Rare earth and the Indo-Pacific: Why Quad must take lead over China

On June 27, 2025, the United States-China trade war came to a truce after China promised to lift Rare Earth Elements (REE) export restrictions while the US promised to lift restrictions on China. In an era powered by semiconductors and driven by data, the obscure group of 17 elements that constitute the REE are indispensable to clean energy, semiconductors, advanced defence systems, everyday technology appliances, and digital infrastructure, forming the foundation of the very technologies driving 21st-century economies and therefore holding immense strategic value.

These elements are not necessarily ‘rare’ in terms of abundance, but their extraction and processing are highly complex and energy intensive. The transition towards REE is not merely technological but rather geopolitical, as the world is moving towards clean energy, digital sovereignty, and next-generation defence capabilities along with innovations in everyday technology products. The REE has not only become a symbol of national resilience but is also at the epicentre of resource diplomacy, industrial policy, and efforts to decouple from overreliance on singular suppliers.

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Role of Individual Quad Members

The Quad is an alliance of Australia, Japan, India, and the United States formed in 2017 to promote a rules-based Indo-Pacific. Therefore, Quad members should also play a positive role in building a resilient REE supply chain through leveraging their own legislation. India’s approach has undergone a significant shift in recent years. India recently launched the National Critical Minerals Mission so as to establish a reliable framework and self-reliance in critical minerals and is working on a Rare Earth Minerals Scheme to counter China’s dominance in the REE supply chain. This, combined with India’s Production Linked Incentive Scheme (PLI) to enhance India’s manufacturing capacity and foster innovation, shows that India wants to be an active participant in building a resilient supply chain.

This repositioning helps Asean and Central Asian countries, as India can emerge as a counterbalance to Chinese influence by helping these countries with technology and skill development and investing in connectivity projects.

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Australia plays a critical role as the Quad’s upstream actor. Australia’s Critical Mineral Strategy 2023-2030 mimics India’s policies of reducing the monopoly of China in the REE supply chain and developing midstream processing and overseas partnerships—the prominent example being developing terbium oxide in Malaysia. The United States too has adopted a multi-pronged approach to REE strategy through the Defence Production Act and the DOE Critical Minerals Hub and by adopting legislation like the CHIPS Act and the Inflation Reduction Act for reshoring manufacturing and reducing Chinese dependence. Japan’s experience from 2010 and its diversification of supply chain to reduce rare earth supplies from China, along with its investments overseas in Vietnam, Australia, and India, along with stockpiling, showcases that the Quad has the impetus to lead a resource framework to build a resilient supply chain for REE, even though recently India is attempting its deal with Japan to conserve its own REEs due to China’s export squeeze.

China’s Dominance in REE and Use of Bilateral Relations

China produces approximately 70 per cent of the world’s rare earth output and controls 90 per cent of the processing. This dominance is not due to a monopoly over reserves but decades of state-led planning. China long ago realised that the control over critical minerals would translate into geopolitical leverage; therefore, they pursued an effective strategy to build dominance in producing and refining REEs.

A key enabler of this dominance has been China’s deep engagement with its neighbouring country Myanmar, which has rich reserves of dysprosium and terbium. Dysprosium enhances magnets in electric vehicles and wind turbines, serves in nuclear reactor control rods, and improves laser materials, while terbium is used in green phosphors for LED displays, energy-efficient lighting, NdFeB magnets, wind turbines, electric vehicles, sensors, and lasers. The unregulated supply of REEs from Myanmar due to the civil war and impunity with which Chinese companies operate in the Kachin and Shan regions in Myanmar have also contributed to the Chinese dominance in the rare earth supply chain.

China is also leveraging its Belt and Road Initiative (BRI) to access untapped mineral reserves in Central Asia. Central Asian countries are believed to possess REE reserves; however, the data is unreliable and outdated, and in some cases, the data used is that of the Soviet era. These countries suffer from weak institutional safeguards and lack processing capacities, and their economies are driven by raw resource exports. Connectivity constraints further hinder Central Asia’s ability to develop their mineral reserves and export them at scale. The region is landlocked, has poor infrastructure, limited cross-border integration, and weak logistics.

Consequently, China’s BRI, which promises development as well as integration, has positioned them in an advantageous position, as it gives them access and logistics to tap into Central Asia’s reserves. China has also expanded its role in the REE supply chain through strategic investments in the Southeast Asian countries of Malaysia, Thailand, and Vietnam, which have substantial reserves of REE but lack production and refining capacities.

In Vietnam, which suffers from unreliable data and unclear environmental safeguards, Chinese state-owned enterprises have signed deals to develop Vietnam’s REE reserves, which Vietnam has welcomed as it lacks the processing technology. In Malaysia, Chinese have promised Malaysians technology that enhances their REE processing, as Malaysia lacks the capacity to process. Thailand too lacks processing capacities. Therefore, China’s dominance in the REE supply chain is not geology but geopolitics that has combined industrial policies with frontier engagements.

From taking advantage of the uncertainty in Myanmar, lack of infrastructure and data in Central Asia, and lack of processing capacity in Southeast Asia, China has built its dominance in the REE supply chain. To counterbalance China’s dominance in the REE supply chain, the Quad (Australia, Japan, India, and the US) must play a prominent role in establishing a resource mechanism to stabilise the supply chain.

Towards a Resilient Supply Chain

The recent tightening of REE exports by China is reminiscent of the 2010 episode when China blocked rare earth exports to Japan after a territorial dispute. Although the ban lasted a few weeks, it served as a wake-up call to Japan to reconfigure its supply chain and reduce its dependence on China for REEs. Today, when the world is moving to clean energy and hi-tech defence technologies that are dependent on REEs, the stakes cannot be higher, with one country dominating the REE supply chain. The Quad, comprising Australia, Japan, India, and the US, must lead this effort.

Each Quad member brings a distinct strength to spearhead this effort—Australia’s vast reserves, Japan’s experience in 2010 and processing innovation, India’s monazite reserves and emerging manufacturing base, and the US’s technical expertise. These complementary qualities, along with belief in a rules-based order and a free, open, and secure Indo-Pacific, make the Quad an alternative to establish a credible resource mechanism to regulate the supply chain, democratise access, and bring transparency to the supply chain.

These countries can also play a greater role through the existing Supply Chain Resilience Initiative ( SCRI), which was initiated to strengthen supply chain resilience and mitigate supply chain disruptions. Integrating REEs into their agenda would elevate the Quad’s strategic relevance and enhance its operational impact. As REEs become central to clean energy transitions, semiconductors, and hi-tech defence systems, China’s monopoly, especially in processing, poses a geopolitical as well as economic risk, as evidenced by the recent export squeeze.

Therefore, integrating REEs in SCRI has become a necessity rather than an option. SCRI should be leveraged to harmonise standards, coordinate investments, and foster ethical mining practices in the Indo-Pacific. In ASEAN and Central Asian countries, SCRI and, broadly, the Quad should help with data modernisation, development of processing capacities, technology transfer, and building skill capacity. This would help in reducing dependence on China and establishing a much more resilient supply chain where everyone has access to REEs and where these smaller countries can become credible partners. In Myanmar, an alternative investment framework should be prioritised, as the country is going through a turmoil where both ethnic armed organisations and the government are engaged. There should also be an arrangement for third-country processing of Myanmar’s dysprosium and terbium so as to not disrupt the technology sector worldwide.

Conclusion

China’s calculus to dominate the REE supply chain has been deliberate and strategic and has been fostered through not only boosting its own production but also through partnerships that complement industrial policies and frontier engagement. The reaction of the rest of the world has been fragmented, and the 2010 crisis with Japan should have been an eye-opener. However, now it is imperative that the Quad must take the lead to establish a resource framework and leverage its domestic policies to build a resilient REE supply chain that is accessible and transparent.

The author is Research Fellow, India Foundation. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect Firstpost’s views.