Rare earth elements (REEs) — a group of 17 chemically similar metals vital to high-tech, energy, and defense industries — have become one of China’s most potent tools of geopolitical influence.

These minerals are indispensable for everything from smartphones, electric vehicles, and wind turbines to fighter jets and missile guidance systems. By controlling more than 90% of the global rare earth refining and processing capacity, China has transformed its industrial dominance into a form of strategic leverage — one that combines economic coercion, diplomatic signaling, and industrial power projection.

This essay examines how China’s rare earth dominance evolved from an industrial policy into a geopolitical instrument, the major incidents that reveal how Beijing has used this leverage, and what lessons the rest of the world has drawn from this strategic imbalance.

1. From Industrial Strategy to Geopolitical Weapon

China’s control over rare earths is not accidental. It stems from a deliberate industrial strategy launched in the 1980s under Deng Xiaoping’s reform-era vision. Deng famously said in 1992:

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

This statement encapsulated China’s recognition that industrial resources could become instruments of power comparable to petroleum. Over the next three decades, Beijing pursued a coordinated national plan: it subsidized domestic production, encouraged consolidation under large state-owned enterprises (SOEs) like China Northern Rare Earth Group, and imposed strict export quotas that ensured strategic oversight.

While Western nations outsourced refining due to environmental and economic concerns, China built an entire ecosystem — from mining to magnets. This vertical integration gave Beijing not only market dominance but also information control: it could track global demand, price movements, and competitor weaknesses.

By the 2000s, China realized that its near-monopoly on refined rare earths gave it something the West lacked — a non-military coercive weapon that could influence other nations’ behavior without firing a single shot.

2. The 2010 Japan Incident: A Geopolitical Shockwave

The most famous example of China’s use of rare earths as a political weapon came in 2010, during a territorial dispute with Japan over the Senkaku/Diaoyu Islands. When Japan detained a Chinese fishing boat captain near the disputed area, Beijing retaliated not with military force, but by suspending rare earth exports to Japan — then the world’s largest consumer of rare earth materials.

The move was unofficial (Beijing never formally announced an embargo), but Chinese customs authorities suddenly stopped processing export paperwork for Japanese buyers. The result was immediate chaos in Japan’s high-tech and automotive industries. Prices for rare earths skyrocketed — in some cases by over 700%. Japanese companies like Toyota and Hitachi scrambled to find alternatives or increase stockpiles.

The world understood the message: China could and would weaponize its rare earth supply dominance to achieve diplomatic goals.

The 2010 incident was a turning point. It demonstrated that control over critical materials could exert pressure more effectively — and more subtly — than traditional sanctions or military threats. Japan eventually released the detained captain, and relations normalized. Beijing learned that rare earths could serve as a “pressure valve” in geopolitical disputes, giving China leverage without direct confrontation.

3. Economic Statecraft Through Supply Control

Beyond crises, China has used rare earths as an instrument of economic statecraft — rewarding allies and punishing adversaries through pricing, quotas, and investment access.

From 2005 to 2014, Beijing repeatedly adjusted export quotas, citing environmental protection and domestic needs. In practice, these measures allowed China to influence global supply and manipulate prices. When quotas tightened, global prices spiked — benefiting Chinese refiners and incentivizing foreign manufacturers to relocate operations to China to secure stable access.

This policy effectively forced global companies to move their high-tech manufacturing into China, deepening their dependence. Companies producing electric motors, permanent magnets, and advanced electronics increasingly established plants inside China, where they could access rare earths without export restrictions.

As a result, China didn’t just dominate raw material exports — it also captured the value-added segment of the supply chain. Rare earths became a magnet (literally and figuratively) for foreign investment and technology transfer. Beijing used this dependency to build industrial strength in sectors such as renewable energy, consumer electronics, and defense manufacturing — all while reinforcing global reliance on its resources.

4. Rare Earths as a Deterrent Against Western Pressure

China’s rare earth dominance also functions as a strategic deterrent in its broader geopolitical disputes, particularly with the United States.

Whenever tensions rise — over Taiwan, trade disputes, or technology bans — Chinese state media and officials hint at the possibility of restricting rare earth exports. For example:

• In 2019, during the U.S.-China trade war, President Xi Jinping visited a rare earth facility in Jiangxi Province, signaling that rare earths could be used as a countermeasure against U.S. tariffs.

• The People’s Daily (China’s main Communist Party newspaper) published editorials suggesting that rare earths could be “an essential bargaining chip” in future negotiations.

• Chinese analysts on state television openly discussed using rare earth restrictions as a “strategic weapon” against U.S. defense contractors like Lockheed Martin and Raytheon, which depend heavily on these materials.

The underlying message was clear: if the West tried to contain China technologically or militarily, China could respond by cutting off access to materials that power the very tools of Western power.

This threat remains largely implicit — China has avoided large-scale embargoes since 2010 — but it continues to hang over global markets as a geopolitical deterrent. The mere possibility of export restrictions can move markets, sway investors, and influence foreign policy decisions.

5. Shaping Global Alliances and Industrial Dependencies

China’s rare earth strategy extends beyond coercion — it also functions as a tool for soft power and alliance building, especially in the Global South.

Beijing has offered rare earth mining partnerships and refining investments to developing countries across Africa, Latin America, and Southeast Asia. These deals often come with infrastructure financing under the Belt and Road Initiative (BRI), allowing China to secure long-term access to resources while exporting its refining technology.

For instance:

• In Myanmar, China sources significant quantities of heavy rare earths through cross-border arrangements, maintaining control while avoiding domestic environmental backlash.

• In Africa, Chinese companies have invested in rare earth projects in Malawi, Tanzania, and the Democratic Republic of Congo, positioning China as both investor and buyer.

• In Latin America, Chinese firms have negotiated mining rights in Brazil and Greenland.

These partnerships not only expand China’s influence but also help it lock in global supply chains under its technological standards. In return, recipient countries benefit from Chinese infrastructure loans, employment, and industrial development. Yet, they often become economically tethered to Beijing’s system — unable to process or sell rare earths independently.

6. Controlling Prices and Punishing Competitors

China’s dominance also allows it to manipulate global prices to suppress emerging competitors. When other countries — like the U.S., Australia, or Malaysia — try to develop independent refining industries, China can flood the market with low-priced materials, making rival projects economically unviable.

For example, when the U.S.-based company Molycorp reopened the Mountain Pass mine in the early 2010s, China responded by lowering export prices, driving global rare earth prices down and pushing Molycorp into bankruptcy by 2015. This pattern of “strategic pricing” has been repeated whenever alternative supply chains begin to gain momentum.

Through this method, China ensures that its rivals face a cycle of dependency — every attempt to diversify supply is undercut by Chinese price manipulation, discouraging long-term investment.

7. The Strategic Message: Power Through Interdependence

China’s rare earth strategy is a masterclass in geoeconomic statecraft. Rather than isolating itself, Beijing has woven the world’s industries into webs of mutual dependence — but dependence tilted in its favor.

The lesson is not that China withholds rare earths recklessly; rather, it maintains the credible threat of doing so. This threat reshapes how other nations approach China diplomatically. Governments and corporations alike know that challenging Beijing too aggressively could have material consequences for their industries and economies.

This creates a subtle yet powerful form of geopolitical deterrence — one that doesn’t rely on military force but on industrial choke points. In an era where economic power and technological control define global influence, China’s rare earth monopoly gives it a unique form of leverage that Western countries struggle to counter.

8. The New Geopolitics of Strategic Materials-

China’s use of rare earth exports as a geopolitical tool represents the fusion of industrial strategy and international power politics. Through decades of careful planning, it built not just dominance in production, but leverage in diplomacy. From coercing Japan in 2010 to subtly warning the United States during trade disputes, Beijing has demonstrated that control over critical materials can shape global behavior.

The West, meanwhile, is racing to catch up — reopening mines, investing in cleaner refining technologies, and forming alliances like the Minerals Security Partnership (MSP) to reduce dependency. Yet rebuilding a supply chain that China spent 40 years mastering will take decades.

In essence, rare earths have become China’s quiet weapon — not one of destruction, but of dependence. It is a reminder that in the 21st century, power is not only measured in missiles or money, but in mastery over the materials that make modern civilization function.