China’s rare-earth dominance reveals the strengths and vulnerabilities of its distinctive political economy — and offers lessons for competitors such as Japan.
In 2024, China mined 60% of global rare earths but produced 91% of refined oxides and 94% of sintered permanent rare-earth magnets. This dominance reflects more than geological luck, cheap labor and state subsidies, although each played a role.
China captured the rare-earth magnet supply chain through an evolving industrial policy that melded communist economic planning with capitalist market dynamics. The state set strategic direction and controlled critical gateways, while firms absorbed technology, cut costs and scaled production. This produced the world’s most complete and lowest-cost mine-to-magnet innovation ecosystem — and a formidable source of geoeconomic leverage.
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