Welcome back, team! In this episode of Dave Talks Politics, hi, I’m Dave, and I’ll be talking politics. Today, team, let’s talk about China’s dominance in rare earths and critical minerals—the structural leverage that gives Beijing massive geopolitical power over the US and the West, and why diversification efforts are still struggling to close the gap.
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**1. CHINA’S OVERWHELMING DOMINANCE**
1. China controls about 70% of global rare earth mining output and 90%+ of separation/processing capacity overall—rising to 99% for heavy rare earth elements (HREEs) like dysprosium, terbium, and yttrium.
2. For critical minerals broadly: China dominates 60–70% of refined lithium and cobalt, 80% of battery-grade graphite and rare earths, and 70% of battery-grade manganese—projections hold this grip through 2035.
3. This isn’t just mining—it’s the full value chain: extraction, refining, and downstream products like permanent magnets (93% of global supply).
4. Beijing has built this over decades: targeted policy since the 1990s, heavy investment in polluting but profitable processing, and overseas control (e.g., Myanmar, Congo, Egypt deposits).
5. Geography locks it in: HREE-dominant deposits are confined to South China, Southeast Asia, and a few spots where China has invested or gained influence.
**2. HOW CHINA USES THIS LEVERAGE**
1. Export controls as a weapon: In 2025, China imposed strict licensing on rare earths, magnets, and trace-content products—targeting defense-linked buyers and even extraterritorial enforcement.
2. April/October 2025 restrictions widened to alloys, high-end magnets, and dual-use tech—requiring MOFCOM licenses, with automatic denials for military affiliates.
3. Trade truce suspension: The October 2025 Busan deal (Trump-Xi) paused October controls for one year (ending November 2026)—some civilian licenses issued, but military bans and dual-use rules remain.
4. Geopolitical signaling: China used controls to gain concessions in trade talks—US paused affiliate rules; recent bans on Japan over Taiwan remarks show readiness to weaponize for foreign policy.
5. Long-term play: Experts say China “played its hand well”—leverage lasts 5+ years; calculated restrictions (not full cutoffs) maximize influence without self-harm.
**3. US AND ALLIED VULNERABILITIES**
1. US is 100% net-import reliant on 12 critical minerals and 50%+ on 29 others—defense systems (F-35 jets, submarines, missiles, drones) heavily dependent on rare earth magnets.
2. 2025 controls caused shortages, production halts—exposed risks to aerospace, EVs, semiconductors, and consumer tech.
3. Broader implications: China can disrupt supply chains for national security leverage—threatening economic resilience and military readiness.
4. Western manufacturers cite truce uncertainty as cause of lax orders—persistent instability in flows.
**4. US AND ALLIED DIVERSIFICATION EFFORTS**
1. Domestic push: Government equity stakes (e.g., $400m in MP Materials, largest shareholder; $150m loan for Mountain Pass heavy rare earth expansion).
2. Offtake and price support: 10-year DoD commitments for magnet output; price floors ($110/kg NdPr) to counter Chinese overproduction.
3. Partnerships: US-Australia framework ($8.5bn pipeline), MOU with Lynas/Noveon for domestic magnets; agreements with Saudi Arabia, Malaysia, others.
4. Stockpiling: Trump announced $12bn critical minerals reserve (”Project Vault”) to build stockpiles and reduce reliance.
5. Progress slow: New facilities face cost overruns, permitting delays—new capacity won’t replace China’s position soon; exploration in Vietnam/Brazil promising but early-stage.
**5. KIWI PERSPECTIVE AND LONG-TERM IMPLICATIONS**
1. NZ’s export reliance on Asia means we feel ripple effects—trade disruptions or higher costs from mineral volatility hit hard.
2. Neutral stance watches closely—China’s resource control ties to our multicultural trade links.
3. Bigger picture: This is mercantilism at its core—China masters resources and processing scale; West needs radical deregulation, reshoring, state competition to catch up.
4. Fragile window for US: Innovation history offers a shot—devolve power, slash red tape, build domestic edge—or China’s leverage wins by default.
5. Avoid dumb escalations—focus trade mastery over proxy fights; geography and demographics favor the prepared.
**BOTTOM LINE**
China’s dominance in rare earths and critical minerals—70% mining, 90%+ processing, near-monopoly on HREEs—gives Beijing structural leverage in trade, tech, and defense that export controls weaponize effectively. US diversification (equity stakes, stockpiles, alliances) is accelerating but slow and costly—full independence years away. This resource chokehold is a core reason China stays formidable in the geopolitics race. West must deregulate aggressively, reshore chains, and compete on mercantilism—or risk permanent disadvantage.
Talk soon!
