Highlights

• Asia Society's China 2026 report confirms China's rare earth policy is embedded in its centralized governance model, treating supply chains as instruments of state power rather than market commodities.
• Beijing's dominance in rare earth separation, refining, and magnet production represents an operational binding constraint across defense, energy transition, and advanced manufacturing sectors.
• Western diversification efforts face a stark reality: China is aggressively entrenching upstream and midstream control globally, while the U.S. and allies still lack matching mines, processing plants, and sustained capital.

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The Asia Society Policy Institute’s China 2026: What to Watch (opens in a new tab) report is not a forecast in the conventional sense. It is a diagnostic. By framing China’s trajectory around unresolved dilemmas—control versus dynamism, security versus growth, self-reliance versus openness—it offers investors and policymakers a clearer lens into how Beijing is likely to behave in strategic sectors, including rare earths and critical minerals, even when those sectors are not explicitly foregrounded.

What the Report Gets Right

The report correctly emphasizes that China’s system is neither collapsing nor unstoppable. It is adaptive, resilient, and increasingly centralized around Xi Jinping’s core priorities: national security, technological self-reliance, and Party control. Those priorities directly shape rare earth policy. Export controls, licensing regimes, industrial consolidation, and downstream capacity expansion are not ad hoc tools; they are expressions of a governance model that treats supply chains as instruments of state power.

Equally sound is the report’s conclusion that U.S.–China competition is now structural, not episodic. Rare earths repeatedly surface as leverage points in trade and technology disputes, including the 2025 flare-ups that forced Western manufacturers to confront their dependence on Chinese separation, refining, and magnet capacity. The report’s emphasis on “managed competition” aligns with what Rare Earth Exchanges has tracked: Beijing favors calibrated pressure over disruption—but only when leverage is secure.

Where Analysis Becomes Abstract

Where the report drifts is in treating critical minerals as one variable among many. Rare earths are not merely another sector; they are a binding constraint across defense, energy transition, advanced manufacturing, and pharmaceuticals. The report’s high-level framing sometimes underplays how asymmetric this constraint remains. China’s dominance in separation, refining, and magnet production is not theoretical—it is operational and immediate.

Similarly, while the report characterizes China’s green mining and clean-energy diplomacy as cautious, it may understate how aggressively these platforms are being used to lock in upstream and midstream control across Africa, Latin America, and parts of Southeast Asia—often well ahead of Western capital and permitting timelines.

Why This Matters for the Rare Earth Supply Chain

The takeaway for investors is stark: China’s rare earth strategy is embedded in its political system, not contingent on market logic. The same forces that drive loyalty-first governance, industrial planning, and security-first policy also drive export controls and supply-chain weaponization.

For the U.S. and its allies, the report indirectly reinforces an uncomfortable truth: diversification will not come from rhetoric or alliances alone. It will require mines, processing plants, magnet factories, and sustained capital, built faster than Beijing can tighten control.

REEx Take

China 2026 is sober, well-sourced, and largely accurate—but its implications for rare earths are sharper than it admits. Beijing is not hedging; it is entrenching. Investors should read this report not as a map of uncertainty, but as confirmation that critical minerals remain one of China’s strongest cards—and one the West has yet to match.

Source: Asia Society Policy Institute, China 2026: What to Watch, December 2025.

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