Is China's Rare Earth Weapon Turning into a Weakness?

Al-Eqtisadiah from Riyadh

Monday, July 20, 2026 21:9 | 1 minute read

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China faces risks that its dominance in the rare earth market could become an incentive for consuming countries to accelerate diversification of supply sources, a scenario reminiscent of what happened to the United States in 1973 when it halted soybean exports to Japan, prompting Japan to build alternative supply chains and reduce its dependence on the U.S. market.

Beijing is imposing export restrictions on a number of rare earth elements, such as dysprosium, terbium, and tungsten, which are essential components in the manufacturing of electric vehicles, semiconductors, magnets, and defense applications, a move interpreted as a pressure tactic amid escalating trade and technological competition.

However, this policy has prompted several countries, led by Japan, to invest in mining and processing projects outside China, including in Australia and Malaysia, in cooperation with the United States and France, contributing to an increase in global production outside China to about a third of supplies after being almost nonexistent about 15 years ago, with expectations that new projects will add nearly 20% to global supplies of heavy rare earth elements.

Observers believe that continued use of rare earth metals as a pressure card could accelerate the rebuilding of global supply chains and encourage Western companies to restore industrial capabilities and expertise in this sector, gradually reducing China's market dominance. In strategic commodity markets, declining buyer confidence in the main supplier often accelerates the emergence of alternatives, which could turn one of China's most prominent strengths into a factor that hastens the erosion of its monopoly in the long term.

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