When the United States launched its economic offensive to thwart China’s technological rise, Washington’s strategists assumed the upper hand lay in financial weapons and sanctions. The logic was conventional and, to them, compelling: export bans on cutting-edge chips, blacklisting Chinese tech firms, tariff escalations, even weaponising semiconductor supply chains. These moves, taken together, were meant to strangle Beijing’s ambitions. Backed by dominant capital markets and a web of military alliances, the West convinced itself it could deny China access to the future. But events did not play out as expected. In trying to enforce technological primacy from the top down, the American empire overlooked the foundation on which that primacy rested. Now that very foundation is being used against it in a kind of geopolitical judo. The result has left Washington off-balance and scrambling for footing.
The inflection point came on 9th October 2025, when China’s Ministry of Commerce unveiled sweeping new restrictions on rare earth elements and related know-how. These were no token measures; they amounted to a comprehensive tightening of Beijing’s grip over an entire value chain. The rules extend far beyond raw ores. Mining, smelting, chemical separation, alloy production, magnet fabrication – every step is now subject to strict export licences. Deliberately, this crackdown covers not only the materials themselves but also the expertise and equipment involved in processing them. In one stroke, China signalled it will henceforth decide who gets access to some of the most critical inputs of the 21st-century economy. In an unprecedented extraterritorial twist, Beijing even stipulated that items manufactured abroad using Chinese rare earths or machinery would require Chinese approval to be sold. It was a move designed to close every loophole, asserting that China’s reach extends into any factory worldwide that relies on its materials. The message echoed along global supply lines: a new era of resource sovereignty had begun, and this time it was China – not the West – writing the rules.
The shockwaves hit the United States almost immediately. Among the first casualties were companies in the defence sector, hitherto obscure in this context. Huntington Ingalls Industries, America’s premier naval shipbuilder, suddenly found itself cut off from critical Chinese-sourced inputs. Alongside it, lesser-known contractors that had only recently inked deals with the Pentagon saw their supply lines abruptly yanked. What had begun as targeted sanctions against Chinese tech firms a year earlier had boomeranged into a targeted squeeze on American industry. Beijing’s new control list explicitly named these firms, putting them effectively in a penalty box. The timing was no accident: this salvo came just days after Washington proudly announced a public-private initiative to secure critical mineral supply chains. Before that effort could even get started, Beijing pulled the rug out from under it. The very materials the US was racing to stockpile were now subject to China’s veto. In Washington, policymakers woke to a nightmare realisation – they were trapped in a supply chain maze of their own making, dependent on the industrial muscle of the very nation they had tried to ostracise.
The extent of U.S. dependence on Chinese materials has long been an open secret, one conveniently ignored in high-level strategy debates. Now it’s impossible to ignore. In recent years the United States has sourced roughly 70–80% of its rare earth elements from China. For some critical elements, reliance is near total: more than 90% of America’s supply of metals like dysprosium and neodymium – used in everything from precision-guided missiles to electric vehicle motors – comes from Chinese sources. These elements might have exotic names, but they are deeply embedded in modern technology. Neodymium, for example, enables the world’s strongest permanent magnets, essential in high-performance electric motors and wind turbine generators. Dysprosium helps those magnets retain strength at high temperatures, making it crucial for aerospace and defence systems. By one Pentagon estimate, nearly 78% of U.S. military platforms – from fighter jets to destroyers – depend on rare earth elements in some fashion. In other words, almost four out of five advanced American weapons or hardware systems require materials that China overwhelmingly controls. It’s a statistic as sobering as it is ironic: the famed “arsenal of democracy” is built on a foundation largely mined and refined by a strategic rival.
This dependency might be a manageable risk were substitutions easy – but they aren’t. Replacing rare earths is usually impossible without severe loss of performance. If you need a heat-resistant magnet for a jet engine or a guidance system for a missile, there’s no simple alternative on the shelf. The periodic table offers only so many miracles, and China currently dominates the supply of those particular ones. American companies learned this the hard way not long ago. When a modest rare earth supply disruption hit in 2023, entire production lines in the U.S. struggled. Manufacturers burned through stockpiles in weeks, then had to tell customers to wait months for new deliveries. Prices of certain rare-earth magnets spiked fivefold as every buyer with deep pockets scrambled for whatever supply could be found. Projects were delayed, contracts quietly breached, profit warnings issued. It was a small foretaste of what a more extensive cut-off could bring. Now, with its new controls, China has resumed and even deepened its tactic of calibrated supply withdrawal. The strategy is plain: remind the world that China’s grip on these irreplaceable elements can tighten at any moment, and by doing so, demonstrate that any attempt to contain China will carry a painful cost.
China’s real leverage, however, doesn’t derive merely from owning mineral deposits – it comes from mastering the technical bottlenecks that turn those minerals into indispensable products. Rare earths in the ground are one thing; extracting and refining them into high-purity oxides, metals, and magnets is something else entirely. Here, China’s dominance is overwhelming. By some estimates, China processes as much as 85–90% of the world’s rare earth ore into finished materials. This includes the complex chemical separation of mixed rare-earth concentrates and the fabrication of specialised alloys and magnets. The expertise involved isn’t learned overnight: it’s equal parts high chemistry and dirty metallurgy, demanding both precision and massive scale. Even when rare earth ore is mined in places like Australia or the United States, it almost invariably ends up shipped to China for processing. Simply digging something up does no good if you can’t refine it – and Beijing has spent decades positioning itself as the indispensable middleman for that refinement. Now it has weaponised that role. Consider a recent example: a much-heralded rare-earth separation facility in Vietnam, intended to help diversify supply, reportedly relies on Chinese-made equipment at every stage. Under China’s new rules, even that plant cannot expand or replace key machinery without permission from Beijing. This isn’t old-fashioned resource nationalism; it’s something more systemic. By dint of technical prowess and manufacturing dominance, China has set itself up at every chokepoint in the modern industrial supply chain. It is exercising a form of control over the system itself.
To fully grasp the significance of China’s move, one must place it in a broader context. Over the last few years, Washington has been waging an aggressive campaign to constrain China’s technological development. In 2022 and 2023 especially, the United States rolled out wave after wave of restrictions: forbidding the export of extreme-ultraviolet lithography machines to China, blacklisting Chinese telecom giants, pressuring allies in Europe and Asia to halt advanced tech transfers. American officials spoke openly of crippling China’s ability to produce high-end chips and AI systems – a strategy a Washington think-tank tellingly described as “decoupling by strangulation.” The calculus was that the U.S. and its allies controlled the high ground of tech – those cutting-edge tools and software without which modern computing is impossible – and that by leveraging this dominance they could stifle China’s rise in supercomputing, 5G, artificial intelligence, and so on. It was a plan to deny China the outputs of Western innovation. But in crafting it, U.S. strategists made a fatal oversight: they forgot about the inputs.
What the West overlooked was the unglamorous backbone of every high-tech system – the raw materials. In the sleek narratives spun by Silicon Valley and the Pentagon, talk of supply chains often glossed over the mundane truth that advanced hardware isn’t magicked from thin air. Rare earth elements, graphite, gallium, lithium, cobalt: these rarely feature in political speeches or flashy tech conferences, yet they form the bedrock of our modern civilisation. Without graphite and cobalt for battery anodes and cathodes, there is no electric vehicle revolution. Without neodymium, terbium, and dysprosium, there are no powerful magnets for efficient motors, wind turbines, or precision-guided missiles. Remove lithium, and the age of portable electronics and large-scale energy storage collapses. Ignore “minor” metals like gallium and germanium, and you forfeit essential components of semiconductors, night-vision devices, and fibre-optic systems. In short, physical materials are the foundation; the chips, devices, and lofty dreams of AI dominance or clean energy are merely the castle built on that foundation. The West can certainly subsidise chip fabs and quantum computing start-ups to its heart’s content – but no Act of Congress or mountain of cash can conjure critical elements into existence.
Beijing grasped this reality early, and acted accordingly. In mid-2023, not long after Washington tightened the semiconductor noose, China targeted two obscure but vital metals: gallium and germanium. Few outside specialist circles had even heard of them, yet these metals are used in specialised semiconductors and military optics. When China abruptly required export permits for both, it was a test – one that yielded telling results. Western firms dependent on gallium and germanium went into panic mode; prices for those materials surged as buyers rushed to hoard supply, and research labs from Silicon Valley to Bavaria suddenly had to worry about running out of ingredients they’d long taken for granted. That 2023 episode was limited in scope and short-lived, a mere warning shot. It reminded the world that China held triggers it could pull. Now, with rare earths, that warning shot has become official doctrine. The new controls take that earlier leverage and bake it into a long-term strategy. The message from Beijing is essentially: if you intend to deny us the outputs of advanced technology (like state-of-the-art chips), then we will deny you the inputs required to even make that technology. The arena of competition has been fundamentally altered. The contest is no longer about whose chip is faster or whose AI is smarter; it’s about who controls the raw fuel and key components that make any of those endeavours possible in the first place.
All of this highlights a material imbalance at the heart of Western power. The United States – for all its military might and financial clout – is learning that dominance in design and dollars does not equal dominance in production. Over the late twentieth century, the U.S. and the West more broadly offshored vast swathes of manufacturing. Rare earth mining and refining, being messy and polluting, were gladly shifted to China while the West moved “up the value chain” into cleaner high-tech and service industries. For decades, this arrangement seemed to work: Western consumers enjoyed cheap goods, Western firms reaped bigger profits, and few paused to consider the long-term consequences of surrendering entire industrial capacities.
Those consequences are now painfully clear. The American industrial base has been hollowed out to such an extent that even with unanimous political will – which itself is hardly assured – rebuilding it would take years or even decades. Strict environmental rules (crucial for health and ecology) mean any new mine or refinery faces a gauntlet of permits and public opposition. Skilled labour in these foundational fields has atrophied; ask yourself, how many young American engineers today specialise in hydrometallurgy or extractive metallurgy? Precious few. Corporate supply chain managers, prioritising efficiency and profit, spent thirty years crafting a global system where a typical product might cross the Pacific multiple times before final assembly. That system delivered astounding efficiency in peacetime, but it assumed a cooperative geopolitical climate that no longer exists. And let us be absolutely clear: that climate no longer exists largely because the United States, in its strategic hubris, decided that cooperation with China was no longer desirable. Washington effectively declared cooperation redundant, and now finds itself lamenting the loss of a cooperative framework it helped dismantle.
In practical terms, the U.S. cannot disentangle itself from Chinese supply lines quickly – even if it desperately wanted to. Imagine Washington somehow mustering the political will and financing to reopen domestic rare earth mines – a herculean task, given local resistance and environmental hurdles. Even if those mines sprang to life, the raw ore dug out of California or Wyoming would most likely need to be sent to China for processing, simply because the U.S. currently lacks the necessary refining capacity and expertise. Consider the case of MP Materials’ mountain pass mine in California: it’s the only active U.S. rare earth mine, yet much of its concentrate still ships to China to be refined. It’s a bitter irony that an American flag flies over the mine, but the real alchemy – turning ore into high-grade metal – happens under a Chinese flag. This encapsulates the crux of the dilemma: extraction is one thing, transformation is another. Extracting ore is futile without the means to refine it. Without mastering the entire chain, the U.S. remains a supplicant – even for resources pulled from its own ground.
The knowledge deficit is just as crucial as the material one. Rare earth processing is not simple “dig-and-deliver” mining; it’s a complex craft that marries chemistry with engineering and demands careful environmental management. Rare earth ores contain multiple elements that are chemically similar, often mingled with radioactive by-products like thorium. Separating those elements cleanly requires dozens of stages of solvent extraction, ion exchange, and precipitation – all precisely calibrated. High-temperature furnaces are needed to reduce rare earth oxides to metals, and those processes must be tightly controlled to prevent impurities. Then come the alloying stages and magnet fabrication, each its own technical realm. In short, this is high-tech metallurgy, not shovel-and-pickaxe work.
China did not become the world’s rare earth hub by accident or overnight. Starting in the 1980s and 1990s, Beijing’s leadership recognised how strategically important these elements would be. They poured money into research institutes, sent students abroad (and sometimes quietly borrowed know-how through those students and joint ventures), and crucially, accepted the environmental costs the West shunned. Villages in Inner Mongolia and Jiangxi paid a dreadful price in poisoned land and water, even as the rest of the world benefited from an abundance of cheap rare earths. Over time, Chinese scientists and engineers accumulated not just theoretical knowledge but hands-on expertise – the sort of tacit know-how that isn’t easily transferred or copied. Today, there are rare earth mines outside China – in the U.S., Australia, Myanmar, and elsewhere – but virtually none of them operate independent of Chinese involvement. Some ship their raw concentrate to China outright. Others use Chinese-built processing facilities or Chinese technical consultants. Japan, after a diplomatic spat in 2010 disrupted its rare earth supply, tried mightily to engineer a non-Chinese supply chain; even Japan found that completely bypassing China was prohibitively costly and complicated. Alternatives to Chinese dominance exist mostly on paper or in pilot stages. The hard reality on the ground is that wherever you dig for these materials, before long you find Chinese technology or expertise in the next step of the process.
The economic costs of this asymmetry are already being felt. In the United States, big-ticket initiatives like the Inflation Reduction Act and the CHIPS Act are pumping tens of billions into domestic manufacturing – electric vehicle plants, battery gigafactories, wind turbine assembly lines, and semiconductor fabs. The aim is clear: reduce reliance on foreign (read: Chinese) inputs and revive high-tech industry at home. The money is committed, the glossy brochures have been printed, and ground has even been broken on some new sites. Yet on the factory floor, an inconvenient truth is emerging: those critical inputs are in short supply. Consider renewable energy: American wind turbine makers, buoyed by green subsidies, have ambitious targets for new installations. But they’re already hitting roadblocks due to a shortage of rare earth magnets needed for turbine generators. Only a few sources globally produce these specialised magnets, and recent spikes in the price of neodymium and praseodymium (thanks to China’s tightening) are delaying projects and blowing out budgets. In the electric vehicle (EV) sector, carmakers find that soaring materials costs – for lithium, nickel, and yes, rare earths for motor magnets – are squeezing their profit margins and forcing them to raise prices or slow production. A few companies have even quietly trimmed their EV rollout plans, implicitly admitting that supply chain headaches are part of the reason.
Meanwhile, the much-publicised new semiconductor fabs in the U.S. face their own chokepoints. Beyond the known shortage of extreme-ultraviolet lithography machines, these fabs need ultra-pure chemicals and materials – some of which are sourced from China or rely on Chinese-processed inputs. Likewise, the burgeoning field of artificial intelligence relies on sprawling data centres, which in turn need advanced chips (themselves in short supply), as well as sophisticated cooling systems, power converters, and other hardware. Each of those depends on various minerals and manufactured components that are themselves under strain. In sum, the grand project to re-shore advanced manufacturing is colliding with the cold reality that you can’t legislate away a resource constraint. No matter how many billions are earmarked or how many white papers are written, factories cannot be built and run without the raw materials and parts.
Financial analysts have started to put numbers to these challenges. Goldman Sachs, for instance, recently warned that if critical material shortages persist into next year, U.S. economic growth could take a noticeable hit – perhaps over a full percentage point of GDP. That may sound small, but in macroeconomic terms it’s enormous: it could spell the difference between a gentle economic slowdown and a slide into recession. These dry statistics translate into real-world pain – factories delayed or running under capacity, consumer prices creeping up, energy projects postponed, jobs not created. It’s a perverse irony that just as money is being mobilised on an epic scale to revitalise industry at home, that very revival is being hamstrung by bottlenecks abroad. Wall Street, at least, is beginning to learn a lesson policymakers should have considered long ago: an industrial policy isn’t worth the paper it’s written on if you can’t get the materials to feed your industry. Perhaps eventually that realisation will dawn in Washington and Brussels – whether it leads to smarter strategy or simply more finger-pointing remains to be seen.
If the economic ramifications are serious, the geopolitical implications are profound. By exposing how heavily the West relies on Chinese materials, Beijing has struck at the credibility of American power projection. A superpower’s strength isn’t just a matter of counting its ships, tanks, or warplanes; it’s about the ability to keep those assets fueled, armed, and operational over time. In any drawn-out crisis or conflict, logistics and maintenance often tip the balance. This is where China’s leverage casts a long shadow. Imagine a flashpoint – say a showdown over Taiwan or passage through the South China Sea. Pentagon planners might be confident in the U.S. arsenal on day one, but what about day fifty or day one hundred? Can they be certain that new missiles and spare parts will arrive on schedule if the supply of critical components is choked off? Many U.S. weapons systems incorporate rare earths and other Chinese-dominated materials at some stage of their production. A fighter jet’s radar, for example, contains components made with rare earth elements; its engines use heat-resistant alloys that rely on them; its missiles use guidance systems that need specific rare metals. If those inputs become scarce or extortionately expensive, every step – building new weapons, repairing older ones, even basic upkeep – slows down and costs more. Over months of high-tempo operations, those delays and expenses would sap readiness. It’s one thing to brandish an impressive arsenal on paper; it’s another to keep that arsenal at full strength when a critical supplier can turn the tap off. And it’s not just an American concern. Allies like Japan, South Korea, Germany, and others who plug into U.S.-led defence supply chains are coming to the same unsettling conclusion. Global military preparedness – not just economic vitality – now has a material dependency on China. Beijing, without firing a shot, has revealed a soft underbelly of the West’s hard power. It’s a vulnerability that I and other futurists have warned about for over a decade, often to deaf ears. Now it is impossible to ignore.
From Beijing’s perspective, its new export controls are acts of self-protection, not aggression. Chinese officials are quick to argue that their measures are lawful and measured. Under China’s updated Export Control Law, Beijing is empowered to restrict exports of items deemed crucial to national security or that could be diverted for military use against China. Rare earth magnets and the technologies to produce them, it argues, clearly fall under that definition – especially when U.S. defence contractors are the end-users. In public statements, the Chinese government has effectively said it’s doing only what any responsible nation would do: preventing vital materials from bolstering an adversary’s military machine. With barely concealed relish, Chinese spokespeople have been known to quip, “We learned this by watching the Americans.” Indeed, for years the United States has cited national security to justify banning high-tech exports to China – most recently cutting off advanced chip technology on the grounds it could aid the PLA (People’s Liberation Army). If extreme lithography equipment and top-tier GPUs are fair game for American export bans, Beijing asks, why shouldn’t rare earth alloys or magnet-making equipment be fair game for China’s own controls? This mirroring of rationale serves both as a diplomatic defence and a propaganda coup. It allows China to tell the global community (and its own populace) that it isn’t the instigator here, merely a great power playing by great-power rules. When the European Union banned certain high-tech exports to Russia as part of its Ukraine sanctions, Western leaders called it necessary and principled. Now China applies a similar logic toward the West, and Western leaders are left fuming – perhaps even grudgingly impressed by the symmetry of it.
The crucial difference is that now the power to set the narrative doesn’t belong solely to the West. This marks a seismic shift in global governance. For decades, the West – through institutions like the WTO and its dominance in international media – defined what was “responsible” behaviour in trade. It challenged or chastised countries (China included) for imposing export controls or engaging in “unfair” trade practices. When China last restricted rare earth exports in 2010, the U.S. and EU dragged Beijing to the WTO, and the policy was struck down. But today, WTO appeals and sternly worded communiqués feel woefully inadequate. Who, after all, will force China’s hand now? The old playbook – shaming a country for protectionism, filing legal complaints, convening allies to demand a rollback – looks feeble when that country holds most of the leverage. Moreover, China has taken care to frame its actions as reasonable and proportionate under international norms (at least as it interprets them). Just as Washington shields its tech bans behind the shield of “national security”, so Beijing does with its resource bans. It’s a near-perfect role reversal, and it puts Western decision-makers in a bind. Do they challenge China’s action in court and risk an embarrassing defeat (or, worse, retaliation in other domains)? Or do they come to the table and negotiate, perhaps offering something in return for eased restrictions? Either way, it’s evident that writing the rules of global trade is no longer a privilege reserved for Washington and Brussels. Beijing has not only amassed the material clout but is now asserting the right to use it to set rules and norms to its advantage.
Independent observers around the world are noting this transformation – and urging Western leaders to catch up. Some, with a dose of schadenfreude, point out that the West is suffering the consequences of decades spent neglecting its factories and foundries. Others take a more urgent tone, warning that unless the U.S. and its allies recognise the severity of their dependency, they will be outmanoeuvred at every turn. Michael Auslin, a strategist at the Hoover Institution, recently remarked that Western policymakers too often mistake legal authority for actual capability. Passing export laws or sanctioning foreign companies can create an illusion of control, but, as Auslin dryly noted, “you can’t deter your adversary by not selling them something you no longer make.” In other words, wielding a trade ban means little if your own productive capacity is nil. Christopher Balding, an economist who has studied Chinese statecraft, put it bluntly: the West’s supply dependence is “baked into 40 years of outsourcing” – a predicament with no quick way out. Technology analyst Dan Wang summed up the situation in a single line: without the materials, the entire tech stack fails. You can be the world’s leader in software, design the smartest chips, or pioneer cutting-edge AI algorithms – but if you don’t have the high-grade metals, chemicals, and components, none of that prowess translates into tangible power. These are not ideological barbs from China’s cheerleaders; they’re cold, technical realities highlighted by objective analysts. And they all point to one conclusion: the West must urgently relearn how to make real things if it wants to regain any true strategic autonomy.
The inconvenient truth is that there are no quick fixes. China took thirty years to climb to its dominant position in these critical domains. The West, even in a best-case scenario, would need years – likely decades – to reclaim a significant share of that ground. Even to shorten that timeframe would require an extraordinary mobilisation of resources, something akin to a wartime effort. So far, there’s little evidence of that level of resolve. Certainly, money is being pledged: Washington and Brussels are dangling subsidies, grants, loans to entice companies to open mines, build refineries, develop alternatives. But money alone isn’t sufficient. How many Western universities today churn out dozens of experts in rare-earth metallurgy or advanced ceramics? Those specialist talent pipelines barely exist. Environmental regulations, reflecting genuine public values, would need streamlining or special exceptions to expedite mining and processing projects – a political minefield in itself. Communities would have to be persuaded that a new mine or material plant in their backyard serves a national interest worth the trade-offs. In an era of social media-fuelled NIMBYism, that’s no small task. Furthermore, complex supply chains cannot be magicked into being just because politicians wish it so. Even if the U.S., EU, Australia, and others form a “critical minerals alliance” tomorrow, in the initial stages they’d likely still rely on Chinese-made equipment or Chinese-trained engineers to get their operations running. It’s the classic catch-22 of capacity-building: you need expertise to build capacity, but to get expertise, you often have to rely on the very competitor from whom you seek independence.
Imagine, for argument’s sake, a very optimistic scenario. By the early 2030s, the United States somehow manages to mine and refine domestically perhaps half of the rare earth materials it consumes. That would be a monumental achievement, involving the opening of multiple mines, the construction of complex chemical refineries, and the training of an entire workforce of metallurgists and technicians. Yet even that “halfway” independence means the other half would still depend on global supply chains – many of them touching China at some point. Europe, which loves to talk about “strategic autonomy”, is even further behind. Yes, there are known rare earth deposits in places like Greenland or Sweden, but Europe currently has virtually no processing capacity. And five to ten years – the kind of timeline politicians bandy about for achieving supply security – is an eternity in a fast-moving world. Wars have been decided in less time; industries can rise or fall in a decade. Does the West actually have the luxury of time to play catch-up? Because China isn’t idly waiting. Even as Beijing restricts certain exports, it’s been busy securing other flanks. Chinese companies have locked in long-term supply deals for lithium from Latin America, cobalt from the Democratic Republic of Congo, nickel from Indonesia – cementing China’s influence over the materials that will power the electric and digital future. In semiconductors, where the West has tried to hold China back, China is pouring billions into developing its own lithography machines and chip designs, striving to eliminate its reliance on Western tech within a few years. In field after field, China is pressing forward on all fronts, determined to win a marathon that some Western leaders don’t even seem to realise has begun.
One of the clearest illustrations of China’s foresight is how it has extended its resource reach globally. The Chinese leadership talks in terms of “resource security”, and it pursues this with a zeal that would make 19th-century colonial powers nod in recognition (albeit using very different means). Across Africa, Chinese state-owned enterprises and private firms backed by state credit have scooped up mining concessions for everything from bauxite in Guinea to cobalt in the Congo. In countries like Zimbabwe and Namibia, Chinese firms are developing new mines, often sweetening the deal by funding local roads, railways, and power plants – infrastructure that doubles as the supply lines to carry those minerals to Chinese-bound ships. In Southeast Asia, China’s influence runs deep too. In Myanmar, for instance, Chinese-linked outfits have capitalised on chaos: reports emerged that a militia in Myanmar’s north (with tacit backing from Beijing) has taken control of rare earth mines there, ensuring a steady clandestine flow into China. In Latin America, Beijing has been trading hard cash and infrastructure projects for reliable access to minerals. Bolivia, sitting on some of the world’s largest lithium reserves, has inked partnerships with Chinese companies to develop its lithium fields after Western firms hesitated or bickered. These actions are strategic, not haphazard. By securing resources at the source, China creates a multi-layered buffer against any attempts to lock it out. If Australia, under pressure from Washington, ever tried to curtail exports to China, Beijing could lean more on supplies from Africa or South America. China has spent decades diversifying its options, while the West is only now scrambling to develop even a single new option outside of Chinese influence.
All of this underscores the brilliance of China’s long game: it operates on material time, not political time. In democracies, politics often runs on frantic short cycles – from one election or quarterly earnings report to the next. But the business of securing and mastering physical resources runs on a slower, cumulative clock. It takes years, sometimes decades, to bring a new mine into production, to train expert metallurgists, to perfect a chemical refining process. China’s leadership has been willing to play that long game. Each year that passes, its grip on critical supply chains grows a little firmer relative to its competitors. Every new mining investment in Africa, every cutting-edge processing facility built at home, every batch of engineering graduates specialising in material sciences – each is a brick in a fortress of capability assembled over decades. And each year the West delays or debates, that Chinese-built fortress only rises higher. This kind of slow, methodical progress doesn’t make for dramatic headlines in the evening news. A new rare earth processing plant in Jiangxi province isn’t as flashy a talking point as a new stealth bomber or a summit of world leaders. Yet, over the long sweep of history, it may prove just as consequential for global power balances – if not more so.
By focusing upstream – on the fundamental inputs and tools of production – China has changed the rules of great-power rivalry. The United States once assumed that having the best final products (the most advanced jets, the fastest computers, the smartest missiles) guaranteed it the upper hand. China countered by taking charge of the upstream essentials needed to make not only those high-end products, but virtually all modern industrial products. It’s as though, in a global chess match, China quietly removed some of the opponent’s key pieces and even altered the board, all before the opponent realised what was happening. The story that the West told about itself – as the benevolent guardian of a global, rules-based order where everyone competes on a level playing field – is becoming harder to sustain. How can Washington claim to uphold a fair global economic system when the physical underpinnings of that system are largely outside its control? Allies and adversaries around the world have noticed this shift. Many countries that once looked to the U.S. for leadership in globalisation are now hedging their bets. Some are drawing closer to Beijing, seeing the writing on the wall. Others are rushing to shore up their own vulnerabilities so they are not caught in the middle of a great-power tug-of-war over resources. Even America’s staunchest allies, like those in Europe, can’t ignore the practical necessity of Chinese materials in their supply chains. Japan may rely on the U.S. for security, but it still needs Chinese rare earths for its car factories. Germany may trust in American friendship, but its electric vehicle plans depend on Chinese graphite and lithium. From boardrooms in Seoul to ministries in Paris, there’s a quiet recalibration underway, a recognition that in this new era, pragmatic engagement might trump old loyalties.
Another tectonic shift is happening in the monetary realm. For over 70 years, the U.S. dollar has reigned supreme as the world’s reserve currency and the default medium for trade. This financial hegemony has been a pillar of American global influence. It’s what gives U.S. sanctions their bite – getting cut off from the dollar system is tantamount to being exiled from the bulk of international commerce. But as control of critical resources shifts, so too does the leverage that comes with currency dominance. We’re already seeing the first ripples. Major commodity exporters like Russia have begun accepting Chinese renminbi for oil and gas sales. Across parts of Asia, the Middle East, and Africa – sometimes dubbed the “Global South” – there’s open talk of conducting trade in non-dollar currencies to reduce dependence on the West’s financial networks. A few oil contracts in the Gulf are now being priced in yuan. China and Brazil have set up arrangements to settle some trades in their own currencies. If China continues to dominate the supply of resources like rare earths, it could quite feasibly encourage or even require more transactions to be settled in its own currency. The logic would be straightforward: if you want our materials, let’s do business on our terms – maybe that means paying in RMB and using a Chinese bank or payment system. Picture an American manufacturer desperate for a specialised magnet that only a Chinese firm can provide. That U.S. company might find it has to pay in yuan through a Chinese bank, effectively sidestepping the dollar and U.S. banking oversight. Each small step like that chips away at the centuries-old edifice of dollar supremacy. Make no mistake, the dollar isn’t going to disappear overnight. But we could be headed for a world with several parallel systems – a world where controlling physical resources grants a form of influence that can rival the traditional might of controlling the global currency. The Bretton Woods system gave the dollar its throne in a world where the West dominated industry and resources. Now that those resources and industries are increasingly under Chinese sway, the foundations of dollar dominance look less unassailable. The renminbi doesn’t have to replace the dollar globally; it only needs to become the currency of choice for enough key commodities and regional trades. If that happens, the old order in which “money talks” will give way to a new one in which the source of that money – the raw stuff of the world – speaks louder. In the 21st century, having the best mint might matter less than having the best mine.
Western policymakers, for the most part, have been slow to internalise this new reality. Many still seem to think the current turbulence is a blip – a problem to be solved with a generous dollop of subsidies here, a new alliance there, and a dose of good old free-market innovation. Their thinking appears to be: if we just spend enough money, rally our friends, and encourage our industries, then in a few short years all will be well and we’ll go back to business as usual, with the West firmly in the driver’s seat. What this view misses is that time and tangible reality are not on their side. Political leaders operate on election cycles; CEOs operate on quarterly earnings; but rebuilding a supply chain or opening a mine operates on geological and generational timelines. You can’t legislate a mine into existence by the next fiscal year, nor can you conjure a thousand skilled metallurgists with a snap of the fingers. The physical world has its own inertia and demands. It takes iron, copper, silicon, water, skilled hands, and patience to construct the backbone of modern civilisation. Without any one of those inputs, the rest is just hot air. Factories won’t run on patriotic fervour or ideological manifestos. You can’t fly a fighter jet on political rhetoric, nor feed a population on financial derivatives. In short, material reality doesn’t bend to wishful thinking – and material reality is where the West is currently weakest.
Without urgent access to critical materials, many of the West’s grand visions risk turning into mirages. Plans for a green, net-zero future assume a vast build-out of wind turbines, solar farms, electric vehicles, and battery storage systems – all of which rely heavily on minerals like rare earths, copper, nickel, and lithium. Plans to maintain a military edge assume uninterrupted access to the latest technology, which itself assumes steady supplies of the rare metals and components that technology is built on. Even the vaunted race for AI supremacy ultimately comes down to hardware – data centres full of chips and cooling units, which need specialised materials to manufacture. Fundamentally, Western leaders are bumping against a truth they largely forgot in the post-Cold War euphoria: geography and geology still matter immensely. The world isn’t flat, as one famous book proclaimed; or rather, if it was flattened by globalisation, it’s now springing back into its natural, jagged shape. For a while, globalisation allowed rich countries to ignore who had what beneath their soil – it seemed not to matter as long as trade flowed. But as globalisation frays, age-old realities reassert themselves. Nature abhors a vacuum, and power abhors a lack of resources. We are, in a sense, re-learning where true wealth comes from: the ground, and the know-how to turn what’s in the ground into the products around us.
Washington’s strategy of trying to sanction China into submission has, in effect, backfired spectacularly. Instead of halting China’s technological advancement, it accelerated China’s quest for self-reliance and its control over upstream inputs. Deprived of some high-end Western products, Beijing didn’t roll over; it doubled down on securing everything else. Chinese firms stockpiled critical components and raw materials in anticipation of lean days. The state funnelled even more investment into domestic R&D for things like semiconductor production equipment – determined to eliminate any future need for Western help. And, critically, China began to wield its own asymmetric advantages – its chokehold on certain minerals – with greater boldness. It’s like two mountain climbers roped together: the U.S. tried to drag China down, only to find China planting its feet and tugging the rope in its own direction. Now we’ve arrived at a kind of stalemate, but one largely of China’s design. Beijing has carved out a sphere of relative autonomy for itself, where it either controls or heavily influences the production of essential inputs. Around that sphere, it is gradually building a trading system that doesn’t depend on Western goodwill or Western currency. Rare earths are a prime example: China has set up its own laws, its own pricing mechanisms, even hinting at its own settlement processes (possibly in RMB) for these resources. It’s decoupling, all right – just not the decoupling Washington envisioned. It’s decoupling on Beijing’s terms, wherein China disentangles itself from reliance on the West even as the West finds itself ever more entangled with China.
In the face of these developments, talk in Western capitals has turned, understandably, to countermeasures. “Diversification” is the buzzword: spread the eggs into more baskets so that no single country (meaning China) can hold everyone hostage. In theory, this makes sense. Countries like Australia are allied and have rich deposits of rare earths; why not develop those and import from a friend? Canada, too, has some resources and a stable business climate. There are rare earth veins in the United States itself. Africa and Latin America are full of untapped minerals – perhaps new partnerships there could challenge China’s grip. These ideas are circulating with increasing urgency. But each is easier said than done. Take Australia: Lynas Corporation, the biggest rare earths producer outside of China, is indeed ramping up production. It even got a hefty grant from the U.S. Department of Defense to build a processing facility in Texas. Yet for all its success, Lynas still sends a portion of its partially processed material to China, and scaling up its operations will take time. Australia also has to navigate its own internal debates – not everyone down under is thrilled about more Chinese investment or about the environmental toll of expanded mining, even if it’s for a good cause. Canada has promise, but any new mine there (as in the U.S.) faces years of environmental assessments, consultations with indigenous communities, and potential litigation. Mining companies, often burned in the past, will be cautious about investing billions when they know that Chinese competitors – with state backing – could always flood the market and crater prices if they felt strategically inclined to do so. Then there’s Africa: yes, it holds enormous resources, but China has been actively engaged there for decades building relationships and infrastructure. Western plans to tap African minerals often run up against a simple question from African capitals: where were you 20 years ago, and why should we trust you over the Chinese who are already here building roads and schools? The legacy of Western colonialism and exploitation still looms large, making some African leaders understandably wary of new resource deals that smack of old patterns. Many find dealing with China’s no-strings-attached, business-first approach more palatable than the often lecture-laden approach of Western governments.
Even were new mines to sprout outside of China’s sphere, the real Achilles’ heel is processing. Turning ore into a refined product requires specialised facilities and gear – much of which is currently made by Chinese firms or by Western firms that have their own dependencies. It’s one thing to dig up rare earth ore in Namibia, quite another to convert that ore into high-purity magnet-ready metal. Without Chinese-built equipment or Chinese experts, a newcomer country would essentially have to reinvent an entire industrial process from scratch. It’s doable – Japan has done it on a small scale, and others could too – but it’s slow, extremely expensive, and prone to setbacks. And the political conditions need to be right: many places rich in minerals unfortunately suffer from instability or corruption, which can derail even the best-laid mining plans. The bottom line is that China enjoys a comprehensive edge. It’s not just sitting on the world’s biggest deposits (which would be a lucky geological accident); it has cultivated the knowledge, human capital, financing mechanisms, and diplomatic ties to run the whole supply ballet from ground to factory. The West, by contrast, is piecemeal in its approach – trying a bit of this in one place and a bit of that in another, racing to patch a dam that has already burst.
This imbalance is not merely economic; it’s intellectual. There’s a mindset gap. In Western discourse, there’s often an overvaluation of formal rules, contracts, and declarations – and a corresponding undervaluation of hands-on competence, of actually making things. The Western world built a system of institutions (like the WTO, trade agreements, and legal regimes) premised on the idea that if everyone just plays by agreed rules, global prosperity is assured. But those rules assumed no one would be both willing and able to break them at scale. Now China presents a near-peer competitor that can write its own rules. The West is learning that you can have all the rules in the world, but if you lack factories and workshops to implement your will, you’re a general with an excellently curated rulebook and no army. The U.S. can put out a strategy paper on “supply chain resilience” brimming with alliance jargon and fine objectives – but that paper doesn’t equate to a single operational refinery. The EU can host summits about “reducing dependency”, but without mines and processing plants to follow through, that’s just theatre. To be blunt, the West cannot lawyer or diplomat its way out of this bind; it must manufacture its way out. That means rediscovering the value in disciplines and industries it has downplayed. It means celebrating metallurgists and chemical engineers the way it celebrates app developers and investment bankers – because without the former, the latter have no tools to work with. It might even mean, dare I say, politicians cutting ribbons not just at software start-ups and research labs, but at mines and smelters and factories – and selling those developments to their constituents as vital national interests. Societies, too, will have to confront trade-offs: you can’t have the convenience of a limitless high-tech economy and a pristine backyard with no industrial activity whatsoever. Some communities might need to accept a mine or a manufacturing plant in their vicinity; some taxpayer money might have to fund a years-long project that doesn’t pay off instantly. These are tough sells in a culture used to instant gratification, but without them, the West’s position will only worsen.
No, there is no magic wand to wave here. China’s stranglehold on certain supply chains was decades in the making, and it won’t be undone by a few emergency measures. Beijing’s moves, including the October 2025 rare earth controls, are calculated steps in a long sequence, not knee-jerk reactions. They’re part of an evolving strategy to build China’s autonomy and, simultaneously, to limit the autonomy of any adversary. In a way, these measures are both defensive and offensive. Defensively, they safeguard China’s own access to materials (holding some stockpiles at home, ensuring Chinese industry isn’t starved in a crisis) and they can slow down an adversary’s military or industrial advances. Offensively, they push other countries into dependence on Chinese channels, creating leverage that extends into the future. Chinese policymakers often speak of “sovereignty” in areas that Westerners might not – and for Beijing, having sovereignty over supply chains is part of being a secure nation. They’ve studied the fall of the Soviet Union, noting how economic stagnation and inability to keep up in technology and resources contributed to its collapse. They remember how Japan’s post-war economic miracle hit a wall in the 1990s, in part because Japan still had to import nearly everything it needed in terms of resources. They’ve watched how the West has used the global banking system and the SWIFT network to isolate adversaries like Iran or Russia. And they’ve concluded something quite logical: to avoid being vulnerable, control the basics. Control the stuff without which nothing modern works. Control it at home, and if you can’t get it at home, control it abroad via partnerships and investments. In doing so, they ensure that no one can easily pull on them what they are now pulling on the West. We should expect Beijing to continue along this path. If tomorrow the U.S. finds a workaround for rare earths, perhaps China will tighten exports of high-purity graphite or announce new checks on some other obscure material critical to Western industry. Each quarter, one imagines Chinese planners reviewing a list: what leverage points do we have, and how can we calibrate their use to maximise our gain while minimising backlash? It’s a shrewd game, and so far, China is playing it with skill.
Historians may well look back on this period as a watershed moment. In the latter half of the 20th century, the United States constructed a world order built on pillars of technological innovation, financial dominance, and military supremacy. But the maintenance of that order assumed a particular distribution of industrial might that simply no longer holds. America’s engineers and skilled workers are increasingly found in other countries’ factories; many of those factories are in China. American companies, chasing lower costs, taught Chinese partners how to build everything from microchips to solar panels – and those partners later became formidable competitors, even market leaders. The coercive tools that Washington relied on to enforce its will – sanctions here, trade embargoes there, the omnipresent influence of the dollar – are now meeting their match. China has developed its own arsenal of economic tools: its own blacklistings, its own export bans, and nascent alternatives to Western-centric financial networks (from the Belt and Road Initiative’s financial arrangements to experiments with a digital yuan for international payments). In deploying the rare earths gambit, China is effectively saying: we see your playbook, and we raise you ours. It calls to mind the old tale of the emperor with no clothes. The West, and the U.S. in particular, was accustomed to striding the world in the finery of unchallenged dominance. China’s manoeuvre strips away that finery, revealing the uncomfortable truth of underlying dependency. This is not mere tit-for-tat retaliation; it’s a revelation – a stark demonstration that many assumptions underpinning Western primacy are out of date. It is, in the fullest sense, a reckoning.
We can see the global order shifting not through one great war or dramatic peace, but through the slow yet relentless grind of supply chains and production lines. Geopolitics is as much a story of nitriding furnaces and container ships as it is of missiles and treaties. In this instance, the stage isn’t a battlefield or a diplomatic ballroom but the world’s mines, refineries, ports, and factories. Over the past few decades, a tremendous transfer of industrial capacity and know-how has taken place, largely from West to East, without a shot fired – and now the strategic implications of that transfer are manifesting. It brings to mind a basic lesson that high-flying financiers and policymakers alike often forget: in a contest between the physical and the abstract, the physical wins. You can trade billions in derivatives or float lofty concepts of a “knowledge economy”, but you still need oil to burn, wheat to eat, concrete to build, and metals to wire everything together. For a long time, Western nations revelled in the seeming power of the virtual – software, finance, brands – while happily outsourcing the gritty business of making actual stuff. Now the “real” world is reasserting itself, and it’s not subtle about it. We are witnessing the revenge of the real over the virtual. Mines, metals, and machines obey the laws of physics and chemistry; they are deaf to political spin. If you need ten tonnes of high-purity nickel for a batch of jet-engine alloys, you either have it or you don’t – no stock market wizardry or diplomatic nicety will summon it from thin air. The West is getting a harsh reminder that no amount of financial engineering can compensate for a lack of literal engineering.
So what now? China today controls wide swathes of those physical systems that keep the modern world running, and its leaders are keenly aware of what that power means. If the West wishes to regain leverage and ensure its own security, it faces a stark choice and a daunting task. One path forward is to embark on the long, grinding effort to rebuild industrial capacity and secure critical supply chains through its own production and genuine partnerships. That means serious investment in education and industry, accepting certain inefficiencies in the name of resilience, and working closely with allies to share both the burdens and the benefits of a new industrial strategy. It means – to put it bluntly – remembering and re-applying the lessons of the 19th and early 20th centuries about building national capability, albeit updated to align with 21st-century ideals like sustainability. It also means exploring collaboration even across adversarial lines: finding areas where cooperation with China (yes, even China) or other resource-rich nations is possible and mutually beneficial. After all, supply chains by their nature cross borders; complete self-sufficiency is an illusion for all but perhaps the largest and most resource-blessed countries. Prudent cooperation – setting basic rules of fair play, perhaps establishing resource-sharing agreements, recycling initiatives, or emergency supply swaps – could form a safety net that cushions all sides. The alternate path is to cling to the comforting mirage that existing advantages will carry the day. That path involves continuing to rely on financial clout, legal architectures, and military posturing, hoping those will somehow offset the physical shortfall. But down that road lie more crises like the current one – plans undone by unseen dependencies, alliances strained under resource competition, and possibly increasingly reckless moves as frustration builds. In short, that is the path of denial, and it risks leading to a cascade of self-inflicted calamities.
Perhaps the clearest takeaway is that there is no more middle ground. The world has fundamentally changed, and strategies drawn from a different era will not suffice now. The future will favour those who acknowledge our interdependent, material reality and plan accordingly. Western leaders need to realise that adapting their strategy to this new world isn’t a sign of defeat – it can be a source of renewal. There is strength in recognising truths and acting on them. To secure their prosperity and security, democracies will have to align their lofty visions with the concrete means of achieving those visions. If they don’t, they will continue to see their influence and well-being erode, one supply shock at a time. The era when one nation could unilaterally dictate terms to another is drawing to a close; at least among major powers, the playing field is levelling in a very tangible sense. We are entering an age where, if a country wants to “lead the future”, it will have to build that future in partnership with others, piece by piece, rather than simply decree it.
China has shown its hand – revealing both the strength it has patiently built and its willingness to use that strength deftly. Beijing has also signalled, in its own way, that it is open to collaboration on its terms (for example, offering to continue rare earths supply to those it deems friendly or non-threatening). Now the onus falls on others to respond, and mere indignation will accomplish nothing. The United States and its allies must respond not with bluster or vain one-upmanship, but with clear-eyed purpose and, above all, the courage to change course. If there is one lesson from the rare earths saga, it is brutally simple: control the inputs and you control your destiny; neglect them and you cede your fate to someone else. In a world of intertwined fortunes, cooperation is no longer a choice between idealism and realism – it has become a necessity for survival. The choice before us is cooperation or collapse. And it should not take many more “irreversible blows” for even the most obstinate among us to realise which path we must choose.