The Rare Earth Domination: How China Controls the Global Tech Supply Chain

China dominates the rare earth metals market, essential for technologies like smartphones, EVs, and wind turbines, controlling 60-70% of production and 90% of refining. Through subsidies, lax regulations, and strategic policies since the 1980s, China outcompeted global rivals, gaining a critical geopolitical edge. Recent export restrictions on minerals like terbium and dysprosium highlight its influence, straining dependent nations like the U.S. and Japan. Despite global efforts to diversify supply chains, China's cost advantages and integration maintain its market supremacy.

China has emerged as an unchallenged giant in the rare earth metals market, a critical component of today’s technological and green energy revolutions. From powering smartphones and electric vehicles to enabling wind turbines and advanced defense systems, these elements are indispensable. However, the world’s heavy reliance on a single nation for these resources is raising red flags across industries and governments.

A Strategic Monopoly with Global Impacts

China’s dominance in the rare earth industry has been decades in the making. The country currently accounts for approximately 60-70% of global rare earth production and nearly 90% of refining capacity. This commanding position allows China to wield significant influence over global technology supply chains, creating vulnerabilities for industries dependent on these materials.

Recently, China escalated its control by adding critical minerals to its export restrictions, a move seen as a countermeasure to rising geopolitical tensions and trade barriers, particularly with the United States. These restrictions are a stark reminder of China’s ability to manipulate global supply chains, with ripple effects on everything from renewable energy initiatives to military technologies.

How China Built Its Rare Earth Empire

China’s journey to rare earth supremacy began in the 1980s, when then-leader Deng Xiaoping famously declared, “The Middle East has oil; China has rare earths.” Recognizing the strategic importance of these materials, the Chinese government heavily subsidized its mining and processing industries. This aggressive investment strategy allowed Chinese companies to undercut competitors, forcing mining operations in countries like the United States and Australia to shut down.

By the 1990s, Beijing classified rare earths as strategic resources, insulating the sector from foreign interference and funneling state support into extraction and refining. Initiatives like “Made in China 2025” further embedded rare earths into China’s high-tech and industrial ambitions. Meanwhile, lax environmental regulations and low labor costs gave Chinese operations a competitive edge, albeit at significant ecological costs.

China’s dominance isn’t limited to mining. The country has also mastered the complex and environmentally intensive refining processes required to produce high-quality rare earth materials. By cornering this critical stage of the supply chain, China has become an indispensable player in the global market.

The Geopolitical Leverage of Rare Earths

Through export quotas, tariffs, and outright restrictions, China has repeatedly demonstrated its ability to leverage rare earth dominance for geopolitical gain. In recent years, these measures have caused price surges and supply disruptions, compelling industries to relocate manufacturing operations to China to ensure stable access.

In April, China extended export restrictions on key rare earth elements like terbium, yttrium, and dysprosium, among others. Each of these elements plays a specialized role in modern technology and defense systems:

• Terbium is critical for smartphone displays and aircraft magnets.

  
  

• Yttrium is used in medical lasers and superconductors.

  
  

• Dysprosium is essential for electric vehicle magnets and wind turbines.

  
  

• Gadolinium is vital for MRI machines and nuclear reactor cores.

  
  

• Lutetium aids in oil refining.

  
  

• Samarium has military and nuclear applications.

  
  

• Scandium is crucial for aerospace manufacturing.

  
  

Countries like Japan, South Korea, and the United States, which are heavily dependent on these materials, are feeling the strain of these restrictions.

Global Efforts to Reduce Dependency

In response to China’s tightening grip, nations are scrambling to build alternative supply chains. Australia’s Lynas Rare Earths, for instance, is expanding its operations in Malaysia, while the European Union is funding scandium production. The United States has revived mining at the Mountain Pass facility in California, though the raw ore still needs to be sent overseas for processing.

Despite these efforts, breaking free from China’s dominance is a monumental challenge. China’s low production costs, lenient environmental regulations, and vertically integrated supply chains give it a lasting competitive advantage.

The Road Ahead

The global race to reduce reliance on Chinese rare earths highlights the critical importance of these materials in shaping the future of technology, energy, and defense. However, achieving supply chain independence will require significant investment, innovation, and international collaboration. Until then, China’s control over the rare earth market will continue to shape geopolitical and industrial landscapes worldwide.

As the world navigates this delicate balance, one thing is clear: rare earths are no longer just a resource—they are a strategic asset with the power to influence the future of global technology and energy transitions.