The dominance of China’s rare earth elements (REE) industry continues to shape global supply chains and the country’s relationship with key trade partners. As geopolitical tensions intensify and trade dependencies come under scrutiny, rare earths have become a flashpoint in international policy and economic planning. This article explores China’s leadership in the REE sector, recent regulatory developments, and what foreign businesses should consider when navigating supply chain risk in this critical area.
REEs have become one of the most crucial and sought-after resources in the modern economy. Due to their unique magnetic, luminescent, and electrochemical properties, this group of 17 elements have become indispensable in a broad range of industry settings, from electric vehicles and wind turbines to oil refinery, medical imaging, and advanced military systems.
Over the past several decades, China has emerged as the world’s dominant force in the rare earth sector. Through sustained investment across the entire value chain—from mining and refining to downstream manufacturing—China has built a comprehensive and highly integrated REE industry. Today, it accounts for the majority of global REE production and processing, and is the leading exporter of critical REE-based products such as permanent magnets.
This dominance has positioned REEs at the center of an increasingly complex geopolitical landscape. As countries race to secure resilient supply chains for strategic materials, REEs have become a focal point in diplomatic discussions between China and major trade partners, and provide significant leverage in the ongoing trade dispute with the US. These conversations are shaped by both commercial dependencies and national security considerations, with China’s regulatory shifts and export controls playing an ever more prominent role in international trade dynamics.
In this article, we examine China’s position as the world’s leader in REE mining and production, explore the regulatory landscape shaping its domestic industry and exports, and discuss how companies can navigate the current complexities to secure supply chains and mitigate geopolitical risk.
China far outpaces the rest of the world in both the extraction and refining of REEs. Estimates of China’s total REE reserves vary, but it is generally thought to have around half of the world’s deposits. According to the US Geological Survey (USGS), China is home to around 44 million metric tons in rare earth oxide (REO) equivalent, accounting for around 48 percent of the world’s total reserves. The Guangzhou Institute of Geochemistry of the China Academy of Sciences places the number at around 50 million metric tons.
By comparison, Brazil, which holds the world’s second-largest reserves, has an estimated 21 million metric tons, around 23.3 percent of the world’s total, per the USGS.
Despite having almost half of the world’s total REE reserves, China accounted for 69.2 percent of the world’s total REE mine production in 2024, with a quota of 270,000 metric tons REO equivalent. This does not include any potential unofficial or undocumented extraction. The US comes in at a distant second place, producing around 45,000 metric tons in 2024, or 11.5 percent of global output.
China’s REE reserves are distributed across three main areas located in northern, western, and southern China. By far the largest share, around 83 percent of the country’s total, is found in the Bayan Obo Mining District near Baotou City in western Inner Mongolia. This area, which covers only around 10 square kilometers, is thought to be the largest REE deposit not just in China, but the whole world. As of 2021, this area had REE reserves of an estimated 36 million tons in rare earth oxide (REO) equivalent, according to the Guangzhou Institute of Geochemistry. These mines are predominantly rich in light REEs, such as neodymium and praseodymium.
A second major source of REEs is found in western Sichuan province, which has around five million metric tons REO equivalent of reserves, while a further 10 million metric tons are found across seven provinces in southern China (Jiangxi, Fujian, Guangdong, Guangxi, Yunnan, and Guizhou). Deposits in the seven southern provinces are predominantly rich in ion-adsorption type rare earths (IAT-RE) and other heavy REEs.
China is particularly dominant in the production of heavy REEs, a group of nine elements that get their name from their higher atomic weights and densities compared to light rare earth light REEs. Heavy REEs are less abundant than light REEs, but are found in higher concentrations around Ganzhou city in southern Jiangxi province, Guangdong province, and Longyan city in southwestern Fujian province.
China’s Production of Key REE Materials, 2024 | ||
| Material | Output (metric tons) | Key uses |
| Neodymium praseodymium (NdPr) oxide | 95,046.5 | Permanent magnets |
| NdPr metal | 83,697 | Permanent magnets |
| Dysprosium oxide | 2,909.8 | Permanent magnets; nuclear reactor control rods |
| Dysprosium iron alloy | 2,109 | Permanent magnets; nuclear reactor control rods |
| Terbium oxide | 704.95 | Green phosphors for LED lights and fluorescent lamps; semiconductors |
| Terbium metal | 360.25 | Permanent magnets; semiconductors |
| Gadolinium oxide | 4,119.5 | Medical imaging (MRIs); fluorescent materials; semiconductors; nuclear reactor control rods |
| Gadolinium iron alloy | 3,509.5 | Permanent magnets |
| Holmium oxide | 644.2 | Specialty colored glass; permanent magnets |
| Holmium iron alloy | 335 | Permanent magnets |
| Source: Shanghai Ganglian E-Commerce Holdings Co Ltd | ||
China’s Ministry of Industry and Information Technology (MIIT) and the Ministry of Natural Resources (MNR) set annual quotas on the extraction and refining of REEs, primarily to balance resource conservation with economic development. These quotas are based on several factors, including the distribution and type of REE reserves, industrial development goals, environmental protection considerations, and market demand.
Quotas are divided into two categories—light and heavy REEs—and are allocated to two state-owned enterprises (SOEs) that dominate China’s REE sector: China Rare Earth Group and China Northern Rare Earth Group. These SOEs are responsible for redistributing their assigned quotas to their qualified subsidiaries or affiliated companies, all of which must hold proper mining licenses and meet strict environmental, technological, and safety criteria. This centralized but tiered quota distribution helps the government maintain control over output levels while allowing operational flexibility across different production sites.
China’s REE production quotas have increased substantially over the past five years, nearly doubling as both domestic and global demand for REE-intensive technologies has expanded sharply. Since 2018, the government has generally raised quotas by a considerable amount, generally up by at least 10 percent and often over 20 percent. However, 2024 saw a more modest increase of 5.9 percent and 4.2 percent year-on-year for mining and refining, respectively.
Given China’s dominance in REE production, the country’s REE output quotas have a significant impact on global prices, with higher increases in production quotas keeping prices low and lower increases serving to drive up prices.
Despite leading the world in REE reserves and extraction, China is a net importer of raw REE materials, reflecting its hunger for resources to feed its midstream and downstream industries. In 2024, China imported 129,500 metric tons of REEs, valued at around US$1.5 billion. Myanmar continues to be its largest source of imports, supplying around 34 percent of China’s REE imports last year, with a total of 44,400 metric tons, followed by Malaysia, which supplied 13,700 tons, accounting for 10.6 percent of total imports.
China’s Imports of REE Products* by Country, 2024 | |||
| Country | Import volume (metric tons) | Import value (US$) | Main products |
| Total* | 129,500 | 1,498,709,339 | – |
| Myanmar | 44,400 | 817,835,388 | Rare earth oxides and compounds |
| Malaysia | 13,700 | 189,231,295 | Rare earth oxides and compounds; mixed rare earth carbonates; ores of rare earth metals |
| Laos | 10,700 | 259,557,138 | Rare earth oxides; mixed rare earth carbonates |
| Russia | 898.408 | 3,189,338 | Mixed rare earth carbonates |
| India | 231 | 2,518,133 | Mixed rare earth carbonates |
| Thailand | 25.07 | 1,568,930 | Other rare earth metals, scandium, and yttrium |
| Brazil | 60.039 | 213,636 | Mixed rare earth carbonates |
| * Products under HS subheadings 2530.9020, 2805.3019, 2805.3029, 2846.9019, 2846.9028, 2846.9029, 2846.9039, 2846.9048, 2846.9049, and 2846.9099. Excludes downstream products. Source: China Customs | |||
Meanwhile, China exported just 17,700 metric tons of REE materials in 2024 valued at US$170.3 million. China’s largest export market by volume was Japan (accounting for 34 percent of total exports), followed by the US (17.7 percent).
China’s Exports of REEs Products* by Country, 2024 | ||
| Country | Export volume (metric tons) | Export value (US$) |
| Total | 17,700 | 170,300,000 |
| Japan | 6,060.623 | 47,409,803 |
| Vietnam | 740.775 | 36,822,315 |
| United States | 3,144.861 | 29,294,333 |
| South Korea | 776.909 | 12,392,065 |
| India | 815.178 | 5,190,596 |
| Germany | 121.195 | 3,395,292 |
| France | 98.711 | 1,922,873 |
| Italy | 498.785 | 1,813,266 |
| Thailand | 70.32 | 1,611,855 |
| * Products under HS subheadings 2530.9020, 2805.3019, 2805.3029, 2846.9019, 2846.9028, 2846.9029, 2846.9039, 2846.9048, 2846.9049, and 2846.9099. Excludes downstream products. Source: China Customs | ||
Where China is particularly dominant is in the export of downstream REE products, most notably rare earth magnets. These magnets are used in an incredibly vast range of industries, from electric vehicles to wind turbines and consumer electronics, and are indispensable for the production of high-performance motors, sensors, and other components critical to clean energy and advanced defense technologies.
In 2024, China exported 58,142 metric tons of rare earth magnets, with a total export value of almost US$2.9 billion. Germany was the largest buyer of Chinese rare earth magnets, accounting for 18.8 percent of all exports, followed by the US (12.8 percent), South Korea (10 percent), and Vietnam (8.1 percent).
China also exports a significant amount of REOs, with the total export volume reaching almost 6,000 metric tons in 2024. Of this, almost 70 percent (4,175 metric tons) was exported to Japan, with the second-largest export market of Vietnam accounting for just seven percent.
China maintains strict control over the mining and production of REEs. REE production is governed by the Rare Earth Management Regulations, which came into effect in October 2024. These regulations stipulate that all REEs in China are owned by the state and prohibit the destruction of REE resources. As mentioned, the MIIT and MRE set annual quotas for the extraction and refining of REEs, and only companies that have been designated by the Department of Industry and Information Technology of the State Council are permitted to engage in the mining and refining (smelting and separating) of REEs. No company or individual is permitted to produce REEs without or in excess of their quota allocation.
REE mining and refining companies must also adhere to various other regulations related to energy conservation and environmental protection, clean and safe production, and fire protection.
It is illegal for any company or individual to purchase, process, sell, or export REE products that have been illegally mined or refined. Violations can result in the confiscation of illicit products and profits, fines of five to ten times the illegal gains (or between RMB 500,000 and RMB 2 million (US$69,781 to US$279,125) if gains are insufficient), and, in severe cases, revocation of business licenses.
REE production is also controlled through the Negative List for Market Access, which outlines the industries and fields that are either prohibited or restricted to private investment. The 2025 edition of the Negative List stipulates that investment or construction of REE material projects (including development of REE mines, smelting and separation projects, and deep processing projects) is not allowed without permission from the provincial government.
One of the central geopolitical contentions surrounding REEs—beyond their critical role in industrial applications and clean energy technologies—is their strategic importance to the defense sector. REEs, and in particular permanent magnets, are used for precision-guided munitions, missile guidance systems, stealth technology, and advanced communications equipment, making them essential for modern military capabilities and a focal point of strategic competition between major powers.
As the world’s largest supplier of these critical components, this dynamic creates significant friction between China and its major trade partners. In October 2024, China released the Regulations on Export Control of Dual-Use Items, which grants the Chinese government the ability to control the export of goods, technologies, and services with dual civil and military applications, “especially those that can be used for the design, development, production, or use of weapons of mass destruction and their delivery vehicles, including relevant technical data and other data”.
Because many REE products have clear potential for military use, these regulations, along with the provisions of the Export Control Law, give China considerable leverage in managing access to materials that underpin both commercial and defense supply chains.
Crucially, the regulations provide the legal basis for the government to impose licensing requirements for the export of dual-use items, enabling a case-by-case review process to ensure that sensitive items do not undermine national‑security interests. While this approach has a considerable impact on global supply chains, it is broadly in line with the dual‑use control regimes imposed by other countries, including the US, and reflects China’s stated goal of balancing commercial openness with security responsibilities.
On April 4, 2025, in a direct response to tariffs of 54 percent imposed on China by the Trump administration two days earlier, China’s Ministry of Commerce (MOFCOM) and Customs Administrations placed export restrictions on seven different types of medium and heavy REEs, specifically various derivations of samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium. A MOFCOM spokesperson stated that these items have “dual-use attributes” and that the export controls are aimed at “better safeguarding national security and interests and fulfilling international obligations such as non-proliferation”.
The implementation of export controls means that companies will need to apply for an export license from the State Council’s commerce department before they can export the materials from China.
Export licenses for dual-use items take around 45 days to process, as stipulated in the Regulations on Export Control of Dual-Use Items. However, this period may be delayed if the State Council’s commerce department needs to organize technical assessments, seek expert opinions, or conduct on-site inspections of the exporter or the end user to assess the license application.
Moreover, licenses generally are only valid between one and three years, depending on the type of license granted.
The implementation of export controls on these REEs has caused significant disruption to global supply chains, with major companies such as Ford and Suzuki having to pause production as a result.
China’s REE export license requirements have become a major point of friction in its global trade relationships. Export licenses were a core component of the agreement reached between the US and China following talks in Geneva on May 11 and 12, which saw both sides drastically cut their reciprocal tariff rates. In addition to lowering duties, China agreed to suspend or remove other non-tariff countermeasures that it took against the US since the reciprocal tariffs were first imposed on April 2, 2025.
It appears that, as part of this agreement, the US side expected China to remove or significantly expedite the issuing of REE export licenses to American companies. However, as the restrictions apply to all countries and the processing timeline and requirements are stipulated in Chinese law, it was always highly unlikely that China would make such an accommodation for the US without being given further incentives.
Recent discussions have sought to clear up some of these misunderstandings, including the phone call held between President Trump and President Xi on June 5, as well as talks held between US and Chinese officials in London from June 9 to 10. Following these meetings, which resulted in the formulation of a “framework” to adhere to the agreement reached in Geneva, Trump claimed that disagreements over Chinese exports of REEs have been resolved, stating that China will supply full magnets and any necessary rare earths “up front”.
On June 26, Trump stated that the US and China had signed a deal, which was confirmed a day later by MOFCOM. According to the MOFCOM statement, China will “approve the export applications of controlled items that comply with the conditions set out in the law” in exchange for the US lifting a “series of restrictive measures taken against China”.
Meanwhile, the issue of REE export licenses has also become central to discussions with the EU and other trade partners. In Early June, the EU formally requested greater transparency from China following signs that restrictions on rare earth exports might be eased. EU officials have made the issue a priority ahead of the upcoming July EU-China summit, warning that European industries are being severely affected by export delays, particularly in rare earth magnet supplies. The EU is pressing China for a clear proposal and has emphasized the urgency of resolving the issue beforehand, citing ongoing shortages and business uncertainty.
Meanwhile, the president of the Japanese Chamber of Commerce and Industry in China reportedly raised the issue of the export licenses during a meeting with MOFCOM in late May and urged Beijing to provide standardized licensing procedures and faster license approvals.
China began issuing some rare earth export licenses in early June. On June 27, EU sources confirmed to the South China Morning Post that China had started issuing export licenses to European countries. Meanwhile, while it is unclear at this point exactly what China has agreed to, the deal signed between the US and China on June 25 suggests that China is willing to make concessions with trade partners. Similar deals may be reached with the EU and other trade partners in the near future.
However, many foreign companies continue to face significant uncertainty and delays in securing critical REEs from China. Japanese manufacturers, for example, have reportedly faced particularly onerous demands, such as being required to itemize every end-use product containing rare earth materials, an unrealistic expectation given their widespread use.
To manage these challenges in the short term, companies should prepare for rigorous export licensing processes. This includes developing an internal compliance framework specifically tailored to China’s dual-use export regulations. Firms must ensure that all export applications are complete, accurate, and aligned with Chinese legal requirements, particularly regarding end-user identity, product specifications, and intended usage. Working closely with Chinese suppliers is also critical to ensure consistency across documentation, as this could cause applications to be delayed or rejected. Companies should also be prepared for additional scrutiny, including requests for technical data, end-use declarations, or on-site audits by Chinese regulators, which could further delay application procedures.
Even if the current bottlenecks are resolved, companies will need to remain alert. China’s export licenses are time-limited and subject to evolving political and regulatory conditions. China can alter the scope of export controls again or delay approvals if it deems necessary. Proactive monitoring of policy changes and ongoing risk assessment will be essential to foresee potential supply chain shocks in the future.
Longer-term, the only real hedge against this type of supply risk is diversification. While some REEs—especially heavy REEs like dysprosium and terbium—are still overwhelmingly sourced from China, other countries are beginning to scale up production and processing capacity. The current shock is likely to accelerate global efforts to establish alternative supply chains, particularly in Australia, Canada, the US, and parts of Africa. Nonetheless, building redundancy in these critical supply networks will take time, and for the foreseeable future, China will remain an indispensable supplier.
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