Highlights

• In 2024, China stopped disclosing rare earth mining quotas, using this opacity as geopolitical leverage and forcing markets to assume worst-case scenarios.
• A peer-reviewed study indicates that quota nondisclosure leads to price spikes, precautionary stockpiling, and costly diversification policies, even without actual supply cuts.
• China controls 85% of global rare earth processing, creating strategic uncertainty that may be most impactful before alternative capacities scale in the 2030s.

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In an October 2025 peer-reviewed study (opens in a new tab) published in the Journal of Chinese Political Science, Dwayne Woods, Professor Emeritus at Purdue University, argues that China’s dominance in rare earth processing no longer relies primarily on cutting supply, but on withholding information. The paper, “The Power of Withholding: Rare Earth Quotas and Informational Statecraft in China,” shows how Beijing’s decision since 2024 to stop publicly disclosing rare earth mining and refining quotas has itself become a form of coercive leverage, forcing governments and companies to assume worst-case scenarios and act defensively even when no formal restrictions are announced.

For new readers, the core idea is simple but unsettling: uncertainty itself can move markets and policy as powerfully as embargoes.

How the Study Was Built

Woods combines political-economy theory with empirical analysis. He constructs:

• A new dataset of China’s rare earth quota announcements from 1990–2025, identifying a clear structural break from transparency to nondisclosure beginning in 2024.
• A game-theoretic signaling model demonstrating how silence can function as a strategic signal.
• Empirical evidence linking quota nondisclosure to price volatility, precautionary stockpiling, and industrial policy responses in the United States, Europe, and Japan.

Rather than asking whether China reduced supply, the study examines how markets and governments respond when they cannot observe China’s intentions.

What the Study Finds

For three decades, China regularly published rare earth quotas, providing foreign buyers with limited but valuable visibility into supply. That practice ended in 2024. According to Woods, nondisclosure pushes foreign actors into a pooling equilibrium: they cannot distinguish whether China is strong or constrained, so they behave as if China is strong.

The effects are observable:

• Price spikes in key rare earths—such as dysprosium and terbium—follow missed announcements rather than confirmed quota cuts.
• Precautionary stockpiling by firms and governments.
• Costly industrial policies—subsidies, diversification programs, and recycling investments—triggered by uncertainty rather than material shortages.

China, meanwhile, avoids the legal and diplomatic costs associated with overt embargoes or WTO disputes.

Why Rare Earth Processing Is Central

The author’s paper reinforces a critical supply-chain reality: China’s leverage comes less from mining than from processing and separation, particularly for heavy rare earths. As of 2023, China processed roughly 85% of global rare earth output and nearly all heavy rare earth separation, making opacity especially powerful.

Woods argues this is deliberate. Quota secrecy is layered with export controls, technology restrictions, and patent opacity—creating an ecosystem where information asymmetry amplifies material dominance.

Implications—and Why This Matters

While not really new information for the _Rare Earth Exchanges_™ community, for other policymakers pondering this topic, the implication is stark: diversification costs are being incurred even without supply cuts. For investors, the message is clear: volatility can be policy-driven without being volume-driven.

The study suggests China’s informational leverage is strongest in the late 2020s to early 2030s, before alternative processing capacity meaningfully scales outside China.

Limitations and Debate

This is not a prediction of permanent Chinese dominance. The model assumes rational, risk-averse foreign actors and does not forecast exact prices. Critics may argue markets adapt faster than the paper suggests or dispute the magnitude of price effects.  The moves by President Trump, while not sufficient in our opinion, are notable and palpable and need to be considered in forecasts.

Still, the central claim—that opacity itself functions as power—is difficult to dismiss.

Bottom Line

Woods’ study reframes rare earth geopolitics. The contest is no longer only about tonnage or tariffs—it is about who controls expectations. In a world dependent on Chinese rare earth processing, silence has become a strategic signal—and a costly one for everyone else.

Source: Dwayne Woods (2025), The Power of Withholding: Rare Earth Quotas and Informational Statecraft in China, Journal of Chinese Political Science. https://doi.org/10.1007/s11366-025-09922-9 (opens in a new tab)

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