China's Rare Earth Warning Shot: Beijing's Scientists Confront the Costs of Great Powers Era 2.0 Race

Highlights

• China's rare earth export volumes rose 19% from 2023–2025, yet total export value fell 19%, with average prices dropping 32%—squeezing industry margins.
• Export controls on dysprosium, terbium, and yttrium have sharply reduced shipments to the US and Japan, reshaping global rare earth trade patterns.
• Chinese researchers flag growing upstream vulnerability, especially dependence on heavy rare earth feedstocks from conflict-prone Myanmar.
• Leading Chinese scientists now recommend stress-testing import disruptions, building substitution strategies, and shifting toward higher-value components over commodity exports.
• The competition has evolved beyond mining: control of entire industrial ecosystems, not just raw resources, now defines geopolitical advantage in the rare earth sector.

A new study (opens in a new tab) from researchers at the Chinese Academy of Sciences offers a revealing look into how Beijing views the rapidly changing rare earth landscape. Using monthly Chinese customs data from 2023–2025, the authors conclude that China remains dominant in rare earth processing and magnet manufacturing but faces mounting pressure from supply-chain diversification efforts, export-control policies, geopolitical tensions, and growing uncertainty surrounding upstream feedstock supplies, particularly from Myanmar. Their core finding is striking: China is exporting more rare earth products by volume while capturing less value from those exports, raising questions about the long-term sustainability of its current position.

The Numbers Behind the Concern

The researchers identify three major trends. First, China continues to dominate the smelting, separation, and functional materials segments of the rare earth value chain while remaining dependent on imported ores and partially processed feedstocks.

Second, China's export controls on medium and heavy rare earths have significantly altered trade patterns with the United States and Japan. Exports of dysprosium-, terbium-, and yttrium-related products to those markets have fallen sharply, with dysprosium and terbium exports nearly disappearing.

Third, China's export success is becoming less profitable. Between 2023 and 2025, export volumes increased 19%, yet total export value declined 19%, producing a 32% decline in average export prices. Meanwhile, average import prices increased 22%, compressing margins across the industry.

REEx Great Powers Era 2.0: The Game Has Changed

What makes this paper especially notable is its repeated use of the term "great-power competition." Rare Earth Exchanges® coined a term describing the world as entering the Great Powers Era 2.0, where industrial capacity, strategic minerals, manufacturing ecosystems, logistics corridors, and technological sovereignty increasingly determine geopolitical power.

The acceleration of this trend—particularly under President Trump's renewed emphasis on reshoring, tariffs, critical mineral security, defense industrial policy, and supply-chain resilience—has fundamentally altered the strategic environment.

Ironically, this emerging order creates new challenges for China as well. For decades, China benefited from a globalized system that allowed it to import raw materials, dominate processing, and export value-added products. Today, governments across North America, Europe, India, Japan, Australia, Southeast Asia, and the Gulf states are investing heavily in alternative supply chains. At the same time, China's own upstream vulnerabilities are becoming more visible, particularly its dependence on heavy rare earth feedstocks from conflict-prone Myanmar.

The authors' concerns mirror this reality. They recommend element-by-element resource security assessments, import-disruption stress testing, substitution strategies, inventory management systems, and movement into higher-value components and systems rather than relying primarily on commodity exports.

The Bigger Signal

Perhaps the most important takeaway is not the trade data itself. It is the recognition by leading Chinese researchers that rare earth competition has evolved beyond mining and processing. The contest is increasingly about control of entire industrial ecosystems.

That is precisely the central thesis of Great Powers Era 2.0.

The battle for rare earths is no longer about who owns the resources. It is about who controls the supply chain, captures the value, and ultimately sets the rules.

Authors: Zhao Shen, Tang Linbin, Wang Lu, Chen Weiqiang

Institutions: Ganjiang Innovation Academy, Chinese Academy of Sciences (Ganzhou); Institute of Urban Environment, Chinese Academy of Sciences (Xiamen); University of Chinese Academy of Sciences (Beijing)

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