In the global race for technology, China has a curious advantage: it polices the materials that make the race possible. On October 9th Beijing announced a new clampdown on the export of rare earth metals, the essential ingredients in semiconductors, electric motors and a host of high-tech gadgets. Hours later it followed with restrictions on equipment used to make batteries for electric cars. In a world obsessed with supply chains, China’s move is a reminder that control over the inputs sometimes matters more than control over the factories.
Rare earths are not rare, but refining them is. China produces more than 90% of the world’s supply, and its factories do the lion’s share of the purification, turning a rough mix of minerals into ultrapure metals. One refinery in Wuxi, near Shanghai, produces all of the world’s ultrapure dysprosium, used in capacitors that keep chips cool under high workloads. That plant is controlled by Shenghe Resources, whose largest shareholder is China’s Ministry of Land Resources. By acquiring a Canadian company’s stake earlier this year, Beijing effectively owns the entire supply chain for one of the world’s most critical materials.
The new rules are wide-ranging. Firms anywhere in the world that use Chinese rare earths—even in quantities as small as 0.1% of the value of a product—may need export licences. The Ministry of Commerce claims the measures are aimed at preventing military applications. Yet they give Beijing broad discretion to decide what may be sold abroad and to whom, covering chips, electric motors, magnets and any devices that rely on them.
Western companies are scrambling to respond. Apple, Nvidia, Samsung and Taiwan Semiconductor Manufacturing Company all rely on rare earths in the manufacture of chips, magnets as well as other components. Some factories outside China have been built or are under construction to reduce dependence, but it can take years to bring them to full capacity. Meanwhile, stockpiles in Japan and South Korea provide a temporary cushion, but they will not last indefinitely.
Beijing’s strategy mirrors a tactic long used by Washington. The United States has leveraged its control over semiconductor software and equipment to restrict the flow of advanced chips to China and other countries. Now China has inverted the playbook, using its dominance of raw and refined materials to project influence over global technology production. The timing is delicate: talks between Xi Jinping and Donald Trump loom, and China has previously restricted rare earth exports in response to tariffs. The moves also coincide with a surge in demand for AI-related goods, which now account for nearly half of the global trade growth, according to the World Trade Organization.
For firms dependent on these metals, the immediate impact may be muted. Many chip-makers and suppliers maintain buffer inventories, insulating production for the short term. But the rules introduce a layer of uncertainty over the next three years, the period needed to scale up alternative supply chains. In effect, Beijing has gained a lever to influence technology development worldwide.
The reach of the rules is striking. Even minor use of Chinese rare earths could trigger licensing requirements. Electric car batteries, drones, offshore wind turbines and AI servers: all can fall under Beijing’s scrutiny. That raises questions about the resilience of global technology networks, especially given the centrality of rare earths in both civilian and military applications.
China’s latest maneuver exposes a fundamental tension in globalisation: supply chains are brittle when a small number of actors control crucial inputs. Policymakers and firms can prepare stockpiles and diversify sourcing, but none can escape the fact that China holds the tap. In a world of rising geopolitical friction and the constant chase for technological supremacy, this is a reminder that raw material are still power.
And yet for all the disruption it may bring, China’s move is entirely predictable. It has cornered the market for rare earth processing and ensured that foreign firms cannot easily replicate its capacity. The world might fret about shortages, but Beijing has already written the rulebook. ■
