The Chinese Critical Minerals Strategy

China's critical minerals strategy is built from decades of deliberate policy — state investment, industry consolidation, processing dominance and export controls. This guide ties them together and shows how they work.

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June 1, 2026 | SOURCES | MINERALS

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A dominance already held

China's position in critical minerals is unlike that of either the US or the EU. Where Washington is assembling an alliance and Brussels a regulatory framework, Beijing is defending a dominance it already holds. The strategy is not to build market share but to preserve and exploit it — through control of the processing stage, vertical integration from mine to magnet, and the calibrated use of export restrictions as an instrument of statecraft. China today controls around 70 percent of global rare-earth mining, roughly 90 percent of refining, and over 90 percent of permanent-magnet production, with a near-monopoly on the heavy rare earths most critical to defense and advanced technology.

How it was built

The dominance was not an accident of geology. "The Middle East has oil and China has rare earths," Deng Xiaoping said in 1992, four years after Chinese output had overtaken that of the United States. The foundations were laid much earlier — a processing plant completed in 1959 and the Baotou research institute established in 1963 marked the start of the industry — and Beijing built on them with sustained state investment across decades. China deployed large state subsidies and tolerated low environmental and safety standards to produce rare earths at a fraction of the cost of Western competitors, which is why processing migrated to China and largely shut down elsewhere; the Mountain Pass separation plant in the US ceased producing refined rare-earth compounds in 1998.

The decisive advantage is not mining but processing. Rare earths are not in fact rare; what is scarce is the capacity to separate and refine them at commercial scale. That capacity is concentrated in China, which commands roughly 90 percent of processing and close to 99 percent of heavy rare-earth processing — a technical ecosystem of proprietary separation chemistry and specialized equipment that mining diversification alone cannot replicate. China also holds the largest known reserves: around 44 million tonnes, close to half the world total.

State consolidation

Where the US relies on bilateral agreements and the EU on a central board, China's organising mechanism is the state-owned enterprise. After a consolidation drive that ran through the 2000s and 2010s, China Rare Earth Group was formed in 2021 by merging several major state enterprises into a single integrated entity controlling roughly 70 percent of domestic output. The effect was to eliminate internal price competition while creating economies of scale in procurement, technology and compliance — concentrating pricing and production decisions in a handful of state champions answerable to Beijing.

This consolidation also served an outward purpose. International expansion was a stated part of the five-year plan laid out for the rare-earths industry in 2016; larger firms can raise capital more readily, and Chinese state-owned enterprises can borrow from state banks at preferential rates, which positions them to outbid competitors and lock in supply abroad.

Reach beyond China's borders

The strategy extends well past China's own deposits. From around 40 overseas mines in 1999, Chinese overseas mine ownership reached roughly 1,250 by 2022, and between 2000 and 2021 Beijing provided some 57 billion dollars in aid and credit for transition minerals in developing countries — roughly 24 billion of it to Africa, making China the continent's largest financier of mineral projects. A parallel pattern holds in Southeast Asia: since 2021 China has secured around 84 percent of Myanmar's rare-earth exports — particularly the heavy rare earths terbium and dysprosium — at prices far below typical rates, extracting the ore abroad and refining it at home. This keeps the high-value processing stage, and its environmental burden, inside the model and on Beijing's terms.

Minerals as leverage

What turns this dominance into a strategy is the willingness to use it. China has repeatedly converted its processing monopoly into geopolitical leverage — restricting exports to Japan during a 2010 dispute, and since 2023 tightening a sequence of controls aimed at the West. Beginning in 2023 with restrictions on processing-technology exports, expanding in October 2024 to downstream derivatives, and escalating through 2025, the measures have moved steadily up the value chain.

The sharpest steps came in 2025. On 4 April 2025 China placed seven medium and heavy rare-earth elements, and all magnets containing them, under mandatory export licensing; as export volumes fell, carmakers in the US and Europe struggled to obtain magnets, with some forced to cut output or halt production. That April restriction has not been rolled back. A further escalation followed: on 9 October 2025 China's commerce ministry asserted extraterritorial jurisdiction for the first time, requiring export licences for foreign-made products containing Chinese-origin rare earths or made with Chinese technology. In November 2025 these October measures were suspended for one year, until November 2026, as part of a trade understanding reached after a Xi–Trump meeting — a calibration, not a reversal, with the core April controls left in place.

Beijing has also built the legal architecture to match. In 2026 the State Council promulgated the Provisions on the Security of Industrial Chains and Supply Chains, China's first dedicated supply-chain-security regulation, which elevates export controls and anti-sanctions tools into a single national-security framework and extends scrutiny to commercial conduct — including decisions by foreign firms to stop supplying Chinese customers or exit Chinese supply chains. The direction is set out in policy: China's 2026–2030 five-year plan calls for "extraordinary measures" to enhance exploration, development and reserves of strategic minerals, alongside a licensing system seeking "full chain" regulation from mine to finished product.

The leverage is not hypothetical. When the EU adopted its 20th package of sanctions against Russia on 23 April 2026 — for the first time targeting Chinese firms accused of supplying dual-use goods to Russia's military industry — China responded within twenty-four hours by placing seven European entities on its own export-control list. The episode showed how directly mineral access can be turned into a counter-pressure on Western policy.

A monopoly defended, not expanded

Taken together, the elements form a logic of their own. Decades of state investment built the processing advantage; consolidation concentrated control; overseas financing secured feedstock; export licensing and the new supply-chain law convert all of it into leverage that can be tightened or relaxed at will. China does not need an alliance or a market framework, because it already occupies the chokepoint the others are trying to build their way around. That position is sharpened by a security dimension: China is the dominant supplier of dual-use components to Russia's weapons industry, which is part of why its mineral dominance is treated in the West not only as an economic dependency but as an acute security problem.

The weakness is the mirror image of the strength. The monopoly depends on the rest of the world's inability to process at scale — precisely the gap that the US wants to close with its western alliances Pax Silicia, FORGE and Project Vault, read more. The EU has another approach with the The Critical Raw Materials Act (CRMA) and RESourceEU, read more. Each tightening of controls is also an incentive for customers to diversify, and each suspension buys them time to do so. China's leverage is real and immediate, but it is strongest before the alternatives exist; the strategy is a race between Beijing's ability to use the lever and the West's ability to remove it.

Of significance for Norway

Norway sits on the other side of this equation. Its Fen Field is among the largest rare-earth deposits outside China, and Europe's dependence on Chinese supply is precisely what gives Norwegian resources their strategic weight. China's position is also felt directly: the Swedish-owned Sydvaranger iron-ore project in Kirkenes has signaled it may turn to Chinese investors absent Norwegian state support — the kind of acquisition Norway's security service has flagged as a concern in the north. A fuller account of how these developments affect Norway can be found in the Mineral Petition.