Beijing has long recognised the strategic value of rare-earth elements (REEs). Deng Xiaoping famously stated: “The Middle East has oil, China has rare earths”. Once overlooked on the fringes of the periodic table, these seventeen metallic elements now sit at the heart of global energy policy, advanced manufacturing, and defence strategy. REEs’ turning point came in the 1980s when Japanese engineers alloyed neodymium with iron and boron to create the world’s strongest permanent magnet, neodymium iron boron (NdFeB).
Today, that magnet powers electric vehicle motors, missile guidance systems and MRI scanners. Three decades of low-profile but ambitious industrial campaigns followed, directing subsidised electricity, tax incentives, research grants and low-interest loans towards every stage of the REEs’ supply chain, from open-pit mines in Baiyun Ebo to alloy furnaces in Guangdong.
China’s Strategic Dominance
Despite their name, rare earths are not geologically rare. The bottleneck lies in their processing. Extracting and refining REEs involves kilometres of solvent-extraction columns, thousands of mixers, weeks of immersion in acidic liquor, and the management of radioactive tailings. It is a complex, costly, and environmentally taxing process.
According to the Center for Strategic and International Studies, China contains 60% of global mine output and nearly 90% of downstream processing capacity. Western producers face cost structures that are 47% higher, making it nearly impossible for the refining process to be viable without subsidies.
Beijing has not hesitated to weaponise this advantage. On December 3rd, 2024, it banned exports of gallium, germanium, and antimony, all critical to the production of high-frequency chips and sensors, to the United States. On April 4th, 2025, it introduced a licensing regime for heavy rare-earth oxides and finished NdFeB magnets. Exporters are required to submit full sales contracts to local authorities before shipments are able to leave port.
Global Fragility Exposed
The ripple effects have been swift and severe. Bajaj Auto, India’s two-wheeler giant, recently informed investors that it could only fulfil 50 to 60% of its planned e-scooter shipments due to magnet shortages. Chip manufacturers also reported higher costs after the 2024 export curbs drove gallium prices to record highs.
The global push towards renewable energies is also increasing demand for REEs; Solar panels, wind turbines, and energy storage all require these metals in production. Analysts at the Brookings Institution warn that a full-scale clean-energy transition could triple global demand for critical minerals by 2040. Without rapid scaling of recycling and substitution technologies, chronic shortages may become the norm.
Government sponsors
Governments — led by Washington — use their wallets to secure supply chains. According to an industry audit, public treasuries supplied 84 percent of all rare-earth project financing in 2024, with the United States moving fastest. One of U.S. President Donald Trump’s first security guarantee proposals to Kyiv included a clause which gave the United States preferential access to Ukraine’s untapped rare-earth and titanium deposits.
Domestically, federal money is flowing at every node: the Pentagon has committed more than $439 million in Defence Production Act awards since 2020 to build “mine-to-magnet” capacity, and in August 2025, it extended a further $150 million loan to MP Materials for a heavy rare earth (HREE) line at Mountain Pass.
Across the Atlantic, the European Union has finally moved on from strategy papers to statute: its 2024 Critical Raw Materials Act requires that by 2030 the EU mine, refine, and recycle a fixed share of its own critical minerals, with “priority” projects promised permits in under two years.
Canberra, meanwhile, is leveraging its current infrastructure and funding by deploying liquid finance. Roughly A$15 billion from the National Reconstruction Fund has been funnelled into more than 80 rare-earth ventures. The goal of this massive investment? Lifting Australia’s REEs supply from just under 5% to about one-fifth of global supply by 2030.
New Delhi is hastening its pace as well. Its National Critical Minerals Mission is set to open more than a thousand exploration blocks, bankroll four processing parks, and clear a path for state firms to acquire two dozen deposits abroad. This stratagem has been put on an accelerated licence timetable designed to cut red tape.
The coordinated response
Two frameworks now anchor international cooperation. Capitol Hill’s Quad Critical Minerals Partnership Act would hard-wire Australia, India, Japan, and the United States into a single “mine-to-magnet” strategy, aligning export credits, setting common environmental, social and governance practices, and security screens for new projects.
At a broader level, the Minerals Security Partnership, a US-EU-Indo-Pacific coalition that now includes 14 other governments, has launched a Finance Network that pools development banks and export-credit agencies so eligible mines can access syndicated public capital to attract private investors. This is an important step in attracting private capital, which is currently unsustainable without a financial pipeline developed by the state. Together, the two schemes aim to knit funding streams, cut duplication, and build a supply web resilient enough to weather the next export shock.
The Next Arms Race
As other governments recognise Beijing’s leverage, they are increasing spending and passing laws to push back towards an equal balance of power. Companies, like nations, are also pushing for REEs-centred growth. Like Sam Altman’s AI centres and Nvidia’s chip foundries, the industries driving the future depend on a stable supply of rare earths.
Beijing’s export restrictions have already reshaped global negotiations. Under the threat of U.S. protectionism, shocks to the REEs’ supply chain prompted talks over President Trump’s proposed tariffs, making rare-earth policy a cornerstone of global diplomacy.
