Introduction
China has long regarded rare earths as its “trump card” in geopolitical competition. Its dominance extends not only to the mining and smelting separation of rare earth raw materials, but also to the global manufacturing of rare earth permanent magnet materials (such as NdFeB magnets), controlling the vast majority of global production capacity. China has attempted to use export controls as leverage in international negotiations. However, this strategy is built on a fundamental misjudgment of the essential nature of rare earths. Rare earths are not “irreplaceable strategic weapons” but rather “relatively cheap commodity supplies.” When China attempts to weaponize them, it is actually engaging in strategic self-harm.
1. Strategic Misjudgment of Rare Earth Advantages
1.1 Mistaking Production Capacity Advantage for Monopolistic Position
China indeed dominates rare earth production, with annual output exceeding 70% of the global total, and smelting separation capacity approaching 90%. However, this advantage is essentially a cost advantage rather than resource monopoly. China’s competitiveness stems from three factors: low environmental costs, extensive policy subsidies, and large production scale.
Nevertheless, global rare earth reserves are quite widely distributed. According to the U.S. Geological Survey (USGS) 2024 Mineral Commodity Summaries, global rare earth reserves total 130 million tons, with China holding 44 million tons (approximately 34%). Vietnam, Brazil, Russia, India, and Australia combined hold over 50 million tons. For example, the U.S. Mountain Pass mine (owned by MP Materials, which became the world’s second-largest rare earth producer in 2023 with 43,000 tons of rare earth concentrate, about 15% of global production), Australia’s Lynas (approximately 20,000 tons of rare earth oxides in 2023), and Canada, Myanmar, Vietnam, Brazil, and multiple African countries all possess abundant rare earth resources. These countries haven’t engaged in large-scale mining not because they lack mining capabilities, but because China has provided extremely cheap alternatives.
The root of this strategic misjudgment lies in decision-makers’ cognitive bias regarding global resource distribution, mistakenly understanding temporary market dominance as permanent monopolistic advantage.
1.2 Overestimating the Power of “Chokehold”
Chinese strategic planners view rare earths as a sustainable sanctions tool, but rare earths possess three key characteristics that prevent them from being effective “chokehold weapons”:
Substitutability: Many rare earth applications have technical alternatives. For example, NdFeB magnets can be replaced by ferrite magnets or rare earth-free induction motors. While performance differs, they are completely viable for mid-to-low-end applications. After China restricted rare earth exports in 2010, Japan accelerated R&D of magnetic materials containing no or fewer rare earths, with some high-end motors successfully achieving substitution.
Recyclability: Europe, America, and Japan have established mature rare earth recycling systems, extracting rare earths from scrapped electronic products, wind power equipment, and new energy vehicles. Taking Japan as an example, it actively promoted its “urban mining” strategy after 2010, setting ambitious rare earth recycling targets and striving to significantly improve recycling rates. With policy subsidies, these “urban mines” are completely economically viable.
Expandable Production: Rare earth mining and processing are not high-tech barrier fields. Once prices allow or political necessity arises, Western countries can rebuild considerable production capacity within 6-18 months.
2. Counter-productive Effects of Strategic Implementation
2.1 Stimulating Opponents’ De-Sinification Motivation
After China restricted rare earth exports to Japan in 2010, Japan quickly launched a diversification strategy: restarting domestic resource development, strengthening cooperation with Australia, improving recycling utilization rates, and advancing non-rare earth alternative technology R&D. The result was Japan’s dependence on Chinese rare earths dropping from approximately 90% in 2009 to below 50% by 2018.
During the 2020 US-China tech friction, the United States launched the Critical Minerals Strategic Reserve Act and released the Critical Minerals Supply Chain Strategy in 2022, directly allocating funds to support domestic rare earth industrial chain construction. For example, with government funding support, MP Materials rapidly achieved significant increases in rare earth concentrate production at the Mountain Pass mine in 2020. After resuming operations in 2017, the company reached approximately 15% of global production by 2020. Its more complex second-phase rare earth separation and refining facilities launched in 2023 and achieved record-breaking midstream separation product output in 2024. Australian rare earth companies expanded production regardless of cost under Western government subsidies, willing to sustain losses to establish independent supply chains.
Each “chokehold” attempt provided opponents with legitimate policy reasons for decoupling and gained broad support from voters and Congress.
China’s rare earth strategy actually became a catalyst for Western countries to promote industrial chain reorganization. This approach of “helping enemies make decisions” demonstrates the shortsightedness and naivety of strategic thinking.
2.2 Production Transfer Barriers Severely Overestimated
Mainstream views generally believe Western countries find it difficult to quickly rebuild rare earth production capacity, especially in high-performance rare earth permanent magnet manufacturing (such as NdFeB magnets), where China occupies over 90% of global production capacity, seemingly forming insurmountable barriers. Such analyses often base estimates on the time and cost required to build a complete “mine-to-magnet” industrial chain from scratch during peacetime, underestimating national mobilization capabilities under strategic urgency.
However, this judgment contains fundamental misconceptions: Rare earth raw material beneficiation and purification processes are not scarce, and equipment is highly universal. The processes are highly similar to other non-ferrous metals (copper, nickel, cobalt) extraction procedures, belonging to mature industrial processes. U.S. MP Materials, Australia’s Lynas, Japan’s Sumitomo and other companies already possess complete technical systems. More critically, core equipment used in rare earth industry—crushers, ball mills, flotation equipment, extraction towers—is completely interchangeable with existing non-ferrous metal industry equipment.
However, these higher barriers are being strategically overcome by the West at unprecedented speed: For example, MP Materials rapidly increased rare earth concentrate production in 2020; Japan successfully reduced dependence on Chinese rare earths by half within just two years after 2010. Recently, the United States has actively promoted domestic magnet manufacturing capability construction, with USA Rare Earth’s magnet facility in Oklahoma producing its first batch of sintered rare earth permanent magnet samples in early 2025, planning commercial production by 2026.
Chinese decision-makers’ underestimation of opponents’ industrial potential and emergency response capabilities reflects serious deficiencies in information gathering and strategic analysis capabilities.
2.3 Political Reality of Environmental Constraints
Many analyses consider environmental pressure the main obstacle preventing Western production transitions, but this ignores the relative fragility of environmental issues when faced with national security considerations. Environmental constraints mainly operate during peacetime and commercial interest calculations. However, once facing strategic threats of critical supply chain “chokeholds” or national-level industrial security challenges, Western governments will demonstrate overwhelming political will. At such times, whether environmental assessment standards or approval processes can be rapidly adjusted, simplified, or even suspended.
This incorrect assessment of Western countries’ political resilience and action capacity when responding to external shocks reflects cognitive bias in China’s strategic analysis.
3. Massive Economic Losses
China has long exported rare earth raw materials globally at extremely low prices, essentially “subsidizing the world.” It’s estimated that the export profit per kilogram of rare earth oxide is only a few yuan RMB, while high-end products manufactured from these materials—such as radar magnets, precision motors, or high-purity rare earth permanent magnets in MRI equipment—sell for thousands to tens of thousands of dollars in European and American markets, with value chain profit margins differing by hundreds or even thousands of times.
China controls the resources but gives up core profits in the value chain. When attempting to “punish” opponents through export restrictions, it actually voluntarily abandons already-occupied massive market share and hands over huge profits to competitors. This “chokehold” behavior predictably prompts opponents to accelerate seeking alternative supply chains and technologies, leading to long-term market share shrinkage for China’s rare earth industry.
The irrationality of this economic behavior is astonishing: simultaneously subsidizing opponents at below-cost prices while attempting to threaten them with supply cuts, completely contradicting basic commercial logic.
3.2 Long-term Disadvantage in Technology Accumulation
By viewing rare earths as strategic resources rather than market commodities, China’s rare earth industry has long been trapped in a vicious cycle of “low-price exports—minimal profits—insufficient technology investment.” Although China is the world’s largest rare earth permanent magnet producer, controlling approximately 90% of global capacity, it still lags behind Western leading companies in core patents for high-end magnetic materials, cutting-edge manufacturing processes, and product performance consistency.
Meanwhile, Japan, the U.S., and Europe have used China’s cheap rare earth raw materials (and Chinese-produced magnets) to establish world-leading rare earth application technologies, forming technical barriers in magnetic materials, precision manufacturing, aerospace and other fields.
China has become a “raw material and intermediate product supplier” making wedding dresses for others, rather than the value chain leader.
4. Deep-rooted Causes of Strategic Failure
4.1 Political Thinking Overriding Economic Logic
The fundamental problem with China’s rare earth strategy lies in using political competition thinking to handle economic issues. Decision-makers are obsessed with geopolitical concepts like “balance” and “deterrence,” completely ignoring market laws and economic efficiency.
4.2 Naive Understanding of International Politics
Chinese decision-makers seem to believe that controlling any resource enables unlimited international political maneuvering. This cognitive level remains stuck in 19th-century resource diplomacy thinking, completely unsuited to the complex international environment of the 21st century. The core of modern international competition is technological innovation and industrial upgrading, not resource control.
4.3 Short-sighted Strategic Planning Lacking Foresight
Each rare earth export restriction lacks long-term planning and fails to consider opponents’ countermeasures and adaptive capabilities. This lack of strategic foresight makes each “move” an opportunity for opponents to decouple.
5. A Strategic Experiment Doomed to Failure
China’s rare earth strategy can be summarized by four “cannots” that characterize its failure:
- Cannot intimidate opponents: Although production transfer barriers are high, this only stimulates de-Sinification determination
- Cannot earn real money: Voluntarily abandoning market profits and share, giving up core value chain segments
- Cannot maintain trust: Destroying international reputation as a reliable supplier
- Cannot block substitution: Prompting opponents to establish independent supply chains, losing long-term advantages
This strategic self-harm stems from three fundamental misjudgments:
- Misjudging rare earth strategic attributes: Treating commodity supply as strategic weapons
- Misjudging opponents’ countermeasure capabilities: Underestimating production transfer speed and political will
- Misjudging own real advantages: Treating cost advantages as monopolistic position
Conclusion: A Collective Exposure of Strategic Capabilities
The failure of China’s rare earth strategy is not merely a policy error, but a collective exposure of strategic thinking capabilities, international political cognitive levels, and economic decision-making rationality.
This mindset of politicizing economic tools and militarizing market competition inevitably leads to divergence between strategic objectives and actual effects. Rare earths are not China’s “nuclear weapons” but a mirror reflecting strategic capability defects.
When a country’s strategic formulation is built on systematic misjudgments of reality, each “move” may become the beginning of self-harm. China’s rare earth strategy failure provides international political science with a typical case of strategic failure: how to turn a good hand into a bad one, how to transform advantageous position into strategic disadvantage.
True strategic wisdom is not using resources at hand to threaten others, but using these resources to create irreplaceable value for oneself. Unfortunately, regarding rare earths, China chose the former and will pay a heavy price for it.
