Beijing, July 9 — Rare earth elements are indispensable to the electric vehicles, smartphones, and petroleum refining catalysts that drive modern industry. China’s dominance over this critical supply chain, from mining to the final refining steps that produce usable metals, is the result of decades of deliberate state policy. For the United States and its allies, the scale of that lead is measured in production figures and processing bottlenecks, even as Washington announces efforts to build alternative supply routes.
A Strategy Decades in the Making
The foundation for Beijing’s control was laid in the 1980s, when Chinese leader Deng Xiaoping declared, “The Middle East has oil; China has rare earths.” That statement framed the seventeen metallic elements as a national priority. By the 1990s, the country had used low labor costs and lax environmental oversight to become the world’s largest producer.
State-backed companies consolidated the industry, giving Beijing direct control over mining, separation, and refining. China’s strategic approach hardened in 2010, when it cut rare earth export quotas, sending prices sharply upward and triggering global alarm. The World Trade Organization ruled against those restrictions in 2014, finding that they violated international trade rules.
But the ruling did little to alter the underlying structure of the industry. State-owned enterprises — including China Northern Rare Earth Group and China Southern Rare Earth Group — remained the backbone of production.
Then, in 2016, the central government formally designated rare earths as a strategic resource. That designation provides policy cover for Beijing to intervene in the market whenever it chooses.
The Refining Choke Point
Production numbers illustrate the scale of the gap between China and other producers. In 2023, China produced 240,000 metric tons of rare earth oxides. The United States produced 43,000 metric tons in the same period.
The disparity is not limited to mining. According to data from the U.S. Geological Survey, China processes over 85 percent of the world’s rare earth concentrates.
That refining capacity is the real chokepoint. Even if new mines are opened outside China, the technical and industrial infrastructure required to turn raw ore into usable metals cannot be built quickly. China has periodically used export controls as a tool in trade disputes.
The most recent example came in 2023, when Beijing announced export restrictions on certain rare earth extraction technologies. The move was widely interpreted as a signal to Washington and other capitals that China is willing to weaponize its supply chain advantage.
Governments and manufacturers have announced efforts to diversify sources, yet decades of policy and investment have entrenched Beijing’s central role. The result is a market where supply security depends heavily on decisions made in the Chinese capital.
What to Watch Next
The gap between Beijing’s position and any rival is not closing quickly. China’s 240,000 metric tons of production in 2023 dwarfed America’s 43,000 metric tons. And even if new mines open, the refining bottleneck — over 85 percent of global capacity inside China, per the U.S. Geological Survey — remains the harder problem to solve.
Officials in Beijing have not signaled any intention to relax their hold. The strategic resource designation remains in place.
The state-owned enterprises continue to operate as the primary producers. And the 2023 export restrictions on extraction technology suggest China intends to keep its technical edge as well as its market share. For the United States and allied governments, the data makes the challenge clear: a position built over decades does not change quickly.
Rare earth elements power high-performance magnets used in electric vehicles, the phosphors in smartphone screens, and the catalysts in petroleum refining. Their scarcity in concentrated deposits makes processing difficult and environmentally sensitive.
Because China controls most refining capacity, any disruption can ripple across global supply chains. The question for global markets is whether diversification is possible at scale — and whether policy intent can keep pace with strategic reality.
