This article is based on CEI’s Rare Earth and Magnet Production Report. To read the full report, click here.
In the high-stakes arena of global technology competition, rare earth elements have become the ultimate lever of influence—and China holds the handle. With an astonishing 85.7% share of global refined rare earth production and near-total dominance in magnetic materials, Beijing has transformed these once-obscure minerals into instruments of economic statecraft. As the green energy transition accelerates, China’s strategic grip on the sector is reshaping supply chains, forcing realignments in international relations, and leaving Western economies vulnerable to market manipulation.
The scale of China’s control is staggering. Despite holding only 36.7% of global reserves, the country accounts for over 90% of the world’s processed heavy rare earths—elements like dysprosium and terbium that are irreplaceable in high-performance magnets, defence systems, and electric vehicles. This dominance is no accident: it is the result of decades of industrial planning, export restrictions, and aggressive investment in downstream processing capacity. Companies like Northern Rare Earth now operate at a scale that dwarfs international competitors, with 100,000 tonnes of annual magnetic alloy production.
But it is the sophistication of China’s market manipulation that truly reveals its strategic approach. In 2025, Beijing began implementing a bifurcated export strategy: civilian customers, particularly in the automotive and renewable sectors, saw a 660% surge in magnet exports to the US, while military applications faced strict controls. This calibrated approach allows China to reap economic benefits while constraining the technological advancement of geopolitical rivals. Price discrimination further amplifies this advantage—dysprosium sells at $1,000/kg on international markets but just $333/kg domestically, giving Chinese manufacturers a crushing cost advantage.
The reverberations are felt across global industry. Wind turbine manufacturers require two tonnes of rare earth magnets per megawatt of capacity; electric vehicle motors depend on neodymium-based magnets for efficiency; and advanced defence systems—from F-35 fighters to nuclear submarines—are built around these critical materials. As one industry executive noted, “There is no green transition without rare earths—and currently, no rare earths without China.”
Western efforts to build alternative supply chains have largely faltered. The US’s Mountain Pass mine ships its output to China for processing, highlighting the persistent gap in refining capability. Recycling initiatives have struggled with technical challenges and high costs, while new mining projects face years of development and environmental opposition.
Beijing shows no intention of relinquishing its advantage. Instead, it is moving up the value chain, focusing on high-performance magnet production and patent control. Over 85% of high-efficiency separation technologies are now covered by Chinese patents, creating a moat that may prove even more durable than resource control.
The lesson is clear: in the 21st century, economic security is inseparable from resource security. As the world races toward a digital and green future, control over critical minerals may prove as decisive as control over oil was in the last century—and China is already miles ahead.