China's Rare Earth Strategy Shift: Selective Friction Over Full Embargo 2026

China's rare earth strategy is shifting from a full embargo to selective friction, a move that could reshape global supply chains. In 2025, China produced about 270,000 tonnes of rare earths out of roughly 390,000 tonnes mined worldwide, according to the US Geological Survey. That's around 69% of global output—a dominant position that gives Beijing significant leverage.

But production is only part of the story. China also controls about 90% of the global processing industry, which is essential for turning rare earths into usable materials. This near-monopoly on processing means that even if other countries mine rare earths, they often rely on China to process them.

Why China's Grip on Rare Earths Matters

Rare earths are critical for many high-tech applications, including smartphones, electric vehicles, wind turbines, and military equipment. China's dominance in both production and processing has allowed it to use rare earths as a tool of economic pressure. For example, in early December 2024, China banned exports of several critical minerals to the US, including gallium, germanium, and antimony—metals essential for the chip industry.

However, China's strategy is evolving. Instead of a blanket embargo, it now appears to be adopting a more targeted approach: selective friction. This means applying pressure strategically, perhaps by slowing down exports or imposing regulatory hurdles, rather than cutting off supplies entirely.

What Is Selective Friction?

Selective friction refers to the use of non-tariff barriers, regulatory delays, and targeted restrictions to create uncertainty and increase costs for competitors. By doing so, China can maintain its leverage without triggering a full-scale trade war or prompting other countries to accelerate their efforts to find alternatives.

This approach allows China to keep its rivals dependent on its rare earth supply while avoiding the backlash that a complete embargo might cause. It's a more nuanced strategy that leverages China's dominant position in the market.

Key Takeaways

• China produces about 69% of the world's rare earths and controls 90% of processing.
• In December 2024, China banned exports of gallium, germanium, and antimony to the US.
• China is shifting from a full embargo to selective friction—targeted restrictions rather than outright bans.
• This strategy aims to maintain leverage without provoking a strong response from other nations.
• Countries dependent on rare earths may need to diversify supply chains and invest in alternative sources.

How Selective Friction Works in Practice

Selective friction can take many forms. It might involve stricter environmental regulations that delay mining projects, or export licensing requirements that slow down shipments. It could also include informal pressure on companies to prioritize domestic buyers.

For example, China might increase inspections on rare earth exports, causing delays, or impose quotas that fall short of a full ban. These measures create uncertainty and raise costs for foreign buyers, giving China more bargaining power.

Impact on Global Supply Chains

The shift to selective friction could have significant implications for global supply chains. Companies that rely on rare earths may face increased costs and delays, prompting them to seek alternative suppliers or invest in recycling and substitution.

However, developing new rare earth mines and processing facilities takes years and requires significant investment. As a result, China's dominance is likely to persist in the near term, giving it continued leverage.

Note: Production figures are approximate and based on US Geological Survey data. The background to this story is set out in Rare Earth Supply Chains: Securing Critical Minerals. A related thread runs through China Tightens Yttrium Supply as Japan's Rare Earth Stockpiles Dwindle. Earlier coverage in China's Rare Earths Stranglehold Must End, Says EU Supplier shows how the argument developed.

What to Watch Next

Look for signs of how China implements selective friction. Are there new export licensing requirements? Are inspections increasing? Also, watch how the US and its allies respond—whether they accelerate efforts to develop alternative supply chains or file complaints with the World Trade Organization. A closer look at the same subject appears in EU Factory Job Cuts Loom as China Colonises Supply Chains. Anyone following the wider picture can start with US Chip Industry Still Relies Heavily on China Supply Chain. The same theme surfaces in Kyiv Food Shortages: Russia Targets Supply Chains, which takes a different angle.

Additionally, monitor China's domestic rare earth policies. If China tightens environmental regulations or consolidates its rare earth industry further, that could affect global supply. Context on how this played out before sits in Sweden's Sami Mining Dispute: Indigenous Rights vs Rare Earth Minerals. A companion piece, Food Security Crisis: Why Just-in-Time Supply Chains Need a Backup, approaches the same subject from another angle.

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