Highlights

• China controls over 60% of global rare earth mining.
• China controls 90% of rare earth processing.
• China is weaponizing these critical minerals for geopolitical advantage.
• Beijing has demonstrated strategic leverage by restricting REE exports.
• These restrictions disrupt industries like automotive manufacturing and military technology.
• The study predicts China will maintain significant rare earth market dominance through 2035.
• International diversification efforts are growing, but China is expected to retain dominance.

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A new study by Péter Goreczky, Senior Research Fellow at the Hungarian Institute of International Affairs, published in the Journal of East Asia Security (Vol. 1, Issue 2, August 14, 2025), argues that China’s dominance in rare earth elements (REEs) has shifted from being merely an economic advantage to a geopolitical weapon.

Study Summary

Goreczky traces the strategic significance of rare earths back to Deng Xiaoping’s 1992 remark: “The Middle East has oil, China has rare earths.” Today, China controls over 60% of global REE mining and nearly 90% of processing, giving it disproportionate influence over critical supply chains. Rare earths are indispensable not only in consumer technologies (smartphones, batteries, medical devices) but also in military applications, including precision-guided missiles and aircraft.

The study documents how China has already leveraged this dominance:

• In response to U.S. tariffs under President Trump, Beijing imposed export restrictions on key REEs, forcing automakers such as Ford to halt production.
• The EU’s leadership, including Commission President Ursula von der Leyen, has publicly accused Beijing of “weaponizing” rare earths to undermine competitors at the 2025 G7 summit.
• While G7 nations have pledged to diversify supply chains and reshore production, the International Energy Agency projects China will still hold 52% of global mining and 77% of processing capacity by 2035

Implications

The findings underscore that rare earths have become one of Beijing’s most potent economic statecraft tools. Each time China restricts supply, it disrupts Western industry and incentivizes further decoupling. Importantly, the paper notes that China’s REE leverage mirrors U.S. dominance in the global financial system—a mutually interdependent balance that both stabilizes and destabilizes geopolitics.

For investors, this translates into heightened demand for ex-China supply diversification, particularly projects in Australia, the U.S., Africa, and South America. It also signals that volatility—both in pricing and policy—will remain a defining feature of rare earth markets for the next decade.

Limitations

While the paper provides compelling geopolitical analysis, it has several limitations:

• It focuses primarily on state-level strategies, with less attention to emerging ex-China industrial capacity and ongoing Western investment in separation and magnet production.
• The study assumes China’s dominance will remain entrenched through 2035 but does not fully weigh the disruptive potential of new technologies (recycling, substitution, and advanced separation).
• Finally, the emphasis on geopolitics may underplay the complexity of market economics, including demand elasticity and the role of private-sector innovation.

Conclusion

Goreczky’s analysis offers a stark reminder: China’s rare earth dominance is not merely an economic concern, but a structural vulnerability for the West. Yet the very act of Beijing weaponizing rare earths accelerates the diversification strategies that could, in time, erode its leverage. For retail investors, this underscores a clear takeaway—rare earths remain both a strategic choke point and a growth frontier, where geopolitical risk and industrial policy will drive market opportunity.

Citation: Goreczky, P. (2025). Weaponizing Rare Earths: China’s Strategic Leverage in a Fragmenting Global Order (opens in a new tab). Journal of East Asia Security, 1(2), 44–48.

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