Highlights
- In 1995, GM sold Magnequench to a Chinese-linked entity, giving China control over 85% of key magnetic materials used in precision-guided munitions.
- China now controls the entire rare earth magnet supply chain, impacting military systems, EV production, and critical technological infrastructure.
- The U.S. industrial strategic advantage has been dismantled through short-term thinking, potentially compromising national defense capabilities.
A gripping exposé by Michael Dunne has reignited outrage over a pivotal moment of U.S. industrial surrender: the 1995 sale of General Motors’ rare earth magnet subsidiary, Magnequench (opens in a new tab), to a Chinese state-linked entity disguised as an American investment group. Despite warnings from Pentagon officials, the deal—brokered for just $56 million—gave China control over 85% of key magnetic materials used in U.S. precision-guided munitions.
Fast forward to 2025: While Americans cheered the B-2 stealth bomber strike over Iran this month, few realized those aircraft, and the missiles they carry, are now reliant on permanent magnets sourced from China. “The U.S. cannot produce a single guided missile without China’s permission,” Dunne warns. The dependency is no longer theoretical—it’s an active national security crisis.
In May, Beijing abruptly halted exports of rare earth magnets. Ford shut down EV production lines. German manufacturers panicked. Magnosphere CEO Frank Eckard captured the moment: “The whole car industry is in full panic… they are willing to pay any price.”
This isn’t about price—it’s about power. China controls the supply chain for mining, refining, and magnet production. Meanwhile, the U.S., once a rare earth titan, has dismantled its strategic advantage through short-term thinking, environmental complacency, and an addiction to offshoring.
The implications go far beyond cars and consumer goods. Rare earth magnets are embedded in F-35 fighter jets, hypersonic missiles, submarine sonar arrays, and classified defense systems. Without them, American deterrence falters.
Rare Earth Exchanges Editorial Note:
Dunne’s piece is factual, well-sourced, and historically accurate. His warnings echo what REEx has long emphasized: without a cradle-to-factory-to-arsenal U.S. rare earth magnet strategy, America remains strategically leashed to its rival.
RARE EARTH EXCHANGES™ BIAS METER
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Source: Michael Dunne, The Magnequench Betrayal (Dunne Insights Substack (opens in a new tab))
On Dec 12, 2025 I sent an email to US Steet Board of Directors, in the email I said, this deal Japan’s Nippon Steel should not be approved. US Steel (Ticker “X”) and its Intellectual property is a Precious Company to America. If this sale goes through America will eventually lose jobs over time, and its intellectual properties and its current trade with the Americas and Europe.
In this same email, I cited the loss of the Magniquench Company to China, Please fact check my dates!
Do you recall back in 1997, China was allowed to purchase the Magniquench Company ( A Rare Earth Mineral Processing Co.) along with all of it patents, processes, and America Intellectual properties and technology to China? After the sale the entire business in the USA it was moved to China. Magniquench, then-America’s leading rare earths company, was sold to an investment consortium headed by Archibald Cox, Jr., son of the same-named Watergate prosecutor, with two Chinese state-owned metals firms, San Huan New Materials and China National Nonferrous Metals Import and Export Company.
According to geologists, rare earths are not rare, but they are precious. The answer to what appears to be a riddle lies in accessibility. Comprising 17 elements that are used extensively in both consumer electronics and national defense equipment, Rare Earth Elements (REEs) were first discovered and put into use in the United States. However, production gradually shifted to China, where lower labor costs, less concern for environmental impacts, and generous state subsidies enabled the People’s Republic of China (PRC) to account for 97 percent of global production. In 1997, Magniquench, then-America’s leading rare earths company, was sold to an investment consortium headed by Archibald Cox, Jr., son of the same-named Watergate prosecutor, with two Chinese state-owned metals firms, San Huan New Materials and China National Nonferrous Metals Import and Export Company. The chairman of San Huan, son-in-law of paramount leader Deng Xiaoping, became chairman of the company. Magniquench was shut down in the United States, moved to China, and reopened in 2003, where it fit in well with Deng’s Super 863 Program to acquire cutting-edge technologies for military applications, including “exotic materials.” This left Molycorp as the last remaining major rare earths producer in the United States until its collapse in 2015.
The sale of the North Dakota property should be stopped. I also recall when Hilary Clinton approved the sale of the USA Canadian reserves of Uranium were sold to Russia. This sale should have never happened!