• Jiangxi province has rapidly emerged as one of China's fastest-growing industrial hubs.
• The province is attracting major companies like CATL and BYD.
• Jiangxi is pioneering sectors including brain-computer interfaces, nuclear medicine, and low-altitude aviation despite lacking coastal access.
• The rare-earth industrial cluster in Ganzhou exceeds ¥1 trillion in scale.
• Jiangxi has achieved world-first commercial maglev applications.
• The province reinforces China's dominance in critical materials where the U.S. and Europe remain structurally dependent.
• Jiangxi's rise signals China's strategic shift toward interior industrial development.
• The province is integrating state policy with advanced manufacturing in AI, batteries, and neurotechnology.
• This development narrows the window for Western nations to rebuild domestic supply chains.

China’s inland province of Jiangxi—long viewed as economically peripheral—has quietly become one of the country’s fastest-moving industrial growth stories, according to a report published by Xinhua and the China Rare Earth Industry Association. Once defined by geography that lacked coastal access or border trade, Jiangxi is now attracting heavyweight companies including China Rare Earth Group, CATL, and BYD, while accelerating into frontier sectors such as brain–computer interfaces (BCI), nuclear medicine, advanced materials, and low-altitude aviation manufacturing.

Jiangxi—On the Rise

The most eye-catching development: construction has begun on a “super factory” in Ganjiang New Area to mass-produce China’s first fully implantable, wireless, full-function brain–computer interface system. The company behind it says Jiangxi was chosen not for subsidies, but for its unusually dense industrial ecosystem—ready access to sensors, lithium batteries, circuit boards, and a government willing to incubate “future industries” from prototype to scale.

Jiangxi’s industrial metrics now rival far more famous manufacturing provinces. Its overall manufacturing efficiency ranks 9th nationally, while computer and smartphone production rank 3rd and 4th, respectively. Non-ferrous metals—particularly rare earths and copper-based advanced materials—are on track to become the province’s second trillion-yuan industry, alongside electronics.

From a global competitiveness standpoint, the rare-earth story is critical. A national-level innovation center in Ganzhou has reportedly achieved the world’s first commercial application of rare-earth maglev technology in rail transit, incubated 17 technology firms, and built 26 pilot production lines—supporting a rare-earth industrial cluster now exceeding ¥1 trillion ($140+ billion) in scale. This directly reinforces China’s dominance in downstream rare-earth processing and functional materials, an area where the U.S. and Europe remain structurally exposed.

Jiangxi is also emerging as a clean-energy innovation node. Solar giant JinkoSolar recently announced a photovoltaic conversion efficiency of 27.79%, breaking a world record for the 31st time. The company attributes its lead to over 5,600 global patents and more than ¥20 billion ($2.8B) in R&D spending over five years, despite tariff pressure and global solar oversupply.

Equally notable is Jiangxi's competition for capital. Rather than headline tax breaks, officials emphasize speed, service, and execution—from one-year land-to-production timelines to aggressive digitization subsidies that have cut defect rates and operating costs by double digits across thousands of firms. BYD alone has invested roughly ¥15 billion ($2.1B) in its Fuzhou EV complex, spawning nearly 100 suppliers and generating nearly ¥587 billion ($82B) in revenue in 2025.

Relevance for the West

Jiangxi’s rise underscores a broader shift: China’s industrial power is no longer coastal-dependent. Strategic sectors critical to U.S. national security—rare earths, batteries, advanced materials, AI-enabled manufacturing, and neurotechnology—are being scaled rapidly in China’s interior, with tight integration between state policy, capital, and industrial execution. For Western policymakers and investors, this narrows the window to rebuild domestic supply chains and weakens assumptions that geography or labor costs alone can blunt China’s industrial advantage.

Disclaimer: This news item originates from Chinese state-affiliated media, including Xinhua and organizations linked to state-owned enterprises. While the information appears internally consistent, all claims should be independently verified through non-Chinese or third-party sources before being relied upon for investment, policy, or strategic decisions.

• BYD aims to sell 1.3 million vehicles outside China in 2026, representing approximately 24% growth from 2025's 1.05 million overseas deliveries and approaching Tesla's total global volume of 1.64 million.
• Accelerating Chinese EV exports amplify demand for critical materials—NdPr magnets, power electronics, and Dy/Tb inputs—while China maintains dominance across separation, alloying, and magnet manufacturing.
• Nation-states must enforce coordinated industrial policy and ex-China capacity buildout to avoid being simultaneously flooded with Chinese products yet captive to Chinese material supply chains.

BYD’s plan to sell 1.3 million vehicles outside China in 2026 is a clean data point in a bigger REEx theme: China’s industrial system is managing overproduction by pushing harder into export markets while trying to stimulate domestic demand through “digitization,” ongoing “greenification,” and ambitious urban upgrade programs. Theinvestor implication is not limited to autos. More exported EVs meanmore traction motors, power electronics, and NdFeB magnets—and because China dominates key downstream steps, export volume can translate into pricing and supply leverage unless nation-states deliberately diversify and secure mine-to-magnet capacity.

What’s new

At a Shanghai media briefing, BYD’s Li Yunfei said the company aims to sell 1.3 million cars outside China in 2026, compared with 1.05 million overseas deliveries last year (roughly ~24% growth).

That target is below what Citigroup said it understood from management discussions: 1.5–1.6 million overseas sales in 2026.

Export scale comparison: BYD vs Tesla

To understand the scale: BYD’s overseas volume in 2025 (1.05 million) is already approaching the magnitude of Tesla’s total global 2025 deliveries (about 1.64 million).

This comparison matters because it illustrates how Chinese exports can reshape pricing and competitive dynamics across open markets (Europe, ASEAN, Latin America) even where tariffs exist—especially when exports help relieve domestic margin pressure tied to overcapacity.

REEx supply-chain lens: magnets and power electronics are the multiplier

More EV exports generally pull forward demand for:

• NdPr-based permanent magnets (traction motors and auxiliaries)
• Power electronics (inverters, onboard chargers, DC-DC converters)
• Dy/Tbinputs in higher-temperature motor designs

REEx’s core warning remains: if China’s export engine accelerates while it maintains dominance in separation, alloying, and magnet manufacturing, global markets can be “flooded” on the product side while staying “captive” on the materials side—unless nation-states collectively enforce industrial policy, offtake security, and ex-China capacity buildout. The recent Canada— China deal is not optimal from a USA-centric lens, for example. The tension between the USA and NATO over Greenland may not be optimal.  More tight collaboration and coordination among NATO members (traditionally allies economically, politically, and culturally) is likely a net positive, given the severity of the unfolding situation.

• BYD and Chinese EV makers doubled exports in 2025, capturing 7% of Western Europe's market by leveraging rare earth permanent magnet dominance that Western competitors lack.
• Chinese automakers bypass tariffs through new factories in Hungary, Turkey, Brazil, and Thailand while maintaining control over critical EV components like motors and battery systems.
• Western tariffs prove ineffective without downstream rare earth processing capabilities—China's vertical integration from refined materials to magnet manufacturing creates an irreversible competitive advantage.

Chinese electric vehicle makers, led by BYD, are rapidly gaining share across Europe, Latin America, and parts of Asia—despite tariffs, political resistance, and regulatory friction. That is the headline takeaway from a detailed Wall Street Journal report by Stephen Wilmot and Santiago Pérez, but for rare earth and critical-minerals investors, the more important story sits beneath the surface: China’s EV export surge is powered by rare earth dominance, and Western policy remains reactive, not structural.

What’s New — and Why It Matters

BYD delivered more than one million vehicles outside China in 2025, doubling exports year over year and overtaking Tesla globally. Chinese brands now control roughly 7% of Western Europe’s auto market, with ambitions to scale sharply by 2027. New factories in Hungary, Turkey, Brazil, Thailand, and Indonesia allow Chinese automakers to bypass tariffs while preserving control over core components. 

Soon, with the recently announced Sino-Canadian deal, North America will open up more as well.

What yesterday’s WSJ piece does not emphasize—but investors should—is that EV motors, power electronics, and battery systems depend heavily on rare earth permanent magnets, especially neodymium, praseodymium, dysprosium, and terbium. China dominates magnet manufacturing, not just mining. Exporting EVs is simply exporting that embedded advantage.

What’s Accurate — and What’s Promotional

The reporting is strong on market data, consumer anecdotes, and policy friction. However, it implicitly frames Chinese EV success as a pricing and branding story. That is incomplete. A fundamental moat remains vertical integration—from refined rare earths to magnet alloys to motor assembly—an area where Europe and the U.S. remain dangerously exposed.

Absent from the piece is any serious discussion of supply-chain risk, industrial dependency, or the fragility of Western EV strategies without magnet independence.

Implications for U.S. Policy and Investors

Tariffs alone are not working. Even Volkswagen and legacy OEMs now face Chinese competition on their home turf. Meanwhile, the U.S. has effectively outsourced the most critical EV subcomponents to China.

If the U.S. is serious about rebuilding its rare earth supply chain, it must go beyond mine-level headlines and invest downstream—processing, metals, alloys, and magnets—in coordination with Europe. Otherwise, Chinese EV exports will continue to scale, regardless of tariffs.

Key Questions REEx Is Raising

• Where are U.S. and EU-based magnet plants at a commercial scale? (REEx is tracking the emerging ecosystem in the USA)
• Who controls motor IP when vehicles are assembled “locally” but sourced globally?
• How exposed are Western EV margins to Chinese rare earth price leverage?

Bottom Line

Chinese EVs are winning because China solved the rare earth problem first. Until the West does the same, market share losses will continue—quietly, structurally, and irreversibly, at least in multiple key sectors.

• In 2025, China produced 34.53 million vehicles, marking a 10.4% year-on-year increase.
• New Energy Vehicles (NEVs) accounted for 47.9% of total vehicle sales, indicating progress towards electrification market parity.
• NEV exports more than doubled, reaching 2.62 million units, a 103.7% year-on-year increase.
• Total vehicle exports reached 7.10 million units, representing a 21.1% year-on-year growth.
• In December, NEV sales comprised 52.3% of new vehicle sales despite overall market softness.
• The rise in NEV sales directly increased demand for rare earth magnets and critical minerals.

China’s automobile industry closed 2025 with record annual production and sales, reinforcing its position as the world’s largest auto market—even as December volumes softened year-on-year, according to data released by the Ministry of Industry and Information Technology (MIIT) and compiled by the China Association of Automobile Manufacturers (CAAM).

Full-year performance was solid. In 2025, China produced 34.53 million vehicles and sold 34.40 million, representing year-on-year increases of 10.4% and 9.4%, respectively. Growth was overwhelmingly driven by new energy vehicles (NEVs), with production and sales reaching 16.63 million and 16.49 million, up 29.0% and 28.2%. NEVs accounted for 47.9% of total new vehicle sales for the year—bringing electrification close to outright market parity.

December results were more mixed. Total vehicle sales declined 6.2% year-on-year to 3.27 million units, largely due to a contraction in passenger vehicles, whose sales fell 8.7% YoY. In contrast, commercial vehicles outperformed, with December sales rising 15.3% YoY, pointing to continued momentum in logistics, freight, and infrastructure-linked activity.

NEVs remained a bright spot in December. Sales increased 7.2% YoY to 1.71 million units, pushing NEVs to 52.3% of monthly new vehicle sales—a notable milestone underscoring how deeply electrification is now embedded in China’s auto market.

Exports were the standout accelerant. In December alone, China exported 753,000 vehicles, a 49.2% YoY increase. NEV exports surged 124.8% to 300,000 units. For the full year, vehicle exports totaled 7.10 million units (+21.1% YoY), while NEV exports reached 2.62 million units, more than doubling (+103.7%) from 2024.

Why This Matters for Rare Earths and the West

China’s EV-led expansion and export surge directly translate into rising demand for rare earth permanent magnets, battery materials, power electronics, and lightweight alloys. As vehicle exports scale, embedded rare earth content increasingly moves offshore, tightening the linkage between China’s automotive dominance and global critical-minerals supply chains—an issue of growing strategic relevance for the U.S. and allied economies.

Disclaimer: This article is based on information released by China’s Ministry of Industry and Information Technology and industry associations operating within a state-affiliated information framework. All data and interpretations should be independently verified before forming business, investment, or policy conclusions.

• BYD overtook Tesla in full-year battery-electric vehicle sales for 2025, delivering roughly 2.26 million BEVs versus Tesla's ~1.64 million, marking China's shift from domestic champion to global EV pace-setter.
• Chinese auto exports are surging, hitting 6.343 million units through November 2025 (+18.7% YoY) with projections exceeding 7 million for the year, as manufacturers lean on foreign markets to absorb massive overcapacity.
• The EV market is entering an 'elimination round' where survival depends on cash flow and gross margins rather than volume alone, with intense pricing pressure creating clear winners and strugglers among Chinese automakers.

China’s major automakers opened 2026 by posting their 2025 sales results, and the headline is a market splitting into winners and strugglers: scale leaders are pulling away, while many companies are missing targets or discovering that volume growth doesn’t automatically translate into profits, as Rare Earth Exchanges™ has called out. The most symbolic datapoint: BYD overtook Tesla in full-year battery-electric (BEV) sales, with roughly 2.26 million BEVs delivered versus Tesla’s ~1.64 million, cementing BYD’s shift from a China champion to a global EV pace-setter.

Why is the EV Space Important to Monitor

Since 2020, battery-electric vehicles (BEVs) have been the fastest-growing category globally, even as growth has become more uneven by region. The International Energy Agency (IEA) reports (opens in a new tab) that electric car sales exceeded 17 million in 2024 (over 20% of global car sales) and notes that the increase in EV sales from 2023 to 2024 (about 3.5 million) was larger than the total number of EVs sold worldwide in 2020—a simple way to see how steep the EV growth curve has been since 2020.

Looking into 2025, the IEA expects EV sales to exceed 20 million (about one-quarter of global car sales) and to grow about 25% year-over-year, which remains far faster than the underlying growth of the overall car market.

Hybrids (non-plug-in HEVs) have also grown quickly—often faster than pure petrol—especially where charging, pricing, or incentives make BEVs harder to adopt—but they generally trail BEVs in global growth rate. And these, too, depend on rare-earth element-based magnets.  In Europe, for example, hybrids have become a dominant “bridge” technology: ACEA’s EU fuel-type tracking (opens in a new tab) shows hybrids rising strongly across 2019–2023, while petrol/diesel shares trend down and “electrically chargeable” vehicles (BEV+PHEV) climb.

In the U.S., the story into late 2025 tilts even more toward hybrids: a Reuters report (opens in a new tab) dated January 4, 2026, describes 2025 U.S. sales rising modestly overall, with gas trucks/SUVs and hybrids driving demand while EV share softened in late-year retail mix. Note that under President Trump’s Big Beautiful Bill, EV and green energy downstream incentives were eliminated.  Net: global winner on growth since 2020 = BEVs; runner-up = hybrids; laggard/decliner in share = petrol (and diesel), which remains large but is not the growth engine.  And that’s a trend Chinese producers are banking on. Again, however, they face what Rare Earth Exchanges refers to as an over-production crisis.              

Chinese Reporting

The story behind BYD’s leap is less about a single hit model and more about system competition—tight cost control, vertical integration, and a broad product portfolio that includes both BEVs and plug-in hybrids. In parallel, legacy Chinese groups are pushing the same playbook: “new energy + overseas expansion.” China’s auto exports through the first 11 months of 2025 hit 6.343 million units (+18.7% YoY), with industry officials projecting full-year exports above 7 million, a record—an unmistakable signal that China is leaning on foreign markets to absorb capacity.

Company-by-company, the “target completion rate” tells the real story: some, like Geely, reportedly cleared goals, while others fell short despite strong EV and export growth—evidence of intense domestic competition and pricing pressure. Rare Earth Exchanges has pointed to an over-production crisis across multiple Chinese industries.  

For newer EV brands, 2025’s “elimination round” is evolving from deliveries to cash flow, gross margin, and channel efficiency—in other words, who can survive a price war and still fund R&D. There will be substantial losers within China.

For the U.S. and Europe, the implications are direct: more Chinese exports (where they are allowed into markets), more pressure on Western automakers, and a faster scaling of EV supply chains that depend heavily on rare-earth permanent magnets (NdPr, Dy/Tb) and associated processing—precisely as the West tries to build its own capacity.

Disclaimer: This item is based on reporting carried by Securities Daily via SINA, a Chinese media corporation owned by private company New Wave Holdings Limited, controlled by Charles Chao.

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• China controls 69% of rare earth mining and 90% of processing.
• China files 30 patents for every one U.S. patent to secure intellectual property across various sectors such as defense, lasers, electronics, healthcare, and robotics.
• China aims to own tomorrow's breakthroughs before rivals can approach them.
• By 2025, Chinese innovations are set to include world-first ytterbium fiber lasers.
• Chinese innovations in 2025 will also include dysprosium-reduced magnet alloys for electric vehicles and military systems.
• China's advancements involve medical-grade gadolinium refining, supporting over 40 million MRI scans annually worldwide.
• By integrating resource control with aggressive R&D and standards-setting, China has created a self-reinforcing ecosystem.
• Foreign firms need to license Chinese technology to stay competitive in critical 21st-century industries.

China’s near-monopoly over rare earth elements – about 69% of global mining and 90% of processing – is more than a resource play; it is the backbone of a strategic innovation drive across high-tech sectors. In 2025, Beijing’s state-guided approach of vertical integration and aggressive patenting is fueling downstream breakthroughs in defense, lasers, life sciences, materials, robotics, and electronics.

Chinese firms and institutes are setting technology standards and securing intellectual property to “own the industries of the future” as stated numerous times via Rare Earth Exchanges.™ Below is a survey of Chinese rare earth innovations and patents in 2025 across key domains.

Patent Power and “Technological Moat”

China has spent decades building a technological moat through R&D and patents. By 2018, Chinese entities had filed around 25,900 rare-earth-related patents – more than double the U.S. total – and filings only accelerated into the 2020s. In fact, China now files roughly 30 rare earth patents for every one filed by the U.S., reflecting an enormous lead in intellectual property, as cited by GQG Partners (opens in a new tab).

These patents span extraction processes, refining techniques, new alloys, magnet compositions, and cutting-edge applications. Notably, Chinese engineers are pushing into next-gen challenges such as solvent-free REE separation, recycling methods, and rare-earth substitutes – aiming to solve problems before the West even approaches them. This patent boom is deliberate: by patenting tomorrow’s breakthroughs, China ensures that as new technologies emerge, Chinese companies will hold the key IP. It forces foreign firms to license Chinese tech or fall behind. In short, Beijing is leveraging resource control into intellectual control, using patents and standards-setting to dictate innovation on its own terms.

Defense and Aerospace: Rare Earths as a Strategic Edge

Modern military systems depend heavily on rare earths, and China’s dominance translates into a strategic edge. Each U.S. F-35 fighter contains 920 lbs of rare earth materials, an Aegis destroyer 5,200 lbs, largely in specialty alloys and high-strength magnets for sensors, motors, and weapons. Dysprosium and terbium, for example, are critical for heat-resistant magnets in jet engines and laser targeting systems – and China refines 98% of the world’s supply of these heavy REEs as reported via Rare Earth Exchanges.

Chinese metallurgists have mastered magnet miniaturization and high-temperature materials, giving China’s defense industry superior compact power systems and creating a chokepoint for rivals who must source these components. In 2025, Chinese firms continued to introduce advanced magnet alloys with less dysprosium (a scarce heavy REE) without sacrificing performance, a crucial innovation for military and aerospace applications that need lighter, heat-tolerant parts. Beijing’s rare earth leverage isn’t just about denying others' supply; it’s about leading in defense tech – ensuring Chinese missiles, jets, and radar have the world’s best materials. 

Lasers and Photonics: Ytterbium Boost and New High-Power Lasers

Chinese control of rare earths also underpins major strides in lasers and photonics. In 2025, researchers at the Chinese Academy of Sciences achieved a world-first ytterbium-doped fiber laser with stable single-frequency output of 42.8 mW at 972 nm. This laser demonstrated remarkable precision and temperature stability, using Yb³⁺ (a heavy rare earth ion) to produce a very pure light beam – ideal for quantum sensing, deep-sea LiDAR, and advanced optics. Around the same time, a team at China’s National University of Defense Technology unveiled a portable high-power laser (~2.5 kW) that can cut through metal at half a mile and operate from -50°C to +50°C with no bulky cooling, thanks to an ytterbium-fiber core and novel thermal management. These breakthroughs show how China’s command of rare earth materials (like Yb) is translated into cutting-edge laser devices.

From industrial welding to anti-drone weapons, Chinese lasers now push the envelope in power and durability. As one analysis noted, by mastering both the rare earth resources and the photonic applications, Beijing is positioning itself as an indispensable player in advanced laser tech. In short, China’s rare earth monopoly is yielding direct innovation dividends in optics – a field vital for communications, manufacturing, and directed-energy defense systems.

Electronics and Green Tech: Owning the Magnet and Motor Revolution

Rare earth innovation is perhaps most visible in clean energy and electronics, where permanent magnets and related components are crucial. Neodymium-iron-boron (NdFeB) magnets – containing neodymium, praseodymium, and often dysprosium – are the silent drivers of electric vehicle motors, wind turbine generators, and countless electronics. Here, China’s scale and R&D lead are striking. In 2024, China produced 260,000 tons of rare earth magnets (85–90% of global output), while the U.S. produced few, although this will change in the next couple of years with growing investment and at least some industrial policy in America.

Backed by massive R&D programs, top Chinese magnet companies like JL Mag and Ningbo Yunsheng each make tens of thousands of tons annually. This scale enables rapid innovation at lower cost. Chinese magnet producers in 2025 rolled out new formulations that use less heavy dysprosium yet maintain high heat performance, securing long-term supply for the EV boom. By controlling both the materials and the know-how behind this green tech revolution, China ensures its electric vehicle and wind industries have first access to the best magnets at stable prices, while foreign competitors face higher costs and supply uncertainty.

China’s reach in electronics goes beyond magnets. Its firms dominate production and patents for things like LED phosphors (europium, yttrium) and other components that define next-gen consumer devices. For example, the red and green phosphors in high-efficiency LED screens rely on europium and terbium – elements China refines almost exclusively. By embedding rare earth innovation across smartphones, audio equipment (neodymium in speakers and earbuds), and advanced batteries, China is effectively writing the blueprint for consumer tech. Many of the standards and patented designs for future electronics are coming from Chinese labs, meaning even if other countries source rare earths elsewhere, they may end up licensing Chinese-developed tech to use them.

Life Sciences and Healthcare: Rare Earths Behind the Scenes

Even the life sciences are touched by China’s rare earth strategy. Switzerland-based life science expert Bart Reijs has chronicled this for Rare Earth Exchanges.  Advanced medical devices and diagnostics quietly depend on rare earth elements – a domain where China’s control and innovation can have life-or-death implications. For instance, gadolinium (a heavy rare earth) is the key ingredient in MRI contrast agents, enabling over 40 million scans per year worldwide, and it must be of extremely high purity. China not only supplies most of the world’s gadolinium, but also operates the limited facilities that can refine it to 99.99% purity for medical use

Similarly, europium, terbium, and yttrium are critical in fluorescence-based diagnostic tests that detect diseases at ultralow concentrations reports Switzerland-based Reijs.  Chinese companies lead in producing these phosphors. Meanwhile, miniaturized rare-earth magnets (neodymium, samarium) power implantable devices like pacemakers and cochlear implants. In each case, China’s dominance means it effectively underwrites the innovation pipeline in medtech: Western healthcare firms rely on Chinese rare earth compounds to develop the latest MRI machines, laser scalpels, or diagnostic assays.

In 2025, Beijing’s export curbs on certain REEs (e.g. a July 2025 licensing rule for gadolinium and others) sent a wake-up call through the medical device industry, highlighting that any future breakthroughs in healthcare imaging or devices are intertwined with Chinese-controlled materials. While not as publicized as magnets or batteries, this is a hidden front where China’s rare earth R&D (e.g. in new contrast agents or radiotherapy isotopes) could quietly shape the next generation of life-saving technologies.

Robotics and Drones: Powering Next-Gen Machines

The robotics and drone sector benefits directly from China’s rare earth mastery, as high-performance motors and sensors depend on rare earth magnets. Chinese companies are actively innovating to equip the coming wave of robots and unmanned systems. For example, JL Mag, one of China’s magnet heavyweights, is piloting specialized magnet assemblies for humanoid robot joints and drone rotors. These magnets enable lighter, more powerful actuators, giving robots greater agility and drones higher lift and endurance.

By 2025, Chinese drone makers (like DJI) and emerging robot manufacturers will have first access to cutting-edge NdFeB magnets and compact motors designed in tandem with rare earth producers. This tight integration means China can iterate quickly on robotic systems that leverage stronger magnetic torque or precise rare-earth sensors (such as small gyroscopes or lidar with REE-based lasers).

On the defense side, the aforementioned portable laser weapon and other directed-energy systems could be mounted on autonomous platforms, marrying China’s strengths in AI, robotics, and rare-earth photonics. In effect, China’s rare earth innovation pipeline – from new magnet materials to fiber lasers – is feeding into both the hardware and the components of robots and drones. As the world races toward AI-driven machinery, China’s control of the “muscles and senses” (motors, sensors, power systems) via rare earth tech gives it a formidable lead.

Importantly, the administration of Donald Trump (2.0) moved to disrupt Chinese drone dominance. As recently cited by the Federal Communications Commission, Chinese drones won’t be accepted into the U.S. market moving forward. A striking possibility below to demand for Chinese products. Rare Earth Exchanges will follow this story.

Advanced Materials and Recycling Initiatives

China’s downstream strategy also encompasses materials science innovations and recycling technologies to secure long-term advantages. Rare earth catalysts have long been used in petroleum refining and chemical processes; Chinese chemists are improving these catalysts for cleaner fuel production and petrochemical efficiency as cited in Rare Earth Exchanges.

New rare-earth-infused alloys are being developed for next-generation aerospace and automotive parts – for instance, adding cerium or lanthanum to magnesium alloys for high strength and low weight, or using samarium-cobalt magnets in high-temperature engines. Many of these advances are patented by Chinese institutes, ensuring any novel alloy or material incorporating REEs falls under Chinese IP.

At the same time, recognizing that rare earth resources are finite (and mining them is environmentally taxing), China is heavily investing in REE recycling and substitution R&D. Patent analyses in 2025 show that China is by far the most active country in rare earth recycling patents, with Chinese universities the top source of filings worldwide (opens in a new tab).

For example, Chinese researchers are refining methods to recover neodymium and dysprosium from used motors and electronics, and to recycle fluorescent phosphors and battery materials. Although Western labs often lead in patent quality (citations), the sheer quantity of Chinese patents (opens in a new tab) indicates a strategic push for a circular economy in rare metals.

Additionally, Chinese engineers are exploring substitutes for critical rare earths – such as experimenting with iron-nitride or alnico magnets to eventually reduce neodymium use, or developing phosphorus-based phosphors to replace europium in some applications.

Many of these efforts are nascent, but by staking out intellectual property early, China is aiming to solve supply risks on its own terms. Crucially, Beijing’s 2025 export controls now even cover certain REE processing technologies, underscoring that China treats its know-how as a strategic asset not to be shared.

The result is that, whether through patented efficient separation processes (Chinese refineries achieve 99.9% purity vs ~95% elsewhere) or eco-friendly mining innovations (like electrokinetic extraction to cut chemical use), China is locking in a lead in the material science of rare earths from start to finish.

Owning the Future: A 2025 Snapshot

By late 2025, China’s rare earth downstream strategy has built a self-reinforcing ecosystem of resource control, innovation, and intellectual property. Across defense, renewable energy, electronics, healthcare, and industrial robotics, Chinese firms are not just manufacturing components – they are patenting the core technologies and setting the standards. A U.S. analyst observed that China is “not just owning today’s production; it is _patenting tomorrow’s breakthroughs_” From the smallest Yb-doped laser chip to the biggest EV motor, chances are a Chinese patent or material is involved.

This comprehensive approach (backed by state financing and coordinated research) means that many 21st-century breakthroughs – whether in quantum computing, hypersonic flight, or biotech – will orbit China’s rare earth ecosystem by design. For the rest of the world, 2025 made clear that catching up will require unprecedented investment and collaboration.

In the meantime, China seeks to decisively own the future by marrying its rare earth monopoly with relentless downstream innovation. 

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• Thai King's Beijing visit showcased China's immersive developmental approach—EVs, AI, rail, and smart farming—masking deeper integration into Chinese-controlled critical mineral and technology supply chains.
• China's charm offensive contrasts sharply with U.S. transactional strategy: while Washington secures MoUs preventing export bans, Beijing offers infrastructure, technology stacks, and long-term market demand.
• China Daily's narrative celebrates bilateral cooperation without addressing technology dependence, data governance risks, or China's rare earth dominance underpinning these 'future industries.'

How about soft power plus hard metals? Recently, Thai King Vajiralongkorn visited Beijing, according to state media (opens in a new tab) China Daily, representing a warmwatercolor of “one family” ties: polar science, smart farming, AI, high-speed rail, EVs, and youth exchanges. It is classic Chinese soft-power storytelling—culture, cooperation, and climate, not cobalt, copper, or rare earths.

But under the diplomatic poetry sits an unmistakable industrial agenda. EVs, AI, satellites, and high-speed rail all consume NdPr magnets, battery metals, sensors, and advanced semiconductors. Deepening China–Thailand integration in these sectors almost certainly implies tighter anchoring of Thai industry to Chinese-controlled supply chains for critical minerals and technology.

Two Playbooks in ASEAN: Charm vs. Contracts

Contrast this with Donald Trump’s recent ASEAN swing, where Washington inked MoUs and trade pledges with Malaysia, Thailand, Japan, and others to diversify critical mineral supply chains away from China. Malaysia, for example, agreed not to ban or impose quotas on exports of critical minerals and rare earth magnets to the U.S., even as it maintains a ban on raw rare earth exports and courts Chinese refinery investment.

The U.S. approach is transactional and defensive: lock in supply, prevent future export controls, and create tariff-mediated incentives. China’s approach, on full display in the China Daily account, is immersive and developmental: railways, AI labs, space projects, smart tractors, and consumer brands like Red Bull’s TCP leaning into “certainty” in China’s market. One offers contracts and tariffs; the other offers infrastructure, technology stacks, and long-term demand.  What’s going to be taken more seriously?

Where the Story Rings True—and Where It Glows

First, what’s credible. China is Thailand’s largest trading partner and top market for Thai agricultural exports; bilateral trade of nearly $114 billion is plausible and directionally consistent with other sources. Chinese EV and tech firms (BYD, Great Wall, Huawei, Xiaomi) really are expanding aggressively into Thailand’s consumer and industrial sectors.

Omitted intentionally or not was the lack of mention of technology dependence, data governance, or strategic leverage that may follow deep integration in AI, rail, and EV supply chains.  Plus, no discussion of how China’s rare-earth dominance underpins many of these “future industries,” or of ASEAN hedging with new U.S. and Japanese critical-minerals deals.

While the China Daily piece is not misinformation, it is a one-sided narrative—a celebration without risk analysis.

Disclaimer: China Daily is an English-language newspaper owned by the Chinese Communist Party, and is widely regarded as a state propaganda outlet; all claims require independent, third-party verification.

© 2025 Rare Earth Exchanges™ –Accelerating Transparency, Accuracy, and Insight Across the RareEarth & Critical Minerals Supply Chain.

• China's electric vehicle sector is at risk of collapse due to artificial sales inflation, excess capacity, and unsustainable government subsidies, posing a threat to the world's largest consumer of NdFeB magnets.
• A stalling Chinese EV market could either flood global markets with surplus NdPr and Dy or lead to tighter export controls, causing unprecedented volatility in rare earth magnet pricing.
• Beijing may leverage surplus magnet capacity to undercut Western competitors, aiming to maintain downstream dominance even as domestic automakers consolidate, highlighting a critical blindspot in U.S. industrial policy.

Michael Schuman’s reporting (opens in a new tab) in The Atlantic paints a vivid picture: China’s EV market is awash in “used-but-unused” vehicles, artificially inflated sales, and a government scrambling to stop the façade. The economic spectacle is striking—but for rare earth investors, it opens a deeper, more consequential story.

China’s electric-vehicle crisis is not just a demand problem. It is a signal flare for the global rare earth magnet supply chain. EVs are the largest and fastest-growing consumers of NdFeB magnets; their motors swallow NdPr, Dy, and Tb at an industrial scale. If China’s EV sector implodes—or even flatlines—the ripple effects could strike everything from upstream mining to downstream magnet pricing.

And that’s the angle no mainstream outlet hits: What happens to rare earths when the world’s EV engine stalls?

Where the Article Rings True—and Where It Drifts

Schuman accurately captures three realities:

1. Excess capacity. China massively overbuilt EV supply and now bears the consequences.
2. Artificial sales inflation. The “used car” gimmick is well-documented in Chinese retail channels.
3. Policy distortion. Beijing’s subsidies and command-driven quotas created unsustainable, hyper-competitive conditions.

But several claims glide past a deeper context:

Speculation risk

Predicting a full-blown EV “crash” without quantifying domestic fleet electrification, export growth, or Beijing’s capacity to bail out strategic firms overshoots the data.

Missing magnet implications

The rare earth and magnet industries—direct derivatives of China’s EV ecosystem—are not examined, despite being central to global industry stability.

No supply-chain reflection

Western policymakers may misread this as Chinese weakness; in reality, China’s rare earths, magnets, and motors remain structurally dominant even if EV makers wobble.

The tone leans toward declinism—engaging but arguably overstated.

The Rare Earth Angle: Hidden Volatility Ahead

If EV output drops sharply, China could flood global NdPr and Dy with surplus volumes—or, conversely, tighten exports further to stabilize pricing. The world is already operating under the unresolved April 2025 Chinese export controls, which still restrict processing technologies, know-how, and certain heavy REE-related goods despite Washington’s celebratory misreadings.

A collapsing EV sector does not mean collapsing rare earth power. If anything, Beijing may double down on keeping the West dependent on Chinese magnet and motor supply as its domestic auto makers consolidate.

For REE investors, three strategic questions loom:

1. Will China weaponize surplus magnet capacity to underprice Western startups?
2. Will depressed domestic EV demand push more REEs into export markets—or fewer?
3. Does U.S. industrial policy finally recognize that downstream magnets, not just upstream mines, determine independence?

© 2025 Rare Earth Exchanges™ – Accelerating Transparency, Accuracy, and Insight Across the Rare Earth & Critical Minerals Supply Chain.

• China controls 69% of global rare earth mining and 90% of processing.
• This dominance is used as a strategic lever to own future high-tech and green technologies.
• China employs vertical integration, aggressive patent strategies, and state-guided innovation.
• China is building a technological moat across critical industries like defense, electronics, and renewable energy.
• Beijing's comprehensive approach encompasses resource control, intellectual property, and setting global technology standards.
• China is positioning itself to dictate the terms of technological innovation.

Rare earth elements (REEs) – the 17 metals vital for electric vehicles, wind turbines, advanced electronics, and defense systems – have become a cornerstone of geopolitical and economic power. China recognized early the strategic value of controlling REEs. As Deng Xiaoping famously said in 1992, “The Middle East has oil; China has rare earths”. That foresight became reality: by 2024, China was mining 69% of the world’s rare earths and controlling about 90% of processing capacity. Beijing treats this dominance not just as an upstream resource play, but as leverage for downstream innovation and intellectual property leadership. In other words, China is using its rare earth monopoly to “own the industries of the future” through intensive R&D, patents, and a vertically integrated strategy. While the U.S. and its allies scramble to rebuild basic mining and refining, China is already racing ahead to set the technology standards and secure the patents that will define the next generation of green and high-tech industries.

From Mine to Magnet: A Vertically Integrated Monopoly

As Rare Earth Exchanges (REEx) has chronicled, China spent decades building an end-to-end “mine-to-magnet” supply chain that no other nation can match; Beijing controls roughly 70% of global rare earth mining and up to 90% of processing – including an astonishing 99% of heavy REE refining (for critical elements like dysprosium and terbium used in lasers, jet engines, and guidance systems). Perhaps more importantly, China produces 85–90% of the world’s high-strength rare earth magnets, the valued-added components at the heart of EV motors, wind turbine generators, and precision weapons. This vertical integration means China doesn’t just export raw minerals; it processes them into metals, alloys, and finished magnets domestically, capturing far more economic value.

Beijing’s playbook has been deliberate. It merged key producers into giant state-owned groups, enforced output quotas, and cracked down on illegal mining – all to stabilize control over supply and prices. Tax policy reinforces downstream production: exporters of raw rare-earth concentrates receive no VAT rebate, whereas exporters of finished magnets enjoy a 13% rebate, incentivizing companies to keep value-added manufacturing in China. By tightly linking rare-earth suppliers with domestic industries (such as pairing magnet makers with electric vehicle firms), China ensures its own manufacturers have first access to critical materials, a key to its national industrial policy.  This closed-loop system has turned rare earths into an engine of industrial growth for China. As a result, China’s Communist Party has a powerful strategic lever: a near-monopoly that can be wielded as a “trump card” in global markets.

Crucially, China’s dominance extends to processing know-how. Separating and refining REEs is a complex, environmentally challenging task requiring dozens of chemical steps. China mastered solvent extraction techniques (many originally pioneered in the U.S.) and scaled them to industrial levels, especially for the hardest-to-process heavy elements. By perfecting these methods and keeping them at home, China built a technical moat that others struggle to cross. In 2023, Beijing even designated rare earths a “state resource” and banned the export of advanced REE separation and magnet manufacturing technology. Further, in April 2025, China imposed new export licensing requirements on several refined rare earths and magnet products.

These moves underscore that China’s rare earth monopoly is as much about protecting intellectual capital as it is about controlling raw materials. By tightening export policies on critical processes and equipment, Beijing ensures other countries remain dependent on Chinese expertise. Competing with this hybrid system – part market-driven, part state-directed – is extremely difficult for free-market nations, as China can marshal state resources, industrial policy, and private firms in tandem to maintain its edge.

Innovation and Patents: Building a Technological Moat

Beyond commanding today’s supply, China has set its sights on owning tomorrow’s technology through aggressive innovation and patent activity. Chinese entities have filed far more rare earth-related patents than any other country. By 2018, China had ~25,900 REE patents on record – more than double the U.S. total (≈9,800), and more than Japan and the EU combined. Tellingly, over half of those Chinese patents were filed after 2011, reflecting a sharp acceleration in the last decade. This patent boom spans extraction processes, refining techniques, new alloys, magnet designs, and applications across electronics and energy. It highlights a strategic intent: patent the future so that as industries evolve, Chinese companies hold the key intellectual property.

Chinese engineers and scientists are pushing the envelope in areas like solvent-free separation, recycling technologies, and rare earth substitutes, aiming to solve next-generation challenges before the West even gets there as reported via REEx.

For example, Chinese magnet firms have innovated ways to reduce reliance on scarce heavy REEs (like dysprosium) by improving magnet compositions and cooling techniques. These breakthroughs lower costs and mitigate supply risks, giving China’s manufacturers an enduring advantage in price and performance. By contrast, the U.S. and Europe hold only a fraction of global REE patents, mirroring a broader innovation gap. As one analyst puts it, China is “not just owning today’s production; it is patenting tomorrow’s breakthroughs”.

Patents are only part of the story; standards and technical know-how are another pillar of China’s strategy. Through participation in global standards bodies and sheer market weight, Chinese firms can influence the specifications that future technologies must follow – often embedding their patented solutions as industry norms. At home, China’s government has rolled out national standards for high-end rare earth materials (e.g., for magnets and alloys) in line with its Five-Year Plans, ensuring domestic innovations set the pace for global markets.

By controlling intellectual property and setting de facto standards, China can force foreign companies to either license Chinese technology or risk falling behind technologically. In essence, Beijing is constructing a technological moat around its rare earth sector. Its 2023–24 export bans on REE processing know-how were explicitly meant to treat its innovation lead “as a strategic weapon, not just a commercial advantage”. We should expect to see China enforce its patents vigorously in international courts and trade disputes in the years ahead, cementing its claims as the primary innovator in all things rare earth.

“Green Paradigm” Breakthroughs: Owning the Clean Energy Revolution

Perhaps nowhere is China’s downstream strategy more consequential than in green technology. Rare earth magnets – particularly neodymium-iron-boron (NdFeB) magnets – are the unsung heroes of the clean energy economy, critical for electric vehicle motors and wind turbine generators. Here, China’s dominance is striking. In 2023, China produced about 240,000 tons of rare earth magnets (≈85–90% of global output), dwarfing all other countries. By 2024, it was on track for ~260,000 tons, while the entire U.S. had yet to produce even 1,000 tons per year. In fact, the first significant American magnet plant (MP Materials in Texas) is slated to come online in 2025 at a mere ~1,000 tons/year capacity – less than 1% of China’s output.  REEx reminds that the U.S.

Department of Defense (Now War Department) has injected capital into MP Materials (in exchange for 15% and access to the first rare earth mine-to-magnet play with imminent scale). Chinese companies like JL Mag and Ningbo Yunsheng individually manufacture tens of thousands of tons of magnets annually, supported by massive R&D programs. This scale gives China an unparalleled ability to supply the surging demand for EVs and renewable energy, and to innovate at scale. Chinese magnet producers have introduced advanced formulations that use less heavy dysprosium without sacrificing performance, a critical innovation to secure long-term magnet supply as EV adoption grows.

By controlling both the materials and the know-how behind the green tech boom, China positions itself to profit from the world’s clean energy transition. Every Tesla, Ford, or BYD electric car relies on Chinese-made magnet components, as do most wind turbines spinning from Texas to the North Sea. Upstream control guarantees downstream advantage: China can ensure its EV and wind industries have stable access to inputs at predictable prices, while foreign competitors face higher costs and supply uncertainty. Beijing has even shown its willingness to flex this muscle multiple times, as we have just experienced with the latest export controls announced by China’s Ministry of Commerce on October 9, 2025.

Importantly, China’s emphasis on green applications of rare earths aligns with its broader industrial policy. It’s not only about supplying magnet materials, but also about leading in the design and manufacture of the next wave of green technologies. With close government-industry coordination, Chinese firms are developing new types of electric motors, battery chemistries, and renewable energy systems optimized for domestic rare-earth materials. This synergy means China is shaping the direction of green innovation itself. By setting technical standards (for example, standardizing certain magnet grades or motor designs) and holding the patents in these areas, China is poised to dictate the terms of the green revolution. Other countries may find that even if they can source rare earths elsewhere, they will still be using Chinese-designed components or processes under license – paying intellectual rent to Beijing’s innovators.

The West Tries to Catch Up – But the Gap Is Wide

China’s rare earth dominance now permeates every strategic sector—from defense and electronics to healthcare and advanced materials—anchoring its technological advantage for decades to come.

Modern militaries rely heavily on rare earths: each U.S. F-35 jet contains roughly 920 pounds, an Aegis destroyer 5,200 pounds, and a Virginia-class submarine about 9,200 pounds, embedded in specialty alloys and high-strength magnets used in missiles, radars, and propulsion systems. China’s mastery of magnet miniaturization and heat-resistant materials gives its defense industry an edge while creating a potential chokepoint for rivals.

The same innovation engine powers China’s supremacy in consumer electronics—from neodymium magnets in smartphones and earbuds to europium and yttrium phosphors in LEDs—where Chinese firms not only produce the materials but dominate the patents that define next-generation designs. Even medicine and metallurgy are shaped by this reach: gadolinium for MRI contrast agents, rare earth catalysts for cleaner fuels, and REE-enhanced alloys for high-performance vehicles and aerospace. By embedding rare earth innovation across every industrial domain, Beijing isn’t just leading one sector—it’s writing the blueprint for them all, ensuring that future breakthroughs in quantum computing, hypersonic flight, or biotechnology will still orbit China’s rare earth ecosystem.

Conclusion: Owning the Future

China’s rare earth strategy is no longer about mining minerals—it’s about mining the future. By marrying resource control with relentless innovation, Beijing has built a self-reinforcing ecosystem of patents, processing dominance, and industrial standards that underpin the world’s next-generation technologies—from EVs and wind turbines to advanced defense systems and biotechnology. Its hybrid model of state-guided capitalism—where government planners, SOEs, universities, and private firms move in lockstep—has outmaneuvered the fragmented, short-term approach of Western markets.

For the United States and its allies, the warning could not be clearer: a comprehensive, long-horizon industrial policy for critical minerals and rare earths is no longer optional—it’s existential.

Building mines without midstream processing, magnets without offtake guarantees, or research without manufacturing integration will not close the gap. Only a coordinated “Operation Warp Speed” for the critical materials economy—anchored in R&D, financing, and allied cooperation—can ensure America and allies own a stake in the technologies that define the 21st century. The time to act is now; the cost of delay is dependence.

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• China's auto sector shows strong growth with 2.857 million vehicles sold in August, up 16.4% year-over-year.
• New energy vehicles (NEVs) reached 48.8% of all new car sales in August, signaling rapid electric vehicle market transformation.
• Chinese NEV exports hit 224,000 vehicles in August, indicating significant global market expansion and competitive pressure on Western automakers.

China’s auto sector kept its foot on the gas in August, with the China Association of Automobile Manufacturers (CAAM) reporting 2.815 million vehicles produced and 2.857 million sold—up 13.0% and 16.4% year over year. January–August totals reached 21.051 million produced and 21.128 million sold (both up ~12.6–12.7%). Passenger vehicles did the heavy lifting: August output hit 2.50 million and sales 2.54 million, each up low- to mid-teens year over year; year-to-date passenger sales stand at 18.384 million (+13.8%).

New energy vehicles (NEVs) remain the growth engine. In August, China produced 1.391 million NEVs and sold 1.395 million—up 27.4% and 26.8% year over year—pushing NEVs to 48.8% of all new car sales that month. Year to date (Jan–Aug), NEV production hit 9.625 million and sales 9.620 million, up 37.3% and 36.7%, with NEVs accounting for 45.5% of all new car sales. Within the NEV mix, fuel-cell vehicles fell versus last year, while the other two major categories (battery EVs and plug-in hybrids/erevs) posted gains.

Domestic NEV demand stayed brisk. August domestic NEV sales reached 1.171 million (+18.3% YoY), led by 1.106 million passenger NEVs (+16.5%) and 66,000 commercial NEVs (+58.6%). For Jan–Aug, domestic NEV sales totaled 8.089 million (+30.1%), including 7.607 million passenger (+28.6%) and 481,000 commercial (+59.0%).

Exports remained a standout despite a slight month-over-month dip. China exported 224,000 NEVs in August (-0.6% MoM, +100% YoY), including 220,000 passenger NEVs (-0.2% MoM, +110% YoY) and 4,000 commercial NEVs (-15.8% MoM, +9.5% YoY). For Jan–Aug, NEV exports hit 1.532 million (+87.3%), with passenger NEVs at 1.473 million (+85.1%) and commercial NEVs at 58,000 (+170%).

Why this is a business story

NEV penetration brushing 50% in August signals China is approaching a majority-electric market—years ahead of most forecasts. The export surge, even with minor monthly noise, implies ongoing price and market-share pressure for Western automakers in Europe, Latin America, the Middle East, and potentially North America via affiliates. For U.S. supply chains, sustained Chinese NEV growth tightens competition across batteries, power electronics, and rare-earth magnet demand (NdFeB) used in traction motors—raising the bar for domestic and allied industrial policy, trade defenses, and on-shoring timelines.

Why It Matters

Rare Earth Exchanges (REEx) has tracked Beijing’s long-game—systematically using its rare earth monopoly not just to extract upstream rents but to lock in downstream revenue and market dominance. The endgame, in some visions, stretches beyond materials into influence over global digital currency frameworks. All of this is now unfolding as planned by the Chinese government.

Disclaimer: This item is sourced from Chinese state-linked media reporting CAAM data (opens in a new tab). Figures and characterizations should be independently verified.

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• China's JL Mag dominates rare-earth permanent magnet manufacturing.
• Record production of 29,300 tonnes of magnet blanks in 2024.
• Plans to expand production to 60,000 tonnes by 2027.
• Supplies top global customers like Tesla, BYD, and Toyota.
• Strategic advantages in scale, vertical integration, and technological performance.
• Demonstrates leadership in ESG with:
  • 30% recycled rare-earth inputs.
  • Carbon-neutral product certifications in the critical minerals supply chain.

JL Mag Rare-Earth is a top-tier manufacturer of neodymium-iron-boron (NdFeB) permanent magnets—the muscle inside EV traction motors, direct-drive wind turbines, industrial drives, and high-efficiency compressors. Founded in 2008 and headquartered in Ganzhou, Jiangxi, the company is dual-listed (Shenzhen: 300748; HKEX: 6680) and sits squarely inside the world’s dominant rare-earth ecosystem: China produces an estimated 85–90% of global NdFeB magnets. JL Mag leverages that home-court advantage with its own R&D, processing depth, and global customer reach.

The company is listed as the number one magnet manufacturer in the Rare Earth Exchanges (REEx) Magnet Manufacturers global ranking.

Scale That Dwarfs the West

• Record output: In 2024, JL Mag produced 29,300 tonnes of magnet blanks (+39% YoY), roughly 20,900 tonnes of finished magnets (+~38% YoY).
• Capacity runway: Management is pushing capacity to 40,000 tpa by the end of 2025 and ~60,000 tpa by 2027.
• Share leader: By volume, JL Mag is widely regarded as the #1 producer of high-performance rare-earth magnets globally**,** some industry estimates place its share in the mid-teens —in a fragmented market otherwise dominated by Chinese incumbents.

The “Vast Differences”

Even the largest non-Chinese players operate at a fraction of JL Mag’s scale. A single JL Mag expansion tranche (20,000 tpa) approaches or exceeds the entire annual output of leading Western/Japanese magnet makers—illustrating the gulf in capacity, vertical integration, and domestic demand support.

Recent Moves: Building Where the Ore Is

• Baotou Phase III: A RMB 1.05B (~USD 146M) project adding 20,000 tpa in Inner Mongolia—anchored near China’s largest light rare-earth hub. This lifts the Baotou base to 40,000 tpa and cements JL Mag’s production lead.
• Green intelligent manufacturing: A separate 20,000 tpa project targets ~2027 completion, taking total capacity toward 60,000 tpa.
• Upstream security: Long-term supply ties with China Northern Rare Earth (light REEs) and China Rare Earth Group (heavy REEs) stabilize feedstock under China’s quota regime. A ~9.8% stake in Australia’s Hastings Technology Metals adds optionality outside China.

Customers: Blue-Chip Demand

JL Mag supplies magnets to top EV makers (e.g., Tesla, BYD, Toyota), 8 of the top 10 vehicle A/C compressor manufacturers, and 5 of the top 10 wind turbine OEMs. That spread diversifies revenue across EV drivetrains, HVAC, and wind power—and increasingly into robotics and UAVs, where JL Mag is piloting magnet assemblies for humanoid-robot joint motors and rotor components.

Technology Edge: High Performance, Less Heavy REE

A key technical lever is reducing dysprosium/terbium (scarce, costly heavy rare earths) while maintaining high-temperature performance. JL Mag’s low-HRE alloy and process work matters as EVs scale and OEMs target cost, efficiency, and supply resilience.

The Competitive Gulf: Why China’s Magnet Makers Win

Bottom line: even with new Western projects, announced outputs typically sit in the hundreds to low-thousands of tonnes—years from challenging China’s entrenched scale.

Geopolitics: License to Ship, License to Lead

In 2025, China imposed export-license requirements on certain rare-earth magnet categories (notably HRE-dependent). Customs pauses jolted global OEMs reliant on Chinese magnets. JL Mag secured an export license by mid-year, becoming an early conduit for resumed overseas shipments.

Investor read:

• China’s licensing underscores policy risk, but also signals that leading, compliant exporters like JL Mag can be favored channels in tight regimes.
• The episode accelerated Western efforts to localize magnets—but multi-year buildouts won’t erase dependence soon. Near-term, JL Mag’s strategic importance is likely to increase, not decrease.

ESG: Cleaner Magnets, Not Greenwash

• Recycling at scale: In 2024, ~30% of JL Mag’s rare-earth inputs (2,575 t) came from recycled sources (scrap and end-of-life magnets)—well ahead of most peers.
• Carbon steps: First in the magnet industry to obtain PAS 2060 carbon-neutral certification for select products (SGS). Rooftop solar and efficiency upgrades lower process intensity.
• Compliance: ISO 14001 environmental management in place. Supply-chain traceability—especially HREs from Myanmar—remains an area for ongoing scrutiny across the industry.

Financials & Sentiment: Volume Up, Margins Rebuilding

• 2024 snapshot: Revenue RMB 6.76B (USD 930M, +1% YoY) on surging volume but lower selling prices (raw material deflation). Net profit RMB ~291M, down ~48% as price compression and inventory effects bit.
• Q1-2025 turn: As prices stabilized and utilization rose, net profit +~58% YoY with revenue up ~14% YoY—evidence that scale plus cost discipline can restore margins.
• 2025 guide & views: Management guides RMB 8–9B revenue; some analysts peg RMB 8.8B (+30% YoY). Consensus sentiment leans bullish given capacity adds, export license clarity, and strong EV/wind pipelines.
• Volatility check: Shares have moved sharply on headline risk (e.g., Tesla’s “rare-earth-free motor” research; export controls). Yet the broader market signal remains: PM motors with NdFeB are still the efficiency king, and major OEMs continue to increase magnetized motor adoption.

What Could Go Wrong (and Right)

Risks: Raw-material swings (NdPr/HRE), policy shocks (tariffs/controls), and long-term substitution attempts (ferrites, synchronous reluctance) could weigh on margins or growth.

Offsets: JL Mag’s scale, upstream ties, HRE-lean alloys, recycling, and multi-market customer mix are built to buffer volatility. Capacity to ~60,000 tpa lines up with a potential global magnet shortfall this decade if EV/wind growth tracks expectations.

Investor Takeaways (Retail-Friendly)

1. China’s magnitude wins the near term. JL Mag’s capacity and integration are in a different league—one expansion phase can rival a Western peer’s entire annual output.
2. Customers validate quality. Supplying top EV, wind, and HVAC names confirms performance and delivery reliability.
3. Policy cuts both ways. Licensing risk is real—but JL Mag’s quick approval highlights its role as a strategic shipper in a controlled system.
4. ESG is improving. 30% recycled feedstock and early carbon-neutral certifications matter to global OEMs.
5. Growth with bumps. Expect quarter-to-quarter swings, but the secular EV/renewables tide—and JL Mag’s capacity path—point up and to the right.

Bottom Line: JL Mag is not just another factory—it’s the keystone of a magnet empire powering the electrified economy. China’s scale advantage is overwhelming, and JL Mag sits at the apex: bigger plants, deeper integration, tighter customer ties. For investors seeking exposure to the EV and wind buildout, JL Mag offers a front-row seat to the magnetization of global industry—alongside the candid risks that come with geopolitics and commodities.  Moves by the West, without a comprehensive industrial policy with an Operation Warp Speed style of thrust, REEx forecasts the U.S. and West won’t achieve 50% market share for at least a decade.

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• China's A-share companies invest record RMB 745.7B in R&D.
• BYD leads in R&D investment with RMB 30.88B.
• BYD's overseas revenue surged 130% year-over-year, with higher pricing abroad fueling continued innovation.
• China's rare earth supply chain monopoly provides a strategic competitive advantage in electric vehicle technology.

China’s A-share listed companies spent a record RMB 745.7B (USD 104.4B) on R&D in the first half of 2025, up 2.68% year-on-year. BYD once again dominated the field, investing RMB 30.88B (USD 4.3B)—a surge of over 50% compared with last year, equal to 8.3% of sales.

BYD also delivered RMB 371.28B (USD 52.2B) in revenue (+23.3% YoY) and RMB 15.51B (USD 2.2B) in net profit (+13.8% YoY). Six companies crossed the RMB 10B (~USD 1.4B) mark in R&D: BYD, China State Construction, ZTE, China Mobile, SAIC, and CATL. Meanwhile, tech-heavy boards like STAR and ChiNext showed R&D intensities in double digits, underscoring Beijing’s pivot from cost advantage to technology advantage.

New Signals to Watch

Two growth engines are feeding each other: R&D spending and overseas sales. BYD’s offshore revenue jumped 130% YoY to RMB 135.36B (~USD 19.0B), accounting for 36.5% of its total. Crucially, BYD’s models sell for 2–3x higher prices abroad than at home, especially in Germany, Brazil, Australia, and Thailand. Those margins recycle into more R&D, reinforcing its loop of innovation.

Rare Earths: An Invisible Tailwind

Behind the R&D headlines is China’s stranglehold on the rare earth supply chain—from Bayan Obo mine feedstock to NdFeB magnet production. This integrated base allows domestic EV makers like BYD to rely on secure, low-cost permanent-magnet motors while Western peers scramble for substitutes. Permanent magnets are critical for EV range, torque, and efficiency. Beijing’s export licensing on rare earths adds further strategic leverage.

Implications for the West

• Cost curve: Pairing secure magnet supply with multi-billion-dollar R&D budgets lets Chinese EV makers stay ahead in motor efficiency. Western OEMs experimenting with rare-earth-free designs face near-term efficiency penalties.
• Pricing power: BYD’s higher overseas pricing, plus its material hedge at home, create a durable margin-for-innovation cycle.
• Policy risk: If China further tightens magnet export rules, Western automakers could face a critical bottleneck just as EV adoption accelerates.

Rare Earth Exchanges has reported that the Chinese rare earth element supply chain monopoly, as well as growing sales downstream in verticals such as electric vehicles, is no accident. Part of a long-term, strategic orchestrated plan, China soon plans to surpass the U.S.A. in GDP, then move into oversight of digital currency, for example.  Or so that’s the plan.

Bottom line

China’s message is clear: R&D scale plus rare-earth security equals competitive firepower. BYD’s rise is not just about car design—it’s underwritten by China’s rare-earth monopoly feeding directly into global EV markets. Unless the U.S. and allies accelerate magnet production, processing, and substitution technologies—plus further downstream innovation, the gap will only widen.

Disclaimer: This article draws on Chinese financial media and corporate disclosures; sources include state-affiliated institutions. Figures and claims should be independently verified.

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• China controls 60-70% of global rare earth mining and 80-90% of processing capacity.
• This creates a strategic economic and geopolitical advantage for the country.
• Beijing has developed a comprehensive 'mine-to-magnet' system with vertical integration, technological innovation, and state-controlled production.
• The Chinese Communist Party's rare earth strategy positions China to dominate critical technology supply chains.
• This dominance is particularly impactful in green energy and advanced manufacturing sectors.

China has quietly built a near-monopoly in rare earth elements – the 17 critical minerals essential for everything from electric vehicle (EV) motors and wind turbines to smartphones and advanced weapons. Today, Beijing controls about 60–70% of global rare earth mining and more than 80–90% of processing capacity, a stranglehold widely viewed as a strategic “trump card.” Often called the “industrial vitamins” of modern technology, rare earths have become the backbone of China’s bid for long-term economic and geopolitical leverage. The Chinese Communist Party (CCP) has pursued a deliberate playbook: secure resources at home, consolidate production, push aggressively into downstream manufacturing, and weaponize supply when necessary.

From Mines to Magnets: Vertical Integration as Strategy

Beijing has spent decades building an end-to-end supply chain – from Inner Mongolian mines to Jiangxi magnet factories – making China the only nation with a fully integrated “mine-to-magnet” system. The 2021 creation of China Rare Earth Group, by merging several state-owned firms, further concentrated production and reserves under state oversight. While not the only player, it is now one of the largest globally. As of 2022, China produced about 58% of global rare earths, but an even more commanding ≈89% of processing, 90% of refining, and 85–90% of magnet output.

Beijing’s tactics include consolidation of producers, enforcement of quotas, and crackdowns on illegal mining to stabilize pricing. Fiscal policies favor high-value exports: for instance, no VAT rebate for raw concentrates versus a 13% rebate for finished magnets. And in partnerships, rare earth suppliers are tightly linked to downstream EV and renewable energy firms, ensuring Chinese companies first access to critical inputs. This “closed-loop” system captures more value domestically, transforming rare earths into an engine of industrial growth.

Innovation and Patents: A Technological Moat

China’s dominance extends beyond resources into technology and intellectual property. By 2018, Chinese entities had filed more than 25,000 rare earth patents, more than double the U.S. total. Breakthroughs such as Xu Guangxian’s cascade extraction method in the 1970s gave China an early lead in separation chemistry, later scaled up to industrial levels. Mastery of refining, coupled with relentless R&D into applications like neodymium-iron-boron (NdFeB) magnets, propelled Chinese producers to global leadership. Today, they supply about 90% of these magnets, the beating heart of EV motors and wind turbines.

To safeguard this edge, Beijing in 2023 declared rare earths a “state resource” and tightened export restrictions on processing know-how and advanced equipment. This ensures that even as other countries discover deposits, they remain dependent on Chinese expertise to bring them to market. The result is a self-reinforcing cycle: dominance in resources feeds innovation, innovation deepens technological leadership, and leadership entrenches market power.

Beijing’s key tactics to secure this vertical dominance include:

Cashing In on the Green Energy Boom

With this foundation, China is uniquely positioned to profit from the global shift toward EVs and renewables. Every Tesla or BYD relies on Chinese-made magnets, as do wind turbines worldwide. By controlling upstream and midstream supply, Beijing guarantees that the economic value of the clean energy boom flows through its economy. At the same time, China has demonstrated its ability to move markets at will. In 2010, it halted shipments to Japan, shocking global supply chains. More recently, its 2023–2024 restrictions on rare earth magnets triggered shortages and price spikes, underscoring the continued dependence of automakers and clean energy firms.

For domestic companies, meanwhile, supply is secure and costs are stable – a structural advantage for China’s EV and renewable giants. Foreign competitors, from Europe to the U.S., face higher costs and long timelines to build alternative supply chains. As policymakers scramble, Beijing’s message is blunt: “The Middle East has oil, China has rare earths.”

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• China's JL MAG breaks ground on third phase of permanent magnet production, adding 20,000 tonnes annual capacity
• The company controls 14% of global high-end rare earth magnet supply
• Serves major clients like Tesla and Toyota
• Expansion supports China's strategic goal to dominate the permanent magnet value chain across mining, separation, and fabrication

China’s leading rare earth magnet manufacturer, JL MAG (Baotou) Technology Co., Ltd (opens in a new tab)., has officially broken ground on the third phase of its massive permanent magnet production complex in Baotou’s Rare Earth High-Tech Zone. According to Asian Metal (July 10), the new expansion will add 20,000 tonnes per annum (tpa) of high-performance rare earth magnet capacity and is backed by a RMB 1.05 billion (USD 146 million) investment over a 7.67-hectare footprint.

According to their data JL Mag controls 14% market share of the world’s high end rare earth magnet supply.

The development includes smart manufacturing workshops, high-throughput production lines, and grid-supporting infrastructure like a new substation. Once complete, JL MAG’s total production capacity at the Baotou base will hit 40,000 tpa—cementing its role as the world’s largest rare earth magnet producer.

Company Profile: JL MAG

JL MAG (Jingling Magnetics), founded in 2008 and publicly traded on the Shenzhen Stock Exchange, specializes in sintered NdFeB (neodymium-iron-boron) permanent magnets, used in electric vehicle (EV) motors, wind turbines, robotics, and high-efficiency motors across industrial sectors.

Key facts:

• Global Market Leader: Supplies to Tesla, Toyota, Siemens Gamesa, and BYD
• Vertical Integration: Sources rare earth oxides, handles metallurgy, coating, and shaping in-house
• Technology Edge: Focuses on high-performance, low-heavy rare earth (HRE) magnet grades to reduce reliance on dysprosium/terbium
• Domestic Anchor: Core production hubs in Baotou (Inner Mongolia) and Ganzhou (Jiangxi)

JL MAG’s aggressive expansion supports China’s long-term goal to dominate the permanent magnet value chain, from rare earth mining and separation to final magnet fabrication. With this latest buildout, the company is positioning itself to meet surging domestic and global demand for EVs, wind power, and defense applications.

Implications for Global Competitors

This move may intensify competition for Western magnet hopefuls like MP Materials, USA Rare Earth, Neo Performance Materials, and VAC, which are racing to onshore production and reduce reliance on Chinese supply. With global demand for NdFeB magnets projected to exceed 300,000 tpa by 2030, JL MAG’s scale and vertical control offer a formidable cost and speed advantage.

JL Mag is influenced by the Chinese state, but it's not fully state-owned. A significant portion of the company is owned by private entities and individual investors. While specific state ownership percentages vary depending on the source, one report indicates that state ownership is around 9.4%, with another 9.3% owned by government enterprises. Other sources highlight the involvement of state-owned enterprises (SOEs) as shareholders, including the China State-owned Assets Supervision & Admn Commission (opens in a new tab), and a mixed-ownership reform fund.

Rare Earth Exchanges Takeaway

JL MAG’s Phase III project is more than an expansion—it's a signal. China is doubling down on rare earth magnet leadership. For Western producers and investors, this raises the stakes: compete on tech, ESG, or verticality, or risk irrelevance. And we don’t have a lot of time. Yes, even with the recent MP Materials and Department of Defense deal, this involves a few years of ramp-up, at least, and in the meantime, trade conflict with China could worsen.  The stakes are large.

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Rare Earth Exchanges™

• China has strategically dominated rare earth element production by controlling the entire supply chain from mining to manufacturing.
• The Big Beautiful Bill seeks to boost U.S. critical mineral production through funding, permitting reforms, and strategic investments.
• The legislation reveals a complex tension between supporting mining extraction and maintaining demand in clean energy industries.

Rare earth elements (like neodymium, dysprosium, and others) are critical ingredients in everything from electric vehicle motors and wind turbines to many electronic components and advanced weapons systems. However, mining these elements is only the first step – they must also be refined into high-purity materials and converted into components (such as powerful magnets) before they are incorporated into finished products. China learned this early and has spent decades building an end-to-end supply chain for rare earths, from mining to magnet production. Starting in the 1990s, Chinese firms – backed by state investment and lax environmental standards – flooded the market with low-cost rare earths, undercutting competitors. This strategy drove nearly all non-Chinese producers out of business.

A telling example is the Mountain Pass mine in California: once the world’s leading rare earth mine, it halted operations in 2002 after a waste spill and intense Chinese price competition made it unprofitable to continue. In short, without strong support across the entire supply chain, new mines in the West have struggled to survive when China can dump product at lower prices.

This is why industrial policy is so important. Simply opening a rare earth mine doesn’t guarantee a secure supply if you lack domestic processing plants or steady demand from manufacturers. As past experience shows, a mine-alone approach can collapse if China slashes prices or restricts exports to exert leverage. (Notably, China’s government has at times used export quotas or bans as a geopolitical tool – for example, cutting off rare earth shipments to Japan in 2010 over a political dispute, which caused global prices to spike.)

And as President Trump’s recent “Liberation Day” trade initiative triggered a swift Chinese clampdown on rare earth exports, it’s clear that—at least in the short to medium term—America’s leverage remains limited based on how events have unfolded thus far.  On the other hand, no one should count out U.S. power and influence; it goes deep, broad, and far, so the situation remains dynamic.

A comprehensive strategy needs to invest in every link, including mining, refining, manufacturing, and even stockpiling, as well as innovative breakthroughs in recycling and non-rare-earth magnet technology.  It may also require safeguards, such as offtake agreements or tariffs, to prevent state-subsidized dumping. In essence, building a resilient rare earth supply chain is a collaborative effort between industry and government, often requiring significant public support and investment, much like China has done. The question is whether the United States is now willing to mount a similarly concerted effort, especially with midterms around the corner and a political culture in the USA that tends to kick the can down the road.

What the “Big Beautiful Bill” Does for Critical Minerals

House Republicans’ newly unveiled “One Big Beautiful Bill (opens in a new tab)” (H.R. 1) – a sweeping $4 trillion reconciliation package – includes several provisions aimed at jump-starting domestic production of critical minerals, including rare earth elements.

On paper, the bill clearly recognizes the strategic importance of these materials. Notably, it sets aside $2.5 billion specifically to boost U.S. critical mineral production through the National Defense Stockpile (opens in a new tab). The government could use this funding to purchase and stockpile domestically produced rare earths, effectively guaranteeing a buyer for U.S. mines (a buffer against price crashes). The bill also provides $500 million to expand a Department of Defense loan program that would support critical mineral projects with loans and loan guarantees.

According to the legislative text (opens in a new tab), this could leverage up to $100 billion in private financing for developing “reliable sources” of critical minerals and related industries.

In plain terms, Washington is offering to help finance new mines, processing facilities, or even manufacturing plants to ensure these strategic materials are mined and refined either in the U.S. or by allied countries.

Beyond funding, the Big Beautiful Bill aims to make it easier and less risky to bring new resource projects to fruition. It creates a new “De-Risking” program (opens in a new tab) that would compensate companies if a federal action (like a permit revocation or sudden regulatory change) shuts down a major energy or mineral project mid-stream.

Under this program, a U.S. company investing $ 30 million or more in a “covered” project, which explicitly includes critical mineral extraction and processing, could recover its sunk costs if the government were to withdraw support (for example, if a future administration canceled a mining permit after it was issued). This is essentially political risk insurance designed to reassure investors that the rules of the game won’t change unexpectedly.

Likewise, the bill includes permitting reforms to expedite project approvals. It allows project sponsors to pay a fee to expedite environmental reviews, imposing hard deadlines (e.g., one year for a full environmental impact statement) and even barring legal challenges to the resulting ecological studies. For a rare earth mine or processing facility that might otherwise face years of regulatory delay and courtroom battles, this fast-track option could be a game-changer.

The idea is to shorten the timeline from investment to production, so that strategic projects can come online before investors lose patience or capital.

In short, H.R.1’s mining-related provisions would pour significant money into the critical minerals sector and attempt to break logjams in the mine approval process. These steps certainly acknowledge that a robust supply of rare earths is a national priority.

The big question, however, is whether this approach, which focuses heavily on the upstream (extraction) side, is sufficient to secure the supply chain truly. Rare earth development doesn’t happen in a vacuum; it relies on healthy downstream industries to purchase the materials and transform them into products. This is where the bill’s broader thrust raises some concerns.

As Rare Earth Exchanges (REEx) has continuously suggested:

Industrial policy is crucial for building a resilient rare earth supply chain, as market forces alone cannot overcome the deep structural advantages China has established across upstream mining, midstream processing, and downstream manufacturing. Decades of Chinese state subsidies, export control strategies, and infrastructure integration have made it nearly impossible for private Western firms to compete without coordinated public support. Rare earth mines in the U.S. and allied nations risk collapse without guaranteed processing, offtake agreements, or price stabilization, especially when faced with Chinese rare earth dumping. At the same time, gaps in domestic refining, recycling, and magnet-making leave new mines disconnected from end markets. A whole work force needs to be educated.  To succeed, America must invest across the entire value chain—from geologic surveys and permitting reform to separation facilities, magnet innovation, and substitutes like non-rare earth permanent magnets, to educational and vocational programs across the value chain—ensuring strategic redundancy, economic viability, and technological independence.

Of course, this is far from a perfect world, and given current dynamics—including the contents of the Big Beautiful Bill—such a comprehensive industrial policy in the U.S. remains unlikely. More realistically, progress will depend on a blend of public-private partnerships shaped by both market forces and targeted subsidies. That’s where REEx comes in: our online tools aim to guide smarter capital deployment toward the most promising companies and projects (with the supply chain in mind), helping maximize impact across the critical mineral supply chain.

Green Industry at Stake: Will Mining Support Be Enough?

Critics point out a potential contradiction in the Big Beautiful Bill: even as it boosts mining, it simultaneously pulls back on policies that sustain demand for critical minerals. A resilient rare earth supply chain needs both ends – supply and demand – working in tandem. Yet, H.R.1 aggressively rolls back many of the clean energy initiatives that were creating new markets for these minerals.

Most prominently, the bill guts or sunsets a slew of incentives for electric vehicles, renewable power, and advanced energy manufacturing that were enacted just a couple of years ago in the Inflation Reduction Act. It proposes to repeal or phase out nearly every major clean energy tax credit, including credits for buying EVs, installing EV chargers, wind and solar investments, and even the advanced manufacturing credit that covered domestically produced battery components and critical minerals, as reported by expert attorneys via Lexology (opens in a new tab).

For example, the IRA’s Section 45X advanced manufacturing credit, which would have rewarded U.S. production of materials such as battery components and rare earth magnets, would be phased out years early under this bill (opens in a new tab). This latter point is particularly dangerous given the Two Rare Earth Base China policy, with emphasis on near monopolization of rare earth magnets, components and assemblies, not to mention a torrent of patents in downstream innovation in the Middle Kingdom.

Likewise, new clean electricity projects would lose their tax credits in short order, and incentives for purchasing electric or fuel-cell vehicles (Sections 30D and 45W) would be reduced. In effect, the legislation shifts U.S. policy away from electric cars and renewables and back toward traditional energy (it even mandates more oil and gas lease sales and funds oil reserve purchases).

This is why tech and automotive leaders have sounded alarms. Industry stakeholders – including Tesla’s CEO Elon Musk – warn that canceling clean energy incentives will undercut the very industries that make use of rare earth materials, from EV makers to wind turbine manufacturers. Musk and others point to the hundreds of new projects and over $120 billion in private manufacturing investment announced since the IRA’s passage as evidence that the prior policy was effective in building domestic capacity. They argue that yanking support now could derail this nascent momentum.

From a rare earth supply chain perspective, this matters because without a robust domestic clean tech sector, who will buy the output of new U.S. rare earth mines?  Remember, other countries are already acting in their interests to develop industrial policies, such as India and Europe.

A big driver of rare earth demand is the push for electrification and renewable energy. For instance, an electric car can contain a kilogram or more of neodymium in its motor magnets, and each large wind turbine requires hundreds of kilograms of rare-earth magnets. If U.S. policy makes it less attractive to build or buy EVs and wind turbines (by removing credits and even rolling back fuel efficiency and emissions standards, then the growth in rare earth demand may occur overseas instead of in America. That could leave U.S. mines serving a mostly export market or competing globally against China’s still-dominant producers – a precarious scenario, given China’s ability to drive prices.

China’s Moves

Meanwhile, China is moving in the opposite direction. Beijing continues to heavily support its green industries and the raw materials behind them. As a result, China not only produces about 90% of the world’s rare earth elements but has also leveraged that position to become a manufacturing powerhouse in EVs, batteries, and renewable energy technology. In fact, China spent years investing in every stage of the supply chain (often through state-led programs), and today it enjoys what one analyst called a “near monopoly” in the mining and processing of rare earths and other minerals essential for the clean energy transition, as cited by Yale (opens in a new tab) and many others.

It’s important to also understand China’s aggressive and massive Belt and Road Initiative (opens in a new tab), and the hundreds of deals the nation already has with countries worldwide. These are advancing, maturing, and consequently make it hard for the U.S. to regain its resurgence in many parts of the world.

This dominance was not accidental – it came from long-term industrial policy. The payoff is that Chinese companies, such as BYD, now lead the world in EV production, and China accounts for more than 80% of global solar panel manufacturing capacity. It is also rapidly installing renewable energy at a record pace (China added as much solar capacity in 2022 as the rest of the world combined, then doubled that addition in 2023). China’s leadership clearly sees moving away from fossil fuels as an opportunity to capture economic and strategic advantage, and it is acting on that vision. Fossil fuels still play a big role in China’s energy mix (coal remains huge). Still, tellingly, as of 2023, fossil fuel plants account for less than half of China’s power generation capacity, down from about two-thirds a decade ago, according to a Yale report (opens in a new tab).

The trajectory is set toward cleaner technologies, which means sustained demand for critical minerals, such as rare earths, in China and allied markets.

This contrast raises a blunt point: If the U.S. retreats on support for clean tech industries, it could inadvertently cede further ground to China in the next-generation sectors that rely on rare earths. Even if America succeeds in digging more rare earths out of the ground, will we end up shipping those raw concentrates to Asia for processing and manufacturing (as happens with the Mountain Pass mine today)? Without domestic customers and processing plants, the U.S. risks remaining an upstream supplier at the mercy of global commodity prices, still far from achieving proper supply chain security.

A Contrarian Play

Trump’s contrarian play in the Big Beautiful Bill rests on a bold assumption: that while much of the world chases green energy transitions, the United States will seize global energy dominance by doubling down on fossil fuels and reviving nuclear power. The argument posits that oil, gas, and coal still account for over 80% of global energy consumption, and with demand from emerging markets like India and Africa expected to increase, a fossil-fuel-rich America can reap substantial geopolitical and economic benefits. By rejecting costly green subsidies and over-regulation, this strategy bets that the herd is wrong—that China, the EU, and ESG-driven investors are racing toward an energy cliff. At the same time, the U.S. remains rooted in energy realism. Add in a new generation of modular nuclear reactors, and the vision becomes one of unshackled industrial might and global leverage.

However, this bet may underestimate a rapidly shifting global reality. China is not abandoning green energy—it’s dominating it, investing more in renewables and EVs than the rest of the world combined, while building up its rare earth and battery supply chains (China controls much of the battery value chain now).

Europe is accelerating decarbonization not just for climate, but to escape geopolitical energy dependence. Even major oil companies are hedging toward net-zero. As clean tech costs fall and climate-driven trade barriers rise (such as carbon tariffs), clinging to fossil fuels could isolate the U.S. both economically and diplomatically.

Instead of bucking the herd, America may find itself behind it—outpaced in the race for future industries and increasingly reliant on yesterday’s energy for tomorrow’s challenges. 

REEx cannot predict the future; we only delineate the possibilities here.

Balancing Extraction and Demand: An Objective Look

From an objective standpoint, Big Beautiful Bill’s critical mineral provisions demonstrate a serious effort to fortify the supply side of the rare earth equation. The funding for mines, stockpiles, and loan guarantees, as well as permitting relief, would lower barriers for companies looking to extract or process rare earth elements in the U.S. These measures could help kick-start projects that have long been considered too risky or expensive. They also indicate policymakers understand that China’s stranglehold on rare earths is a strategic vulnerability worth addressing with public resources. In that sense, the bill’s proponents are right: a degree of “industrial policy” is needed if the U.S. hopes to catch up in this arena.

However, securing a resilient rare earth supply chain is about more than just digging mines. It requires nurturing the entire ecosystem – from mines, to refiners, to manufacturers – and aligning it all with actual market demand.

On this front, observers note that H.R.1’s broader provisions seem to be at cross purposes with supply chain resilience. By slashing support for clean energy and high-tech manufacturing, the bill could weaken the very domestic customers who would buy rare earth materials. The risk is that mining projects get greenlit. However, the downstream industry isn’t there to fully utilize them, leaving the U.S. still reliant on selling into foreign supply chains (or relying on government stockpile purchases as the main customer). In economic terms, a healthy demand pull is as important as the supply push.

It’s also worth mentioning that while the House passed the One Big Beautiful Bill in May 2025, its prospects in the Senate (and with the current administration) are uncertain. Many provisions – especially the reversals of clean energy programs – face staunch opposition from Democrats and even some Republicans who are otherwise friendly to cleantech.  However, as of today, it appears that the Senate is headed toward advancing the bill into law.

Of course, once the bill is signed into law, the 2022 Inflation Reduction Act’s incentives will no longer be in effect: these have been policies actively driving investment in battery plants, EV assembly lines, and rare earth magnet factories on U.S. soil.  That momentum is something any future compromise will have to grapple with. Policymakers on both sides of the aisle agree on the goal of reducing dependency on China for critical minerals; the debate centers on how to achieve it.

REEx Reflections

In conclusion, the Big Beautiful Bill highlights a pivotal tension in America’s approach to rare earth security. On the one hand, support for mining and stockpiling suggests a recognition that the government must help jump-start the supply side. But a truly compelling industrial strategy would likely also bolster the demand side, ensuring that the clean-energy industries of the future take root in the U.S. rather than overseas. This would include far more provision for production downstream of necessary magnets, components, and assemblies for defense purposes, for example.

One reality is the clash of politics and business. Something Trump is learning in this second term,  and a dynamic Elon Musk still does not fully understand.

Is the bill enough? On its own, probably not: a resilient rare earth supply chain will require a more holistic approach, one that couples raw material production with thriving domestic manufacturing, significant contribution to educational and vocational readiness, and according to REEx’s understanding of the global nature of the problem, coordinated efforts with allies such as Australia, Canada and even nations such as Malaysia and others.

In the long run, the United States may need to find a balance between encouraging extraction at home and staying in the race for the high-tech, low-carbon industries that will define the future – the very industries (including the future of defense, robotics (humanoids), drones and more) that make rare earth independence strategically worthwhile. As the saying goes, mines don’t exist in isolation: they succeed when part of a competitive, end-to-end supply chain. The Big Beautiful Bill makes a big bet on one end of that chain; whether it delivers security will depend on what happens with the rest.

• China's new energy vehicle (NEV) sales surged 36.9% in May 2025, capturing 48.7% of total vehicle sales.
• NEV exports more than doubled, with 212,000 units shipped in May and a 64.6% year-on-year increase.
• China's control over rare earth materials and EV supply chains represents a significant geopolitical and industrial strategic advantage.

In a key development with direct implications for global rare earth markets, China’s Ministry of Industry and Information Technology (opens in a new tab) has released figures (opens in a new tab) showing explosive growth in new energy vehicle (NEV) production, sales, and exports—solidifying China’s dominance in the electric vehicle (EV) ecosystem and foreshadowing intensified global competition for critical materials like neodymium, dysprosium, and terbium.

According to the media release:

• In May 2025, China sold 2.69 million vehicles, a 11.2% year-over-year increase, with NEV sales surging 36.9% to 1.31 million units, accounting for a significant 48.7% of all new vehicle sales.
• From January through May, NEVs comprised 44% of total new vehicle sales, with cumulative NEV sales reaching 5.61 million units, up 44% year-over-year.
• NEV exports more than doubled, with 212,000 units shipped in May alone, and 855,000 exported year-to-date, marking a 64.6% year-on-year increase.

Implications for the West

This data confirms that China is not just outpacing the West in EV adoption—it is exporting the future of mobility at scale, while also commanding supply chains of critical inputs, especially rare-earth permanent magnets (NdFeB) used in EV motors.

With each EV motor requiring 1–2 kg of rare earth magnets, China’s pace suggests rare earth demand is entering a structurally higher plateau. As trade tensions and export controls escalate, Western automakers and defense sectors are facing growing vulnerability, particularly as China tightens its grip on dysprosium and terbium supplies, which are essential for high-temperature motor performance.

Rare Earth Exchanges (REEx), since its launch in October 2024, has reported that explosive growth in downstream verticals—especially electric vehicles (EVs)—is central to China’s multi-decade strategy for global ascendancy as a geopolitical leader. 

The latest sales data validates that forecast.

And assuming even conservative accuracy, this is a wake-up call for the supply chain. The data must be viewed with scrutiny, given a lack of transparency.  

However, it's becoming apparent China is no longer merely dominating the upstream rare earth mining sector; it is converting that advantage into global market share across magnets, motors, and final products. The sheer scale of China’s NEV ecosystem gives it a commanding presence over demand-side dynamics, reinforcing its pricing power and geopolitical leverage.

For the West, continued dependence on Chinese rare earth supply chains is a strategic liability. Critical magnet materials, such as neodymium, dysprosium, and terbium, are increasingly embedded in Chinese exports, not just components. As these materials underpin everything from EV motors to missile guidance systems, this isn’t just industrial risk—it’s national security exposure.

Final Thoughts

REEx urges Western policymakers, defense planners, and automakers to heed this as a final warning: diversify rare earth sourcing, build domestic processing capacity, and implement coherent industrial strategies—or risk watching China capitalize on its rare earth momentum to establish lasting geopolitical control.

• Nickel prices plummeted from $48,000 to $15,000 per ton due to Indonesian oversupply and EV battery technology shifts.
• Borsje suggests the price collapse reflects broader systemic dysfunction in global pricing mechanisms, particularly around U.S. dollar benchmarking.
• A quarter of global nickel producers are now operating at a financial loss, signaling significant market disruption.

In a widely discussed LinkedIn post, Dubai-based Pieter Borsje (opens in a new tab), founder of Eona (opens in a new tab) and a vocal advocate for hard assets, argues that the recent plunge in nickel prices is less a signal of weakening industrial demand than a symptom of systemic dysfunction in global pricing mechanisms.

Nickel has fallen dramatically—from $48,000 to $15,000 per ton—due to oversupply from Indonesia, a shift by EV makers to LFP batteries, and stagnating demand for stainless steel. As Borsje notes, a quarter of global producers are now operating at a loss.

But the real story, he contends, is bigger than nickel. It’s about the erosion of credibility in the U.S. dollar, which continues to serve as the benchmark pricing unit for most industrial metals.

With U.S. interest payments set to exceed $1.1 trillion by 2026, Borsje sees the fiscal spiral triggering a global retreat from investment, infrastructure, and industrial activity, not growth, but contraction to pay for the past.

He warns that as the dollar becomes “a unit of distortion, not value,” pricing signals are breaking down. Nickel’s plunge, then, may reflect a market misfire, not a loss of relevance. After all, nickel remains essential to defense, high-performance alloys, power grids, and next-gen batteries.

“When illusions clear,” Borsje writes, “real assets resurface.”

Counterarguments to the “Nickel Mispricing” Thesis

While Pieter Borsje’s opinion argument about systemic distortion in pricing mechanisms carries rhetorical force, it may overstate the case by attributing too much of nickel’s collapse to macro-monetary dysfunction and not enough to genuine shifts in supply, technology, and industrial strategy.

First, the price drop in nickel is more directly explained by fundamental oversupply than fiat currency distortion. Indonesia’s aggressive expansion of nickel mining and refining capacity, backed by state support and low-cost labor, has created a sustained glut in the market. This is a structural and physical reality, not a monetary illusion. If anything, the price decline reflects a functioning commodity market responding to tangible changes in supply and demand dynamics, not a systemic breakdown.

Second, the technological shift toward lithium-iron-phosphate (LFP) batteries by major EV manufacturers, such as Tesla and BYD, is not simply a transient trend but a deliberate industrial pivot. LFP batteries are cheaper, safer, and no longer as far behind nickel-based chemistries in energy density as they once were. Nickel demand from the EV sector is being structurally cannibalized, not temporarily mispriced.

Third, attributing price movements to a collapsing U.S. dollar overlooks the fact that the dollar has actually strengthened in global currency markets relative to many of its peers, especially during times of economic uncertainty. If anything, a strong dollar puts downward pressure on commodity prices by raising the relative cost of dollar-denominated goods. This doesn’t signal “distortion”—it suggests the market is doing what it’s designed to do: reprice risk and demand under evolving global conditions.

Furthermore, industrial metals like nickel are not only priced in dollars—they are traded on global exchanges with deep liquidity and sophisticated hedging tools. The idea that the entire pricing system has lost credibility implies a far broader breakdown than the evidence supports. Producers and consumers continue to transact, hedge, and invest across currencies and platforms without a collapse in trust.

Note nickel itself is not a mineral nor a rare earth element, but it is a key component of various minerals. Nickel is a chemical element, a naturally occurring metal with a silvery-white, shiny appearance. While nickel can exist in its pure metallic form, it is more commonly found in combination with other elements, particularly sulfur, arsenic, and iron, to form minerals like pentlandite (opens in a new tab), nickeline (opens in a new tab), and millerite (opens in a new tab). 

Join the Unfolding Debate

Rare Earth Exchanges raises the critical question for the mindful to ponder: does a monetary system increasingly misprice industrial metals—nickel included—under growing strain? According to this hypothesis, as metal markets decouple from real-world utility, the case for strategic stockpiles, new pricing mechanisms, and alternative benchmarks becomes stronger. Yet we include counterarguments that are just as likely. What do you think? See the REEx Forum (opens in a new tab).

Source: Pieter Borsje via LinkedIn, June 2025; Rare Earth Exchanges LLC

• A comprehensive study predicts the U.S. military could face a catastrophic 8-12 year capability decline if China cuts off rare earth exports.
• China controls 85-90% of global rare earth refining and potentially weaponizes resource control as a 'non-kinetic strategic deterrence' mechanism.
• The research estimates $100-200 billion needed to rebuild domestic rare earth and critical mineral supply chains to maintain U.S. military technological superiority.

Recently Rare Earth Exchanges (REEx) reviewed a provocative new war-gaming study led by  Dr. Wei Meng (opens in a new tab), at  Dhurakij Pundit University (opens in a new tab) (Thailand) and the University of Western Australia. The professor outlines a simulated scenario in which a total rare earth export ban from China to the United States results in the structural degradation of U.S. military readiness and defense-industrial capacity over a 10-year period. Rare Earth Exchanges co-founder Daniel O’Connor (opens in a new tab) interacted with Dr. Meng for a comprehensive interview on this notable findings, including the need for up to $100 billion in capital needed for USA investment to ensure rare earth element supply chain resilience.

What follows is fist an executive summary of the interview followed by the online interview---we believe of significant importance to the U.S. government.   See the underlying study (opens in a new tab) that still needs peer review.

Executive Summary – Strategic Rare Earth Dependency & U.S. Vulnerability

Based on the interview, a comprehensive modeling study published in June 2025 underscores how deeply the United States depends on China for rare earth materials—critical to defense systems, AI warfare platforms, and high-tech manufacturing.

The research estimates that over 95% of U.S. military components requiring rare earths are tied to Chinese-controlled supply chains, from mining to refining and permanent magnet production. Reconstructing equivalent domestic capability would take at least $100 billion in rare earth-related investments alone and up to $200 billion when factoring in lithium, tungsten, gallium, and germanium infrastructure. These figures reflect not just financial costs but the structural and technological gaps that cannot be closed with capital alone.

The study warns that a full supply cutoff would trigger a cascading degradation across U.S. military systems, with an estimated strategic lag of 8–12 years. The timeline assumes no emergency mitigation measures, highlighting vulnerabilities in platforms like the F-35, Virginia-class submarines, and AI-enabled systems, which rely heavily on Chinese inputs. Most critically, the paper models a “non-kinetic strategic deterrence” framework: China could suppress U.S. military capability not through direct confrontation, but by systematically exploiting industrial asymmetries in rare earths, energy storage, and advanced sensing.

Without urgent industrial rebuilding, coordinated allied frameworks, and a shift from raw material replacement to functional autonomy, the U.S. risks a steep decline in strategic readiness between 2029 and 2033.

On the interview with Dr. Wei Meng and Daniel O’Connor.

Question 1: What is the basis of the Chinese model for the US estimate of $100 billion needed to catch up with China?

Structural Strategic Reasoning Based on Market Capitalization of Rare Earth Industry Chain

June 2025 data shows that the outstanding market capitalization of the core listed companies in China's rare earth industry chain (e.g. Luoyang Molybdenum, Northern Rare Earths, China Rare Earths, Jinli Permanent Magnet, etc.) has reached approximately RMB 600 billion (approximately US$83 billion).This value not only reflects asset prices, but also maps China's systematic capabilities built through more than 30 years of strategic deployment and technological accumulation, covering a complete ecological closed loop from resource control, technological research and development to industrial synergy.

In contrast, if the United States were to attempt to reconstruct equivalent capacity through capital investment, the initial construction costs of alternative systems would already exceed $200 billion: $60 billion for the reconstruction of rare-earth separation and refining, about $20 billion for gallium and germanium high-purity purification systems, $110 billion for lithium full-chain capacity, and about $10 billion for tungsten alloying system construction. Obviously, such huge capital requirements are not due to exchange rate differences, but stem from systemic faults and structural gaps in its current industrial system.

My research suggests three key logics underpinning that extrapolation path. First, capital expenditure does not equal industrial capacity. China’s rare earth assets are not speculative bubbles, but rather a national industrial structure constructed by long-term policy guidance, scientific research, and market synergy. In contrast, the United States is currently hundreds of billions of dollars of investment is at best only "catching up with the start-up costs", cannot be quickly converted into global control. Secondly, the industry chain has "structural input incompressibility". The United States does not have a mature rare earth smelting - alloy - magnet manufacturing system, even if the funds are in place, but also need to cross the technological break, approval barriers and engineering experience gap and other practical bottlenecks. Third, in terms of manpower allocation, China relies on research institutes and industrial collaboration network, has formed from the "laboratory to the factory" of the rapid transformation of capacity, while the United States is trapped in the "technological disruption" and "high-end manufacturing hollowing out. The United States is stuck in the quagmire of "technological breakthrough" and "hollowing out of high-end manufacturing", which makes it difficult to achieve effective replacement during the strategic window.

Therefore, the "$100 billion or more in reconstruction costs" proposed in the paper is not a guess, but is based on the results of modelling the investment structure of each link, assessing the maturity of the technology, and simulating the lag of the system. More importantly, the conclusion reveals a key strategic reality: systemic advantages cannot be replaced by short-term capital stacking, and the incompressibility of the industrial chain constitutes the real vulnerability of the United States in the strategic resource game.

Summary of market capitalization of major listed companies in China's rare earth industry chain

Total estimated market capitalization: approximately RMB 600 billion

Description and data sources

• Luoyang Molybdenum: total market capitalization of approximately RMB 127.001 billion.
• Northern Rare Earths: total market capitalization of approximately RMB 85.496 billion.
• China Rare Earths: total market capitalization of approximately RMB 36.686 billion.
• Jinli PM: market capitalization of approximately RMB28.7 billion (approximately HK$2.87 billion).
• Chinatungsten High-Tech: estimated market capitalization of approximately RMB 10 billion.
• Minmetals Rare Earths: it has been merged into China Rare Earth Group, the exact market capitalization is not separately disclosed.
• Zijin Mining: with a market capitalization of approximately RMB300 billion, part of its business involves rare earth resources.

The above companies cover all aspects of the rare earth industry chain, including resource mining, separation and purification, and magnetic material manufacturing. It should be noted that some companies, such as Zijin Mining, have a wide range of businesses, and their rare earth business only accounts for a part of their business, so the proportion of their rare earth business needs to be considered when estimating their total market capitalization.

Question 2: Time horizon validity

Your model predicts a lag time of 8 to 12 years for the U.S. military industry in the event of a total supply stoppage. What assumptions did you use in developing this timeframe, particularly with respect to inventory depletion rates and component life-cycle attrition? Does the model consider any emergency acceleration mechanisms (e.g., DPA spending, allied imports)?

2.1. Basis for modelling lag times of 8-12 years

The study has set a clear time period when constructing the "Strategic Resource Disconnection Three-Stage Path Model" and the "REG-CAP Four-Level Simulation Sandbox System":

Time division structure

2.2. Key modelling assumptions

The model explicitly lists the following key assumptions in Sections 3.2 & 4.2:

2.2.1 Stock depletion rate

For core platforms such as the F-35, an inventory buffer cycle of 3-6 months is assumed;

For nuclear submarine systems (e.g. Virginia class), set at 6-12 months;

For AI platforms (chips + reasoning modules) only 1-2 months, i.e., a "cliff decline".

These assumptions are based on publicly available data from DoD, CSIS, USGS, etc., as well as the average annual maintenance replacement frequency and system dependency nodes of typical equipment.

2.2.2 Functional decay function and system response modelling

Degradation functions using exponential functions

where λi is the response sensitivity;

Multi-path composite attenuation mechanism to simulate the non-linear coupling between multi-resource → multi-platform → multi-function.

2.3. is it included in the emergency response mechanism?(e.g. DPA or allied imports)

My research does not explicitly incorporate emergency acceleration mechanisms (DPA, Allied Assistance)

The paper states: "My study assumes that the U.S. does not have sufficient industry-level alternative paths in the short to medium term, and therefore does not model mitigating factors such as increased production in Canada, Australia, or technology transfers in order to highlight the sheer effect of structural deterrence."

The design logic is based on the following judgements:

• Alternative path construction cycle is not compressible (rare earth separation line construction takes 5-7 years, AI chip return without local packaging capacity);
• DPA capital investment ≠ physical capacity upgrade;
• Allied supply is also constrained by the "Chinese concentration" of midstream smelting and magnet manufacturing (90 per cent of the world's rare earth separation facilities are in China).That is to say, increased production is also a drop in the bucket, it is difficult to solve the problem of systemic shortages.

This is not to say that the United States does not have the ability to solve this problem, but a time lag problem. In this case, even if the United States to catch up with China, China will develop to another level, which is called the generation gap problem.

2.4. Summary answers

The 8-12 year lag time in the study is not an empirical assumption, but is calculated through system path dependency modelling + resource-equipment-capability node mapping, combined with the inventory cycle, life cycle response and functional degradation dynamics of each system.

The time frame reflects the following facts:

1. The first three years are the "initial deactivation period", but operational capability can still be maintained;
2. Years 4-6 create a technological generation gap that creates a fault line in the deployment of new equipment;
3. Years 7-12 are a period of full degradation of system capabilities, with deployment imbalances and industrial reconfiguration failing to recover in tandem.

At the same time, the absence of an emergency relief mechanism is intended to portray the maximum non-kinetic deterrent effect of a strategic cut-off in an "unbuffered state".

Question 3. Matrix of defence vulnerabilities

You point out that 95% of US defence system dependence on rare earths can be traced back to China. Can you provide the methodology for sourcing this data? Are these dependencies quantified at the component level (e.g., guidance systems, propulsion systems) or by programme (e.g., F-35, Virginia-class submarines)?

Factual dimension: China's share of control of the global rare earth supply chain

Rare earth mineral production: China accounts for about 60-70% of global mining (source: USGS 2024).

Rare earth separation and smelting capacity: China holds about 85-90 per cent of the world's rare earth refining and separation capacity.

Magnet manufacturing and downstream products: China controls more than 90% of the global rare earth permanent magnet manufacturing market.

U.S. Dependency

According to the United States Geological Survey (USGS) and Department of Defense (DoD) data, approximately 80 per cent of United States rare earth imports come directly from China, but some of these are "mixed oxides" or intermediate products; when combined with Chinese-controlled global processing nodes and indirect trade routes, overall reliance on the Chinese processing chain can approach 95 per cent. A number of US Department of Defense reports (e.g., the 2022 Defense Industrial Base Assessment) note that over 90% of rare earth components in high-performance weapon systems used by the US military can be traced back to the Chinese supply chain; a 2020 US congressional report states that "approximately 95% of defence-critical systems are affected by China's rare earth In the 2020 US Congressional Report, it appears that "approximately 95 per cent of defence-critical systems are affected by Chinese rare earths"; this "95 per cent" is not just a reference to physical inputs, but to control of key nodes along the entire supply chain traceability path.

The thesis uses strategic modelling and risk sandbox simulation, emphasizing control and vulnerability reconstruction, not direct statistics of mineral quantities; the "95% dependence" in the model can be interpreted to mean that 95% of the modules in the U.S. military's rare-earths-critical capability chain are unable to independently maintain a complete production chain in the event that China cuts off its supply; this figure is consistent with the existing policy level and the current situation. This figure is consistent with existing reports at the policy level. The '95% dependence' in the current study refers to the fact that the vast majority of key rare earth components and their refining processes in the US defence system are directly or indirectly dependent on the raw materials, separating capacity and permanent magnet finished products supplied by China's rare earth industry chain, reflecting the controllability of the supply chain, rather than the statistical significance of the proportion of raw material origins.

In my research, we point out that 95% of US defence systems' supply dependence on rare earth materials can be traced back to China, a conclusion that stems from comprehensive modelling of multiple data cross-validation and system path mapping.

Specifically, the conclusion is based on component-level dependency path modelling, supplemented by structural material composition analysis of major US high-end weapons platforms (e.g., F-35 fighters, Virginia-class nuclear submarines, AI combat platforms, etc.).The research methodology synthesizes publicly available supply chain structure data for the period 2020-2024 from the US Department of Defense Industrial Base Reports (DoD Industrial Base Reports), the US Geological Survey (USGS), the RAND Corporation (RAND), and the Center for Strategic and International Studies (CSIS), and combines Chinese White Paper on Export Controls in the Rare Earth Industry, data from the China Rare Earth Industry Association, and scientific literature, the specific uses, ratios, sources, and pathways of rare earth materials in military systems were quantitatively modelled at multiple levels.

In terms of methodology, the study firstly constructs a third-order mapping network of "resource node - equipment node - functional module", and identifies the core components of each type of platform that rely on rare earth resources by using path dependency mapping and coupling weight matrix. Among them, the F-35 fighter jet is quantitatively analyzed as a typical high-dependence platform, with a single aircraft containing about 418 kg of rare earth materials, which is concentrated in key subsystems such as radar systems, electronic warfare modules, infrared thermal imaging, flight control transmission structures and high-performance permanent magnet motors, etc.; and the Virginia-class nuclear submarine uses about 4,173 kg of rare earth materials, including neodymium, dysprosium, samarium, and other magnetic properties in its propulsion system, hydrostatic control module, and navigation and navigation system, Dysprosium, Samarium and other magnetic alloy elements. In addition, the military chips, inference units and electromagnetic immunity packaging structures on which the AI unmanned combat platforms rely require large quantities of gallium, germanium and other rare-earth-related elements as the basic thermal conductivity and performance-enhancing materials. These data have been presented structurally in paper No. 1, and visualized and interpreted through path diagrams and radar charts.

It is important to note that the "95% dependence" used in my study is not a statistical indicator of the percentage of national materials, but is based on the Key System Path Tracing method, which traces the dependence paths of strategic rare earth resources on all key equipment in the defence system in terms of functional maintenance, system performance and platform deployment capability. Rather, it is based on the Key System Path Tracing method, which traces the strategic rare earth resource dependence paths of all key equipment in the defence system in terms of functional maintenance, system performance and platform deployment capability. Rare earths are defined in the study as strategic elements that are irreplaceable, non-redundant, and cannot be replaced by processes in the short term, so even if some platforms do not have a high proportion of rare earths, they will be considered as "system level dependency nodes" if they are located in the key chain of control, sensing, or guidance.

The "95% dependency" data source in my study is based on a comprehensive cross-modeling of publicly available industry data, tactical system components, rare earth supply maps, and platform component path analysis, with dependencies mapped both at the micro-component level (e.g., radar modules, propulsion units, laser systems) and the macro-platform level (e.g., the entire F-35, the Virginia-class nuclear submarine).(e.g., F-35, Virginia-class nuclear submarine, AI combat system chain).This suggests that the supply chain security of the U.S. military-industrial system is highly coupled with China's rare-earth exports at the structural level, and that this irreplaceability is the key logical basis for my study's proposal of "resource supply cut-off as a mechanism of non-kinetic strategic suppression".

Primary Data Sources for U.S. Dependence on China's Rare Earths

1. United States Geological Survey (USGS) and Government Accountability Office (GAO) Reports

According to the U.S. Geological Survey (USGS) and the Government Accountability Office (GAO), the U.S. relies on imports for more than 95 percent of the rare earths it consumes between 2019 and 2022, with about 72 percent coming directly from China.([gao.gov][1])

"According to USGS estimates, the U.S. market - including the Department of Defence and its industrial base - relies heavily on imports of rare earths, particularly from China."

--Report on Critical Materials: actions needed to implement requirements, GAO-24-107176, 2024 ([gao.gov][2])

2. Ministry of Defence supply chain assessment

China is the only country in the world with processing capabilities at all stages of the NdFeB permanent magnet supply chain, the US Department of Defence assessment states.

"The DoD report states that China is the only country in the world with processing capabilities at all stages of the NdFeB permanent magnet supply chain."

--Critical Materials: Actions Needed to Implement Requirements report, GAO-24-107176, 2024 ([gao.gov][2])

3. Congressional Research Service (CRS) Reports

According to the Congressional Research Service, China produces about 90-95% of the world's rare earth oxides and is the world's leading producer of two of the strongest permanent magnets (samarium cobalt and neodymium iron boron).([everycrsreport.com][3])

"Some estimates suggest that China now produces about 90-95 per cent of the world's rare earth oxides and is the world's leading producer of the world's two strongest permanent magnets (samarium cobalt and neodymium iron boron)."

Rare Earth Elements in National Defence report, CRS, 2013 ([congress.gov][4])

The statement in the paper that "about 80 per cent of United States rare-earth imports come directly from China, and with China-controlled global processing nodes and indirect trade paths, overall dependence on the Chinese processing chain can approach 95 per cent" is well founded. These figures underline the high dependence of the United States on China in the rare earth supply chain, especially in the defence and high-tech sectors. It is recommended that the above authoritative sources be cited in the paper to enhance the credibility and authority of the argument.

1. "Critical Materials Are In High Demand. What is DOD Doing to ... - GAO (opens in a new tab)"
2. "[PDF] Critical Materials: Action Needed to Implement Requirements That ... (opens in a new tab)"
3. "Rare Earth Elements in National Defense - Every CRS Report (opens in a new tab)"
4. "Trade Dispute with China and Rare Earth Elements | Congress.gov (opens in a new tab)"

4. Modelling scope and blind spots: Why are allied responses not modelled?

As I explained in Section 1.2 and Chapter 2, the study uses "one-way supply cut-off" as a hypothetical scenario in order to construct a model of strategic repression under the "minimum mitigation mechanism", emphasizing the destructive window of the asymmetric game. Response measures such as production increases and recalls by Canada and Australia are not included in order to strengthen the identifiability and quantifiability of the "non-kinetic deterrent effect". Introducing these variables may delay the window of generation gap formation, but it will not fundamentally reverse the structural paradox of "degradation of warfighting power - incompressible industrial reconfiguration.

In the strategic sandbox model constructed by my institute, we explicitly adopted "one-way supply cut-off" as the underlying scenario, i.e., China's imposition of a comprehensive, sustained, and uninterruptible ban on U.S. exports of rare earths and other key resources, regardless of the possible mitigation, substitution, and remediation mechanisms that could be adopted by the U.S. and its allies.

This modelling choice is not to ignore the complexity of the variables in reality, but rather the theoretical requirement of a "minimum mitigation condition" in strategic simulation, which aims to accurately identify the maximum tactical and strategic windows of suppression that can be triggered by the act of controlling resources in a non-kinetic confrontation architecture. The objective is to accurately identify the maximum tactical and strategic suppression effect window that can be triggered by resource control behaviour in a non-kinetic adversary architecture.

Specifically, as the thesis has clearly pointed out in Section 1.2 and Chapter 2, the core objective of the model is not to reproduce all the real game factors in the multinational game, but to highlight China's institutional superiority at the strategic resource level through structural variable modelling. Therefore, we focus our modelling on the unidirectional strike path of "irreplaceable, non-resupplyable, and non-short-term reparable", aiming at restoring the real tempo and evolutionary trajectory of the US military-industrial system in terms of degradation of functions, interruption of deployment, and fault lines in capabilities under the condition of purely cut-off supply.

At the same time, at the methodological level, such as the introduction of Canada, Australia and other rare earth allies to increase production capacity, rare earth recycling technology, stockpile release programme and other compensation mechanisms, although it can to a certain extent slow down the rate of degradation of the system, change the formation of the intergenerational gap in the time point, but it is difficult to fundamentally reverse the "decline in war power - capacity reconstruction incompressible" This structural contradiction. This is because:

1. The alternative resources itself is highly dependent on China in the smelting, separation, magnetic material manufacturing and other midstream links, even if the raw materials can be mined in other countries, but the mid-end processing link is still subject to China's technological monopoly;
2. Although the recycling path is theoretically feasible, the scale of recycling is limited, the economic cost is high, the technology maturity is insufficient, and most of the old products are in bulk, which is not timely for war preparation;
3. The cycle of industrial reconstruction is incompressible. As my research shows, the United States to rebuild the rare earth chain with industrial scale, at least need to invest $100 billion, take 5-10 years, and face environmental regulations, talent shortages and supply chain coupling and other systemic barriers;
4. Policy response and industrial incentives in reality, there is a "system lag", even if the allies are willing to link up, it is difficult to form a joint effort to make up for the technological gap within the window of strategic rhythm.

Therefore, in order to highlight the strategic suppression effect formed by the "resource-capability" path dependence in the asymmetric game, my study chooses to exclude the "responsive variables" from the main model intentionally, so as to ensure that the deterrent ability, capability evolution curve and tempo window of the supply cut-off strategy itself have the greatest recognition and visibility.

The window of the supply cut-off strategy itself has the highest degree of recognition and quantification. This approach helps to clearly reveal how rare-earth export control evolves into an institutionalized, predictable and visualized non-kinetic strategic weapon system from the level of theoretical modelling, thus providing the underlying paradigm for future policy formulation and gaming exercises.

5. AI dependency and gallium/germanium disruption

You have estimated the loss of AI war platforms to be as high as $100 billion due to shortages of gallium and germanium. Can you explain the technological pathways responsible for these losses? Is this estimate based on unit-level hardware failures, chip performance degradation, or R&D stagnation?

In the strategic sandbox model constructed by my institute, gallium (Ga) and germanium (Ge) are regarded as strategic minor metal elements that support the core performance of AI warfighting platforms, and the systemic degradation effect triggered by their disruption is classified as a "high sensitivity pathway”. The model predicts that the U.S. military will face a cumulative capability loss of more than $100 billion in the AI warfighting platform domain if gallium/germanium exports are completely disrupted. This loss estimate does not originate from a single node, but rather from an integrated system collapse under the coupling of multiple paths, which is mainly manifested in the following three technical levels:

5.1 Unit-Level Hardware Failure Paths (Device-Level Failure)

Gallium and germanium are widely used in high-performance semiconductor devices, including GaAs (gallium arsenide) microwave communication chips, GaN power amplifiers, Ge infrared sensors, and high-frequency modulators, etc. The computational acceleration chips, inference modules, and smart radar antennas used in a large number of AI military platforms all rely on gallium/germanium as the material base. Once the supply of raw materials is cut off, it will first cause the failure of the key chip packaging capability, which is manifested in the new chip cannot be manufactured, the existing device packaging interruption, tactical module maintenance stagnation, which triggers the hardware level of "functional disconnect" or "thermal runaway.

5.2 Platform Degradation Paths

Gallium and germanium are key elements in building modules for optoelectronic communication, data conversion, and thermal stability control of AI training arrays in AI platforms. Germanium devices are widely used in AI optical interconnects, high-speed data buses, and infrared recognition units; gallium is used throughout AI perception chips, signal gain circuits, and target recognition radar core components. The interruption of raw materials will cause the AI platform to experience serious perception delays, reasoning failures, and rising recognition errors, severely restricting its tactical performance in joint operations, information fusion, and autonomous gaming, resulting in a decline of more than 40% in the overall performance index.

5.3 R & D and deployment of the entire stagnant path (Pipeline-Level Disruption)

The core of the AI military system is not the active terminal, but the continuous iterative optimization and cross-generation deployment. once the supplyof Ga/Ge is cut off, it will not only affect the current tacticalplatform, but will also directly interrupt the next-generation design and validation chain of the AI chip, resulting in the systematic research and development shutdown of the upstream and downstream industrial chain (EDA design, silicon validation, power testing, and batch preparation).Because military AI systems need to undergo rigorous packaging testing and extreme environment verification, the supply will lead to the entire ability to iterate path breaks, the formation of the "technology lost area" from the laboratory model to the deployment of the actual combat.

5.4 Estimation Logic and Loss Measurement

The simulation data presented in Sections 4.3 and 7.1 of the paper indicate that the degradation cycle of AI battlefield platforms alone after a gallium/germanium supply cut-off is 1.5-2 years, with an average annual loss of more than $10 billion, which is the highest single-unit loss of any military equipment category. This estimate is based on the "system response degradation model + multi-path coupling propagation mechanism", considering the chip package failure rate, component replacement delay factor, platform decommissioning advance rate and R&D stagnation loss cost, and arrives at the cumulative tactical window and strategic capability degradation window of AI combat platforms in the supply disruption state.

The high dependence of AI military platforms on gallium and germanium makes them the most vulnerable and costly disablement nodes under resource supply disruptions. The loss estimation in my study is not only based on the functional failure at the hardware level, but also emphasizes that at the system level, the supply disruption will trigger a chained collapse path of diminishing capability - deployment disruption - strategic time window loss, which is also the "non-kinetic paralysis" in the rare earth strategic deterrence mechanism. This is also the key embodiment of "non-kinetic paralysis" in the strategic deterrence mechanism of rare earths.

Question 6: China's "three-dimensional repression strategy"

Can you elaborate on the concept of "non-kinetic strategic deterrence" and how rare earth restrictions fit into China's broader geopolitical tools (e.g., cyber, trade, energy)?

In my research, Non-Kinetic Strategic Deterrence is defined as a systematic mechanism that does not rely on direct military strikes or physical violence, but rather on the control of systems, structures, resources, and tempo to achieve the effect of suppressing and weakening the adversary's operational capabilities, deployment tempo, and strategic choice space, the systematic mechanism of suppressing and weakening the opponent's operational capability, deployment tempo, and strategic choice space. Its core logic lies in the following: by controlling the key elements of opponents that are "irreplaceable, not quickly replenishable, and not externally adjustable", create a compound strike chain of "capability degradation - decision-making lag - deployment imbalance", to achieve the construction of strategic victory in the absence of war.

In Chapters 2, 5, and 6, my research further suggests that China has already possessed a "non-kinetic, cross-dimensional, and structural deterrence platform" based on the export control of rare earths, and that, with this as the core, it is gradually constructing a multiaxial linkage of a "three-dimensional suppression strategy". A "three-dimensional suppression strategy" is gradually being built around this. This strategic system consists of the following four pillars:

6.1 Resource Dominance Axis: Export Controls on Rare Earths and Key Strategic Materials

Rare earth elements (e.g., neodymium, dysprosium, samarium, terbium), semiconductor metals (e.g., gallium, germanium), and high-energy materials (e.g., tungsten, lithium) constitute the core structural dependencies of the U.S. military's combat system.

China has "institutionalized" these resources through the construction of export tools such as the "blacklist mechanism", "classification licensing system" and "technology transfer locking mechanism”. Weaponization" of these resources has resulted in a form of suppression that paralyses industries and disrupts the military tempo without the need for a head-on conflict. The simulation model of my research shows that once the 10-year zero supply strategy of rare earths is implemented, the U.S. military will enter a serious deployment capability lag period in the 4th-8th year, and then lose the technological dominance in the key strategic window.

6.2. Energy regulation axis: lithium, photovoltaic and new energy strategic levers

China occupies more than 60% of the global lithium battery, energy storage system and new energy equipment chain (e.g. Ningde Times, BYD, etc.).Through the lithium resources, rare earth oxides and battery materials exports to implement synchronized control, China can be in the future energy military fusion situation on the United States to form the energy scheduling tempo of the institutional disruption capacity, especially in the special energy reserve system, unmanned platform energy module has the potential for strategic destruction.

6.3 Science and technology sealing and control axis: rare earth technology, AI devices, lasers and sensing systems export intervention

Rare earths are not only raw materials, but also embedded in key high-tech devices such as AI chips, laser modules, infrared detection, and guidance systems. The "resource-equipment-capability" three-stage model proposed by my research suggests that if the export and licensing channels of rare-earth-derived technologies are frozen, it will trigger a disruption in the R&D and deployment of new platforms, resulting in a systemic military-industrial science and technology disruption. On this basis, China could also intervene with key outputs of AI training chips, optical modules and high-frequency communications equipment to strengthen system-level paralysis capabilities.

6.4 Information and Networking Axis: Cognitive Warfare - Supply Chain Warfare - Platform Competition

Under the framework of non-kinetic strategies, information warfare and economic warfare can be synergized with rare earth policies. For example, China can control the rare earth supply time node, strengthen the guidance and suppression of the global industrial chain sentiment (such as the release of policy, public opinion linkage), in the global capital market to create a "sense of structural uncertainty"; at the same time, with the help of the "One Belt, One Road" Rare Earth Alliance. At the same time, through the "Belt and Road" rare earth alliance to build cooperation mechanisms with Central Africa and Central Asia, substantially dismantle the G7 Group's attempts to integrate the supply chain, so that the U.S. allies to form a "collective anxiety of resource reconstruction", and indirectly form a cognitive and policy hysteresis effect.

6.5 Integrated features and strategic significance of the "three-dimensional suppression" model

Overall, rare earth export control is not an isolated policy action, but a core trigger mechanism embedded in China's "three-dimensional suppression strategy”. This strategy is characterized by the following features:

1. Multiple axes of action: the four axes of resources, energy, technology, and information work in tandem to suppress the export of rare earths;
2. Institutionalized control: the "sense of strategic temperature control" is enhanced through adjustable export mechanisms and blacklisting. 3;
3. Low-cost, high-pressure: real deployment delays and capability imbalances can be generated without military conflict;
4. Systematic expectation shaping guiding adversaries' strategic judgements through policy windows, creating "staggered responses".

Therefore, "non-kinetic strategic deterrence" is a structural deterrence transformation mechanism in which China elevatesresource leverage to institutional power, and export control tostrategic suppression, the essence of which lies in transforming the advantage of rare earths from "raw material bargaining power" to "raw material bargaining power", and then transforming the advantage of rare earths from "raw material bargaining power" to "raw material bargaining power”. Its essence lies in transforming the rare earth advantage from "raw material bargaining power" to "system control power" and "strategic time-sequence interference power", and constructing a multi-dimensional and integrated non-contact suppression strategy platform through the synergistic linkage with energy, trade, networks and other policy tools.

Question 7. Policy application and next steps

What would be your key recommendations to the United States and its allied governments to prevent simulation scenarios? Do you believe that the United States is working hard to avoid such a strategic decline, or are the opportunities disappearing?

In the three-layered simulation system of "Strategy Sandbox - Resource Supply Disruption - Capability Degradation" constructed by my research institute, the strategic capability degradation triggered by the disruption of rare-earth exports is not a sudden risk event that can be reversed in the short term, but a strategic degradation process that is embedded, structural, and highly path-dependent. Instead, it is an embedded, structural and path-dependent process of strategic degradation. Therefore, the prevention of the "8-12 years of systematic lag in U.S. military capabilities" presented in the simulation scenarios does not rely solely on tactical remedies or ad hoc procurements, but requires systematic and forward-looking adjustments and deployments by the U.S. and its allies at the strategic level. Based on the results of my study on the mechanism of the suppression window and the identification of structural bottlenecks, we make the following five strategic recommendations to the United States and its allies:

7.1 Strategic transformation from "resource substitution" to "functional autonomy".

Current U.S. policy still favors "material substitution" or "increased production in other countries" as the main countermeasure to rare earth supply cut-offs, such as increasing the supply of raw rare earths in cooperation with Australia and Canada, or mitigating the problem through tactical-level material recovery. However, my research clearly indicates that it is not the break in the mineral source itself that really leads to the degradation of the strategic capacity, but rather the hollowing out of midstream technology and the disorganization of industrial support. Therefore, it is recommended that the strategic focus be shifted from "supply replacement" to "functional autonomous reconstruction", i.e., the establishment of an industrial backbone network centered on rare-earth separation, alloys, and magnet manufacturing.

7.2 Construct a "resilience-embedded" defence industrial policy mechanism.

Research simulation shows that, even if the short-term access to limited imports to supplement, its equipment renewal, platform deployment, combat tempo in the impact is extremely limited. Therefore, the United States needs to establish a new type of defence industry policy framework based on the mechanism of "strategic redundancy-multi-path substitution-industry chain synergy", in order to enhance its own supply chain pressure resistance. Especially in the areas of AI chips, infrared sensors, magnetic suspension propulsion and other highly dependent areas, it is necessary to set up "industry chain resilience red line indicators" and incorporate them into the defence procurement standards.

7.3 Promote the policy construction of the "resource-capability bivariate strategy model".

My research emphasizes that it is not the quantity of rare-earth supply cut-offs that makes them a mechanism of suppression, but rather the breaks in capability paths that they trigger. Therefore, I suggest that the Pentagon and relevant allied governments should no longer regard resource policy as just a part of energy and economic affairs, but should plan it in conjunction with the capability model, troop deployment tempo, and the life cycle of weapon platforms, so as totruly construct an integrated defence strategy system that is "coupled with the dual variables of resources and capabilities".

7.4 Exchanging time for space, and restarting the three-stage strategy window of "early warning, deployment, and reconstruction".

According to the research output model, the U.S. still has a "critical hedging window" of about 3 to 4 years, which can be used to mitigate the intergenerational technological fault and system deployment delays occurring in the 5th to 8th years. Therefore, it is recommended that a national "Strategic Materials Capability Reconstruction Timeline" be developed as soon as possible, including bill support, talent introduction, engineering design standards reconstruction, and environmental compliance streamlining processes, in order to strive for structural inputs for rhythmic recovery.

7.5 Build a "Strategic Resources Mutual Guarantee Alliance Mechanism" with allied countries.

At present, although Australia, Canada, the European Union, Japan, and other countries have a resource base and technical reserves, they lack a coordinated mechanism. It is recommended that the United States take the lead in establishing a "strategic resources mutual protection mechanism" to share information on key material reserves, technological capabilities, talent synergies, and deployment rhythms, so as to achieve flexible adjustment in the event of structural disruptions in the global supply chain, rather than falling into a "global self-help type of isolated island competition".

My research is cautiously pessimistic about whether the United States is trying to avoid the strategic downturn that the modelled scenarios suggest. Although the U.S. government has issued policy documents such as the National Strategy for Critical Minerals and the National Defence Supply Chain Repatriation Strategy, and initiated support programs for rare earth companies such as MP Materials, there is still a significant gap between the actual intensity of inputs, the tempo of policies, and the efficiency of the system's response to the structural capacity gap. Especially in the context of the incompressible cycle of industrial reconstruction, the serious problem of talent disruption, and the lack of cross-sectoral coordination, the U.S.'s current efforts are more akin to tactical adjustments than strategic reconstruction.

In short, if it does not complete the strategic transformation of system construction and defence industry in the next 2-3 years, the United States will encounter a system-level strategic lag period between 2029 and 2033, characterized by resource suppression, and its dominant position in AI warfighting deployment, joint air-sea capability output and high-precision operational control will be weakened. As a result, the window of opportunity, while not completely gone, is rapidly narrowing.

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• BYD is aggressively expanding its electric vehicle manufacturing and market presence across South America.
• Significant investments have been made in:
  • Brazil
  • Chile
  • Colombia
• There is emerging interest in Peru.
• The company is leveraging South America's rich mineral resources such as:
  • Lithium
  • Copper
• BYD is creating local jobs and supporting regional electrification efforts in public transportation.
• BYD's strategic approach aligns with China's broader goals:
  • Securing global markets
  • Establishing local production
  • Positioning itself as a leader in green technology and electric mobility

Peru is positioning itself as a potential hub for BYD’s electric vehicle (EV) manufacturing in South America. In June 2024, President Dina Boluarte met with BYD executives and invited the company to build an auto assembly plant on Peru’s Pacific coast as reported (opens in a new tab) by Investing.com She offered BYD significant incentives, noting that a factory could be located near the Chinese-built Chancay port (opens in a new tab) (opened late 2024) to streamline exports. Boluarte announced plans for a new industrial park in either Chancay or Arequipa to host EV assembly, stating “in either of those places, that’s where the vehicle assembly industry could be set up” reports ET Energy World.

Why is this research relevant for Rare Earth Exchanges (REEx)? As this media has reported China has implemented a three phased strategy to enable global ascendancy.  Built on the rare earth element supply chain monopoly, phase 2 of this plan features massive market capture in downstream sectors from green energy to electric vehicles. The last and final stage over the next decade involves an oversight of emerging global currency domination.

But back to Peru and South America, electric vehicles, namely BYD,

Emphasizing Peru’s rich mineral resources, Boluarte argued that instead of China merely importing Peru’s copper and lithium, BYD should come “to Peru to set up their assembly industry.”

To sweeten the deal, the government indicated it would offer zero tariffs and other incentives to attract BYD’s investment. As part of broader talks, Peru is also weighing an agreement with China to electrify the nation’s public transportation fleet within four years.

Deeping Engagement

Peru’s ministers have actively engaged BYD to support these goals. Raúl Pérez Reyes (opens in a new tab), the Minister of Transportation and Communications, led a delegation to China in mid-2024 and met with BYD – the “largest producer of electric vehicles in the world, “according to America Economia (opens in a new tab). The aim is to discuss financing for new EV fleets. He revealed plans for a bilateral agreement in which China would help fund the replacement of Peru’s public transit vehicles (from taxis to 25-seat minibuses) with electric models. The aim is to sign this agreement by the APEC summit and then, over the next 3–4 years, convert a significant number of Lima’s taxis and 20,000 minibuses (“combis”) to electric cites America Economia (opens in a new tab).

To facilitate adoption, Peru is drafting legislation – in coordination with its finance ministry and Congress – to eliminate import taxes on EVs used for public transport (including electric taxis) as reported (opens in a new tab) last year.

Financing tools were on the table as well: “We have expressed our interest in putting together a financing package for the acquisition of electric cars to renew the taxi fleet,” Pérez Reyes noted in the media cited above.

BYD is expected to be a key partner in this transition; a follow-up meeting with BYD was “planned… to see how this program could be implemented”, underscoring BYD’s role in advising and possibly supplying vehicles for Peru’s electrification drive.

Commercialization in Peru

On the commercial front, BYD has already begun establishing its presence in Peru’s automotive market. The company entered Peru via a partnership with local distributor Motorysa, and in April 2025, it opened its first BYD-branded flagship showroom in Lima, cites a report (opens in a new tab).

This 1,000 m² store in the La Molina district showcases BYD’s models and offers test drives and after-sales service, signaling a “stepped-up effort” to expand in the country. BYD used the occasion to launch the Yuan Up compact electric SUV in Peru and highlighted that its sales network already spans key Lima shopping districts. As of early 2025, BYD planned to open 6–7 stores across Peru within the year to reach more consumers.

The company’s initial model lineup – including the BYD Song Pro, Tang SUV, Yuan Up, Seal sedan, and Shark sedan – was introduced in late 2024 cnevpost.com (opens in a new tab), covering a range from electric SUVs to sedans. These moves come alongside high-level signals of deeper investment: Peru’s foreign minister, after visiting China, publicly stated in July 2024 that BYD “could potentially build an assembly plant in Peru,” just as it has done in Mexico and Brazil, cites CNEVPost (opens in a new tab).

While BYD has not yet confirmed a factory in Peru, the combination of government incentives, policy reforms, and BYD’s market entry groundwork suggests that Peru could soon host BYD’s next overseas assembly plant.

BYD’s Operational Footprint Across South America

REEx reviewed past and any ongoing BYD activity in South America.

Brazil: Brazil has become BYD’s largest base in the region, reflecting a mix of early investment and recent expansion. BYD entered Brazil in 2015 by opening an assembly plant in Campinas (São Paulo state) to produce 100% electric bus chassis, as reported (opens in a new tab) by the electric vehicle venture in 2023.

It later added a lithium iron phosphate battery pack assembly plant in Manaus (Amazonas) to localize battery production according to one account (opens in a new tab).

In 2023, BYD significantly ramped up its commitment by acquiring Ford’s former auto manufacturing complex in Camaçari, Bahia. The company is investing about 3 billion reais (~$580–$600 million) to transform this site into an EV production hub, with construction officially starting in March 2024 (opens in a new tab).

According to a report in Sustainable Bus, BYD plans to build three factories at the Bahia complex: one to make electric bus and truck chassis, another to assemble electric and hybrid passenger vehicles, and a third to process key components (likely batteries or drivetrains) for export.

According to BYD, the Camaçari facilities (opens in a new tab) are expected to begin operation by late 2024 and ramp up to an annual output of 150,000 vehicles. This project will create an estimated 5,000 direct jobs in Brazil’s northeast or at least that’s the promise.

Importantly, it also secures BYD a long-term manufacturing base in Mercosur, allowing BYD to eventually supply all Brazilian states and other Latin American countries tariff-free from Brazil, reports Fundacion and Andres Bello (opens in a new tab).

According to Stella Li, BYD’s Executive Vice President, “these new factories in Bahia will bring innovation… allowing the introduction and acceleration of electromobility in the country.”

The Bahia hub will initially produce models tailored to the local market, including the BYD Dolphin (a compact hatchback EV), the Song Plus (SUV, offered as a plug-in hybrid), and the Yuan Plus (a compact electric crossover), as well as a new “Dolphin Mini” city car. BYD’s aggressive expansion comes as it already leads Brazil’s EV market by sales. In 2023, BYD sold 17,943 new energy vehicles in Brazil.

Making it the country’s top seller of plug-in light vehicles. Its Song Plus DM-i (a dual-mode PHEV) and Dolphin EV were among the year’s best-selling electrified models.

Notably, the Dolphin, introduced in mid–2023, quickly gained popularity, with over 6,800 units sold in six months. The model was so well received that it became “the most-awarded electric car in Brazil in 2023,” earning ten automotive awards in its first half-year on the market carnewschina.com (opens in a new tab). To support surging demand, BYD is rapidly scaling up its retail network in Brazil, aiming for 250 dealerships by the end of 2024 (up from 100 in 2023).

By localizing manufacturing in Bahia, BYD will also gain exemption from Brazil’s EV import duties, preserving its price advantage as tariffs on imported EVs begin to rise. In sum, Brazil now hosts BYD’s most comprehensive overseas operation – from buses and batteries to consumer EVs – anchoring the company’s South American strategy.

Chile

Chile has been a focal point for BYD’s transit electrification and battery supply chain efforts. BYD is a dominant player in Chile’s electric bus sector, primarily through deployments in Santiago's capital.

By mid-2020, BYD had 455 electric buses in operation in Chile, about 65% of the country’s e-bus fleet according to bydglobal.com (opens in a new tab).

Santiago’s Metbus company operates a large portion of these BYD buses as part of the RED municipal transit system, making Santiago one of the largest electric bus fleets outside China. Tamara Berríos, BYD’s country manager in Chile, noted that expanding the electric bus fleet “will bring citizens more quality trips while improving Santiago’s air quality,” reiterating BYD’s commitment to Chile’s clean transport goals reports BYD (opens in a new tab).

Beyond vehicles, Chile attracted BYD with its rich lithium resources. In early 2022, Chile’s economic development agency (CORFO) awarded BYD a quota in a lithium tender, paired with an incentive for local value-added. BYD proposed a $290 million plant in Chile’s Antofagasta region to produce 50,000 tons per year of lithium iron phosphate (LFP) cathode material for EV batteries, cites CNEVPOST (opens in a new tab).

This plant would have integrated Chilean lithium into BYD’s battery supply chain and marked one of the first major Chinese battery investments in the Americas.

However, the economics became unfavorable due to a sharp decline in global lithium prices through 2023. BYD filed to withdraw from the Chilean project in January 2025, and CORFO confirmed the LFP plant plans were halted as “plunging lithium prices” hit these investments—see CNEVPOST (opens in a new tab).

Despite this setback, Chile remains a key market for BYD’s products. The firm has been selling its passenger EVs locally – by 2023, BYD reportedly held about 19% of Chile’s electric car market share, largely thanks to its affordable models (the Dolphin and a smaller city EV)—see CleanTechnica (opens in a new tab).

Chile’s push to electrify all public transport by 2040 and its ongoing lithium partnership talks with China ensure BYD will continue playing a significant role in the country, whether through vehicle sales or future production projects, should market conditions improve.

Colombia

BYD has built a strong reputation in Colombia by delivering electric buses and collaborating on local assembly. In Bogotá, BYD achieved a landmark deployment: 1,002 BYD electric buses were ordered in a single tender in 2020, making BYD the principal supplier for the city’s TransMilenio BRT system, according to Sustainable Bus (opens in a new tab).

As of 2021, BYD had accumulated 1,550 orders for pure electric buses in Colombia, the largest e-bus rollout in the Americas, according to Sustainable Bus (opens in a new tab).

These buses, which operate in Bogotá and other cities, significantly reduce noise and emissions in public transport. BYD partnered with Japan’s Hino Motors to further localize production and assemble electric bus chassis in Colombia. In August 2023, the first BYD 12-meter electric bus chassis was assembled at Hino’s plant in Cota, Colombia.

This pilot initiative aims to transfer technology and know-how to Colombian workers. “As BYD, we believe we should not only provide the technology but also transfer knowledge,” said Lara Zhang, BYD’s regional manager in Colombia, cited in LATAM Mobility (opens in a new tab).

BYD sees Colombia as fertile ground for deeper manufacturing: “We have found the right ground in the country… we will seek to make important parts of the bodywork, and later on, [achieve] much greater [local] assembly,” Zhang noted.

The goal is to eventually assemble complete electric buses in Colombia, leveraging the country’s existing coachbuilding industry (Colombia already builds bodies for BYD bus chassis). BYD’s collaboration with local firms and its supply of over 1,500 e-buses have given it a strong foothold as Colombia’s cities pursue cleaner transit. The company also sells electric cars in Colombia (for example, the BYD Yuan crossover is used in a Bogotá taxi pilot), but its impact is most visible in the public transport sector. With Colombia’s government supportive of electric mobility and local manufacturing, BYD’s partnerships could evolve into a full-fledged assembly plant if demand continues to grow.

Argentina

Argentina has engaged in on-and-off dialogues with BYD for over a decade, driven by the country’s interest in EVs and its vast lithium reserves. BYD established a local subsidiary (CTS Auto S.A.) and signed an MOU with Argentina’s government several years ago. In 2017, Argentina granted BYD “terminal automaker” status, allowing local production, and an agreement was signed (opens in a new tab) to build an EV plant in the province of Salta.

The plan envisioned a $100 million investment to produce electric buses (and possibly electric cars like taxis) at Salta’s General Güemes industrial park, creating 600 jobs. Salta’s appeal was its proximity to lithium deposits and an enthusiastic provincial government. BYD’s Stella Li and Salta’s governor, Juan Manuel Urtubey, even signed a letter of intent in 2017 to move forward with the factory.

However, shifting political winds and economic challenges intervened. By 2018, Argentina’s national government opened a limited window for duty-free imports of electric buses (to encourage quick adoption), on the condition that importers localize production within two years, as cited by Info Negocios (opens in a new tab).

This policy change, plus lobbying at the federal level, led BYD to reconsider its site selection. The Salta project cooled, and insiders suggested BYD was leaning towards Argentina’s more populous Buenos Aires province for any future plant.

Indeed, as of 2023, BYD had not yet built a factory in Argentina. Instead, it supplied vehicles via imports – for example, BYD won a government tender (opens in a new tab) to provide 50 electric buses for Argentina’s Metrobus in 2017.

Those buses were deployed as pilots across various cities. Today, Argentina’s policy environment is shifting again.

In early 2025, the new Argentine government under President Javier Milei slashed import tariffs on fully electric and hybrid vehicles to 0%, aiming to make EVs more affordable cites Rest of World (opens in a new tab).

Up to 50,000 EVs per year can now be imported tariff-free. This move is expected to “open the floodgates” for Chinese EV brands like BYD in Argentina.  This could undercut local offerings. BYD has signaled interest in capitalizing on this opportunity – it is expanding its dealer network and marketing in Argentina, confident that its low-cost models will attract Argentine consumers who are long-priced out of EVs. However, the policy has drawn criticism from Argentine vehicle manufacturers; the CEO of local EV startup Coradir warned that an unchecked influx of cheap Chinese EVs could “wipe out” nascent domestic production.

It remains to be seen how BYD balances importing vehicles versus revisiting local manufacturing in Argentina. Argentina’s rich lithium (and a recent agreement with China to jointly explore lithium value chains) could entice BYD to establish battery production or assembly there in the future. For now, Argentina stands as a major prospective market for BYD, newly accessible due to favorable import rules but still without a BYD factory on the ground.

Uruguay and Others

Uruguay, a smaller market, has nevertheless embraced BYD in its modernization of public transit. In September 2023, BYD delivered 100 K9 electric buses to Montevideo’s public transport company (CUTCSA), one of the largest single batches of e-buses in Uruguay’s history, according to BYD.

These 12-meter buses, built in China, will help replace older diesel buses in the capital. Uruguay’s government has worked with BYD and financiers to introduce electric buses and taxis as part of its national decarbonization strategy. BYD does not yet have manufacturing in Uruguay, but its vehicles serve as high-profile demonstrations of EV viability in the country. Elsewhere in South America, BYD’s footprint is growing through vehicle imports and pilot projects.

In Ecuador, BYD has supplied a fleet of electric taxis in cities like Loja and electric buses in Guayaquil through partnerships with local authorities. More recently, BYD entered Bolivia and Paraguay, offering electric SUVs and vans via local distributors and showcasing electric buses at trade fairs.

These markets are nascent, but BYD’s early entry and reputation earned in larger neighbors give it a first-mover advantage. As South America’s smaller countries formulate EV policy incentives, BYD is well-positioned to provide turn-key solutions (from vehicles to charging infrastructure), often backed by Chinese green financing programs. This pan-regional presence means BYD is actively shaping the EV adoption curve across South America, not just in the largest economies.

Market Share and Model Performance in South America

The surge of Chinese EV makers in Latin America – spearheaded by BYD – is reshaping the region’s automotive landscape. BYD and Great Wall Motor already dominate EV sales in Brazil, the world’s sixth-largest auto market cites Newswav (opens in a new tab).

Thanks to a lineup of affordable EVs and plug-in hybrids, BYD ended 2023 as Brazil’s best-selling NEV (New Energy Vehicle) brand, capturing an estimated ~35% of all battery-electric and plug-in hybrid light vehicle sales reported (opens in a new tab) Car News China.

BYD’s sales in Brazil nearly doubled in 2023, mirroring a 91% jump in Brazil’s overall EV sales from the prior year.

The BYD Song Plus DM-i – a mid-size SUV with a fuel-efficient plug-in hybrid system – became one of the top-selling electrified vehicles in Brazil, appealing to consumers transitioning from gasoline SUVs. Similarly, BYD’s pure-electric models gained traction: the compact Dolphin EV’s combination of price (R$150,000 or <$30k) and range (400 km) proved very attractive, making it the most popular electric car in Brazil by late 2023 again reported in Care News China (opens in a new tab).

It even won Car of the Year accolades in the EV category, as noted, securing 10 major industry awards in Brazil within months of launch. BYD’s strategy of offering different models (from entry-level hatchbacks to luxury SUVs like the Tang) has allowed it to serve multiple customer segments and outcompete rivals like Renault, Nissan, and even Tesla in volume. Notably, Tesla’s presence in South America is minimal outside of a few high-end units, allowing BYD to establish its brand unchallenged in the mass-market EV segment.

In other markets, BYD has similarly vaulted to leadership. In Colombia, BYD was the best-selling EV brand in 2022 and 2023, leveraging its strong commercial vehicle presence to build trust in its passenger cars. BYD’s electric SUVs (such as the Yuan Pro and Tang EV) led Colombia’s small EV market, and the company has delivered electric trucks for urban cargo fleets as well.

In Chile, BYD’s early entry with models like the Han EV sedan and Tang helped it achieve nearly one-fifth of EV market share, as reported by CleanTechnica (opens in a new tab).

This was second only to Tesla in high-end sales, but far ahead in mainstream segments. BYD has tailored its offerings to local needs – for instance, deploying extra battery thermal management for the Altiplano (high altitude) conditions in Bolivia and Peru, or offering right-sized EVs for Uruguay’s compact urban areas. The company also benefits from its vertical integration: BYD makes its own batteries (the Blade Battery technology), which ensures it can supply products despite global battery shortages. This supply chain strength meant BYD could deliver on large orders (like hundreds of buses or thousands of cars) faster than competitors.

Supply chain integration extends to after-sales and charging infrastructure. BYD often partners with local power companies (e.g., Enel in Chile, EPM in Colombia) to support charging stations for its bus and taxi projects reported (opens in a new tab) BYD.

It also provides training for maintenance technicians through its local distributors. The growing volume of BYD vehicles on South American roads has prompted BYD to increase investment in service centers and parts warehouses in the region. For example, BYD is establishing parts distribution hubs in Brazil and possibly a regional center in Panama to streamline logistics. These efforts alleviate one of the traditional consumer concerns with new brands – service and support – thus reinforcing BYD’s market position.

One notable aspect of BYD’s performance is how it’s driving EV adoption in sectors beyond private cars. BYD’s electric buses and taxis often serve as many people per day as dozens of private EVs would. Every BYD electric bus put into service in Bogotá or Santiago reduces diesel consumption and showcases EV reliability to thousands of daily commuters. This creates a knock-on effect: public exposure to BYD’s EV technology increases acceptance and interest in electric cars for personal use. In many South American cities, a BYD bus or BYD-branded taxi is the first encounter the public has with an electric vehicle, effectively making BYD an ambassador of EV technology. This broad-based approach – attacking the market from both the top-down (government fleet contracts) and bottom-up (consumer car sales) – has yielded BYD a commanding lead in South America’s EV race.

Implications for Rare Earth Supply and China’s Global EV Strategy

BYD’s expansion in South America carries significant implications for critical minerals and rare earth supply chains and for China’s global EV ambitions. EVs and batteries are resource-intensive products: each electric car contains large amounts of lithium (in its battery), copper (in cables and motors), and often rare earth elements like neodymium in its motor magnets.

South America’s resource wealth is therefore a strategic draw. Peru’s president highlighted that synergy, suggesting BYD could use “copper and lithium from Peru” in local production cited (opens in a new tab) Investing.com.

Indeed, South America is a global treasure trove for EV materials – the region holds roughly 60% of the world’s known lithium reserves (Chile, Argentina, Bolivia) and is a top source of copper (Chile and Peru together provide ~40% of global copper output).

REEx has suggested firms such as Brazilian Rare Earths (BRE) show great promise.

By establishing factories or assembly plants in these countries, BYD could gain more direct access to raw materials while also helping those nations move up the value chain beyond just exporting ores. For example, a BYD assembly plant in Peru might source Peruvian copper for electric motors and wiring, creating a local demand for refined copper products. It could also eventually tap into any lithium mining in Peru (which has smaller deposits under exploration) to feed a battery pack facility. Such integration would increase BYD’s control over its supply chain and potentially lower costs (through tariff-free material access and reduced shipping).

However, BYD’s regional footprint also underscores the continuing reliance on China for certain components, particularly rare earth magnets and battery chemicals. South America has almost no domestic production of neodymium, dysprosium, or other rare earths needed for EV motors; China dominates these supply chains. BYD’s electric motors will likely use magnets manufactured in China (or with Chinese rare earths), even if the car is assembled in Brazil or Peru. In batteries, while lithium is mined in South America, the processing of lithium into battery-grade chemicals is still largely done in Asia (China, South Korea, etc.).

BYD’s cancelled Chilean cathode plant illustrated the challenge: transforming local minerals into battery components requires stable market conditions and significant investment.

The withdrawal of that project in 2025 due to low prices suggests that deeper local processing may lag without economic viability or strong government support. That said, REEx suggests Chile’s initiative to offer preferential lithium prices in exchange for local battery plants could be a model other countries adopt to entice players like BYD back when market conditions improve.

BYD or its partners may revive plans for lithium refineries or cathode/anode material factories in Latin America, as EV demand (and thus lithium prices) is expected to rise long-term.

From a geopolitical perspective, BYD’s South American foray aligns with China’s broader strategy of securing markets and resources in the Global South as traditional Western markets become more challenging. Chinese EV makers have faced tariffs and political pushback in the US and Europe, but countries like Brazil have been far more welcoming.  This, of course, has intensified since the onset of Trump 2.0 and the trade war.

Brazil, Argentina, Chile, and others have trade agreements with China or are part of China’s Belt and Road Initiative, creating a favorable environment for Chinese firms. By investing in local production, BYD not only sidesteps import tariffs but also ingratiates itself with governments by creating jobs and supporting industrialization.

This approach is effectively “the blueprint” that China’s manufacturing giants may use elsewhere: to “invest, produce and hire in overseas markets instead of just shipping goods there,” as cited in Newswav (opens in a new tab).

BYD’s new factories in Brazil and (potentially) other countries exemplify this shift. They bolster China’s image as an investor in Latin American development, even as they serve China’s interest in expanding EV export volumes. It’s a symbiotic arrangement: Latin America gets technology and investment; China’s EV sector gains market access and influence.

The growth of BYD’s South American operations will likely boost regional demand for battery minerals and related materials, reinforcing trade ties with China. For instance, more EV assembly in Brazil could increase Brazil’s imports of lithium (for batteries) and rare earth magnet materials – likely sourced from China, given its near-monopoly. This could deepen China’s role as the upstream supplier for parts, even as final assembly happens in South America. Conversely, it may also spur Latin American countries to develop their processing capabilities to capture more value (e.g., Argentina pushing for lithium hydroxide plants, or Brazil exploring rare earth mining in Amazonas). In either case, BYD’s presence catalyzes discussions on resource utilization in the EV age.

There are also implications for local competitors and industries. BYD’s aggressive strategy puts pressure on South American automakers and governments. Domestic companies (like Argentina’s small EV makers or Brazil’s traditional OEMs) now face a formidable competitor with scale and cost advantages. We may see alliances or joint ventures form in response, for example, a local manufacturer partnering with BYD to produce components, or governments creating EV supply chain consortia to ensure local firms aren’t entirely displaced. Additionally, BYD’s deals often come with financing from Chinese banks or funds, which could increase these countries’ financial ties to China. Policymakers will need to manage this carefully, leveraging BYD’s investments to build domestic capacity (as Colombia is attempting with bus assembly) rather than just opening markets to imports.

In the big picture, BYD’s South American expansion underscores how China’s global EV rollout is intertwined with resource strategy. BYD, backed by China’s massive domestic market and supply chain, can export affordable EVs and set up plants overseas in a way Western rivals currently find hard to match.

This helps secure long-term demand for China’s battery industries and even its rare earth magnet producers. It also aligns with China’s aim to be a leader in green technology worldwide. For South America, the arrival of companies like BYD accelerates the transition to electric mobility and could kick-start local EV production ecosystems—a significant shift for a region long dependent on imported automotive technology.

As BYD and its Chinese peers deepen their footprint, South America’s role in the “electric revolution” will grow, both as a consumer market and as part of the EV supply chain. In turn, this will contribute to increased demand for lithium, copper, and potentially rare earth elements, strengthening the strategic importance of South America’s natural resources in the coming decades. The interplay between BYD’s commercial objectives and the region’s resources and policies will be a key space to watch as the global auto industry enters a new electric era.

• Saudi Arabia is aggressively expanding its mining sector to diversify its economy, valuing its mineral wealth at $2.5 trillion and targeting rare earth elements and battery metals.
• The kingdom is pursuing strategic international partnerships with global mining companies from China, USA, Australia, and Canada to develop processing capabilities and critical mineral supply chains.
• Saudi Arabia aims to become a geopolitically neutral link in global mineral supply chains, investing $100 billion in mining by 2035 and developing downstream manufacturing capabilities.

Saudi Arabia is aggressively expanding its mining sector to diversify its economy under Vision 2030. The kingdom has rapidly upgraded its resource estimates – the government now values Saudi Arabia’s identified mineral wealth at about $2.5 trillion (up from $1.3 trillion in 2016), as reported (opens in a new tab) in S&P Global. This surge is largely due to newly “discovered rare earth elements and transitional metals”. Rare earths (REEs) – a group of 17 chemically similar metals used to make high-performance magnets, batteries, and electronics – are especially prized. For example, as reported by Reuters (opens in a new tab) and Rare Earth Exchanges (REEx), Saudi officials note that rare earths can be “used to make magnets that turn electricity into motion for EVs, cell phones and other devices”. In short, developing REEs is central to Saudi goals of building local industries (e.g., electric vehicles, renewable energy, high-tech manufacturing) instead of exporting raw oil.

Much of this push has been driven by Vice‐Minister of Industry and Mineral Resources for Mining Affairs Khalid bin Saleh Al-Mudaifer (opens in a new tab) and other leaders in government, who have outlined sweeping reforms, investment initiatives, and projects. Al-Mudaifer frequently emphasizes that” Vision 2030 economic diversification.  Saudi Arabia has set up state-backed Ma'aden (opens in a new tab) (1211.SE) (opens in a new tab), also known as Saudi Arabia Mining Co,  formed as a Saudi joint stock company on 23 March 1997 for the purpose of facilitating the development of Saudi Arabia's mineral resources.

In interviews and public forums, Al-Mudaife has championed major milestones. For instance, he announced in early 2025 that Saudi Arabia would mobilize SR375 billion ($100 billion) in new mining investments by 2035 (with SR75bn already committed). He also spearheaded a feasibility study (announced late 2023) on launching a commodity exchange for battery materials – including graphite and rare earths (opens in a new tab) – to bring transparency to these markets. As Al-Mudaifer explained, “to be a minerals hub you have to have it all”, and the kingdom is even considering an exchange for REEs, lithium, cobalt, and nickel.

Al-Mudaifer’s office has driven regulatory and incentive reforms, too. The 2020 Mining Investment Law was overhauled to attract foreign and private investment, and the Ministry of Industry and Mineral Resources has issued hundreds of exploration licenses (see Timeline below).

Al-Mudaifer often notes that the surge in exploration activity – Saudi exploration spending has risen ~32% annually, much faster than the global average (opens in a new tab) – is producing results: dozens of new discoveries (gold, phosphate, copper, lithium, etc.) and higher valuations. In short, Al-Mudaifer is a key public face of Saudi mining policy, authorizing deals and speaking alongside international partners from Davos to the BMO conference in Miami (Feb 2025) about Saudi investment opportunities.

Timeline of Milestones and Partnerships

• Jan 2023 – Manara Minerals JV formed (opens in a new tab): The sovereign Public Investment Fund (PIF) and state-owned miner Ma’aden created Manara Minerals, a mining investment JV. Manara’s first major deal was a 10% stake in the copper-nickel unit Vale Base Metals (valued at $26 billion), giving Saudi Arabia exposure to one of the world’s largest copper/nickel assets.
• Nov 2023 – Rare Earth Exchange Study: Vice-Minister Al-Mudaifer announced (in a Reuters interview (opens in a new tab)) that Saudi was studying a commodities trading platform for battery materials – including graphite and rare earths. He noted challenges (small volumes, varied specifications) but emphasized the goal of becoming a minerals hub with efficient price mechanisms.
• Dec 2024—Lithium from Brine: Ma’aden announced (opens in a new tab) a breakthrough in extracting lithium from seawater, signaling Saudi Arabia’s broader ambitions in battery metals (though commercial viability is pending).
• Jan 2025 – $100 Billion Mining Plan: At the BMO Global Metals, Mining & Critical Minerals Conference (opens in a new tab) in Miami, Al-Mudaifer unveiled a SR375 billion (~$100 billion) investment program for mining by 2035. He stated that SR75 bn had already been allocated to projects, underscoring strong momentum.
• Mar 2025 – Exploration Licenses Awarded: Saudi Arabia awarded new mining exploration licenses covering 4,788 km² (see Table 1) to both domestic and international firms. As covered by Reuters, these included India’s Vedanta Ltd, which won a copper/zinc license at Jabal Sayid, and a consortium of local Ajlan & Bros plus China’s Zijin Mining won a license at Al-Hajar (Aseer). These initial licenses are expected to spur SR366 million ($97.6m) in exploration spending over three years, as reported by Reuters (opens in a new tab).
• Apr 2025—Rare-Earth Processing Partnership Search: Reuters reported that Ma’aden was negotiating with four specialized firms to build a domestic rare-earth processing (and ultimately magnet-making) plant. The candidates are U.S. MP Materials (opens in a new tab), China’s Shenghe Resources (opens in a new tab), Australia’s Lynas Rare Earths, (opens in a new tab) and Canada’s Neo Performance Materials (opens in a new tab). Ma’aden plans to select one or more partners by mid-2025, with feasibility studies on extraction and refining to be completed by year-end.
• Apr 2025 – Aramco – BYD Joint Development: Saudi Aramco (through its technology arm, SATC) signed a Joint Development Agreement with China’s BYD on April 21, 2025. Note: BYD is the world’s largest electric vehicle manufacturer.  This collaboration, aimed at improving electric-vehicle efficiency and lowering emissions, combines Aramco’s energy R&D with BYD’s EV/battery expertise. It underscores Saudi Arabia’s push into the EV supply chain: the kingdom aims to raise EV adoption from ~1% to 30% in five years.
• May 2025 – Saudi-US Mineral Cooperation Talks: As reported in Reuters and in Rare REEx, on May 6, 2025, Reuters reported that the Saudi cabinet authorized discussions with the U.S. on a mining and minerals cooperation agreement. The MoU – to be negotiated between Saudi Arabia’s Industry & Mineral Resources ministry and the U.S. Department of Energy – is slated to cover joint exploration, technology transfer, and supply-chain security. These talks are timed ahead of a planned visit by U.S. President Trump (under a second Trump administration scenario), reflecting a mutual interest in diversifying non-China critical-mineral supply lines.

Table 1 belowsummarizes recent key deals, MOUs and programs. The next section discusses these international partnerships in more detail.

Aramco Technologies (SATC) & BYD (China)

International Partnerships and Deals

Saudi Arabia has pursued strategic partnerships with global mining companies and countries to build its critical minerals supply chain:

Taken together, these partnerships illustrate Saudi Arabia’s strategy of leveraging foreign expertise and capital. The choice of partners often reflects Saudi’s geopolitical balancing act: it courts both Chinese and Western firms while positioning itself as a neutral “link” in critical minerals (a theme noted by analysts at SWP-Berlin (opens in a new tab).

Domestic Mineral Resources and Capacity

Geology and Reserves: The kingdom’s geology is very promising. Most deposits lie in the western Arabian Shield (opens in a new tab), a well-known Precambrian mining province. Surveys have identified major orebodies of gold, copper, zinc, phosphate and more. For example, the Khnaiguiyah project (Al Rayn Terrane) is projected to contain ~26 Mt of zinc-copper (valued over $80 billion in situ investornews.com (opens in a new tab)) – one of the world’s largest undeveloped base-metals deposits, cites Lexology (opens in a new tab). Saudi Arabia also claims substantial reserves of lithium (notably in oilfield brines discovered by Aramco, with production targeted by 2027) and large phosphate and bauxite assets for fertilizers and aluminum.

Crucially, updated geological models and airborne surveys (mapping ~600,000 km² in 2024) have revealed significant rare-earth potentials, as cited by Discovery/Alert. Analysts estimate that Saudi Arabia’s identified rare-earth deposits alone account for tens of billions of dollars of resource value, as cited by Reuters and InvestorNews (opens in a new tab).

Exploration Activity

The pace of exploration is accelerating. In 2025 alone, the government granted dozens of new licenses (over 4,700 km²) and attracted both domestic and foreign miners. As reported in Fast Company, the number of licensed explorers has jumped from only a handful in 2020 to well over a hundred by 2023. International survey firms (including China’s) have aided this process, as Saudi authorities have widely shared seismic and drill data. The results have been dramatic: between 2016 and 2024, Saudi Arabia’s estimated resource base shot up 90% to $2.5T per S&P Global.

Processing and Industrial Capacity

Despite its geology, Saudi Arabia currently has no commercial rare-earth or battery-metal processing plants. Most of the kingdom’s mining today is upstream: Ma’aden mines gold, phosphate, and aluminum (bauxite) and ships out concentrates. The Saudi strategy is to develop downstream capacity through refining and value-added manufacturing. This is why so many deals focus on building a processing hub inside the kingdom. As Reuters and others note, Saudi officials explicitly “aim to have those rare earths processed into a form that can be used to make electronics inside the kingdom” rather than exporting raw ore. Similar ambitions apply to lithium, nickel, and copper refining.

The government’s Global Supply Chain Resilience Initiative ( (opens in a new tab)Nov 2024) is funding domestic smelters—e.g., $9.3 bn to copper (with Vedanta) and zinc (with Zijin) smelters—to ensure raw inputs are refined locally. Separately, Saudi Aramco’s venture Lucid Energy is building a large EV battery-assembly factory in Saudi Arabia, which will eventually consume local critical minerals.

However, the current processing capacity remains very limited. For rare earths specifically, Saudi Arabia must import all technology, equipment, and expertise. The standard REE separation process is complex and environmentally challenging, as REEx often cites.  None of the shortlisted partners (MP, Shenghe, Lynas, Neo) has completed an overseas REE refinery besides Lynas’s U.S. plant under construction.  Saudi Arabia has started training a domestic workforce and exploring research avenues (e.g., clean separation methods), but in the near term, almost all know-how will come from foreign partners.

Challenges and Risks

Saudi Arabia’s rare-earth strategy is bold, but it faces substantial obstacles:

Despite these challenges, Saudi leaders argue the long-term rewards justify the risks. With depleting oil fields and global demand for clean-technology minerals surging, the country bets that its vast reserves can be unlocked. Already, foreign partners see an opportunity: Aramco’s deal with BYD and Ma’aden’s engagement with MP Materials and others suggest growing confidence.

The Kingdom certainly has the ambition, drive, and lots of money.  Ultimately, Saudi Arabia aims to become a miner and a critical node in global supply chains – “a geopolitically neutral link” bridging East and West. For investors, this means watching both the policy rollout (licenses, regulations) and the outcome of key partnerships (who Ma’aden picks, how US-Saudi talks go, etc.) – as these will determine whether Saudi Arabia’s rare-earth gambit reshapes the market or remains a bold vision.

Sources: Public statements by Saudi officials and energy news organizations; Reuters news reports (Mar–May 2025); Arab News, SWP Berlin; company press releases; REEx network; and original research.

• Saudi Arabia launches an ambitious $170 billion mining development program, targeting rare earth elements and critical minerals.
• The proposed US-Saudi memorandum of cooperation aims to deepen bilateral ties in mining and mineral resources, potentially reshaping global supply chains.
• Despite vast energy reserves, Saudi Arabia lacks proven rare earth element deposits and processing capabilities.
• Saudi Arabia seeks to transform from an oil kingdom to a mining powerhouse.

In a move that raises both strategic eyebrows and geological questions, Reuters reports that Saudi Arabia and the United States will begin formal discussions on a memorandum of cooperation in mining and mineral resources, according to a statement from the Saudi Cabinet (Reuters, May 6, 2025, reporting by Cairo Bureau).

The talks will be led by Saudi Arabia’s Ministry of Industry and Mineral Resources (opens in a new tab) and the U.S. Department of Energy (opens in a new tab), to deepen bilateral ties in a sector increasingly vital to clean energy, defense, and advanced manufacturing. While the Trump administration continues to sign sweeping international agreements as part of its broader critical minerals offensive, this proposed deal with the Kingdom of Saudi Arabia may signal more about geopolitics than geology.

Despite its vast energy reserves and touted mineralogy underground, Saudi Arabia lacks the proven rare earth element (REE) deposits and midstream processing capacity critical to reshoring U.S. supply chains. That is the proof that the material can be pulled out, separated economically, and then, of course, refined.

Though the Kingdom has launched an ambitious $170 billion mining development program under Vision 2030 (opens in a new tab)—claiming potential in phosphates, bauxite, and even lithium—the hard reality is that its geology remains largely unproven for rare earths and high-value critical minerals at commercial scale.

Riyadh has little to no downstream capacity in REE separation, alloying, or magnet manufacturing. However, eventually, processing rare earths seems comparable in some ways to processing petroleum. Perhaps with enough dedication, investment, and commitment, Saudi Arabia could emerge as a regional mining and processing hub.

But the effort raises a critical question. Is this potential deal rooted in strategic supply-chain realignment, or is it a geopolitical signal aimed at diversifying partnerships away from China while rewarding a favored Middle East ally? For U.S. investors and policymakers, this is a moment to look past the diplomatic pageantry and ask: Will this memorandum generate real mineral supply or just promising headlines?

What’s Underground?

According to reports, Saudi Arabia possesses some notable deposits of rare earth elements, particularly within the Arabian Shield region in the western part of the country. Key sites such as Jabal Sa'id have been identified to contain significant concentrations of REE-bearing minerals like bastnaesite, dolerite, monazite, and synthesize.

These deposits may also include valuable critical minerals such as niobium, tantalum, and zirconium.

Recent geological surveys have substantially revised the Kingdom's estimated mineral wealth, which is now valued at approximately $2.5 trillion, with rare earth elements contributing significantly to this figure.

As reported by Reuter (opens in a new tab)s, Arabian mining company Ma’aden (opens in a new tab) is in the process of selecting an international company to establish a rare earths processing partnership. The company aims to position the kingdom as a critical minerals hub.

However, despite the possible geological findings and aspirations, and a lot of money, Saudi Arabia currently lacks extensive midstream and downstream capabilities for processing and refining these minerals.

But Ma'aden is actively seeking to transcend such barriers. Potential collaborations include companies like MP Materials, Shenghe Resources, Lynas Rare Earths, and Neo Performance Materials, aiming to establish a comprehensive rare earths value chain within the Kingdom.

A Critical View

In a critical review for InvestorNews (opens in a new tab) (April 2, 2025), Anthony Milewski explores Saudi Arabia’s sweeping ambitions to pivot from oil superpower to global mining force under its Vision 2030 plan.

The report touts investment in infrastructure, exploration, and downstream industries like battery manufacturing and copper smelting, citing up to $2.5 trillion in untapped mineral wealth. Through Ma’aden and strategic ventures with Aramco and the Public Investment Fund, the country is targeting key minerals, including copper, lithium, rare earth elements, and uranium.

Milewski reports that Saudi leaders such as Khalid Almudaifer (opens in a new tab), Vice-Minister of Industry and Mineral Resources for Mining Affairs, pledged over $100 billion in new projects, and deals with global partners like Vale, Glencore, BYD, and Vedanta are already underway.

Yet, as Milewski cautions, the Kingdom faces steep challenges. For investors, the assumptions and, of course, the details matter. Water scarcity, limited mining infrastructure, and a workforce historically tied to the oil economy would likely stall progress. Most crucially, Saudi Arabia’s heavy dependence on petroleum—87% of budget revenue—represents a classic case of “Dutch disease,” making economic diversification structurally difficult.

While Saudi Arabia won’t rival Australia or Canada in mining leadership anytime soon, its deep pockets, geopolitical reach, and aggressive joint ventures may still position it as a pivotal—if not influential—player in the global critical minerals supply chain.  Perhaps Donald Trump can help them along?

• Radomir Pachytel's geological report reveals Greenland's extensive critical mineral reserves.
• Potential to reduce EU's dependence on foreign raw material suppliers.
• Greenland contains 25 out of 34 EU-designated critical minerals.
• Promising projects in:
  • Graphite
  • Rare earths
  • Molybdenum
  • Platinum group metals
• Significant geological potential, but:
  • Geopolitical challengesEnvironmental challengesInfrastructural challenges
  Currently, limit Greenland's immediate mineral extraction capabilities.

A sweeping geological report authored by Radomir Pachytel (opens in a new tab) of the Polish Geological Institute–National Research Institute (opens in a new tab) delivers a tantalizing thesis: Greenland possesses the mineral endowment to significantly offset the European Union’s dependence on foreign critical raw materials (CRMs)—including graphite, rare earth elements (REEs), molybdenum, niobium, tantalum, and platinum group metals (PGMs).

Published in the Polish scientific journal Przegląd Geologiczny (opens in a new tab) (Vol. 73, No. 3, 2025), the article presents a meticulously sourced, geologically rigorous, yet geopolitically limited assessment of Greenland’s mineral potential.

Pachytel's report arrives at a pivotal moment. The EU, grappling with soaring CRM demand driven by its green and digital transitions, remains alarmingly dependent on China for REEs (100% of heavy REE imports) and the U.S. for molybdenum. The report argues Greenland’s mineral endowment could change this dynamic, citing 25 out of 34 EU-designated CRMs present in Greenland, many with medium-to-high development potential.

So, What are the Author’s Key Findings?

Greenland is emerging as a geostrategic reservoir of critical minerals that could reshape Europe's raw materials security. The Amitsoq graphite project (opens in a new tab), led by London-based GreenRoc Strategic Materials, (opens in a new tab) boasts ore with over 20% carbon content—more than double the global average—with production targeted for 2028. In the realm of rare earths, the Kringlerne and Kvanefjeld deposits contain multibillion-tonne eudialyte-rich bodies potentially capable of meeting much of the EU’s demand. However, Kvanefjeld remains legally stalled due to uranium co-mining restrictions.

Meanwhile, the Malmbjerg molybdenum project (opens in a new tab), licensed to Toronto-based Greenland Resources (opens in a new tab), could supply up to 30% of EU consumption by 2029.

Greenland’s zirconium and hafnium resources are equally significant—an estimated 57.1 million tonnes of zirconium and over 100,000 tonnes of hafnium, possibly the world’s largest reserve. The niobium- and tantalum-rich Sarfartoq and Motzfeldt complexes offer diversification away from volatile African sources. Exploratory work at the Skaergaard intrusion also indicates promising reserves of platinum and palladium. While titanium, vanadium, and antimony deposits are present, they remain longer-term prospects, facing high CAPEX and harsh logistical constraints.

Strategic Proximity Meets Harsh Reality

The author, Radomir Pachytel, effectively highlights Greenland’s strategic advantages for European supply chains—its proximity to the EU, its legal and institutional alignment via the Danish Realm, and its streamlined one-door permitting system. These features do offer a comparative edge over unstable or distant suppliers. However, Pachytel’s analysis omits or glosses over three critical challenges undermining Greenland’s immediate viability as a central critical mineral hub.

First, the report sidesteps geopolitical volatility, notably ignoring the more profound implications of President Trump’s 2025 claim that the U.S. should control Greenland. While diplomatically dismissed, such rhetoric underscores the island’s uncertain geopolitical trajectory as it moves toward complete independence from Denmark. Second, the report soft-pedals uranium-related opposition, failing to engage with Greenland’s domestic uranium ban or the broader societal skepticism toward large-scale mining, factors that currently freeze projects like Kvanefjeld.

Third, it understates logistical and financial barriers: most deposits lie in remote, icy terrain with minimal infrastructure, no domestic processing capacity, and high-risk profiles. No major mining company has made a full-scale commitment—despite years of geological mapping—which raises serious doubts about Greenland’s near-term capacity to meet EU demand. The details of execution matter, suggesting Rare Earth Exchanges (REEx).

What the Report Overlooks

Pachytel's thorough geological mapping analysis falls short in economic, legal, and geopolitical diagnostics. For example:

• No cost-benefit comparison is provided to assess whether EU financing mechanisms (e.g., European Investment Bank or Global Gateway) can realistically bridge the infrastructure gap.
• No estimate is given of how long permitting, mine construction, and downstream processing would take under real-world political conditions.
• The massive environmental tradeoffs, including protected areas and indigenous land use, are acknowledged but not explored in depth.

Final Thoughts

The Pachytel report powerfully argues Greenland’s geological relevance in the global CRM map. However, it is a technical foundation, not an operational roadmap. If EU policymakers, investors, and Greenland’s autonomous government cannot align legally, financially, and socially, then even world-class deposits will remain frozen—literally and politically.

The potential is undeniable. But in a world defined by power, protest, and planetary limits, the value of a deposit is only as good as the will to mine it. Execution matters, and investors should be mindful of that mantra.

Greenland Minerals

• Li Bo's strategic tour of Ganzhou highlights China's complex rare earth ecosystem.
• The tour reveals gaps between laboratory innovation and industrial competitiveness.
• Systemic challenges exposed include slow academic research translation.
• Limited private sector involvement is identified as a challenge.
• Bureaucratic coordination issues are highlighted as systemic challenges.
• China risks plateauing as a rare earth exporter without meaningful structural reforms.
• Stronger cross-sector collaboration in technology development is necessary.

In a high-profile two-day tour of one of China's rare earth capital, Ganzhou, Chairman Li Bo of the China Rare Earth Society led a delegation to strengthen ties between academia, industry, and government laboratories. While framed as a strategic move toward high-quality development, the visit also highlights systemic bottlenecks that still hinder China’s goal of global rare earth leadership beyond extraction.

Ganzhou, located in Jiangxi Province, China, is a major hub for rare earth mining, smelting, and processing. It's considered a perennial hub for these activities. China Rare Earth Group, a major entity in the rare earth industry, is also headquartered there.

The message gleaned from this translation differs markedly from company press releases emanating from the China rare earth complex.

Bridging Institutions or Paper Partnerships?

Last month--April 15–16,  Li Bo, Chairman of the China Rare Earth Society, along with Secretary-General Yang Zhanfeng, conducted an intensive field visit (opens in a new tab) to seven major rare earth institutions in Ganzhou, including state-owned China Rare Earth Group, Jiangxi University of Science and Technology, and the National Rare Earth Functional Materials Innovation Center. The delegation emphasized “self-reliance in science and technology” and aligning with national strategic needs.

Li praised China Rare Earth Group's efforts in consolidation and technology innovation, but the visit also revealed a top-down strategy that may still be overly reliant on legacy state actors while under-leveraging China's dynamic private sector and startup ecosystem.

Science Hubs with Limited Spillover?

At the Gannan Institute of Innovation (Chinese Academy of Sciences), Li’s team was shown advances in green extraction and resource-efficient utilization. Li called the institute a "source of original innovation" and pledged deeper collaboration on major national projects and talent pipelines. Yet the real challenge lies not in laboratory capability, but in transforming that capability into scalable, industrial output with global competitiveness.

Chinese Academy of Sciences Ganjian Innovation Research Institute

Similarly, visits to quality inspection centers and midstream application hubs—like the tungsten and rare earthproduct testing facility—highlighted progress in standardization,but underscored China's Achilles' heel: global certification and trust in standards remain limited beyond national borders.

Local Universities, National Expectations

Jiangxi University of Science and Technology showcased its rare earth research and talent development breakthroughs. While the Society promised support through project funding and strategic integration, translating academic research into industrial competitiveness remains slow, particularly compared to U.S., Japanese, and Korean university–industry tech transfer models. An important point for the administration of Donald Trump in the U.S. is to internalize and consider acting on accelerating research into R&D in America, particularly in the rare earth element and critical minerals space.

Private Sector Still Undervalued

Perhaps the most sobering insight came during Li’s visit to QianDong Rare Earth Group (opens in a new tab), a private firm that raised challenges around R&D commercialization and attracting high-end talent. Private players remain marginalized in China’s top-down innovation architecture despite being nimble and market-responsive. Li acknowledged their role but offered little regarding institutional reform or policy guarantees.

National Tungsten and Rare Earth Product Quality Inspection and Testing Center

Provincial Coordination or Bureaucratic Redundancy?

Meetings with the Jiangxi Rare Earth Society—represented by Xu Zhifeng and senior officials—underscored the push for provincial collaboration. But the overlap between national and local societies, coupled with weak enforcement power, suggests more coordination is needed to avoid policy duplication and streamline strategy.

Critical Commentary

China’s rare earth agenda in Ganzhou continues to follow a familiar formula: central planning, institutional visits, and a rhetorical commitment to collaboration. But the global rare earth race demands more than slogans. Without stronger integration of private sector innovation, faster tech transfer pipelines, and genuine regulatory transparency, China risks plateauing as a rare earth exporter rather than an advanced materials powerhouse.

Conclusion

While the China Rare Earth Society’s visit to Ganzhou signals momentum, the true test lies in execution. Cross-sector collaboration is no longer optional—it’s existential. Without meaningful structural change, China’s rare earth ambitions may remain impressive in presentation but insufficient in impact when we peel open the onion layer.

If U.S. and Western capital, entrepreneurial energies, and technical capacity are primed, especially given government help, it’s just a matter of time before China’s rare earth stranglehold is mitigated.