Highlights

• SCMP's coverage of China's rare earth strategy understates reality—Beijing controls 92% of global magnet production and uses targeted export restrictions on separation technology and heavy rare earths rather than broad embargoes.
• China's export controls are a pre-emptive strategy, not reactive diplomacy, designed to preserve magnet manufacturing dominance, pressure U.S. allies economically, and slow Western supply chain diversification efforts.
• Investors should monitor Dy/Tb pricing volatility and magnet alloy availability as China may weaponize rare earth access if the U.S. tightens AI chip restrictions, while Western alternatives remain 10+ years away.

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The South China Morning Post’s (SCMP) latest explainer (opens in a new tab) on China’s rare earth leverage tries to present a balanced portrait of Beijing’s export-control strategy. Drawing on Morgan Stanley’s report (opens in a new tab) Navigating China’s Export Control Playbook and Market Impact, the article argues that China’s use of critical-material restrictions is “measured,” “calibrated,” and designed to reshape U.S.-led tech restrictions rather than ignite a full-blown commodities war.

That may be partially true—but investors should read this piece as a carefully moderated window into a much harder geopolitical reality.

Behind the “Measured Assertiveness” Narrative

First Rare Earth Exchanges suggests China’s tools are not hypothetical. SCMP is correct that China now wields rare earth controls with more confidence than it did in 2010 or during the early stages of the U.S.–China trade war. And yes, the new controls—especially the April 2025 dual-use technology restrictions—are structured, legalistic, and intentionally asymmetric.

Where the article softens the edges:

China doesn’t need to launch broad embargoes. It simply needs to restrict magnet-grade metals, separation know-how, equipment, and heavy rare-earth feedstock to create pain points for the West. These levers remain fully intact despite talk of an October “pause.”

Reciprocity Framed as Moderation

The framing suggests Beijing reacts only when provoked—mirroring the U.S.’ “small yard, high fence” model. Yet in practice, China’s export-control logic is not merely reciprocal. It is pre-emptive, designed to:

• Preserve China’s dominance in magnet manufacturing,
• Force U.S. allies to weigh economic cost vs. security alignment,
• And slow Western re-industrialization by constraining upstream capacity.

This is strategy, not tit-for-tat diplomacy.

The Silence That Speaks Loudest

SCMP does not address several critical facts:

1. China controls ~92% of global NdFeB magnet output, including downstream alloys.
2. Heavy rare earth separation outside China remains embryonic.
3. Western diversification efforts—Brazil, Australia, U.S.—are promising but may take 10+ years.
4. Export controls on know-how, machinery, and intermediate alloys are far more damaging than raw-ore restrictions.

Omitting these points leaves readers with a softened impression of the stakes.

What Investors Should Watch

If the U.S. or its allies tighten lithography or AI chip restrictions, Morgan Stanley suggests China may target those nations’ rare earth imports. For REE investors, that means potential volatility in:

• Dy/Tb pricing,
• magnet alloy availability,
• and strategic movement among Western OEMs seeking non-Chinese supply.

Source: South China Morning Post, Kandy Wong, Nov. 12–13, 2025

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