Overview: Beijing’s expanded leverage over rare earths
On October 9, Beijing unveiled sweeping export controls targeting rare earths and related technologies, signaling a bold strategic move to weaponize a critical input for modern defense, energy, and high-tech manufacturing. The move expands beyond the seven rare-earth elements already restricted in April, covering five additional metals and bringing nearly all recognized rare-earth elements under tighter scrutiny. Under the new framework, foreign companies must obtain Beijing’s approval to export goods containing a threshold value of Chinese-sourced rare earths (0.1 per cent or more) or products made with China’s rare earth-related technologies. This regulatory stance also excludes rare earth materials used in the defense sector from export, while case-by-case reviews apply to outputs used in highly advanced technologies, including semiconductor equipment and certain AI applications with potential military uses.
Why rare earths matter in today’s economy
Rare earths underpin a broad spectrum of critical products—from consumer electronics and electric vehicles to wind turbines and sophisticated defense systems. In 2024, China accounted for at least 60 per cent of global rare earth production and processed roughly 90 per cent of the world’s supply. The new controls extend Beijing’s influence from upstream materials to midstream and downstream manufacturing, giving the government leverage over complex global value chains. The implications ripple across producers, assemblers, and service providers who rely on Chinese machinery, components, and technical know-how for processing and refinement.
Immediate and longer-term implications for global supply chains
For foreign manufacturers, the policy introduces two major risks: the potential loss of access to critical equipment and tooling, and the possibility of delayed exports due to case-by-case approvals. Because China has long supplied the essential precision machinery and technical expertise for rare earth processing, many companies could face disruptions in maintenance, spare parts, or timely shipments. Analysts warn that aggressive enforcement could add production delays of three to six months for some advanced chips and components, complicating already stretched global supply chains.
The rules also enable Beijing to require disclosure about who will use Chinese materials and for what purpose, enabling stricter regulatory oversight and strategic intelligence gains. In effect, the regime gives China a regulatory lever that can slow or condition access to key technologies for Western manufacturers, especially those relying on components or processing supplied by or through China. The broader midstream and downstream scope matters because it shifts the battleground from raw materials to the entire ecosystem of fabrication, testing, and final assembly.
Strategic blush: defense and technology implications
Rare earths are vital for defense systems—fighter jets, missiles, radar, and associated guidance infrastructure—where even small material bottlenecks can translate into meaningful capability gaps. The United States, which has historically depended on China for a significant share of its rare earths, faces a real risk of supply disruption during periods of diplomatic tension. Analysts caution that Beijing’s ban on military-related exports could complicate the U.S. defense industrial base, particularly as U.S. and allied production scales up in response to perceived risks in supply reliability.
On the technology front, the case-by-case export approvals create a new layer of regulatory discipline for global chipmakers and AI developers. Japan, South Korea, and Taiwan, among others, could experience delays in sourcing Chinese materials for advanced semiconductor manufacturing tools, potentially reverberating through the supply chain with timelines of several months. The net effect is to shift some strategic leverage toward China in the global race to secure premier manufacturing capabilities.
The Western response: diversification and reshoring momentum
Washington’s policy response is to accelerate diversification and resilience. The United States and allies, including Canada, are pursuing a mix of domestic development and international collaboration to reduce dependence on Chinese supply chains. Canada’s approach, for instance, pairs investment with the Saskatchewan Research Council’s refining capacity projects that could support U.S. defense needs if supply lines are disrupted. The U.S. has enacted measures aimed at expanding critical mineral production and processing, while allied nations explore refining capacity and strategic reserves.
Meanwhile, Japan, Australia, and Europe are advancing commitments to secure alternative sources of rare earths through partnerships and investment. The goal is not rapid decoupling but a pragmatic, staged diversification that can withstand price swings and policy shifts. However, such efforts are capital-intensive and require time, technology transfer, and robust infrastructure, underscoring the longer horizon before Western supply chains are truly self-reliant in this area.
What to watch next
- The U.S.–China dynamic will likely continue to zigzag as both sides respond to moves in export controls, sanctions, and tariff policy.
- Ongoing diversification strategies across North America, Europe, and the Asia-Pacific will shape the pace and cost of reshoring rare-earth processing.
- Industry expectations of production delays and maintenance gaps will influence procurement, pricing, and strategic stockpiling decisions.
As the United States and its partners recalibrate for a more multipolar supply landscape, Beijing’s latest move confirms that rare earths will remain a central battleground in the broader geoeconomic contest. The outcome will hinge on whether Western countries can accelerate investment and cooperation fast enough to blunt the impact of China’s export controls while maintaining competitive manufacturing and national security imperatives.
