China’s Rare Earths Rise: A Strategic Supply Chain Shift

A low-profile 1978 visit by Chinese engineers to major U.S. aerospace firms marked the start of a decades-long effort that transformed global rare-earth supply chains.

Rare earth elements — a group of 17 minerals essential for smartphones, wind turbines, and advanced weapons systems — were identified early on as strategic assets. China moved from miner to dominant refiner by the 1990s, ultimately capturing roughly 85% of global refining capacity.

Innovation and cost control drove that shift. Plants in Baotou developed cheaper refining approaches — including plastic-lined equipment and hydrochloric acid processes — and operated under more permissive environmental enforcement, allowing Chinese producers to undercut competitors and force much foreign processing to be exported to China for finishing.

Beijing converted industrial strength into geopolitical leverage, using export restrictions from 2010 onward to pressure trading partners such as Japan, South Korea and others. Analysts call this “precision economic statecraft.” The trend prompted tighter sourcing rules for U.S. defense contractors and growing concern about supply resilience.

The expansion was deliberate, backed by state planning and investment dating to the late 1970s. Western responses include U.S. Department of Energy funding, expanded Lynas operations, and EU stockpiles, but rebuilding independent refining capacity remains a long, costly task—OECD estimates 10–15 years under strict environmental standards.