earth’s crust. What is rare is their commercially viable concentration, and rarer still is the industrial ecosystem required to mine, separate, process, and alloy them. That ecosystem, built over four decades of deliberate state policy, is overwhelmingly Chinese.
How China Built Its Dominant Position
China’s rare earth dominance was engineered, not inherited. In the 1980s and 1990s, Beijing made a strategic decision to develop the sector as a national priority. Former paramount leader Deng Xiaoping reportedly quipped: “The Middle East has oil; China has rare earths.” The government invested in processing technology, subsidized domestic producers, and kept export prices low enough to drive higher-cost Western competitors — including American and Australian operations — out of business.
According to the US Geological Survey (USGS), China accounts for approximately 60% of global rare earth mining output and more than 85% of global rare earth processing capacity. That processing share is the more important figure: many nations have ore bodies, but China controls the separation, refining, and alloying steps that convert raw ore into the magnets, phosphors, and catalysts manufacturers actually need.
China’s top producing provinces are Inner Mongolia (home to Bayan Obo, the world’s largest rare earth deposit), Sichuan, and Jiangxi. The Bayan Obo deposit, operated by Baogang Rare Earth High-Tech Co., contains an estimated 35 million metric tons of rare earth oxide equivalent. Jiangxi is critical for heavy rare earths — dysprosium and terbium — essential for the high-performance permanent magnets used in EV motors, wind turbines, and precision-guided weapons.
Downstream: Where Real Leverage Lives
Mining is only the first step. China’s strategic power lies in magnet production. China Northern Rare Earth Group, controlled by state-owned Baogang Group, is the world’s largest rare earth producer by revenue — exceeding 25 billion RMB ($3.5 billion) annually. Along with China Minmetals Rare Earth, China Southern Rare Earth Group, and Shenghe Resources, it forms the “Big Six” state-consolidated producers that Beijing created in 2016 to bring pricing discipline and traceability to the sector.
Downstream, Chinese firms such as Zhong Ke San Huan and Ningbo Yunsheng dominate global NdFeB (neodymium-iron-boron) permanent magnet production. These magnets are foundational to the EV revolution — a single battery-electric vehicle contains 1 to 2 kg of rare earth magnets in its drive motor. This supply chain is deeply intertwined with CATL’s battery dominance and China’s broader clean energy industrial strategy.
Export Controls as Geopolitical Leverage
China has progressively tightened its regulatory grip. The 2010 export quota reductions that triggered WTO complaints from the US, EU, and Japan were an early signal. After a 2014 WTO ruling forced removal of formal quotas, Beijing replaced them with more sophisticated tools: production caps, strategic environmental inspections, consolidated state ownership, and formal export licensing requirements for specific materials.
The 2023 controls on gallium and germanium were followed by restrictions on antimony in 2024 and expanded rare earth processing technology controls in 2025. China’s Ministry of Commerce (MOFCOM) administers these through its export licensing bureau, and officials have been explicit: if Western nations restrict technology exports to Chinese companies, Beijing retains the ability to respond with mineral supply constraints.
For global businesses, this creates a structural vulnerability that cannot be resolved quickly. Building a non-Chinese rare earth supply chain from scratch would require an estimated $10-20 billion in investment and a decade of lead time, per the US Department of Energy’s Critical Materials Assessment.
What Western Alternatives Look Like Today
Progress on diversification is real but modest. In the US, MP Materials’ Mountain Pass facility in California is the only operating rare earth mine in North America, producing approximately 15,000 metric tons of rare earth oxide per year by 2024. Its partnership with General Motors to produce NdFeB magnets in Fort Worth, Texas is a significant milestone. Australia’s Lynas Rare Earths, operating in Kuantan, Malaysia and scaling a US-funded processing facility in Seadrift, Texas, is the most advanced non-Chinese processor globally.
The EU’s Critical Raw Materials Act sets a 10% domestic mining target by 2030. Sweden’s LKAB announced a significant rare earth discovery in Kiruna in 2023. But production at commercial scale for most European projects remains years away. The honest assessment: China will remain the dominant global rare earth processor for at least 10-15 years. Policymakers and businesses are hedging at the margins — they are not replacing Chinese supply.
What Business Leaders Must Do Now
For manufacturers of EVs, wind turbines, consumer electronics, or industrial automation equipment — all of which depend on rare earth magnets or phosphors — three imperatives stand out:
Audit your Tier 2 and Tier 3 supply chain. Many Western component suppliers source from Chinese processors without clearly disclosing it. Identifying exactly which rare earth compounds you consume, from which Chinese producers, is now a standard best practice in defense and automotive procurement.
Invest in demand-side efficiency. Toyota has developed reduced-dysprosium motor magnets; ABB and Siemens are advancing synchronous reluctance motors for applications where rare-earth-free designs are viable. Reducing reliance through engineering is slower than procurement diversification but far more durable.
Maintain Chinese supplier relationships even while diversifying. The economics of Chinese rare earth supply remain compelling. Processing clusters in Ganzhou, Baotou, and Shenyang represent decades of accumulated industrial expertise that no Western supply chain can replicate on a short timeline. Companies that understand this — as seen in how China’s BRI strategy locks in infrastructure customers over decades, or how CRRC dominates global rail through scale and value — are better positioned than those pursuing purely binary choices.
Beijing’s Next Move: Value Capture Over Raw Material Export
China’s industrial policy signals a clear direction: export finished magnets and components, not raw oxides. The policy bank financing that underpins China’s global infrastructure expansion is being deployed in the rare earth sector too — backing Chinese processing investments in Africa, Myanmar, and Southeast Asia that bring offshore ore bodies into Chinese refining networks. If successful, this strategy would concentrate Chinese leverage further downstream, making it harder for Western nations to build independent magnet capacity even if they develop alternative ore sources.
Rare earth supply chains are ultimately a case study in why US-China economic interdependence is both a source of tension and a reason for constructive engagement. Decoupling is theoretically possible but practically expensive and slow. The companies and governments that navigate this best will pursue diversification with realistic timelines, maintain operational relationships with Chinese suppliers, invest in demand-side efficiency, and use diplomatic channels to establish clearer rules for critical mineral trade. The minerals that power the global clean energy transition are, for the foreseeable future, overwhelmingly Chinese in origin — and that reality demands strategic engagement, not avoidance.