During a visit to Baotou, Inner Mongolia, in 1987, former Chinese leader Deng Xiaoping famously said that while “the Middle East has oil, China has rare earths.” In retrospect, Deng was decades ahead of the rest of the world. Since his proclamation, Rare Earth Elements (REEs) have indeed become the new oil. This group of 17 minerals – critical to the manufacture of modern technologies across the energy and defense sectors – is used in everything from fighter jets, missiles, and drones to wind turbines, electric vehicles, and smartphones. As a result, these crucial, strategic resources have been thrust onto the global stage – and China has a chokehold on the industry.
China is home to a third of rare earth reserves – around 44 million tons of deposits – but through a decades-long process of strategic state intervention, the country also has mining investments on five continents and controls roughly 60% of global mining and nearly 90% of global processing capacity. As a result, China has built a commanding monopoly over rare earths, currently providing over 90% of the world’s REE supply. This control has allowed China to undercut global competitors and cement near-total control across the entire value chain, from mining and refining to manufacturing.
Now, as geopolitical tensions intensify and trade dependencies come under scrutiny, rare earths have also become a flashpoint in international policy and foreign relations.
Holding such great sway over the REE industry, China has been able to create what investment manager Louis O’Connor likened to a “tap system” which it can turn “on and off.” Seen as the world economy relies on magnets from China, any move to “turn off” the tap, restricting rare earth shipments, would result in massive ramifications felt across the globe. China therefore holds a great deal of power – and Chinese President Xi Jinping is leveraging it in ways “intended to be coercive.” In other words, Xi is using China’s “tap system” to influence foreign policy decisions and to achieve political objectives.
In 2010, for example, prompted by a territorial dispute over the East China Sea, China restricted rare earths exports to Japan. After cutting shipments of the critical metals used by high-tech companies and auto makers, Japan was left scrambling to find alternative supplies. Similarly, in April 2025, China added seven of the 17 rare earth metals to a list of export controls in direct response to US President Donald Trump’s 54% tariff imposed on the country. This move caused significant disruption to global supply chains, and major companies such as Ford and Suzuki had to pause production as a result. With the US military, tech, and automotive sectors depending on REEs, China’s action succeeded as a defensive strategy, allowing the country to hold substantial leverage as it entered into its trade and technology negotiations with the US.
So, when geopolitical tensions run high, or when moving toward a certain political goal, China has proven both its ability and readiness to weaponize global dependence on rare earth metals. Xi calls this power a “deterrent,” but Ursula von der Leyen, head of the European Commission, labels it “blackmail.” Until countries build secure, independent capacity across the critical minerals supply chain, they remain vulnerable to potential disruptions should China turn off its “tap.” As a result, most are trying to lessen their dependency. In June, the G7 agreed to “work together and with partners beyond the G7 to swiftly protect our economic and national security” by “diversifying the responsible production and supply of critical minerals.” Other countries are similarly working to invest in alternatives to China; Australia, Brazil, South Africa, Saudi Arabia, Japan, and Vietnam all have initiatives and investments underway to bolster REE mining, processing, magnet manufacturing, and research and development.
But the concern held by many analysts and security experts – as former Obama Administration appointee to the US Department of Defense, Dewardric L. McNeal, points out – is that REEs are still being viewed as mere commodities. The past few months and years have shown countries around the world that dependence on China’s REE industry could be disruptive at best and devastating at worst. Without diversifying their supply chains, or at least making efforts to stockpile, recycle, or invest in new rare-earth projects, countries remain susceptible to such “blackmail,” and will be affected if – and when – China decides to use its “deterrent” to chase foreign policy goals.
This outcome is avoidable only if the rest of the world grasps the fact that REEs are more than just valuable resources. Unless China is to maintain its strategic advantage, the world needs to “treat critical minerals not as commodities, but as instruments of geopolitical power.” China is certainly already doing so – and it is reaping the benefits.
Image source: Openverse
