Highlights

• China controls over 60% of global rare earth production and 80% of processing capacity, leveraging a near-monopoly across tech, clean energy, and defense industries.
• The country's REE supremacy is built on cheap labor, advanced extraction technologies, state-backed interventions, and strategic geopolitical positioning.
• Despite environmental challenges, China continues to strengthen its global rare earth element market control through selective export policies and technological innovation.

Saurav Shukla, Assistant Manager at Eastern Coalfields Limited (ECL); former consultant at PwC and Hindustan Zinc Ltd last year articulates (opens in a new tab) that China’s rare earth element (REE) dominance stems not only from its natural endowment but also from its advanced processing technologies, regulatory strategies, and integration of environmental and geopolitical tools to consolidate global market power.

As Rare Earth Exchanges readers know, China commands over 60% of global REE production and more than 80% of processing capacity, leveraging this near-monopoly to shape supply chains and pricing. The country’s reserves—approximately 44 million metric tons—are distributed across six strategic provinces, with Inner Mongolia’s Bayan Obo mine alone producing 70% of national output.

China excels not in mining alone but in value-added processing, employing cutting-edge separation methods like solvent extraction, plasma smelting, and bioleaching to transform raw ores into high-performance inputs for clean energy, defense, and tech industries.

Factors of Production

This dominance is undergirded by cheap labor, subsidized electricity, and extensive infrastructure. Shukla highlights that even as the U.S., EU, and Australia scale mining, they remain reliant on China for refining. China’s control is also geopolitical: in 2010, a temporary REE export ban to Japan over territorial disputes sent global prices soaring. Export quotas, selective bans on strategic elements like dysprosium and terbium, and state-backed supply chain interventions further entrench China’s leverage.

Externalities

However, this supremacy comes at an environmental cost. The author documents widespread contamination, deforestation, and soil degradation linked to mining, particularly from in-situ leaching. While China has strengthened environmental regulations, invested in green extraction technologies, and expanded REE recycling (projected to meet 25% of domestic demand by 2025), long-term issues persist—especially radioactive waste management and HREE resource depletion.

Resilience Necessary

Shukla warns that global clean energy ambitions may remain tethered to China unless nations invest seriously in processing infrastructure, recycling, and upstream diversification. As demand for neodymium and dysprosium grows, China’s grip could tighten further—unless matched with equal technological and strategic resolve elsewhere.