China’s control over rare earth elements (REEs) has emerged as a critical instrument in its broader geopolitical strategy, particularly amid rising tensions on its border with Myanmar and ongoing trade disputes with the United States. Recent conflicts involving the Kachin Independence Army (KIA) in Myanmar’s Kachin State—home to nearly half of the world’s heavy rare earth deposits—have amplified Beijing’s ability to leverage its dominant position in the global REE supply chain.
In late 2024, the KIA’s capture of strategic towns near the Myanmar-China border disrupted mining operations in this resource-rich region. The conflict has driven up prices for key rare earths such as terbium and dysprosium, essential for manufacturing components in electric vehicles, wind turbines, semiconductors, and defense technologies.
Global manufacturers have felt the impact. Ford Motor Company’s CEO announced plant closures due to shortages, while major automakers Toyota and General Motors warned of supply disruptions that threaten production lines worldwide.
Although the KIA maintains mining activities and dialogues with businesses, increased taxes and operational disruptions have limited output. Since refining capacity remains overwhelmingly concentrated in China—processing nearly 90% of global rare earths—China’s decision to restrict trade crossings with Myanmar exerts significant pressure on the supply chain.
In response to the escalating conflict, Beijing issued an ultimatum to the KIA, threatening to sever economic ties unless hostilities cease and cross-border trade resumes. This maneuver underlines China’s strategic use of its rare earth processing monopoly as leverage in regional conflicts and global diplomacy.
China controls the largest rare earth reserves, estimated at 44 million tonnes, and dominates the refinement process. According to industry analysts, China’s threat to halt imports from KIA-held territories is a calculated tactic to reinforce its geopolitical standing.
The International Energy Agency reports that China and Myanmar together supply approximately two-thirds of heavy rare earths globally, with China refining nearly all of this output. Continued instability threatens to constrain raw material inflows, likely driving prices higher and underscoring China’s pivotal role in maintaining global supply stability.
China’s rare earth dominance is also a focal point in its broader trade tensions with the United States. Beijing has implemented export restrictions on critical rare earths, intensifying tariff escalations and prompting the US to invest in expanding domestic rare earth production.
Currently, the US relies heavily on its Mountain Pass mine in California, which accounts for about 15% of global rare earth mining. Partnerships such as Apple’s recent $500 million investment in MP Materials, the operator of Mountain Pass, aim to strengthen American supply chains through enhanced production and recycling efforts.
Despite these initiatives, China’s dominance remains largely unchallenged. Experts trace China’s strategic emphasis on rare earths back to the 1980s when Deng Xiaoping equated their importance to oil in the Middle East—a comparison that continues to resonate in Beijing’s current policies.
As the Myanmar conflict persists and global geopolitical tensions intensify, China’s use of rare earth resources as a geopolitical instrument is set to remain a defining feature of international power dynamics in the years ahead.
