China's rare earths control raises the hopes of investors in US

China’s sweeping new export controls on rare earth elements and related technologies have ignited a surge of optimism among US investors, particularly those with stakes in domestic rare earth companies.

Announced by China’s Ministry of Commerce on October 9, the regulations require foreign companies to obtain explicit government approval to export products containing even trace amounts of Chinese-sourced rare earths, or to use Chinese technologies in their production.

The announcement immediately triggered a sharp rise in US rare earth company shares, reflecting speculation that the United States government would respond by increasing investments in domestic mining, processing and magnet manufacturing capacity, a report by The Associated Press said.

These new restrictions come at a moment of heightened geopolitical tension, with the Asia-Pacific Economic Cooperation (Apec) summit just weeks away.

US President Donald Trump and Chinese leader Xi Jinping are likely to hold summit talks on the sidelines of the summit in South Korea, making the rare earths dispute a potential flashpoint in broader US-China negotiations.

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The move also highlights a broader strategy by China to use regulatory tools as instruments of geopolitical influence, a tactic increasingly visible in areas ranging from semiconductors to data flows and international standards-setting.

China’s export control measures

China’s new export regulations represent the most comprehensive controls on rare earths in years.

They extend not only to physical materials but also to technologies for mining, smelting, recycling and manufacturing magnets.

Any magnet or component containing Chinese rare earths — or produced using Chinese methods — requires Beijing’s explicit export approval. Requests for military use of these materials are expected to be rejected.

China currently controls nearly 70 per cent of global rare earths mining and roughly 90 per cent of rare earths processing, making it the dominant player in the global supply chain.

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Rare earths are critical to advanced manufacturing, defence systems, electric vehicles, consumer electronics and renewable energy technologies, meaning that restrictions on their export can have far-reaching consequences for global industries.

Analysts have noted that these measures mirror elements of US trade controls, such as the Foreign Direct Product Rule applied to semiconductor exports, highlighting China’s intent to use legal and regulatory tools strategically for geopolitical leverage.

Impact on US rare earth companies

The market response to China’s announcement was immediate.

Shares of US-based rare earth producers, including MP Materials and USA Rare Earth, jumped sharply, reflecting investor anticipation of increased government support for domestic production.

MP Materials, which operates the only US rare earths mine in California and recently opened a magnet manufacturing facility in Texas, saw its stock rise nearly 3 per cent, while USA Rare Earth’s shares increased approximately 15 per cent.

This investor optimism is driven by the expectation that the United States will accelerate efforts to build a domestic mine-to-magnet supply chain.

The Department of Defence has already invested $400 million in MP Materials to secure critical minerals and guarantee a portion of the output from its new Texas facility.

Similarly, US magnet manufacturer Noveon announced an agreement with Australia’s Lynas Rare Earths to diversify supply outside of China.

These steps suggest that both public and private sectors see rare earth independence as a matter of national security as well as economic strategy, CNBC reported.

Speculation on US government response

China’s export controls have fuelled speculation that the US will move aggressively to reduce dependence on Chinese rare earths.

Analysts expect a combination of government investment, industrial policy incentives and partnerships with foreign suppliers outside China to accelerate domestic capacity development.

The Associated Press quoted Neha Mukherjee of Benchmark Mineral Intelligence as saying that the timing of China’s move is a signal that supply chain security requires independent value chains from mining to magnet production, particularly for military applications.

Recent US efforts include financial support for domestic mines and processing plants, streamlined permitting for rare earth projects and potential tax or subsidy incentives for companies developing technologies outside China.

This proactive approach is intended to mitigate the risk of future supply shocks while signalling to Beijing that the United States is prepared to assert its own industrial and strategic independence.

US-China trade tensions reloaded

China’s latest restrictions come amid a renewed phase of the US-China trade tension, which had shown tentative signs of cooling earlier in the year, ahead of the Apec summit. Geopolitical analysts say that the both sides could merely be involving in posturing for a better bargain at the trade deal negotiation.

The strategic timing ahead of the Apec summit indicates that China is willing to leverage its dominant position in rare earths to gain bargaining power during high-level talks, including the anticipated Trump-Xi meeting.

The controls are part of a broader Chinese approach to lawfare, using regulations and legal mechanisms to achieve geopolitical objectives, a practice that has expanded in recent years to include data governance, foreign sanctions and corporate compliance.

While the trade war has typically been framed around tariffs and semiconductor controls, rare earths offer China a unique lever over US defence and high-tech sectors.

By selectively restricting access to essential minerals and technologies, China can influence both market dynamics and diplomatic negotiations, signalling its willingness to escalate economic pressure when strategic objectives are at stake.

Concerns among US executives

US executives have expressed growing concern that China will continue to weaponise regulations to exert economic pressure.

Previous moves, such as the Unreliable Entities List and export controls on gallium and germanium, have shown that compliance with US law alone does not protect firms from China’s sanctions or trade restrictions.

The expansion of controls to cover rare earth processing technologies shows China’s strategy to dominate critical supply chains, including those that underpin military, intelligence and high-tech sectors.

Executives are increasingly aware that strategic planning must account for both market and regulatory risks.

Many US firms are investing in alternative supply chains, expanding production capabilities domestically and securing partnerships with allies to reduce reliance on Chinese minerals.

These efforts are considered essential not only for corporate competitiveness but also for national security, reflecting the deep interconnection between industry and geopolitics.

Strategic implications and global context

China’s rare earth restrictions highlight the broader geopolitical significance of critical minerals.

Rare earths are foundational to emerging technologies such as electric vehicles, 5G networks and advanced military systems.

China’s ability to control their supply gives it a structural advantage in shaping global standards, influencing international organisations and advancing its China Standards 2035 initiative.

For the United States, ensuring access to rare earths requires coordinated industrial policy, investment in domestic production and international partnerships.

Investors and policymakers alike are increasingly viewing the development of a resilient domestic supply chain as an urgent priority. The surge in US rare earth company shares reflects both immediate market optimism and recognition of the long-term strategic stakes involved.

As the Apec summit approaches, and Trump and Xi prepare for the summit talks, rare earths are likely to remain a critical negotiation point.

These trade tensions underscore that rare earths are no longer simply industrial inputs. They are now instruments of global power, central to the strategic competition.