Are China's rare earth restrictions counterproductive?

Beijing's move to control rare earths to consolidate global influence is making the West wary, prompting a wave of supply diversification and reducing dependence on China.

China's rare earth restrictions could prompt the US and its allies to seek ways to break free from Beijing's dominance (pictured: Rare earth mine in Mountain Pass, California, US). Photo: REUTERS/TTXVN

China's latest export controls on strategic materials, while aimed at cementing its dominance, may be pushing the world to diversify its supply sources and ultimately weaken China's long-term influence in the most important supply chain of the 21st century, according to Newsweek.com.

China's Ministry of Commerce recently announced new regulations that will take effect from December, requiring foreign companies to seek approval from the Chinese government before exporting magnets and certain semiconductor materials containing rare earth elements originating from China.

Rare earths are essential to the modern economy, especially in high-tech sectors such as advanced weapons systems, electric vehicles (EVs) and the energy transition. Ryan Kiggins, a political science professor at the University of Central Oklahoma, said China's move "fits perfectly into the broader strategic competition between the US and China," where rare earths are "at the heart of that competition."

Decades of investment and restrictive environmental regulations have given China a near monopoly on rare earths. It now accounts for about 70% of global supply and about 90% of global processing capacity, a similar proportion to US imports.

Western reaction

US officials have strongly denounced the new restrictions. US Treasury Secretary Scott Bessent accused Beijing of using a “bazooka” on “the industrial base of the entire free world.” US Trade Representative Jamieson Greer described the move as “an act of economic coercion” that would give Beijing “basically control over the entire global economy and technology supply chains.” Mr. Bessent also warned that the world would be prepared and able to “decouple” from China’s market for critical elements.

Western producers are facing “severe supply risks and rising input costs,” according to Jamie Underwood from critical minerals consultancy SFA (Oxford), warning that military systems in particular will be affected by the de facto ban.

Jane Nakano, a senior fellow at the Center for Strategic and International Studies (CSIS), said rare earths are “a well-known Achilles’ heel for industrial economies like the US, and China’s export controls are one of the most powerful levers Beijing has.”

However, many experts say China's use of its rare earth dominance may be weakening its geopolitical toolkit, while accelerating a global shift to alternative sources of supply.

“The current restrictions could prompt Washington and its allies to intensify reshoring, hoarding and recycling strategies, ultimately undermining China’s influence,” said Professor Kiggins, who said that, in the long term, Beijing could be “facilitating the emergence of a parallel rare earth ecosystem outside its control.”

Mr. Underwood agrees, saying: “Prolonged restrictions could increase rare earth prices, attract excessive investment, and ultimately erode China’s market share while spurring innovation that weakens its leverage.”

The market has also reacted to the change. Shares of US and Australian rare earth mining and production companies jumped after the announcement. JPMorgan Chase also announced it would invest billions of dollars in “industries critical to our national security and economic resilience,” including critical minerals, whose dependence on foreign supplies is a “painfully obvious” weakness, CEO Jamie Dimon said.

Brian Menell, chairman and CEO of TechMet Limited, an investment firm focused on “Western-oriented” supply chains, said the US has the potential to reduce its dependence on China. He believes the US can “outspend” and “out-innovate” China to change technology across the entire supply chain, making it less dependent on Beijing.

TechMet, which receives funding from the US International Development Finance Corporation, has been in “daily” contact with US government agencies about accelerating the transition to a “China-free” rare earths supply since the announcement.

Initial steps in diversification

The vulnerabilities of China’s dependence have long been acknowledged by both the public and private sectors, prompting significant investments and recent breakthroughs. In July, Apple announced a $500 million partnership with MP Materials to purchase rare earth magnets and set up new recycling and manufacturing facilities in California and Texas. In May, Australian company Lynas became the first company outside of China to successfully produce dysprosium oxide (a “heavy” rare earth) at its facility in Malaysia.

While China still dominates in terms of production and processing, the US also has its own mineral resources such as the Mountain Pass mine in California and the Spruce Pine mine in North Carolina.

However, Nakano, an expert at CSIS, warned that the sheer scale of China's production and processing capacity would be "hard to match in the near term," noting that "China is not standing still" and "will likely continue to develop its mineral supply chain to strengthen its position."

So China’s latest restrictions could be leverage to win concessions in ongoing trade talks, or simply a “warning” ahead of the planned meeting between US President Donald Trump and Chinese President Xi Jinping later this month. But years of China leveraging its dominance have pushed the world down the path of diversification.

Source: https://baotintuc.vn/the-gioi/cac-han-che-dat-hiem-cua-trung-quoc-co-phan-tac-dung-20251027170339991.htm