Highlights
- China controls approximately 90% of heavy rare earth production and 80% of global rare earth magnet output.
- Hudson Institute report highlights China’s bureaucratic strategies to manipulate rare earth element exports and technology access.
- Growing geopolitical tensions and supply chain vulnerabilities pose significant risks for global manufacturing and technology sectors.
William Chou’s July 2025 policy memo (opens in a new tab) for the Hudson Institute (opens in a new tab), “China’s Bureaucratic Playbook for Critical Minerals,” lands like a warning shot aimed at Western complacency. The document is not subtle, casting China as a master manipulator of rare earth supply chains, leveraging bureaucratic slow-walking and export controls to extract foreign technology, dominate downstream manufacturing, and inflict economic pain.
But how much is fact, and how much is framing? What should investors interpret when considering the critical minerals landscape?
On the Money
Chou’s core data points are broadly accurate:
- China controls ~90% of heavy rare earth production and ~80% of global rare earth magnet output.
- The 2010 Senkaku Islands export freeze and the 2023 gallium/germanium restrictions are well-documented coercive precedents.
- The April 2025 export restrictions on seven rare earths (e.g., dysprosium, terbium, scandium) were confirmed by Reuters and Bloomberg.
- The memo notes Ford’s Chicago plant shutdown in May due to shortages of rare earth parts—a real and serious signal of supply-chain fragility.
Assessing the Situation
Chou’s claim that Beijing’s Ministry of Commerce (MOC) demands blueprints, product photos, and full supplier data as part of export license applications, allegedly to steal technology, is sourced to anonymous industry reports. It’s plausible—but lacks official documentation. Rare Earth Exchanges (REEx) has been informed by direct sources on condition of anonymity that this, in fact, is going on. Similarly, the assertion that China may deliberately favor Germany over Japan in gallium exports to divide allies is intriguing, but unconfirmed.
The memo’s suggestion that automakers might be forced to send American engines to China for magnet installation is likely extreme, but it highlights the squeeze.
Directional Framing
This is not a neutral report. The Hudson Institute’s framing is overtly hawkish, tied closely to the Trump administration’s narrative of trade decoupling and reindustrialization. Nearly every fact is presented through the lens of Chinese coercion. There is minimal exploration of why China may act in this manner (e.g., as retaliation for chip bans or as a continuation of industrial policy), nor any introspection on Western market failures to diversify supply chains earlier.
Nor is there any criticism of the political and economic elites who have greatly benefited from the outsourcing of critical minerals over the last few decades.
That said, Chou does cite legitimate developments: the Quad Critical Minerals Initiative, U.S. executive orders on mining, and DoD funding for Lynas and NioCorp—steps that validate the urgency of his warnings. The output was authored and published before the big MP Materials and Department of Defense deal was announced.
REEx Investor Takeaway
Retail investors should read this memo as both a signal and a strategy. While the Hudson Institute paints in sharp nationalist tones, the underlying data—on supply concentration, bureaucratic risk, and geopolitical chokepoints—is real. Chou may overstate China’s monolithic intent, but he’s right to warn: in rare earths, access can be revoked overnight.
Key Questions:
- Can alternative refining capacity (e.g., in Texas, Saudi Arabia) come online before another Beijing clampdown?
- Will allied cooperation survive Chinese wedge strategies?
- Could U.S. policy overcorrect, raising costs without securing new capacity?
REEx will continue to monitor the trends for investors.
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