China's Rare Earth Export Controls: How Beijing Is Using Mineral Dominance as a Strategic Lever

Since 2023, Beijing has imposed export controls on gallium, germanium, antimony, graphite, tungsten, and rare earth magnets, each timed to coincide with Western restrictions on Chinese technology exports. The tungsten ban in February 2025 tripled prices. A December 2025 licensing regime for rare earth products requires detailed end-use compliance applications, giving Beijing discretionary control over who receives supply and in what quantity. The result is a widening market bifurcation: BMI reported that heavy rare earth pricing outside China surged to a 250% premium over Chinese domestic prices in the second half of 2025. That premium hands Chinese magnet manufacturers a structural cost advantage over every non-Chinese competitor.

The Architecture of China's Rare Earth Leverage

China's dominance in rare earth permanent magnets for defence applications has reached approximately 91% global share, according to analysis of the NdFeB magnet market. For a narrow list of materials that includes dysprosium, terbium, and samarium, China controls essentially 100% of the refining and magnet-grade separation capability outside a small number of recently commissioned facilities in the US and Estonia.

The export control regime deployed since 2023 is not simply about restricting supply. It is about extracting downstream value from China's processing monopoly. When Beijing issues licences on a case-by-case basis for materials China refines, it creates asymmetric pricing: Chinese manufacturers access materials at domestic prices while non-Chinese manufacturers pay whatever the export licence and premium arbitrage dictates. The 250% premium BMI documented in H2 2025 is the mechanism by which China translates processing dominance into competitive advantage for its downstream industries.

The April 2025 restrictions on seven heavy rare earths including samarium, gadolinium, terbium, dysprosium, and others followed the Trump administration's Liberation Day tariffs almost immediately. This is not coincidence. China has been clear that it regards export controls on strategic minerals as a direct counter to Western semiconductor and technology export restrictions.

The DoD-MP Materials Model vs. the Japan-Lynas Model

The strategic responses from Western-aligned governments reveal two distinct approaches. The US Department of Defense struck a landmark deal with MP Materials in July 2025: a 10-year agreement with a US$110 per kilogram NdPr price floor, US$400 million in equity, and a guaranteed offtake for a new 10,000 tonne per annum mine-to-magnet facility. The DoD became MP's largest shareholder at approximately 15%.

By January 2026, signals emerged that the White House might reverse course on the price support mechanism. The instability of US critical minerals policy relative to the Japanese model is the structural contrast that matters most.

Japan took a different path. In March 2026, Lynas Rare Earths locked in a long-term supply agreement with JARE, providing up to 7,200 tonnes per annum of NdPr through 2038 at a US$110 per kilogram floor. Japan has been building this relationship since 2010, when China first weaponised rare earth exports. Lynas now supplies a substantial share of Japan's neodymium and praseodymium. The agreement is pragmatic, commercially structured, and quietly effective. It has been built over fifteen years and is unlikely to be reversed on a political cycle.

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The Structural Gap That Private Markets Cannot Fill

Rare earth supply chain diversification requires three things that private markets structurally underprovide: sustained government commitment across political cycles, capital at risk with a long-duration time horizon, and patient development of processing expertise and institutional knowledge that takes decades to accumulate.

The geology outside China exists. Australia's Mount Weld, Brazil's carbonatites, and greenfield rare earth projects across Africa, Canada, and Scandinavia collectively represent a credible alternative supply base. The processing expertise, equipment supply chains, and separation knowledge do not exist at scale outside China. Building them requires the kind of decade-long public-private commitment that Japan has executed and the US is attempting to structure.

Private markets priced on quarterly returns will not fund the gap. The economics only work when government provides the price floor, the offtake certainty, or the risk capital that makes a 15-year development horizon commercially viable for a private operator.

What the Bifurcated Market Means for Non-Chinese Manufacturers

The 250% rare earth pricing premium outside China documented by BMI in H2 2025 is not a temporary market distortion. It is a structural cost disadvantage for every non-Chinese manufacturer that uses NdFeB permanent magnets: EV motor producers, wind turbine manufacturers, defence contractors, and robotics companies.

That cost disadvantage compounds over time. Chinese magnet manufacturers producing with access to domestic rare earth prices at a fraction of global market rates can price their products competitively into export markets while generating margins that fund further capacity expansion. Western manufacturers paying 250% premiums for the same input materials are structurally disadvantaged in every market they compete in against a Chinese supplier.

The supply chain diversification question is not academic. It is a direct determinant of manufacturing competitiveness in every industry that requires permanent magnets.

• Since 2023, China imposed export controls on gallium, germanium, antimony, graphite, tungsten, and rare earth magnets. Heavy rare earth prices outside China surged to a 250% premium over Chinese domestic levels in H2 2025, handing Chinese manufacturers a structural input cost advantage.
• China holds approximately 91% of global NdFeB permanent magnet production for defence applications. The export control regime deploys this processing monopoly as a direct counter to Western semiconductor and technology export restrictions.
• The US DoD's July 2025 deal with MP Materials (US$400m equity, US$110/kg NdPr floor) and Japan's March 2026 Lynas-JARE agreement (7,200tpa NdPr through 2038 at the same floor) represent allied efforts to establish a Western NdPr price architecture independent of Chinese pricing.

What critical minerals has China restricted exports on since 2023?

Since 2023, China has imposed export controls on gallium, germanium (July 2023), graphite (October 2023), antimony (August 2024), tungsten, tellurium, bismuth, molybdenum, and indium (February 2025), and seven medium and heavy rare earth elements including terbium, dysprosium, samarium and others (April 2025). Successive rounds of controls have coincided with Western restrictions on Chinese technology exports, establishing a clear pattern of mineral controls as trade policy leverage.

What happened to rare earth prices outside China following export controls?

BMI reported that heavy rare earth pricing outside China surged to a 250% premium over Chinese domestic prices in the second half of 2025, following export control escalations in April and October 2025. European rare earth prices were reported at up to six times Chinese domestic prices during the peak disruption period. This bifurcation gives Chinese magnet manufacturers a structural input cost advantage over every non-Chinese competitor using the same materials.

What is China's share of global NdFeB permanent magnet production?

China controls approximately 91% of global NdFeB permanent magnet production, according to analysis of the defence applications market. For rare earth separation and refining of heavy rare earth elements including dysprosium and terbium, China accounted for essentially 100% of global capacity until the recent commissioning of facilities at MP Materials in the US and Neo Performance Materials in Estonia. MP Materials produces around 1,000 tonnes per annum of NdFeB magnets as of late 2025, compared with an estimated 300,000 tonnes per annum in China.

How does the DoD-MP Materials deal address US rare earth supply chain risk?

The US Department of Defense entered a transformational public-private partnership with MP Materials in July 2025 that includes US$400 million in equity investment, making the DoD the company's largest shareholder at approximately 15%. The agreement establishes a 10-year US$110 per kilogram NdPr price floor and a 10-year guaranteed offtake commitment for 100% of magnets produced at a new 10,000 tonne per annum facility. The deal is the first deployment of US supply-side and demand-side policy tools in combination for critical minerals.

CSIS China Rare Earth Export Controls April 2025 and October 2025; Global Trade Alert China Export Controls inventory; MP Materials press release July 11, 2025; MINING.COM July 18, 2025 and March 12, 2026; IEA commentary October 2025; Clark Hill PLC November 2025; Payne Institute August 2025.

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