Global Race for Rare Earths as China Holds Key Advantage

U.S.-Pakistan Resource Cooperation
From September to October 2025, Pakistan signed a $5 billion memorandum of understanding on critical minerals cooperation with the U.S. Strategic Metals Company (USSM) and delivered its first batch of rare earth-containing mineral products to the United States in early October. These products included antimony, copper concentrate, and light rare earth concentrates such as neodymium and praseodymium. This cooperation covers the entire industrial chain framework from geological exploration and mineral extraction to concentrate production, with the ultimate goal of establishing complete smelting facilities in Pakistan. Pakistan’s decision was primarily driven by economic pressure, as its foreign debt has exceeded $100 billion, and its foreign exchange reserves have dwindled to just $14.4 billion. Mineral development has become a critical means to alleviate its financial crisis. The United States aims to reduce its reliance on Chinese rare earths through this cooperation—currently, 80% of its antimony and 70% of its neodymium, among other critical minerals, are imported from China. Rare earths are essential materials for military products such as the F-35 fighter jet and missile guidance systems.

China’s New Rare Earth Regulations
On October 9, China’s Ministry of Commerce issued three announcements on rare earth export controls, with core provisions including: implementing export controls on the entire rare earth industry chain (Announcement No. 62), covering technologies for extraction, smelting separation, metal smelting, magnetic material manufacturing, and recycling; imposing licensing management on five medium and heavy rare earth items—holmium, erbium, thulium, europium, and ytterbium (Announcement No. 57); and, for the first time, extending the scope of controls to overseas activities (Announcement No. 61), requiring that rare earth items utilizing Chinese technologies or containing Chinese components (with a value share of ≥0.1%) must apply for a license from China when exported overseas. Chinese Foreign Ministry Spokesperson Lin Jian emphasized that these measures are "legitimate actions to safeguard national security and interests and fulfill international obligations such as non-proliferation," explicitly stating that they are "not related in any way" to the Pakistan incident.

International Developments
Japan and the European Union launched the "Economic 2+2 Dialogue" in July 2025, aiming to collaborate on building alternative supply chains for rare earths and other critical materials to reduce dependence on China. India has pledged not to re-export imported Chinese rare earth materials to the United States, with multiple companies submitting end-user certificates to ensure that rare earths are used solely for domestic production. India also plans to establish a strategic reserve for critical minerals and designate rare earth mines as "strategic projects" to accelerate their development. G7 countries are discussing measures such as implementing floor prices and imposing tariffs on rare earths to support domestic industries, but disagreements remain within the group regarding specific plans.

Rare Earth Supply Chain Landscape
According to a UBS analysis from September 2025, China controls 60%–70% of global rare earth mining output and approximately 90% of refining capacity, with technological advantages leading overseas competitors by at least two decades. This dominance makes it difficult for other countries to achieve immediate success in their substitution efforts: the refining costs of U.S. rare earth company MP Materials are 40% higher than those in China, and it relies on government subsidies. Although Pakistan possesses resources, it lacks refining technology, and its rare earth samples fall far below industrial-grade standards. A CITIC Securities report notes that China’s new regulations may prompt overseas countries to increase reserves, which could benefit long-term steady price increases for rare earths.

The global rare earth supply chain is accelerating toward a "dual-track" evolution: one track is centered around China’s technology and resource integration system, which consolidates advantages across the entire industrial chain through controls; the other is a "de-sinicized" supply chain promoted by the United States, seeking diversification through investments in projects in countries like Pakistan and Australia. However, technological barriers remain a critical challenge. The restructuring of rare earth supply chains involves multiple factors, including resource development and technological accumulation, and countries are seeking a balance between ensuring security and promoting global cooperation.