China’s domination of more than 90% of global rare earth refining didn’t happen overnight — it was the result of a strategic, long-term national plan combining state support, industrial policy, and geopolitical foresight.

Below is a detailed breakdown of how China achieved this near-monopoly:

1. Understanding the Rare Earth Context

Rare earth elements (REEs) — a group of 17 metals including neodymium, dysprosium, and lanthanum — are essential for modern technology:

• Electric vehicles and wind turbines (magnets)

• Smartphones and electronics (screens and batteries)

• Military systems (radars, missiles, guidance systems)

While these elements are not actually rare in nature, they are difficult and costly to refine. The refining process requires handling toxic acids and radioactive waste safely — something few countries have been willing to do domestically.

🇨🇳 2. China’s Strategic Entry in the 1980s–1990s

a. Vision from the Top: Deng Xiaoping’s Strategy

In the 1980s, Chinese leader Deng Xiaoping recognized the future importance of rare earths.
He famously said in 1992:

“The Middle East has oil; China has rare earths.”

This statement symbolized China’s intent to treat rare earths as a strategic resource, not just a commodity.

b. Massive Investment in Mining and Refining Infrastructure

• China developed large deposits like Bayan Obo (Inner Mongolia) — the world’s largest rare earth mine.

• The government offered cheap loans, electricity, and land to rare earth refiners.

• Western countries, meanwhile, shut down refineries due to environmental and labor costs.

Result: by the mid-1990s, China had the only full rare earth supply chain — from ore to magnet.

3. Aggressive Market Strategy: Undercut, Absorb, and Dominate

a. Dumping Prices

China flooded global markets with cheap refined rare earths, undercutting competitors like the U.S., Australia, and France.

• Prices fell below sustainable levels for Western producers.

• Mines like Mountain Pass (USA) closed in 2002 due to low profitability.

b. Acquisition of Foreign Technology

Chinese firms acquired refining technologies and expertise from Japan, the U.S., and Europe through:

• Joint ventures (e.g., with Japanese magnet makers)

• Technology transfers as part of market access deals

• Talent recruitment of foreign engineers

4. Control of the Value Chain

By the 2000s, China had mastered not just mining and refining, but downstream manufacturing too:

• Magnets: Neodymium-iron-boron (NdFeB) and samarium-cobalt (SmCo)

• Components: For EVs, wind turbines, and electronics

• Export restrictions: Raw REEs were taxed or restricted, pushing foreign firms to relocate manufacturing to China to get supply access.

This created a lock-in effect — foreign industries became dependent on China’s refined output.

5. Environmental Trade-offs

While other nations hesitated over pollution, China tolerated the toxic waste, acid runoff, and radiation from refining.

• Entire areas like Baotou (Inner Mongolia) became “sacrifice zones.”

• But the government treated this as a strategic cost — environmental damage for global market control.

China later tightened environmental laws — after dominance was secured — driving smaller illegal miners out and consolidating control under state-owned enterprises (SOEs).

6. State Coordination and Consolidation

The rare earth sector was nationally reorganized into a few mega-firms under strict state control:

• China Northern Rare Earth Group

• China Minmetals Corporation

• China Rare Earth Group (est. 2021)

This consolidation:

• Reduced price competition between Chinese firms

• Enhanced government control over exports and pricing

• Aligned production with national industrial goals like EVs, defense tech, and green energy

 7. Geopolitical Leverage

China’s dominance gives it strategic leverage:

• In 2010, China cut off rare earth exports to Japan during a diplomatic dispute — proving its ability to weaponize supply chains.

• Western nations realized their dependence only after this event.

Since then, countries like the U.S., Japan, and Australia have tried to rebuild refining capacity — but China’s decades-long lead, low costs, and state subsidies remain unmatched.

8. Today’s Landscape (2020s)

9. Key Lessons from China’s Rise

1. Strategic patience pays — decades of state planning can build industrial dominance.

2. Environmental tolerance can serve as an early advantage (though at high cost).

3. Control over processing, not just mining, is where the real power lies.

4. Integration with downstream industries (EVs, defense, green tech) ensures market lock-in.

5. Export controls can shape global geopolitics and supply chain dependencies.

10. Implications for the World

• Dependence risk: The U.S., EU, and Japan remain vulnerable to Chinese export restrictions.

• New players emerging: Australia, Canada, Vietnam, and some African nations are seeking to enter refining — often with Western backing.

• Strategic realignment: “Friendshoring” and “supply chain diversification” are now policy priorities in the West.

• Africa’s opportunity: Rich in rare earth deposits, African countries could develop refining partnerships and local value chains — but only if they learn from China’s integrated model.

Summary

China’s rare earth dominance was not an accident. It was built through:

Visionary leadership + Long-term industrial policy + Environmental trade-offs + Vertical integration + Export strategy + Geopolitical leverage.

By combining these elements, China turned a niche mining sector into one of the most powerful industrial monopolies of the 21st century.