Highlights
- China’s three-phase strategy: dominate rare earth elements, control green industries, and establish a global digital currency by 2049.
- China’s green technology dominance includes manufacturing 70% of solar panels and 50% of wind turbines globally.
- The Digital Yuan aims to challenge the US dollar’s global dominance and reshape international finance.
China’s rare earth element (REE) domination, the result of a state-directed, strategic industrial policy is but a means to a much bigger end. But what is the end game for the world’s second largest economy as measured by gross domestic product (GDP) ? A hint, it kicks in full gear by 2049.
First a refresher of how we got to our current place, summarizing a three-prong strategy to achieve the planned Chinese economic domination worldwide.
REE First
China’s strategy to control the rare earth element (REE) production market has been a multi-decade effort focused on consolidating production, investing heavily in technology, and strategically managing exports.
First the nation had to plan, execute, and secure a monopoly of production and export controls. By the 1980s and 1990s, China aggressively ramped up REE production, investing heavily in mining and refining technology while benefiting from relatively low environmental and labor regulations. And of course, an overarching, coordinating and underwriting state industrial policy.
This allowed China to produce REEs at significantly lower costs than other countries, driving many global competitors out of the market.
As China became the dominant supplier, it gained the power to set global prices and control the availability of REEs, strategically managing exports to control supply and increase demand for its production.
But more was needed, including the vertical integration plus technological investment and market position. China developed a vertically integrated REE supply chain, from mining to refining and processing, and ultimately to manufacturing REE-based products, such as magnets and electronics.
Significant investments in refining and processing technologies enabled China to produce high-purity REEs more efficiently and with less environmental impact over time, further cementing its global dominance.
But the restricting of exports, when necessary for strategic advantage, certainly becomes mission critical.
Through a series of export restrictions, including quotas and taxes (notably in the 2000s), China limited the amount of REEs that could be sold internationally. This created supply shortages and drove up global prices, pressuring foreign manufacturers to relocate to China to secure a stable supply.
Then of course in 2010, a diplomatic conflict with Japan (opens in a new tab) led China to temporarily cut off REE exports to Japan, showcasing its leverage and prompting major economies to reassess their reliance on Chinese REEs.
With dominance in hand, more lately China has imposed stricter environmental regulations on its REE mining sector, closing smaller, independent operations that contributed to pollution. This move has consolidated production under a few large state-controlled companies, which allows China to exert more control over production volumes, environmental compliance, and pricing.
But the Chinese nation did not rest on its laurels. A major ambition centered on both research and development in REE alternatives plus recycling.
China also invested in researching REE recycling methods and alternative materials, aiming to further reduce dependency on primary REE extraction while staying at the forefront of REE technology, particularly for the energy and defense sectors. Yet another area where the American government was in the best case asleep at the wheel.
Enter the Chinese so-called Belt and Road Initiative for resource security. As part of its Belt and Road Initiative, China has invested in resource-rich countries with rare earth deposits, ensuring long-term access to these resources and expanding its influence over the global REE supply chain.
This strategic control has allowed China to dominate the REE market, producing around 70% of the world's supply as of the early 2020s. The situation has pushed other countries to develop alternative sources and strategies, but China's first-mover advantage and established infrastructure have maintained its position as the key player in the REE industry.
So, What’s Next?
As it turns out, multiple experts in the field that seek to keep their anonymity shared with Rare Earth Exchanges that China’s ultimate motives are far bigger, more extensive, and ultimately more dangerous to the United States’ role as the primary superpower.
It turns out the last few decades’ move to monopolize the REE and supporting market is merely a step in a multiple phased plan to become by far the most powerful nation on the planet.
That’s because China's real aim for this next phaseinvolves the execution of a strategy to dominate green industries, focusing on becoming a leader in clean energy technology and manufacturing, securing raw materials, and influencing global policy and markets.
The main elements to this unfolding stage of the nation’s unfolding imperative includes first and foremost massive investment in green technologies and infrastructure.
China has heavily invested in the research, development, and production of green technologies, including solar, wind, hydroelectric, and nuclear energy, as well as electric vehicles (EVs) and energy storage systems.
It now manufactures over 70% of the world’s solar panels, 50% of its wind turbines, and nearly all its lithium-ion battery components, positioning itself as the key supplier for essential green technology components.
Take electric cars now. While Tesla innovated in the sector, as CBS News recently reported (opens in a new tab) last month “The U.S. blinked, and China built an electric vehicle empire.”
Lei Xing, a Chinese auto industry expert, said "They're taking over the world, except North America," said. "The U.S. will be the last frontier." And that will likely happen via Mexico.
The speed and scale of the shift propelled China past the U.S. not to mention every other nation, in the transition to electric vehicles. Now Chinese electric automakers approach the front of the pack in their bid to dominate the market for years to come. In both July and August of 2024, for example, industry data (opens in a new tab) shows that over half of total automotive sales in China were electric or hybrid.
China's No. 1 selling EV maker, BYD, looks toward Mexico to make cars for the locals, and the U.S. BYD executives have been cautious to say that they are building for export, but the location of the factory will be telling as reported by Kenneth Rapoza for Coalition for a Prosperous America (opens in a new tab).
This predominance over green industry production and sales can be thought of as phase 2 of a three phased plan to dominate all other nations economically. And this will be done by 2049, part of its 2049 Initiative (opens in a new tab).
Also, in phase 2 (currently happening now) control over supply chains and raw materials becomes a vital necessity. And as one might have already figured out, that's why China’s state planners meticulously planned and executed over decades the REE scheme.
But this control over supply chains and raw materials now must be applied for all relevant green industries, such as lithium, cobalt, nickel, and rare earth elements. Through mining investments in Africa, Latin America, and Asia, China has secured long-term supply agreements and partnerships.
Domestically, China has ramped up extraction and processing of critical minerals, like rare earth elements, needed for green technologies. By controlling these raw materials, China can dominate the supply chains for green energy technologies, particularly EV batteries and renewable energy systems.
Supportive Government Policies and Subsidies
At home, the Chinese government offers substantial subsidies, tax breaks, and low-interest loans for green industry sectors, creating an environment where green companies can thrive domestically and internationally. All done in its hybrid state and capitalist mixed economy model.
These policies extend to domestic companies expanding abroad, which are incentivized to grow and invest in foreign markets, thereby increasing China's green technology exports and influence in global markets.
Dominating Advanced Manufacturing and Economies of Scale
China continues to work furiously to perfect mass manufacturing techniques that enable it to produce green technologies at a lower cost than many competitors. Remember the goal is to dominate sales in key industries such as electric cars so the wealth accumulated can be put to use for the next phase!
This scale of production allows Chinese green tech companies to drive down prices globally, making it difficult for foreign competitors to keep up. By leveraging its extensive manufacturing infrastructure and technological advancements, China produces green technology products at a scale that few nations can rival, giving it a competitive edge.
But there is more, and even in the zone of creativity and technological disruption—areas of American ingenuity—China is moving to blow past those old dynamics.
Technological Innovation and Workforce Development
China continues to invest heavily in green technology innovation, from advanced battery storage to hydrogen fuel cells and grid management technology, to novel ways of recycling, new REE magnet production approaches and more.
Importantly the country has also built up a skilled workforce through university programs, research institutes, andpartnerships with global companies, ensuring a steady supply oftalent.
Through initiatives like "Made in China 2025," China has prioritized green industries, aiming to become a leader in high-tech green sectors by fostering innovation and ensuring continuous technological improvement.
But a whole new globalism is required for China to achieve its aims. And perhaps this is why countries like the UK and America now have moved away from the post-World War 2 global order, toward a new nationalism (think Trump and MAGA as an example).
Chinese Global Market Penetration and Diplomatic Influence
Chinese green tech companies are expanding aggressively into international markets through joint ventures, acquisitions, and strategic partnerships, especially in developing countries where energy demand is high. These relationships are vital, and the money accumulated, the growing sales and the future upside all become too enticing for many companies in numerous impacted industries.
Enter China’s Belt and Road Initiative (BRI) projects, as well as other endeavors, which fund green energy infrastructure in participating countries.
Through these partnerships, China not only builds influence but also creates dependencies on Chinese green technology, which further cements its position in global green energy supply chains.
But a unifying driving ideology must persist to drive international collaboration.
Commitment to Climate Goals and Policy Influence
It’s a commitment to a green transition, reduction in greenhouse gases, and a race to avoid losing planet earth, perhaps higher order ideology necessary for China to execute its ultimate aims.
China has committed to peak carbon emissions by 2030 and carbon neutrality by 2060, setting ambitious national goals that align with global climate action. By being a major player in climate policy discussions, China influences international standards, often to its advantage, given its vast green technology industry. Nearly every other developed nation will follow, perhaps not the USA however should Donald Trump enter power again. A disruptive impediment? Probably not given how late we are in this unfolding plan.
China's leadership role in organizations like the International Renewable Energy Agency (IRENA) and participation in global climate summits enables it to push policies and standards that promote its green industries.
Importantly, through this multifaceted strategy, China has achieved a dominant position in green industries, especially in renewable energy technology and EV supply chains. As demand for green technology grows globally, China’s early investments and control over supply chains and resources are likely to strengthen its influence in the sector.
Rare Earth Exchanges has emphasized in this article that China embraced a three-phased approach to achieve its ultimately 2049 aims. Phase 1 was to essentially monopolize the REE supply chains with phase 2 dominating the green industries, using the vast proceeds to fund the next phase.
The Final End Game
So, the capture of REE supply chains, then green industries (think solar, wind, electric cars, etc.) paves the way for the final phase which all comes together in 2049.
In the China 2049 strategic vision that nation is to become the world’s leading superpower, including ambitions that could potentially replace the U.S. dollar’s dominance in global trade with a Chinese digital currency. In fact, that’s the finalchapter, the replacement of the dollar in a new digital currencyorder.
China has been proactive in developing and promoting its digital currency, the Digital Yuan (or e-CNY), as a potential vehicle for reshaping global finance in favor of the Chinese renminbi (RMB). Here are key components of how this aligns with the broader China 2049 strategy:
China was one of the first major economies to develop a central bank digital currency (CBDC), with the Digital Yuan now in an advanced stage of testing and limited deployment. Unlike most digital assets, the Digital Yuan is fully backed by the People’s Bank of China (PBOC), giving it the stability of a sovereign currency.
By establishing a widely used digital currency, China aims to challenge the U.S. dollar’s dominance in global transactions and reduce dependency on the SWIFT system, which is heavily U.S.-influenced and dollar-centric.
Some key aims as we approach that final phase to consider:
Reducing Dependency on the Dollar in International Trade
China has promoted the use of the Digital Yuan in trade agreements, particularly through initiatives with Belt and Road Initiative (BRI) countries. By offering a more accessible, digital currency-based alternative for trade, China seeks to make its currency attractive for international payments, bypassing the dollar where possible.
This is especially significant in regions where Chineseinvestments and loans are high, such as in Asia, Africa, and Latin America, which depend on dollar-denominated trade. The Digital Yuan could streamline payments and reduce reliance on the dollar by offering a cheaper, faster alternative.
Avoiding U.S.-Led Financial Sanctions
A digital currency that operates independently of U.S. financial institutions would make it easier for China and other countries to sidestep U.S.-led sanctions. This would be advantageous for nations that want to avoid dollar-based transactions due to political tensions or sanctions.
By leading in digital currency technology, China may set a precedent for alternative financial systems that can be adopted by other countries that also seek financial independence from the dollar system.
Digital Yuan’s Integration with Other Digital Currencies and Blockchain Projects:
China has encouraged the integration of the Digital Yuan with blockchain technology for international finance, piloting cross-border payments in collaboration with multiple central banks, including those in Thailand and the United Arab Emirates. Such initiatives enhance the credibility and appeal of the Digital Yuan for cross-border transactions, setting the foundation for greater adoption.
As the use of digital currencies rises, China hopes to be at the forefront by offering a government-backed alternative that aligns with other nations’ interests in modernizing and digitizingfinancial systems.
Setting New Standards in Digital Currency Regulation and Infrastructure
By being a first mover in digital currency issuance, China can influence global standards for CBDCs, especially as the International Monetary Fund (IMF) and Bank for International Settlements (BIS) investigate regulations and frameworks for these currencies.
If China’s infrastructure and technology for the Digital Yuan become international benchmarks, it could standardize RMB-friendly protocols, making the Chinese currency easier to adopt globally.
WhileChina hasn’t explicitly stated that its goal is to “replace” the U.S. dollar, these strategies within China 2049 reveal intentions to erode the dollar's dominance and establish a more multipolar financial system. But this is not a static world, and just as some countries can move forward, others can move backward. The U.S. top superpower position because of this multi-phased Chinese approach becomes ever more at risk.
With vast wealth accumulated from the previous two phases, the Digital Yuan plays a central role in this strategy, providing China with a way to increase the RMB's presence in global finance and diminish the dollar's supremacy in the coming decades.
If theU.S. seeks to counter this increasingly eventual reality any number ofdisruptive, unexpected, likely crises-driven dynamics must emerge,evolve, and ultimately direct the forces of political economy toward a different trajectory.
Daniel
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