Rare earth elements, collectively known as the 17 metallic elements, serve as the "industrial vitamin" for modern industry and defense technology due to their unique physicochemical properties, with their strategic significance becoming increasingly prominent in global technological competition. From new energy equipment to cutting-edge weapon systems, from environmental protection technologies to frontier quantum computing, the applications of rare earths permeate core areas of high-end manufacturing. China's absolute advantage in the entire rare earth industry chain positions it as the dominant force in the global rare earth landscape. The export restrictions on rare earths amid trade wars further highlight the strategic value of this advantage, injecting momentum into industrial upgrading.
The industry importance of rare earth elements lies in their irreplaceability and broad applicability. In the field of magnetic materials, permanent magnets, which account for 60% of rare earth usage, are core components of drive motors for new energy vehicles and wind turbines. China's neodymium-iron-boron magnet production accounts for 90% of the global total, while high-end products rely on heavy rare earths like terbium and dysprosium to enhance stability. In the catalytic sector, rare earth elements enable CO/HC oxidation efficiency exceeding 98% in automotive exhaust purifiers, serving as a key factor in the implementation of the China VI emission standard. Additionally, rare earth elements play indispensable roles in optical materials, nuclear energy control, hydrogen storage batteries, and other fields, directly impacting energy transition, national defense security, and technological breakthroughs.
China possesses a globally unparalleled advantage in the rare earth elements (REE) industrial chain, stemming from its comprehensive leadership in resource control, technological barriers, and production capacity. On the resource front, China holds 38% of the world's REE reserves and accounts for 69.2% of global production in 2024. In terms of processing, it controls over 92% of the world's smelting and separation capacity, with cascade extraction technology achieving 99.9999% purity at one-third the cost of Western counterparts. In innovation, China holds 86% of global deep-processing patents, forming a complete closed-loop system from mining and separation to high-end material production. Even if the U.S. and Australia produce REE ores, they still need to be shipped to China for processing—a level of industrial chain stickiness that cannot be broken in the short term.
In the trade war, China's precise measures on rare earth exports have achieved multiple strategic outcomes. In terms of regulatory logic, the approach of "differentiating civilian and military uses, and separating compliant from non-compliant applications" ensures the reasonable needs of enterprises like Tesla while firmly rejecting applications in the military and high-end chip sectors. This strategy not only avoids the stigma of "weaponization" but also safeguards national security. Economically, it drives up the added value of rare earths, with the 2025 Q4 rare earth concentrate rising by 37.13% month-on-month, ending the dilemma of "exporting resources at low prices." Strategically, leveraging the U.S. 83.7% rare earth dependency rate creates room for U.S.-China trade negotiations while signaling an "open stance to cooperation and a firm basis for countermeasures" through differentiated controls on Japan.
Export controls have provided a strong boost to domestic industrial upgrading. Policies have compelled enterprises to shift from raw material exports to deep processing, raising the self-sufficiency rate of high-end neodymium-iron-boron magnetic materials from 60% five years ago to 85%. By 2025, the output value of rare earth downstream applications will exceed 500 billion yuan. From an environmental perspective, incorporating environmental indicators into the approval system has driven enterprises to adopt green technologies such as microbial leaching, reducing water resource consumption in the Ganzi mining area by 40% and achieving a balance between resource development and ecological protection. Meanwhile, stable processing demand supports technological iteration, forming a virtuous cycle of "supply-research-development-upgrading," further solidifying the industry's core position in the supply chain.
The intelligent upgrade of equipment is the core path for China's rare earth industry to maintain global leadership. In the mining phase, the promotion of smart mine systems enables precise extraction through drone exploration and automated mining equipment, reducing resource waste and environmental disturbances. In the smelting and separation phase, intelligent production lines are constructed with the support of industrial internet, utilizing AI algorithms to optimize cascade extraction process parameters, enhancing purity stability and production efficiency. In the deep processing phase, the introduction of smart inspection equipment achieves micron-level precision control for rare earth magnetic materials and optical materials, meeting the stringent requirements of high-end manufacturing for impurity content.
In addition, it is essential to empower industrial chain collaboration and innovation breakthroughs with intelligence. Establish a full-process digital traceability system to achieve end-to-end control from mines to end products, enhancing the precision of export management. Leverage big data analytics to anticipate global demand shifts and guide capacity allocation and technological R&D directions. Strengthen industry-university-research collaboration, promote the integrated innovation of intelligent equipment and rare earth new materials, and develop high-performance rare earth alloys and magnetostrictive materials to seize application opportunities in cutting-edge fields such as new energy and quantum technology.
The competition in the rare earth industry is essentially a contest of comprehensive industrial chain capabilities and core technologies. Leveraging its complete industrial chain advantages and precise policy regulation, China has firmly established its position in the global rare earth landscape. Moving forward, by addressing resource constraints through intelligent equipment upgrades, enhancing technological barriers, and continuously consolidating the full-chain advantage of "extraction-processing-application-innovation," China can truly make rare earths—a strategic resource—into a core force that supports the advancement of high-end manufacturing and safeguards national strategic security, maintaining a leading position in global technological competition.