The origin of China’s dominance of rare earths can be traced to an iron ore mine near Baotou in the country’s north, 50 miles from the Mongolian border.
It was April 1964 and Chinese geologists had discovered that the mine also held the world’s largest deposit of rare earths, a set of 17 metals that have become essential ingredients for today’s global economy. Deng Xiaoping, then a high-ranking Chinese Communist Party official, visited the remote desert mine, owned by a military steel maker, to inspect the massive cache.
“We need to develop steel, and we also need to develop rare earths,” declared Mr. Deng, who over a decade later would emerge as China’s top leader.
Rare-earth metals and the magnets made from them are widely used in a long list of civilian and military applications, from cars to fighter jets. China’s position as the leading supplier has given it enormous leverage over manufacturing and leadership in clean energy technologies like electric cars and wind turbines. Companies all over the world depend on Chinese exports of those magnets.
China’s centrality in rare earths didn’t happen by accident. It is the result of decades of planning and domestic and overseas investment, often directed from the highest levels of the party and the Chinese government.
In the early 1970s, the People’s Liberation Army launched a little-known research program to develop potential military uses of rare earths.
Mr. Deng kept pushing China’s rare-earth advancement forward in the 1980s and 1990s together with Wen Jiabao, a geologist by training who went on to serve as China’s premier from 2003 to 2013. Under Mr. Wen, China consolidated what was a highly splintered web of mostly private companies into a tightly run arm of the Chinese government. Mr. Wen closed mines run by smugglers and cleaned up the industry’s most severe pollution. The sector grew in size and expertise.
In 2019, seven years into his reign as China’s top leader, Xi Jinping described rare earths as “an important strategic resource.” And he has shown this year that he is willing to use rare earths as a chokehold on global supply chains and a powerful tool in China’s trade war with President Trump.
In April and again in October, China enacted new export controls that allowed it to withhold supplies of rare earths and rare-earth magnets and force Mr. Trump to compromise on tariffs. The October order “pointed a bazooka at the supply chains and the industrial base of the entire free world,” Treasury Secretary Scott Bessent said.
Not since the Arab oil embargo in late 1973 and early 1974 had the United States experienced such a drastic loss of access to critical minerals. And while the oil embargo affected a third of the world’s oil supply, China produces 90 percent of the world’s rare earths and rare-earth magnets.
China’s actions this year on rare earths were “undeniably a major moment in geoeconomic history and international relations,” said Nicholas Mulder, a historian of embargoes and sanctions at Cornell University.
Early Role for China’s Military
China’s rare-earths industry leaped ahead in a military operation more than 50 years ago during the chaos of the Cultural Revolution. Mao’s Red Guards had almost completely closed most schools and universities. It seemed an unlikely time for a technological breakthrough.
The father of the industry was Xu Guangxian, a tall, thin man from Shaoxing, a town near Shanghai. He loved Go, an ancient Chinese board game, and devoured martial arts novels.
Shortly after World War II, Mr. Xu completed a doctorate in chemistry at Columbia University. He returned home to teach and do research at Peking University in Beijing. Mr. Xu discovered a new way to process uranium, a breakthrough in China’s efforts to build an atomic bomb that presaged the role he would later play in rare earths.
Then, like many intellectuals, Mr. Xu was imprisoned during the Cultural Revolution. But in 1971 he was politically rehabilitated and brought back to Peking University. The People’s Liberation Army had a job for him: Invent a new way to refine pure samples of rare-earth metals. The Chinese military wanted the samples to experiment with battlefield lasers.
Purifying rare earths is extraordinarily difficult. Early chemists named them rare not because they were hard to find — they are not — but because of the challenge of separating them from one another.
At Peking University, Mr. Xu and his wife, Gao Xiaoxia, also an accomplished chemical engineer, holed themselves up in a laboratory. They had a revolutionary breakthrough: Rare earths could be purified using inexpensive hydrochloric acid and cheap plastic holding tanks rigged together.
Mixed rare earths were poured in one end, and specific kinds of rare earths, after binding to various solvents, emerged from different outlets at the other end. It was the first rare-earth assembly line, a crude version of a process still used today. Production costs plummeted with Mr. Xu’s techniques.
Mr. Xu installed his first production lines, in Baotou and at a chemical plant in Shanghai, and started training engineers from all over China.
Deng Xiaoping Takes Charge
After the death of Mao, Mr. Deng began consolidating power with an economic program that emphasized science and technology and selected Vice Premier Fang Yi to oversee it in 1978. Mr. Fang traveled with an entourage of scientists and engineers to Baotou to inspect the rare-earth industry.
A Five-Year Plan drafted by Mr. Deng and Mr. Fang, covering 1981 to 1985, ordered that China “increase the production of rare-earth metals.”
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More than 100 towns and villages across China built rare-earth refineries in the 1980s, many of them state-owned and few with meaningful pollution controls. By 1986, China was the world’s largest producer of rare earths.
Overseas refineries also adopted some of Mr. Xu’s techniques — and, to his lasting annoyance, they paid no royalties because he had not patented his inventions. “We didn’t have any sense of secrecy back then,” Mr. Xu said in an interview with a Chinese journal many years later.
Rare earths were used in fairly low-tech manufacturing at the time, to make steel stronger or refine oil and polish glass.
But in laboratories in Michigan and Japan, engineers were starting to discover how to turn rare-earth metals into extremely powerful magnets. Rare earths were about to become central to advanced manufacturing, and the creation of a modern world of computers, smartphones and cars.
In 1983, engineers at General Motors and the Japanese magnet maker Sumitomo Special Metals each announced they had developed powerful rare-earth magnets. The magnets were immediately put to use in electric motors in the auto industry and beyond.
China lacked expertise to turn rare earths into magnets. It would purchase that know-how from the United States.
G.M. Steps Out, China Steps In
General Motors had turned its discovery into a thriving magnet manufacturing subsidiary in Indiana, called Magnequench. But a decade later, G.M. decided to stop making many of its own auto parts.
Magnequench was sold in 1995 to a consortium of investors that included two Chinese companies led by sons-in-law of Mr. Deng: Wu Jianchang and Zhang Hong. Under President Bill Clinton, the U.S. government allowed the transaction to proceed because a majority of the owners were American.
The American owners were mainly institutional investors. Mr. Deng’s sons-in-law had led companies with deep ties to low-cost magnet manufacturing in China. Magnequench started moving its equipment in 2001 to Tianjin and Ningbo, China, and shut down in Valparaiso, Ind., by 2004.
“A lot of equipment in Valparaiso was decommissioned, disassembled and put on pallets prepared for ocean shipment,” said Jeff Calvert, who was a Magnequench manager assigned to oversee the installation of the equipment at a magnet factory in Tianjin. He said the Chinese factory had previously been using processes “that were at least 10 years behind” what Magnequench had developed in Valparaiso.
The move by Magnequench, which was then bought in 2005 by a Canadian rare-earth processor with operations in China, taught China how to make rare-earth magnets.
But increased magnet production made pollution from rare-earth mines a bigger problem that Beijing needed to address.
Rare-earth refineries in Baotou were dumping large quantities of radioactive waste into a repository that threated to contaminate the Yellow River.
Starting in 2006, Wen Jiabao, by then China’s premier, imposed annual quotas on Chinese rare-earth exports to limit processing and stem pollution. Cleanup measures began at mines in Baotou. The government took greater control of rare-earth companies, consolidating them under state ownership.
China Tests a Trade Weapon
In late September 2010, two dozen of the most powerful executives in China’s rare-earth industry were summoned to a conference room deep inside China’s Ministry of Commerce, a Stalinist building in the heart of Beijing. China was confronting Japan over uninhabited islands north of Taiwan.
A senior ministry official gave the executives their orders: no more rare-earth exports to Japan, their biggest market. No extra exports to other countries that might forward supplies to Japan. And not a word was to be spoken publicly about the ban.
The embargo was never formally announced, but it forced the Japanese government to compromise on the territorial issue after two months. Yet the ban also exposed a weakness for Beijing.
Chinese crime syndicates, which controlled about half of China’s rare-earth production, had continued smuggling rare earths from China to Japan even during the embargo.
Mr. Wen ordered police campaigns to break the syndicates. Security forces stormed illegal mines and put them under Beijing’s direct control.
From a distance of 15 years, it is clear that the Japan embargo was a turning point for China’s rare-earth industry. Once-lawless areas of industrial activity were tamed and brought under the government’s thumb, and Beijing learned it could use that control to force geopolitical and trade partners to bend.
China’s Future: Education and Research
Today, China is working to cement its lead in rare earths by churning out more trained technicians and researchers than any other country. Programs in rare earths are offered by 39 universities.
The United States and Europe have no such programs — not even at Iowa State University, an institution that once trained generations of American engineers in rare earths. Iowa State has not offered a course in rare earths for the last several years and has one graduate student doing independent study in the field. It plans to offer a course next year.
China has hundreds of scientists exploring rare-earth technologies. Technicians at a refinery in Wuxi, a city near Shanghai, spent seven years doing experiments to refine dysprosium, a rare earth, to extraordinary purity. The refinery is now the world’s sole source of that rare earth, which is used in capacitors — tiny devices to control electricity — found in Nvidia’s Blackwell artificial intelligence chips.
Most of the refinery’s shares were until this year owned by Neo Performance Materials, the Canadian company that acquired Magnequench in 2005. A Chinese state-controlled company bought most of the shares on April 1. Then on April 4, Beijing halted exports of dysprosium and six other kinds of rare earths to the United States and its allies.
China is determined to guard its technological lead. Beijing has halted most exports of rare-earth processing equipment. It has also taken away the passports of rare-earth technicians to prevent them from leaving the country with valuable information.
During a visit in late November to the Wuxi refinery, a shiny steel national security sign at the front gate warned: “Caution: Key Confidential Unit.”
Li You contributed research.
Keith Bradsher is the Beijing bureau chief for The Times. He previously served as bureau chief in Shanghai, Hong Kong and Detroit and as a Washington correspondent. He lived and reported in mainland China through the pandemic.
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