How Did China Become a Global Monopoly in Rare Earth Elements?

Rare earth elements have become indispensable inputs for critical sectors such as electric vehicles, semiconductors and defense technologies, positioning themselves at the center of global power competition. Control over the extraction, supply and processing of these strategic elements provides countries with both economic and geopolitical advantages. In this context, Çin has transformed into a global superpower in rare earth elements, thanks not only to its rich reserves but also to the policies it has implemented.

ABD Geological Survey (USGS) estimates that China alone holds approximately 44 million tons of global reserves, accounting for nearly half of the world’s total. According to the Guangzhou Institute of Geochemistry, this figure is around 50 million tons. These figures establish China as the clear global leader in rare earth element reserves, followed by Brazil with 21 million tons and India in third place with only about 6.9 million tons.

China’s dominance in rare earth elements is also evident in its production capacity. China has long maintained its position as the world’s largest producer of rare earth elements. In 2011, China’s share of global production reached nearly monopolistic levels of 97%, but due to increased global investment, this share has recently declined to approximately 60%. Despite this decline, China remains a decisive actor in the sector.

On the other hand, China continues to maintain absolute dominance in the processing of rare earth elements. According to the International Energy Agency (IEA), China controls 91% of global processing capacity. In other words, the vast majority of rare earth elements mined worldwide ultimately depend on China for processing. Thus, China effectively controls an extremely broad range of industries, from electric vehicles and wind turbines to military systems and smartphones.

Although China is now clearly dominant in rare earth elements, the sector developed for decades under U.S. control following the discovery of the Mountain Pass mines in California in 1949. According to Mark Smith, former CEO of Molycorp, which operated Mountain Pass, Chinese experts conducted numerous visits to the facility starting in the 1960s to closely examine its production technology. This knowledge base laid a critical foundation for China’s later development of highly efficient processing techniques and integrated supply chain models.

Acknowledging that it lagged behind developed countries in this strategic field, the Beijing government expanded cooperation with foreign nations beginning with the Mountain Pass visits. As part of joint research with Inoue Japax Research in 1979, Chinese engineers acquired technical knowledge from Japanese experts, and relationships established with various countries in the 1990s further enhanced China’s technical capacity. Thanks to this multi-source knowledge accumulation, China’s rare earth element production increased annually by an average of 40%.

The most important figure in this process is Xu Guangxian, regarded as the architect of China’s rare earth industry. After receiving education in the United States, Xu Guangxian served in China’s nuclear weapons program but was sent to a forced labor camp under suspicion of espionage by Mao Zedong. After being released in 1972, he redirected his work toward rare earth elements and played a decisive role in both advancing technical capacity and encouraging state strategic investment in the field. Thus, the scientific foundation for China’s subsequent global dominance was laid.

The Chinese government’s support for the sector became institutionalized from the 1980s onward. Launched in 1986, Program 863 aimed to achieve breakthroughs in advanced technologies to strengthen China’s economic and strategic position. Under this program, rare earth elements were recognized as a field of high strategic value for China’s long-term development. Launched in 1997, Program 973 further enhanced knowledge accumulation by promoting scientific research across multiple fields, including rare earth elements.

During this period, China leveraged low-cost electricity, inexpensive labor and lax environmental standards to rapidly establish hundreds of mines and processing facilities. The strategic importance China attached to rare earth elements was clearly articulated in 1992 by President Deng Xiaoping, who stated, “The Middle East has oil; China has rare earth elements.” This remark clearly signals that rare earth elements are viewed as one of the foundational pillars of China’s future economic and geopolitical power.

China’s progress in this field continues through recent planning and regulation. The Rare Earth Elements Industry Development Plan (2016–2020), issued in 2016, aligned with China’s 13th Five-Year Plan, set goals for new discoveries, resource management, strengthened environmental standards and securing the use of rare earth elements in strategic sectors. The Rare Earth Elements Regulation, effective since October 2024, has tightened state control over all stages from mining to production.

Another fundamental pillar of China’s dominance in rare earth elements is the support provided by state-funded R&D investments in production and processing. Between 1950 and 2019, China obtained nearly 26,000 patents in the rare earth sector, placing it at the top. During the same period, Japan obtained about 14,000 patents and the United States around 10,000. These R&D activities have not only strengthened China’s production and processing capabilities but also elevated it to a position of setting technological standards.

An important factor in China’s rise to leadership in the rare earth sector was its ability to curb widespread illegal mining and smuggling activities until the mid-2000s. In 2008, approximately one-third of China’s rare earth exports were illegally shipped out of the country. This situation not only caused state revenue losses but also created price instability in global markets, weakening China’s strategic advantage.

Seeking to eliminate illegal mining and bring the sector under full control, China launched a sweeping consolidation effort that fundamentally transformed the rare earth industry. Hundreds of small, unregulated mines were shut down, and the sector was reduced to six state-controlled companies known as the “Big Six.” This allowed China to effectively limit smuggling and gain far more efficient control over production, pricing and exports.

One of the factors strengthening China’s global power in rare earth elements is its vigorous support for industries that heavily rely on these elements, rapidly expanding its own high-tech ecosystem. For example, China is the clear global leader in electric vehicle production, one of the most critical applications of rare earth elements. In 2024, more than 70% of all electric vehicles produced worldwide were manufactured in China. This demonstrates that China has integrated rare earth elements as a fundamental component of its expanding domestic technological industry.

China’s strong support for these sectors has, despite its rich reserves, turned the country into a net importer of rare earth elements. In 2024, China imported approximately 129,500 tons of rare earth elements valued at $1.5 billion, while its exports were limited to only 17,700 tons. Myanmar is the leading source of China’s imports, and Chinese companies have shifted production to Myanmar since 2016 due to stricter environmental policies, increasing this dependency. Meanwhile, China’s intensive mining activities in the region have severely polluted the Mekong River with toxic metals.

China is also strengthening its access to rare earth elements through mines and logistics routes in Africa. China plays an active role in mining operations in countries such as the Democratic Republic of the Congo, Mozambique, Tanzania and Zambia, and continues investing in logistics infrastructure in the region. The Beijing government enhances its influence through port operations and connects rare earth supplies to its controlled ports via international railway networks such as the TAZARA line, thereby securing its supply.

China’s dominance in rare earth elements has also been reinforced by export restrictions it has implemented since the 2000s to control global supply. These restrictive policies triggered a global crisis in 2010 when China halted rare earth element exports to Japan, and subsequent sharp reductions in China’s export quotas caused rare earth prices to surge dramatically, creating serious supply problems worldwide.

Although a World Trade Organization (WTO) dispute brought by the United States, the European Union and Japan forced China to remove its export barriers, Beijing has since turned to similar tools following intensified trade tensions with the United States after the arrival of Donald Trump. In response to the United States imposing an additional 145% tariff on Chinese goods in April, China introduced new restrictions on the export of seven critical “heavy” rare earth elements widely used in the defense sector.

China has announced that companies must obtain licenses to export rare earth elements and that foreign firms must provide detailed explanations of their intended use, even for the smallest quantities. However, the full implementation of this regulation has currently been suspended. Nevertheless, China’s decision merely to postpone rather than cancel this measure signals that global supply chains may be reshaped in the coming period according to China’s strategic assessments.

China continues to maintain the strategic leverage it has gained in global supply chains through its policies. These policies have caused various supply shortages worldwide and hold a strategic position in the ongoing trade conflict with the United States. Indeed, while the United States was the world’s largest producer of rare earth elements until the 1980s, it is now heavily dependent on China in this field. The United States obtains 70% of its imported rare earth elements from China, creating a critical vulnerability, especially in defense technologies.

In conclusion, China’s dominance in rare earth elements is the product of a multi-layered strategy encompassing rich reserves, international knowledge transfer, state-funded R&D programs, sector consolidation, export restrictions and the development of related industries. Through these policies, China has elevated its production and processing capacity to near-monopolistic levels globally. At the same time, by supporting sectors such as electric vehicles, electronic devices, semiconductors and wind turbines, China has made rare earth elements an indispensable component of its own economic ecosystem.