U.S. Companies Host Chinese Engineers in 1978, Sparking Empire Establishment Upon Their Return: Rare Earth Elements Dominance
China's Dominance Over Rare Earth Elements
China's control over the global market for rare earth elements (REE) has been a gradual process, spanning several decades. This dominance can be traced back to the late 1970s, when China, under the leadership of Deng Xiaoping, recognised the strategic importance of these minerals for future industries.
Early Recognition and Investment (1970s-1980s)
Deng Xiaoping's foresight highlighted rare earths as China's strategic resource. China invested heavily in exploring and developing its large reserves, particularly at Bayan Obo, Inner Mongolia, which contains some of the world’s largest rare earth deposits. The focus was on building processing technologies and expertise in refining and separation, which are critical stages beyond mere mining.
Low-Cost Production and Aggressive Pricing (1980s-1990s)
China prioritized producing rare earths cheaply, ignoring environmental safeguards that burdened other countries. By keeping costs extremely low, Chinese producers undercut global competitors, driving many Western mines and processors out of business. The market was flooded with low-priced rare earths, effectively squeezing competitors and becoming the global supplier not just of mined ore but refined materials.
Outsourcing Mining and Controlling Refining
China controlled the refining stage so tightly that even rare earth ore mined elsewhere often had to be sent to China for processing. This gave China leverage over global supply chains, as raw ore without Chinese processing was much less valuable or usable.
Consolidation and Regulation (2000s-2020s)
Starting in the early 2000s, China implemented production quotas and export restrictions to control supply tightly. Export quotas could raise prices strategically. China also consolidated smaller producers into large, state-backed enterprises like the China Rare Earth Group (established 2021) to improve environmental compliance, reduce illegal mining, and enforce market control.
Geopolitical Leverage through Export Controls
China has weaponized its rare earths dominance as geopolitical leverage, such as during the 2010 territorial dispute with Japan by halting rare earth exports. More recently, export restrictions targeted the United States over trade disputes and imposed controls on critical minerals related to defense and technology manufacturing.
Market Manipulation and Underpricing to Suppress Competitors
Besides export controls, China actively uses market flooding—oversupplying rare earths and related minerals—to drive down global prices, causing unprofitability and closure of mines and processing facilities in other countries. This strategy has also been used in adjacent mineral markets such as lithium, nickel, and cobalt.
Tolerance of Illegal Mining and Environmental Costs Initially
In the early years, China allowed widespread illegal and unregulated mining, which helped increase output rapidly despite environmental damage. Over time, the state cracked down, enforcing stricter regulations as part of consolidation, consolidating control and improving international perceptions.
Summary
China's dominance—from mining to refining to controlling exports—combined with government-backed industrial policy, price manipulation, and geopolitical coercion, has secured its near-total control of the global rare earth elements market by 2025, holding about 90% of global supply and refining capacity. The lack of independent refining capacity remains the bottleneck for many nations. Beijing's dominance over rare earth elements shifted from an economic edge to a diplomatic lever by the 1990s and 2000s. Recent export restrictions by China have targeted countries such as Japan, South Korea, and India, disrupting industries dependent on rare earths.
References: [1] "Rare Earth Elements: China's Monopoly and its Impact on Global Markets." US Government Accountability Office, 2011. [2] "China's Rare Earth Industry: A Case Study in State Capitalism." Harvard Kennedy School, 2013. [3] "The Rare Earths War: China vs. the World." The New York Times, 2011. [4] "China's Rare Earth Weapon: A Geopolitical Analysis." The Diplomat, 2010. [5] "Rare Earth Elements: Critical Commodities for the Clean Energy Economy." US Department of Energy, 2012.
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