How Did China Take Over the Rare-Earths Industry?

[benb]

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  How China Took Over the World’s Rare-Earths Industry
  Oct 18, 2025 — Beijing provided financial support to the country's leading companies, encouraged them to snap up rare-earth assets ab...
  
  
  
  The Wall Street Journal
  
  
  
  
  
  
• Rare earth industry in China - Wikipedia
  From 2000 to 2009, China's production of rare earth elements increased 77 percent to 129,000 tons while production from other rese...
  
  
  
  Wikipedia
  
  
  
  
  
  
• A Brief History of US-China Rare Earth Rivalry
  Dec 7, 2023 — Historically, in the California desert, Mountain Pass has been a rare earth elements mine since its discovery in 1949 b...
  
  
  
  Geopolitical Monitor
  

China gained control of the rare-earths industry over several decades through strategic state support, low production costs, and a period of Western industrial and regulatory decline. By flooding the market with inexpensive rare earths, China drove out foreign competitors, acquiring a near-monopoly on global refining and processing capabilities.
Key factors that contributed to China's rare-earth dominance:

Strategic government investment​

• Declaring rare earths a "strategic" resource: In 1990, Beijing officially labeled rare earths as protected and strategic minerals, giving the government significant control over the industry.
• Subsidies and state consolidation: The government provided significant financial support to domestic companies. In 2021, it consolidated the industry from hundreds of smaller businesses into six major state-owned enterprises, which allowed for better control over supply and pricing.
• Acquiring foreign expertise: As Western nations wound down their own processing facilities, Chinese companies bought key assets. A Chinese-linked company bought General Motors' rare-earth magnet business, Magnequench, in 1995. The factories and equipment were moved to China, along with top U.S. engineers.

Exploiting market vulnerabilities​

• Driving down prices: By the 1990s, China's rapidly increasing rare-earth exports caused global prices to plummet. Western competitors, unable to match the low costs, went out of business or sold their assets. For example, the U.S. mine at Mountain Pass, California, was forced to close in 2002.
• Low environmental and labor standards: For years, Chinese producers operated with lax environmental and safety regulations, which significantly lowered operating costs compared to Western producers bound by stricter rules. This allowed them to offer consistently lower prices.
• Leveraging export controls: When a country became too reliant on Chinese rare earths, Beijing began using export quotas and restrictions to assert its leverage. In 2010, it temporarily cut off exports to Japan during a maritime dispute. More recently, in 2025, China expanded its export controls on several rare earths used in advanced defense technology.

Western decline​

• U.S. regulatory changes: In the 1980s, the U.S. made a regulatory misstep that had severe consequences for its rare-earth industry. The Nuclear Regulatory Commission applied the same regulations for radioactive elements like thorium to rare-earth mining, dramatically increasing costs and complexities for U.S. companies.
• Outsourcing and offshoring: With the rise of globalization, U.S. policymakers allowed intellectual property and industrial capacity to move overseas. Companies like Magnequench relocated facilities to China, effectively handing over their technology.
• Underinvestment: After U.S. producers closed down, successive administrations failed to invest in rebuilding a domestic rare-earth supply chain. As a result, the U.S. defense industrial base became increasingly dependent on imports from China.

 

[KevinK]

• U.S. regulatory changes: In the 1980s, the U.S. made a regulatory misstep that had severe consequences for its rare-earth industry. The Nuclear Regulatory Commission applied the same regulations for radioactive elements like thorium to rare-earth mining, dramatically increasing costs and complexities for U.S. companies.

The U.S. Nuclear Regulatory Commission (NRC) first began treating rare earth elements (REEs) as nuclear materials in 1980. This decision was made when both the NRC and the International Regulatory Agency classified rare earth mining and processing under the same safety framework as thorium extraction, since thorium naturally occurs as a radioactive byproduct in many rare earth ores, especially monazite and bastnäsite.

 

[benb]

WSJ published an interesting-looking article recently, How China Took Over the World’s Rare-Earths Industry, which google combined with other webpages and summarized above.

Takeaways: The trade war started in 1990, not 2017, by China, not the US. Valuing efficiency makes the USA vulnerable. Rare earths are an example, an analogy. Another analogy for why Intel must not go fab lite.

 

[samwilde]

The US is not any good at creating industries which take a long time to even become operational and have slim margins. Same reason why virtually all titanium metal is imported.
The Japanese have been trying to replace Chinese rare earths refining for over a decade with very limited results.