Special Ep. - Beyond rare earths: Why the West’s supply chain problem is bigger than China

In this special edition of the Hinrich Foundation’s podcast on global trade, the Association of Foreign Press Correspondents-USA sits down with Stewart Paterson, Senior Research Fellow at the Hinrich Foundation, to unpack China’s rare earth monopoly and strategies taken by the West to break its dominance.  

China’s control over rare earth minerals stems less from geology than from decades of industrial strategy, subsidies, lax environmental standards, and dominance over processing and refining. Recent export controls have exposed Western vulnerabilities, many rooted in offshoring and the loss of industrial ecosystems needed for advanced technologies. While the United States, the European Union, and allies have begun responding through legislation, investment, and initiatives such as the Minerals Security Partnership, diversification will take at least a decade and cannot be achieved through one-off interventions. Paterson emphasized that rare earths are only one example of broader hidden dependencies, warning that true economic security requires coordinated, cross-border industrial and trade strategies grounded in geopolitical alignment rather than isolated national solutions.

Tune into this podcast as Stewart Paterson, Senior Research Fellow at the Hinrich Foundation, joins the Association of Foreign Press Correspondents-USA to break down how China built its rare earths monopoly and what it means for global economic security and supply-chain resilience. The podcast follows up on Paterson’s recent paper for the Hinrich Foundation, “Lessons from how China played its rare earth card.”

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Tune into the Hinrich Foundation’s podcast series for insights on international trade

 Tune into the Hinrich Foundation’s podcast series for insights on international trade.   

Transcript

HERE IS AN EXCERPT FROM THEIR CONVERSATION: 

Roseanne Gerin: How did China achieve its commanding position in the rare earth sector, and why are countries like the United States dependent on China for critical minerals?

Stewart Paterson: China has been blessed with a surfeit of rare earth deposits. So, it is natural that China is a leading player in the rare earth sector, but really the story of its dominance, and as you mentioned, the rest of the world's dependency on China for rare earths, is a story of industrial policy originated by China. So, in the early 1990s, when Deng Xiaoping made his famous tour of the southern states to articulate his desire for a more modern political economy in China, he said the Middle East has oil and China has rare earths. And so, rare earths have always formed in the Chinese Communist Party's mind a strategic value that they believe will be a source of national power. Through a combination of industrial subsidy, state guidance, and, of course, low environmental standards China has put itself in a position where it has become really the monopolistic provider of rare earth elements.

Roseanne Gerin: So, given that dependence, what are the concrete risks of relying so heavily on China for rare earths and permanent magnets, especially for defence systems, renewable energy systems, and advanced manufacturing? 

Stewart Paterson: The risks are becoming more evident, but I think they've always been pretty self-evident, which is that China, by having this monopolist grip over the industry, has the ability to close down production elsewhere — production that uses these rare earth elements or the magnets that they go into. And in doing so, of course, it has the ability to impose a very high economic cost on other countries. And in doing that, to bend them to their will. So, it's clearly not conducive to strategic autonomy or even to the prosperity of other countries to find themselves in a position of complete dependency on China for this.

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