Highlights

• Beijing faces a strategic contradiction in 2026: control measures that suppress the dynamism needed for growth, particularly visible in rare earth export controls and magnet supply chains.
• U.S.-China compete to eliminate vulnerabilities on an 18-24 month timeline; rare earths create leverage at the magnet stage, not mining, requiring systems-level industrial response.
• Best path forward:
  • China should maintain credible but predictable leverage.
  • U.S. must build a complete magnet stack with procurement pull, not just count press-release mines.

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The Asia Society Policy Institute’s Center for China Analysis frames 2026 as a year of strategic contradiction: Beijing wants control + growth at the same time, even though the tools that increase control often suppress dynamism.

Key These Across the Report

The report’s (opens in a new tab) cross-cutting themes—control vs dynamism, security vs development, and enduring U.S.–China competition—map cleanly onto rare earths and magnets, where “administrative leverage” can shut factories faster than tariffs ever could.

A second recurring idea is that the U.S.–China relationship may sit in a tenuous truce while both sides race to eliminate vulnerabilities. The report explicitly notes China’s use of rare earths and magnets as leverage and describes Washington’s push to reduce dependence on an 18–24 month timeline—a timeline that should be treated as an aspiration, not a plan.

Opportunities for 2026

For the U.S. and allies

The opportunity is to treat rare earths like a systems problem, not a mining problem. The report highlights how “weaponized interdependence” can force leader-level negotiation—rare earths are a leverage node precisely because they sit at the magnet stage, not the deposit stage.

For China

The opportunity is to convert dominance into a durable advantage without triggering a full buyer revolt. The report’s climate chapters suggest Beijing prefers “talk less, do more” while exporting clean tech aggressively—yet also warn that backlash and trade barriers are rising as China floods markets.

Risks

Escalation spiral

The report warns that if either side reduces vulnerabilities faster, it erodes the “mutual disruption” equilibrium that is currently stabilizing relations.

China’s internal constraints

local debt, weak consumption, demographics, and a risk-averse bureaucracy could push Beijing toward sharper control—often bad news for predictable export licensing.

Global backlash

clean-tech overcapacity and export surges are already prompting barriers; rare earth leverage may accelerate “China-plus” supply chains.

Best Course of Action

China

Keep leveraging credible but avoid maximalism. Use licensing predictably, offer stable commercial terms to non-sensitive end users, and prevent export controls from becoming a self-defeating accelerant of de-risking.

USA

Stop treating rare earths as a press-release mine count. Build a magnet-first industrial stack: separation + metal + alloy + magnet + qualification. Pair capex with long-term offtakes, defense procurement pull, and allied stockpiles—because the report’s own logic suggests leverage persists until vulnerabilities are actually removed.

Source: China 2026: What to Watch, Asia Society Policy Institute, Center for China Analysis (Dec 2025).

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