ASEAN’s Rare Earth Hubs Still Depend on Chinese Know-How

Southeast Asia is emerging as the most important rare earth diversification corridor, but its rise does not automatically mean independence from China.

China today accounts for roughly 70 percent of global rare earth mining and around 90 percent of separation and processing, with an estimated 93 percent of magnet manufacturing capacity.311 These capabilities give Beijing outsized leverage over the value chain. In 2025 it imposed its strictest export controls so far, extending licensing to magnets and materials containing as little as 0.1 percent heavy rare earth content of Chinese origin.11 The rules also bar Chinese nationals from participating in overseas exploration, mining, processing or magnet projects without government approval, effectively turning outbound investment and technology transfer into a strategic tool.11

At the same time, China has periodically tightened and relaxed export restrictions to gain diplomatic leverage, including a one‑year suspension of some controls as part of broader talks with the United States and regional partners.3511 These measures have already raised supply‑security concerns among major importers and helped drive price spikes, such as the 45 percent increase in rare earth concentrate prices highlighted by market commentators in 2026.10

Within this context, Southeast Asia’s latent resource base is drawing intense interest. Up to one fifth of the world’s untapped rare earth deposits may lie in the region.5 Vietnam holds the world’s second‑largest reserves, widely seen as an “untapped giant,” while Myanmar ranks fourth and has become China’s most important external heavy rare earth supplier.39 Malaysia claims roughly 18.2 million tons of non‑radioactive rare earth reserves, valued by its government at around 747 billion ringgit, and the Philippines is estimated to hold over 1.2 million tons of critical rare earth‑bearing materials.13

Malaysia: from Lynas beachhead to contested China–US–Japan hub

Malaysia is trying to convert its geology into a full rare earth ecosystem that stretches from mine to magnet. The country already hosts one of the world’s few large separation facilities outside China through Lynas Rare Earths’ plant in Pahang, which processes feedstock from Australia.137

Kuala Lumpur has enforced a nationwide moratorium on exports of unprocessed rare earth materials since the start of 2024, forcing value addition at home.1 The government’s Industrial Master Plan 2030 identifies non‑radioactive rare earths as a strategic sector, targeting integrated capacity in mining, refining and downstream magnet production.13 Prime Minister Anwar Ibrahim has framed policy around using domestic resources primarily to build midstream and downstream industries rather than simply exporting concentrates.1

A notable development is Malaysia’s talks with China on a new rare earth processing refinery that would handle both light and heavy rare earths.13 According to officials familiar with the discussions, Beijing is prepared to provide technology in exchange for access to Malaysia’s reserves, in part to limit competition from Australian rival Lynas.1 The contemplated structure reportedly includes state investor Khazanah Nasional partnering with a Chinese state‑owned enterprise, underlining how tightly Chinese capital is woven into regional projects.1

The project is still at an early stage and faces several hurdles, including community concerns over environmental risk, domestic politics around resource nationalism and the challenge of balancing Chinese participation with Western strategic interests.15 Malaysia is simultaneously negotiating mineral cooperation arrangements with the United States and has become a key partner in U.S. and Japanese efforts to develop an Indo‑Pacific critical minerals “corridor.”37 New U.S. and Japan‑backed agreements aim to channel investment into Malaysian mining and refining, improve environmental, social and governance standards, and secure offtake for magnet and EV supply chains in allied economies.7

For investors, Malaysia’s pipeline now spans:

- Expansion and optimization of Lynas’ separation capacity in Pahang, combined with new supply agreements with domestic mining concessions such as the Kelantan deal for mixed rare earth carbonate.1
- The proposed China–Khazanah refinery, which would add heavy rare earth separation capacity and deepen China’s technical footprint if realized.1
- Prospective U.S. and Japan co‑financed processing plants linked into broader Indo‑Pacific mineral corridors.37

The strategic question is not whether Malaysia becomes a regional processing node, but whose standards, capital and offtake obligations will define that hub.

Myanmar: informal heavy rare earth powerhouse under new armed‑group governance

The most significant but least transparent development in the region is the expansion of heavy rare earth mining in Myanmar’s Kachin and Shan states. Since the 2021 coup, leaching‑based extraction of heavy rare earths, including dysprosium and terbium, has surged along the Yunnan border.9 These materials are critical for high‑temperature magnets in electric vehicles, wind turbines and defense systems.

The number of active rare earth mining sites in northern Kachin increased from roughly 130 in 2020 to more than 370 by the end of 2024, with over 2,500 leaching pits recorded in Chipwi alone.9 Between 2017 and 2024, Myanmar exported more than 290,000 tons of rare earth material to China with a total value above 4.2 billion dollars, and about 85 percent of that value accrued after the coup.9 In recent years Myanmar has supplied over 60 percent of the value of China’s rare earth imports, making it Beijing’s primary external source of heavy rare earth feedstock.9

Control of this trade has shifted. In October 2024, the Kachin Independence Army captured key border towns Chipwi and Pangwa, effectively taking over one of the world’s most valuable heavy rare earth corridors.9 After China temporarily closed border gates, the KIA and Chinese interlocutors agreed a new taxation regime. The group now imposes a 20 percent levy on exports and has negotiated a fixed price of 35,000 yuan per ton of concentrate, formalizing its de facto role as regulator of a strategic supply route.9

From an industry perspective, Myanmar’s “project pipeline” is less about formal mine development and more about how informal operations are consolidated, regularized or replaced. Chinese companies remain deeply engaged in extraction and purchase, and the concentrates are almost entirely shipped to China for separation and processing.39 Environmental damage from in situ leaching is extensive, and governance risk is high.

There are early signs of diversification interest. In December 2024, officials from India’s state‑owned Indian Rare Earths Limited visited Kachin to assess upstream partnerships.9 But for now, China’s grip on the midstream ensures that Myanmar’s rare earth boom reinforces, rather than reduces, Chinese dominance.

Vietnam: untapped giant with growing Western interest

Vietnam holds the second‑largest rare earth reserves globally, but production remains well below potential.3 Hanoi’s strategy is to move up the value chain beyond raw ore. It is courting Western and Japanese capital to help develop its own processing capabilities and avoid over‑dependence on Chinese technology.37

Recent cooperation deals signed by the United States and Japan with Vietnam, alongside other ASEAN states, aim to:

- Bring investment into Vietnamese mining and refining projects.
- Support technology transfer and workforce training.
- Integrate Vietnamese output into a wider Indo‑Pacific mineral corridor linking Australian mines, Southeast Asian processors and Japanese manufacturers.37

Vietnam has attracted Western‑backed projects focused on separation capacity and magnet precursor production, though many are still in the planning or early construction phase.3 The main challenges are environmental permitting, capital intensity and the need to build technical expertise for solvent extraction, impurity control and heavy rare earth separation.

From a market standpoint, Vietnam is uniquely positioned. It can become a swing supplier for light rare earths and, if heavy rare earth deposits are developed economically, a counterweight to Myanmar in supplying dysprosium‑bearing concentrates. But the speed at which Vietnam can translate reserves into reliable midstream capacity will determine whether it materially alters China’s dominance before the early 2030s.

Broader Southeast Asia: ASEAN’s diversification push and ESG concerns

Beyond Malaysia, Myanmar and Vietnam, the rest of ASEAN is also moving, though from a low base.

Indonesia, while better known for nickel and laterite‑hosted battery metals, has significant tin and bauxite deposits and is included in new critical minerals agreements with the United States and Japan.37 These deals target not only battery metals but also rare earth‑bearing streams, including potential recovery from mine by‑products.

Thailand has signed a memorandum of understanding with the United States on critical mineral cooperation that encompasses rare earths, positioning itself as part of alternative non‑Chinese supply chains and as a potential host for processing investments.3 Cambodia and the Philippines are also included in U.S. and Japan initiatives, with the Philippines in particular identified as having sizable REE‑bearing phosphogypsum and related resources.37

Regional policymakers and external partners have floated the idea of an ASEAN Rare Earth Processing Consortium to coordinate investment, standards and technology transfer.3 The goal would be to pool resources across multiple smaller projects, establish shared environmental benchmarks and improve bargaining power with Chinese buyers and Western offtakers.

At the same time, environmental and social backlash is rising. Civil society groups in Southeast Asia warn that poorly structured “dig and dump” agreements risk replicating past resource booms, leaving local communities with mine waste while value is captured offshore.5 Reports highlight how hastily negotiated rare earth deals with Thailand and Malaysia have triggered worries over tailings management, radiation issues where monazite is involved and potential corruption.5 This ESG pressure is likely to slow some projects but may also force higher technical standards that, if met, make ASEAN supply more attractive to Western OEMs facing their own ESG scrutiny.

Industry implications and outlook

Several structural trends emerge from these developments:

- Midstream capacity is the bottleneck. Reserves in ASEAN are substantial, but limited separation and refining capability means most material still feeds into Chinese plants.3 New refineries in Malaysia and possible facilities in Vietnam or Thailand are critical to changing this pattern.

- China is simultaneously tightening control and offshoring risk. Export controls and outbound‑investment approvals give Beijing a gatekeeper role, even as Chinese firms invest in upstream projects in Myanmar and potentially Malaysia.13911 This allows China to secure feedstock while managing environmental liabilities abroad.

- Western and Japanese strategies hinge on ASEAN’s execution. U.S. and Japan agreements with Malaysia, Vietnam, Thailand, Indonesia and others are designed to shift 15 to 20 percent of global refining capacity away from China by the early 2030s, if projects are delivered as planned.7 Delays, ESG disputes or political instability could blunt this diversification.

- Heavy rare earths are the strategic fulcrum. Myanmar’s informal boom highlights how concentrated heavy rare earth supply remains.9 Without credible alternative heavy rare earth projects in Vietnam, Africa or elsewhere, even expanded light rare earth output in ASEAN will not fully erode China’s leverage over defense‑critical magnet materials.

For a senior industry analyst, the immediate task is discriminating between politically announced projects and bankable capacity. Malaysia’s refinery proposals, Myanmar’s evolving governance of Kachin mining, and Vietnam’s early processing partnerships will be the key indicators of whether Southeast Asia becomes a genuine counterweight in the rare earth value chain or remains primarily a feedstock appendage to Chinese processors.

ASEAN processing angle: Southeast Asia can diversify mining geography, but refining is harder. Ionic clay and monazite projects still need leaching, impurity control, solvent extraction and waste management. If Chinese engineers, reagents, equipment suppliers or offtake buyers dominate those steps, the region may diversify the mine map without fully diversifying the processing system.