U.S. and other markets granted export licenses to Chinese rare-earth company
The Lowdown on China's Domination of Rare Earths
📷 Rare earth elements: VCG
China's Iron Grip on the Rare Earth Market
Historically, though rare earth elements are abundant, China's strategic dominance of the global market has been ceremonial. By leveraging supple policy, subsidies, and lenient environmental standards, China managed to undercut Western competition, becoming the world's foremost exporter and refiner by the late 90s and early 2000s [1][2].
A Brief Historical Overview
- The 80s and 90s: China kicked off an ambitious drive to up its rare earth mining and refining sector. Offering incentives and turning a blind eye to environmental misconduct, China gave Western competitors a swift kick in the curb, leading to the downfall of significant players, like the shuttering of Mountain Pass mine in California in 2002, leaving China as the world's sole supplier [1].
- The 2000s: By the dawn of the new millennium, China controlled a staggering 93% of global production and over 99% of heavy rare earths, giving it immense geopolitical sway [2].
- The 2010s: Amid territorial squabbles and trade frictions, China threw its weight around by slapping export quotas and embargoes on countries like Japan, leading to a global price spike. This prompted Western powers to resurrect dormant mines and venture into processing capabilities, reducing China's market share to approximately 70% by 2014. However, China maintained dominance over refining and downstream processing [2].
Current Scenario and Export Policies
- Tighter Export Controls: In recent years, China has clamped down on rare earth exports, citing environmental concerns and illegal mining. Through new licensing rules and a review period of 45 days for each shipment, China's efforts are widely viewed as countermeasures to ongoing trade hostilities, notably with the U.S., which has imposed tariffs on Chinese goods [4][1].
- Export Data: Recent stats have revealed twists and turns in China's rare earth exports. For example, in Q1 2025, exports plummeted 10.9% year-on-year, whereas other export categories thrived. Yet, on a monthly basis, exports have surged at times, peaking at a one-year high in June 2025, hinting at the impact of new regulations and trade dynamics [3].
- The Global Response: Other nations remain jittery about their dependence on China for refined rare earth materials. Despite investment in alternative sources and facilities, China remains the undisputed kingpin of the middle and downstream segments of the value chain [1][2].
Geopolitical and Economic Implications
China's rare earth export policies could spell trouble for international supply chains, particularly in industries such as automotive, electronics, and defense. Western nations worry about economic security, but efforts to diversify sources have been sluggish due to the high costs and technical challenges associated with rare earth extraction and refining [1][2][4].
In a nutshell, while China's grip on global rare earth mining has loosened, its control over refining and exports continues to dictate global trade dynamics and is a flashpoint in U.S.-China trade tussles.
- The strategic dominance of China in the rare earth market has extended to other sectors, as they became the world's leading exporter of high-tech products that heavily rely on rare earth elements in electronics, science, and industry, further highlighting their financial might in these fields.
- The finance sector is another area where China's dominance is apparent, as foreign companies seeking to enter the rare earth market often need to secure loans or investments from Chinese financial institutions due to China's monopolistic control over the downstream processing of these vital elements.
