Rare earth industry in China
Based on Wikipedia: Rare earth industry in China
The Elements That Control Everything
In 2010, China quietly cut off Japan's supply of rare earth elements. No announcement. No warning. One day the ships were loading, the next they weren't. The dispute? A fishing boat captain arrested near some contested islands. The weapon? Seventeen obscure elements most people have never heard of.
Japan's electronics industry nearly ground to a halt.
This is the story of how China came to control the materials that make modern life possible—and what happens when one country holds the keys to everything from your smartphone to your nation's missile defense systems.
What Are Rare Earths, Anyway?
Despite their name, rare earth elements aren't particularly rare. They're about as common as copper or lead in the Earth's crust. What makes them "rare" is how difficult they are to extract. Unlike gold, which conveniently clumps together in veins, rare earths scatter themselves thinly across vast mineral deposits, mixed with radioactive thorium and uranium. Separating them is expensive, toxic, and technically demanding.
There are seventeen of these elements, with names that sound like they were invented by a science fiction writer: neodymium, dysprosium, terbium, europium. Most people couldn't name a single one. Yet these elements are everywhere in your life.
The magnets in your earbuds? Neodymium. The red phosphors in your television screen? Europium. The catalytic converter cleaning your car's exhaust? Cerium. Wind turbines, electric vehicle motors, guided missiles, night vision goggles, MRI machines—all of them depend on rare earth elements. Without them, the clean energy transition stops cold.
The Father of China's Rare Earth Industry
In the 1950s, a young Chinese chemist named Xu Guangxian returned home after earning his doctorate at Columbia University. He could have stayed in America. Many did. But Xu went back to Peking University, where he would spend decades developing the extraction techniques that would eventually make China the world's rare earth superpower.
His timing was ahead of his moment. China discovered rare earth deposits in 1927 and began small-scale production in 1958, but the government didn't care. These elements were curiosities, not strategic assets. That would change.
By 1980, Xu had joined the Chinese Academy of Sciences and established the State Key Laboratory of Rare Earth Materials Chemistry and Applications. He trained generations of researchers. He refined separation processes. And crucially, in the 2000s, he became one of the loudest voices urging the Chinese government to restrict exports. Xu understood something most policymakers hadn't grasped yet: in the coming technology race, whoever controlled rare earths would hold enormous leverage.
Building the Machine
China's dominance didn't happen by accident. It was engineered through deliberate policy over decades.
In 1985, the government established the China Rare Earth Information Center to coordinate research. That same decade, it introduced export rebates—essentially paying companies up to seventeen percent extra for every rare earth product they shipped abroad. The goal was simple: flood the global market, attract investment, build expertise, and drive competitors out of business.
It worked spectacularly.
Program 863, launched in 1986, poured government funding into high-technology research, including rare earth processing. Program 973 followed, focusing on basic science to advance the industry. The government encouraged Chinese companies to partner with foreign firms, absorbing knowledge from Japan, the United States, and Canada.
Meanwhile, American companies like Molycorp faced a different reality. Environmental regulations from the Nixon era made extraction expensive. Labor costs were high. The Mountain Pass mine in California, once the world's largest rare earth operation, couldn't compete with Chinese prices. It closed in 2002.
By 2009, China was producing 129,000 tons of rare earths annually. The rest of the world combined? About 3,000 tons.
The Trap Snaps Shut
In 1990, China declared rare earths a "protected and strategic good." The implications rippled outward slowly, then all at once.
Foreign investors could no longer work with rare earths independently. They had to partner with Chinese firms. The State Development and Planning Commission gained approval authority over all projects. Production quotas appeared, though illegal mines routinely exceeded them—organized criminal groups saw opportunity in the tightening restrictions, smuggling an estimated 20,000 tons in 2008 alone, roughly a third of official exports.
The 2010 confrontation with Japan was a preview of what this leverage could do. China reduced its rare earth exports globally from forty to thirty percent. Prices skyrocketed. Other countries suddenly realized how dependent they had become on a single supplier for critical materials.
In 2012, the United States, European Union, and Japan brought a case before the World Trade Organization. They argued that China's export controls were essentially subsidies—by keeping rare earth prices artificially low domestically, China gave its own manufacturers of steel, solar panels, and semiconductors an unfair advantage. The WTO agreed. China was ordered to remove the restrictions.
China complied. Then it found other ways to maintain control.
The Consolidation
In 2011, the State Council issued a document with the bureaucratic title "Opinions on Promoting the Sustainable and Healthy Development of the Rare Earth Industry." Behind the bland language was a fundamental shift: the government would take tighter control of the entire sector.
The 2016 Development Plan for the Rare Earths Industry pushed further. It called for innovation, consolidation, environmental standards, and strategic application of rare earths in key economic sectors. For the first time, the government explicitly identified twenty-four "strategic minerals" essential for national security and emerging industries. The message was clear: these materials were too important to leave to market forces.
Then came the big move. In December 2021, China announced the creation of China Rare-Earths Group, a new state-owned conglomerate formed by merging several major producers including China Minmetals Rare Earth and Aluminum Corporation of China Limited Rare Earth. The new entity controlled approximately seventy percent of China's rare earth production.
Seventy percent of seventy percent of global supply.
The Environmental Cost
There's a reason the United States stopped mining rare earths. The extraction process is nightmarish.
The major production centers in China—Shandong, Inner Mongolia, Sichuan, Jiangxi, Guangdong, Fujian, Hunan, and Guangxi—have paid a heavy price. At Bayan Obo in Inner Mongolia, one of the world's largest rare earth mines, residents describe the transformation in stark terms.
"Before the factories were built, there were just fields here as far as the eye can see. In the place of this radioactive sludge, there were watermelons, aubergines and tomatoes."
The sewage from processing plants poured into ponds and rivers. By the 1980s, crops grew poorly. Plants would flower but produce no fruit, or the fruit would be small and smell terrible. Many farmers simply left.
China has since begun shutting down some of its most damaging ionic clay mines. But the solution wasn't to stop mining—it was to move the worst extraction elsewhere. Heavy rare earths now increasingly come from Myanmar, where environmental regulations are even weaker. As of 2019, much of China's rare earth supply originated across the border in Myanmar.
The 2021 military coup in Myanmar introduced new uncertainties. What happens when your strategic mineral supply depends on an unstable military junta?
The New Cold War
Between 2020 and 2023, seventy percent of all rare earth compounds and metals imported into the United States came from China. This dependency has become a central flashpoint in the deteriorating relationship between the two countries.
The escalation has been methodical. In 2023, China introduced export restrictions on germanium and gallium—not rare earths technically, but critical materials for semiconductors and electronics. It also banned the export of certain rare earth processing technology. You can buy the materials, but you can't learn how to make them yourself.
In 2024, after the United States restricted technology exports to China, Beijing responded by banning exports of gallium, germanium, and antimony to America entirely.
Then came 2025. During the intensifying trade war, China restricted exports of heavy rare earths to the United States. In October, it tightened controls on twelve rare earth metals and related refining equipment, citing "national security concerns." Foreign companies would now need approval for any items with potential "dual-use applications"—meaning anything that could conceivably have military purposes.
The timing was pointed. The announcement came just ahead of a planned meeting between President Trump and Chinese leader Xi Jinping at the 2025 Asia-Pacific Economic Cooperation summit in South Korea.
The Scramble for Alternatives
The world is trying to reduce its dependence on Chinese rare earths. The results have been mixed.
Australia has emerged as the most promising alternative. Companies like Lynas Corporation, Iluka Resources, and Arafura Rare Earths are expanding operations with government support under Australia's Critical Minerals Strategy 2023-2030. The Mountain Pass mine in California, shuttered since 2002, reopened. Other countries are surveying their own deposits.
But here's the problem: even if you can mine rare earths outside China, you still need to process them. And processing capacity remains overwhelmingly concentrated in China. As of 2025, China was not just the world's largest producer of rare earth elements—it was the world's largest processor, with the expertise and facilities to turn raw ore into usable materials.
The United States Geological Survey's February 2025 report placed China first in the world in both reserves and production. Reserves: forty-four million metric tons. Production: 270,000 metric tons annually. The next largest producers are orders of magnitude smaller.
Why This Matters
The clean energy transition runs on rare earths. Every wind turbine uses neodymium magnets. Every electric vehicle motor requires rare earth permanent magnets—Tesla's shift to a magnetic motor for its Model 3 Long Range increased neodymium demand significantly. Solar panels, energy-efficient lighting, advanced batteries: all need these materials.
So does defense. Guided missiles use rare earth magnets. So do the motors in fighter jets. Night vision goggles require rare earth phosphors. The advanced electronics in modern weapons systems depend on these elements.
This creates an uncomfortable reality. The technologies we need to address climate change require materials controlled by an authoritarian government increasingly at odds with Western democracies. The weapons systems Western nations rely on for defense depend on supply chains running through that same government.
In 2018, a kilogram of neodymium cost about seventy dollars. That price has fluctuated wildly since, rising whenever tensions between China and the West intensify. The market remains fundamentally unstable—hostage to political decisions made in Beijing.
The Future
China's rare earth dominance took decades to build. It was constructed through consistent policy, massive investment, environmental sacrifice, and strategic patience. Breaking that dominance will take years, perhaps decades more.
Some researchers are working on alternatives—motors that don't require rare earth magnets, recycling programs to recover elements from electronic waste, new extraction technologies that might make previously uneconomic deposits viable. But these solutions remain largely theoretical or small-scale.
For now, the seventeen obscure elements with the science fiction names remain essential to modern civilization. And one country controls the supply.
The fishing boat captain was released, eventually. Japan's electronics industry recovered. But the lesson of 2010 hasn't been forgotten—not by Japan, not by Europe, not by the United States. In the great power competition of the twenty-first century, the most important weapons might not be missiles or microchips. They might be minerals most people have never heard of, extracted from mines in Inner Mongolia, processed in factories along polluted Chinese rivers, and shipped to a world that has no alternative but to buy.