Why Is China Winning the Rare Earths Race?

China’s dominance in rare earths did not happen overnight. Its rise stems from decades of deliberate scientific breakthroughs, strategic policy moves, and a relentless pursuit of supply chain control aimed at reshaping global industry.

While many nations possess rare earth reserves, China has turned its resources into both economic power and diplomatic influence, placing it far ahead of competitors in this critical sector.

Scientific edge and vertical control

China’s rare earth journey accelerated in the 1970s when scientists led by Xu Guangxian developed the cascade extraction method. Unlike inefficient Western techniques, this system enabled scalable separation of rare earth elements. China’s method did not require complex imported equipment and offered high purity at lower costs.

Scientist Wang Zhenxi later led the successful creation of China’s first neodymium-iron-boron magnet. Matching Japan’s earlier breakthrough, the innovation marked China’s entry into high-energy magnetic materials. Today, more than 90 percent of the world’s permanent magnets come from China.

China expanded its rare earth strategy beyond the lab. Supply chain mastery allowed China to cover mining, refining, separation, and intermediate processing. This tight control keeps other countries reliant. An example is the Mountain Pass mine in California, where mined ore is shipped to China for processing before returning to the US.

Did you know?
China’s development of the cascade extraction method in the 1970s let it produce high-purity rare earths at industrial scale, leapfrogging Western laboratory approaches.

Driving prices down, widening the gap

China focused on scale and cost after establishing its technical base. By the late 1990s, Chinese firms saturated the global market with low-cost materials. As prices fell, foreign competitors either exited or moved refining tasks to China. Over time, the West swapped independence for convenience.

The government also prioritized environmental repair after years of damage from unregulated mining. Major investments reshaped the industry into a quota-controlled system under six main groups, each managing specific geographies. This approach replaced the chaotic pricing wars with normalized, centralized operations.

Patent acquisition has also played a strategic role. In the 1990s, Chinese companies began licensing core magnet technologies from firms in Japan and the US. From there, domestic firms ramped up R&D, filing thousands of local patents that improved everything from processing methods to magnet formulations.

ALSO READ | AI data centers set to consume 3% of world’s electricity

Challenges ahead and global pushback

Despite leading in upstream and midstream operations, China remains exposed in key high-end applications. Countries like the US and Japan still dominate in specialty functional materials such as phosphors, catalysts, and polishing compounds. Many processed rare earths are exported and later imported again as expensive finished goods.

China’s share of global rare earth reserves has dropped significantly over the last 40 years. Tighter mining caps and restrictions are now partly in place to manage this depletion and enforce ecological standards. These are strategic choices aimed at preserving long-term leadership rather than short-term profits.

Meanwhile, American and European governments are boosting investments in alternative materials and reshoring efforts. If successful, these initiatives could reshape global rare earth dynamics over the next decade.

In the end, the most decisive factor will not be reserves or regulations but the ability to innovate. Sustained progress in applications and material science is what will determine who leads this vital industrial frontier.