China’s strategic capitalism: Tilting the rare earth playing field

In the high-stakes arena of the global rare earth industry, China has emerged not just as a dominant player but as the architect of a tilted playing field.

While the West often views capitalism as a system of free markets and fair competition, China has mastered a hybrid model – strategic capitalism – that fuses state control with market mechanisms to secure an unrivaled advantage across the mine-to-magnet supply chain.

By leveraging subsidies, vertical integration and geopolitical maneuvering, China has transformed the principles of capitalism into tools for national dominance, leaving competitors rushing to respond.

Rare earths: The foundation of the tilt

Rare earth elements (REE) – 17 metals critical for technologies ranging from smartphones to fighter jets – are the lifeblood of modern industry and cornerstones of government policy and global macrotrends related to electro mobility, renewable energy and automation.

China leads roughly 60% of global REE mine output and over 90% of refining and magnet production, a position it has meticulously built over decades. Unlike Western firms, driven by short-term profits and shareholder demands, China’s state-backed enterprises operate with a long-term vision and a willingness to absorb losses to secure market control.

In the 1980s and 1990s, China flooded the global market with cheap REEs, undercutting competitors like the US-based Mountain Pass mine, which closed for a period from 2002. This wasn’t market inefficiency – it was calculated predation.

Subsidies, lax environmental standards and state-owned enterprises enabled Chinese firms to sell below cost, effectively dismantling foreign competition.

Today, as the West belatedly recognizes REEs as strategic assets, China holds the upper hand: it can restrict exports (as it did to Japan in 2010 over a territorial dispute) or oversupply the market to crash prices, stifling emerging rivals.

Bending capitalism, not breaking It

China’s strategy doesn’t reject capitalism – it reengineers it. It exploits the West’s commitment to open markets while protecting its own economy with export controls, tariffs and intellectual property tactics.

The Belt and Road Initiative (BRI) extends this advantage, locking resource-rich nations into China’s sphere through infrastructure loans they can’t repay – think Zambia’s cobalt mines or Laos’ hydropower dams.

These aren’t purely market-driven deals; they’re strategic moves to secure resources and influence.

Meanwhile, China’s state-backed firms operate with a unity of purpose that Western corporations, bound by competition and quarterly earnings, can’t match.

When tensions rise, as with Japan in 2010 and the US today, Beijing wields its dominance of critical mineral supply chains as a geopolitical weapon, signaling that its economic power doubles as leverage.

This isn’t the invisible hand of Adam Smith; it’s a deliberate grip on the global supply chain.

The West’s bind and the cost of catch-up

The West’s response has been hampered by its own capitalist principles. Free-market advocates resist the kind of industrial policy China embraces, while environmental regulations and higher labor costs slow efforts to rebuild capacity.

Initiatives like the US’ import tariffs on Chinese rare earth magnets and Europe’s Critical Raw Materials Act aim to counter China’s edge, but they’re playing catch-up against a decades-long head start.

Establishing new REE mines, refineries and magnet factories takes years and billions – resources the West is only now mobilizing as China tightens its hold.

Adapt or remain sidelined

China’s dominance isn’t unassailable. Rising domestic costs, environmental pressures and geopolitical backlash offer openings for competitors.

Yet its strategic capitalism – patient, coordinated and unapologetic – has redefined the rare earth industry.

China doesn’t just compete in the market; it shapes it, bending capitalism’s rules to ensure the field tilts decisively in its favor. The West faces a stark choice: adapt to this new reality or remain sidelined as the backbone of 21st-century technology stays firmly under Beijing’s control.

Hate the player or the game?

China’s ascent in the rare earth industry invites an uncomfortable question: should we resent the player or the game itself?

Beijing’s approach – ruthlessly pragmatic, foresight-driven – exposes less a flaw in its own system and more a vulnerability in the West’s rigid adherence to laissez-faire ideals.

As noted above, China isn’t breaking capitalism; it’s bending it, playing within the rules of a global market that rewards scale, patience and coordination over short-term purity.

The West, tethered to quarterly profits and allergic to state intervention, left itself open to a rival willing to wield capitalism as a tool of statecraft.

Perhaps the real critique isn’t of China’s cunning but of a Western model that mistook ideological consistency for strength, only to find itself outmaneuvered on a field it helped design.

Hate the outcome if you must – but the game was always there to be played.

Join us at Rare Earth Mines, Magnets & Motors 2025

Join us in Toronto in September 2025 for Rare Earth Mines, Magnets & Motors 2025 where we’ll explore this topic further with leading industry experts.

The two-day event will bring together business and technical leaders from across the global mine-to-OEM supply chain for high caliber discussions and networking at a 5-star venue.

Key themes of this year’s conference will include robotics, automation, advanced air mobility, and the emerging mine-to-magnet supply chain coming together upstream.

Special guest: Steve Wozniak, co-founder of Apple

More information: www.adamasevent.com