Highlights

• China controls 69% of global rare earth element (REE) mining and 90% of processing capacity.
• China leverages its dominance in REE to achieve downstream innovation and strategic technological advantages.
• By 2018, China filed 25,900 rare earth-related patents, far outpacing the U.S., Japan, and EU.
• Over half of these patent filings occurred after 2011.
• China's vertically integrated innovation strategy encompasses mining, refining, and advanced manufacturing.
• This strategic positioning allows China to dominate future industries like electric vehicles (EVs), defense, and green technology.

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Rare earth elements (REEs) – the 17 lanthanides plus yttrium and scandium – are the backbone of modern technology. They power electric vehicles, wind turbines, fighter jets, smartphones, and even MRI scans. Beijing recognized early that controlling these materials could secure a decisive edge in emerging economies. As Deng Xiaoping famously remarked in 1992: “The Middle East has oil; China has rare earths.”

Today, that foresight has become reality. In 2024, China mined ~69% of global REE supply and controlled ~90% of processing and refining capacity. This dominance is not just upstream—it is being leveraged into downstream innovation and intellectual property. From refining breakthroughs to magnet engineering, China is outflanking the U.S. and Europe with intensive R&D, patents, and an integrated industrial strategy aimed at owning the industries of the future.

China’s Rare Earth Patent Boom

Patent data tells the story. According to datasets compiled by PatentManiac and reported in SCMP and Lexology, by 2018, China had filed 25,900 REE-related patents, dwarfing the U.S. (9,800), Japan (13,900), and the EU (7,300). Crucially, over half of these filings came after 2011, showing an explosion of innovation in the past decade.

This surge demonstrates not just quantity but also strategic focus. Chinese engineers are pushing frontiers in extraction chemistry, refining, alloy development, and component design. The U.S., by contrast, holds only a fraction of global REE patents—mirroring its broader innovation gap.

China’s dominance is so entrenched that in 2023–24 Beijing restricted exports of rare earth technologies, banning transfers of separation and magnet manufacturing know-how abroad. This policy underlines how seriously China treats its innovation lead—as a strategic weapon, not just a commercial advantage.

Vertically Integrated Innovation: From Mine to Magnet

Unlike the West’s fragmented efforts, China’s rare earth strategy is vertically integrated: mining, refining, and advanced manufacturing are all tied together by state-guided innovation. Chinese firms, research institutes, and state-owned enterprises collaborate across the value chain with government support.

• Separation expertise: China mastered solvent-extraction techniques—developed decades ago in the U.S. but abandoned there for environmental reasons—and perfected them into industrial-scale capabilities that the West now struggles to replicate.
• Coordinated ecosystem: An Atlantic Council study notes that China’s REE ecosystem includes the Communist Party, SOEs, private firms, and research centers aligned under national plans for innovation and industrial dominance.
• Corporate alignment: Giants like China Northern Rare Earth Group are restructuring R&D programs to “align innovation with national strategic objectives,” tying corporate goals to state visions in defense, green tech, and advanced materials.

As REEx CEO Daniel O’Connor (opens in a new tab) observes:

“We’ve studied their plans. The Chinese aim to own the future based on their REE processing and magnet monopoly today. While the U.S. is still trying to catch up in processing, Beijing has already moved on to the next frontier.”

EVs and Green Energy: Magnet Supremacy

China’s downstream innovation is most visible in permanent magnets—the beating heart of EV motors and wind turbines.

• In 2023, China produced ~240,000 tons of rare earth magnets, about 85–90% of global supply.
• By 2024, output climbed toward ~260,000 tons.
• U.S. capacity? A single MP Materials plant in Texas slated to produce ~1,000 tons/year by 2025, or <1% of China’s output.

Chinese firms like JL Mag and Ningbo Yunsheng each operate at tens of thousands of tons per year. Their R&D has delivered magnets that require less dysprosium, reducing costs and reliance on scarcer heavy REEs. By innovating at scale, China has positioned itself not just as the dominant supplier of magnets, but as a leader in EV motor design and renewable energy technology.

Defense and Electronics: Securing the High Ground

REE innovation translates directly into military and electronic advantages.

• A single F-35 jet contains ~920 pounds of rare earths, while an Aegis destroyer needs ~5,200 pounds and a Virginia-class submarine ~9,200 pounds, according to DOD/CRS estimates.
• NdFeB and SmCo magnets are critical in missiles, radar, satellites, and guidance systems.

For consumer electronics, rare earths are just as indispensable: neodymium magnets in earbuds, smartphones, and hard drives; phosphors in displays and lighting. Here too, Chinese firms dominate patent filings and production, ensuring domestic manufacturers have first access to innovations.

As O’Connor warns:

“There is real fear in parts of Washington now that President Trump is fully aware of the magnet situation. How did leadership allow the U.S. defense sector to depend on a foreign monopoly for its most critical materials?”

Life Sciences and Advanced Materials

China’s rare earth innovation push extends even to healthcare and metallurgy.

• Gadolinium, a rare earth element, is essential in MRI contrast agents. In 2022, ~59 million gadolinium doses were administered globally. The U.S. alone performs ~40 million MRIs annually, with 30–45% using contrast.
• Other REEs like europium, terbium, and yttrium are used in fluorescent markers for disease diagnostics.
• Miniaturized devices—pacemakers, cochlear implants, surgical motors—rely on REE magnets.

China’s dominance in processing (90%) means it also controls the know-how to produce ultra-pure, medical-grade REEs. Research institutes are advancing new REE-based compounds for biotech, broadening their patent base into life sciences.

In metallurgy, rare earths like cerium and lanthanum strengthen alloys, while REE catalysts improve petrochemical efficiency. China is embedding REEs into its steel and advanced-materials innovation pipelines—ensuring its lead spreads across industrial sectors.

Innovation as Leverage

Beijing’s rare earth strategy has evolved: from simply controlling resources to actively mastering the innovations that utilize them. Patent dominance is now feeding into market dominance. China’s state-driven model of innovation—integrating academia, industry, and government—has delivered a commanding lead. Free-market competitors like the U.S. are scrambling to rebuild fragmented supply chains and reestablish R&D footholds. But the gap is wide and growing.

As O’Connor concludes:

“This isn’t a Manhattan Project moment in the West. America is stirring, but fractured and distracted. Without visionary industrial policy, our days as the world’s top economy are numbered. And the countdown has already begun.”

Conclusion

China’s head start is clear. It holds the majority of global REE patents, has locked in 90% of processing capacity, and produces nearly all of the world’s magnets. By coupling resource control with relentless innovation, Beijing is positioning itself to capture the next-generation industries powered by rare earths: EVs, green energy, defense, electronics, and healthcare.

For investors and policymakers, the lesson is stark: control of critical materials plus innovation equals long-term supremacy. Unless the U.S. and allies commit to directed, visionary industrial strategies, China’s lead may soon become insurmountable.

Sources: Rare Earth Exchanges (multiple articles in the repository); USGS Mineral Commodity Summaries (2025), IEA/Atlantic Council reports, SCMP, Lexology, CRS/DOD estimates, MP Materials filings, industry magnet data (SMM, Econofact), MRI/GBCA statistics (medical literature).

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