Highlights

• A 2026 Griffith Asia Institute study reveals:
  • China's dominance stems from controlling 90% of rare earth refining and 94% of magnet production—not just mining.
  • This dominance is a deliberate, decades-long strategy reinforced by extraterritorial export controls.
• Western supply chain diversification efforts focused solely on new mines will fail without:
  • Parallel investment in separation, refining, and magnet manufacturing.
  • Addressing true chokepoints where China holds decisive power.
• Effective U.S. response requires:
  • Allied coordination and systematic support across the entire processing value chain.
  • Permitting reform and workforce development.
  • Recognition that America's fragmented governance may only enable such changes under severe crisis conditions.

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A new 2026 policy study led by Christoph Nedopil of Griffith Asia Institute (opens in a new tab), with co-authors Jean Dong University of Melbourne; Harvard Kennedy School and Hui Feng, Griffith University, concludes that China’s dominance in rare earth element (REE) processing is not accidental, temporary, or easily reversible—but the product of a long-running, coordinated national strategy that continues to strengthen despite Western trade pressure. The paper, China: Staying the Course (opens in a new tab), finds that while China mines roughly 70% of global rare earths, its true leverage lies downstream: about 90% of global refining and ~94% of permanent magnet production, giving Beijing decisive influence over materials essential to electric vehicles, wind turbines, semiconductors, and defense systems.

Study Methods and Scope

The authors conducted a qualitative policy and economic analysis spanning 2024–2025, drawing on trade data, industrial capacity metrics, export-control announcements, and China’s industrial planning documents, including the 15th Five-Year Plan. The study situates rare earths within a broader assessment of China’s regional diplomacy, technology policy, green transition, and currency strategy, emphasizing supply-chain control as a tool of statecraft.

Key Findings: Processing Is the Power

The study’s central finding is stark: control of processing—notmining—defines modern resource power. China has builtvertically integrated REE value chains, reinforced by export controls that extend extraterritorially, requiring licenses for products containing even trace amounts of Chinese-origin rare earths or Chinese processing technology. In 2025, these controls created immediate disruption risks for U.S., Japanese, and European manufacturers—demonstrating that downstream chokepoints can de-escalate trade conflict as effectively as tariffs.

Implications for Markets and Policy

For industry and investors, the implications are profound. Efforts to diversify supply that focus only on new mines—without parallel investment in separation, refining, and magnet-making—are unlikely to reduce dependence. For governments, the study suggests that China is shifting from rule-taker to rule-shaper in critical minerals, using processing dominance to shape trade outcomes. For clean energy and defense supply chains, China’s position makes it simultaneously indispensable and strategically assertive.

Limitations and Contested Issues

The study is a policy brief, not a quantitative market forecast. It does not model alternative supply scenarios or fully assess the pace at which non-Chinese processing could scale if capital, permitting, and technology barriers were addressed. Critics may also argue that export controls risk accelerating long-term diversification—though the authors suggest China’s lead remains measured in decades, not years.

REEx Reflections

Rare Earth Exchanges™ has consistently argued that effective U.S. industrial policy for rare earths must be allied, integrated, and boringly systematic—the opposite of episodic crisis response. That means tight Five Eyes–North America, European–Japan alignment, common standards and uniform pricing signals to de-risk investment, direct support not just for mining but for refining, separation, alloying, and custom magnet manufacturing, and a serious workforce strategy spanning metallurgists, chemical engineers, tool-and-die specialists, and magnet technicians. It also means matrix planning of inputs—reagents, solvents, acids, metals, energy, water—because rare earths fail not at the mine but at the chemistry bench.

On permitting, REEx has pushed for rationalization: fewer agencies, clearer lead authority, parallel reviews, and fixed timelines—without abandoning environmental standards. By contrast, Trump’s approach has emphasized tariffs, executive pressure, episodic funding with some direct equity in companies via emergency declarations, and rhetorical urgency—useful for signaling resolve, but weak on institutional build-out and allied coordination.

The delta is structural: REEx advocates durable systems (but a profound, even radical change from where we are at today); Washington defaults to transactional fixes, some industrial policy, and theatre.

Plus, the deeper problem is cultural and legal—America’s fragmented governance, litigation risk, and budget cycles, and highly polarized body politic make sustained industrial policy politically hard unless a severe, visible crisis forces alignment. And it will have to be significantly more severe than the situation today.  History suggests the system changes only under duress; until then, incrementalism prevails—even when the strategic math is already clear.

Conclusion

The authors’ message is clear: the rare earth challenge is not about geology—it is about industrial depth and policy consistency. Until competing economies build comparable downstream capacity, China’s grip on rare earth processing—and the leverage that comes with it—will remain a defining feature of the global materials economy. And unfortunately, conditions will likely need to markedly worsen before the necessary policy framework is ready for acceptance.

Citation: Nedopil, C., Dong, J., & Feng, H. (2026). China: Staying the course. Griffith Asia Pacific Strategic Outlook. DOI: 10.25904/1912/5890.