7/1/2025, “A Refined Look at Rare Earth Export Policies: Compliance and Geopolitics” at China Crossroads in Shanghai. Talk given by Cory Combs, Head of Critical Mineral and Supply Chain Research at Trivium in China.
Right now, China’s critical mineral export restrictions are a developing issue with no concrete answers. But let’s look at how we got here…
How did China come to dominate the critical minerals industry?
Coming out of the Chinese civil war, Beijing was already looking into the minerals industry. Interestingly, natural resource extraction was promoted seen as the way to kickstart the economies of undeveloped regions. It was development for development’s sake, not necessarily profit. Up until the present, rare earths have been extremely cheap – the business was literally selling dirt at dirt-cheap prices. Because of the low prices and the fact that it’s a primary/unprocessed product, most rare earth extraction operations barely break even, and many run at a loss.
Since at least the 90s, Beijing has been trying to turn this cheap, often ‘worthless’ industry into something profitable. The way they achieved this is to start doing the mid- and downstream processing of these rare earths, in addition to the extraction.
At the same time, there was a lot of offshoring of the pollution costs by ‘Western’ economies. Critical mineral mining and processing is incredibly destructive to the environment. Only about 3% of the waste generated from the extraction and processing of these minerals can be recycled. The other 97% is unrecoverable waste. Due to stricter standards for public health, environmental laws, and social pressure, many advanced economies outsourced the mining and processing to China.
‘Beijing’s dominance in this area is not necessarily a strike at the U.S., but rather that they are trying to get these rare earths to mean something.’* The critical minerals industry was a tool for development, but because of recent geopolitical developments and the fact that these minerals are critical for dual use/military applications, “the development lens is lost, we have our threat goggles on.”
Many people were caught blindsided this summer, but using policy analysis, you could see that Beijing was preparing to ‘pull the plug’ if needed: They were consolidating the industry to prevent any minerals from being smuggled out, and they were passing laws to allow them to control the flow of rare earths out of the country. They also passed stricter reporting and inventory-taking policies.
- Some relevant policy documents: Export Control Law (2020), Regulations on REE Management (2024), REE Traceability Measures (2025), MofCom Announcement No.18 (2025)
Why did China ‘choose’ Rare Earths?
Beijing needed an area where they could pull the plug without completely screwing their own exports. For example, they did not place export restrictions on EVs or Batteries, and other things down the value chain, because that would mean no export revenues for those industries.
With rare earths, they stop other places from being able to make the same kinds of very expensive products that requires processed rare earths. Apart from one small plant in Malaysia, all the processing to turn this ‘dirt’ into useable material is done in China. They chose this basic, building-block resource: it’s dirt cheap domestically, they barely lose money by not selling it abroad because all the value-add is done in China.
The key word is “Dual Use”.
‘Dual Use’ means a product can have both civilian and military applications. As US-China tensions have ramped up, the term, and the application of it to more and more things has been increasingly weaponized.
Technically speaking, all China’s current export controls are to prevent the creation of dual use or military tech. But drawing the line between what is dual use and what is not is not only difficult, but also now political. For example, while some specific forms of carbon are components in dual use technology, China has also banned the sale of other forms of carbon that have no military applications.
Rare earths are ‘tricky’ because they can be used to manufacture dual use items. For example, all the minerals on China’s current export restriction list are used to make magnets. Magnets are used in everything from motors, engines, remotes, sensors, night vision goggles, etc…
The situation as it stands:
Licence Regime Compliance
The current export controls are not a ban. Rare earths are still purchasable, but now companies need a licence to do so. There is a 45-day review period for this, but that only starts when the licence gets officially received and inputted into their system, which can also take ~20 days. So, getting these licences can take months.
Empathy with the Licensing Team
The current workers who greenlight licences to buy rare earths are often overworked and underpaid. They are under immense stress from superiors to figure out which companies could be manufacturing dual use products. When reviewing an application for a licence, they have no incentive to rush, and every reason to be cautious. The high stakes also leads to the Chinese auditors asking to see the factories where the exports are headed. But to the people being asked, that looks like stealing trade secrets.