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

''Economy from Riyadh''

Monday 20 July 2026 21:9 |1 minute read

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China faces the risk 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 the latter 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 materials used in the manufacture of electric vehicles, semiconductors, magnets, and defense applications. This move is interpreted as a pressure tool 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. This has contributed to increasing global production outside China to about a third of supplies, after it was almost nonexistent about 15 years ago, with expectations that new projects could add nearly 20% to global supplies of heavy rare earth elements.

Observers believe that continued use of rare earths as a pressure tool may accelerate the rebuilding of global supply chains and encourage Western companies to recover 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 key strengths into a factor that hastens the erosion of its monopoly in the long term.

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