How did China turn critical raw materials into a geoeconomic weapon?

Beijing has turned its dominance in critical raw materials into a geoeconomic weapon – and Europe is in its sights. This is the main conclusion of the study “Beijing’s Critical Raw Material Weapon”, by the European Union Institute for Security Studies (EUISS), which details how China began to use control over inputs such as rare earths, gallium and germanium to gain a strategic, industrial and technological advantage over the West.

The document argues that this dependence is not just an economic risk, but a vector of structural vulnerability for Europe and its main partners.

China controls 70% or more of the global refining or extraction of half of the 34 materials the EU classifies as “critical”. The study also shows that China dominates more than 74% of global production in at least one link in the value chain of each of these materials, reaching more than 98% in the case of heavy rare earths and gallium.

Despite being used in relatively small volumes, these inputs are indispensable in critical sectors, such as defense, telecommunications, semiconductors, renewable energy, electric mobility and medical equipment. In short, without these materials refined in China, an important part of the state functions and the European industrial base simply cannot function.

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China’s strength lies, above all, in the refining phase of these raw materials, a stage in which the country concentrates the greatest market power. Europe, the United States and Japan depend on this Chinese capacity to produce high-performance permanent magnets, semiconductor wafers and fiber optic cables – components with transversal application across practically the entire digital and green economy.

The report points out that, although the US and Japan have launched policies to reduce risks, progress is expected to be limited, and European initiatives are described as “comparatively modest”.

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Regulatory apparatus

Starting in 2025, after new rounds of tariffs and technology controls imposed by the US in the “Trump 2.0” era, Beijing reacted by abruptly reducing the supply of a series of critical raw materials to almost all countries. Even with a partial recovery in exports in 2025 and early 2026, volumes were well below pre-control levels for most materials.

According to the study, this deliberate “tightening” generated at least eight beneficial effects for China and clearly negative ones for Europe and its partners, including increased costs, production interruptions and chronic uncertainty in supply chains.

The report also highlights the weight of Beijing’s regulatory and export control apparatus, particularly the role of the Ministry of Commerce. European and North American companies report that the licensing process to export certain materials has become “highly invasive,” with requirements to submit detailed production data, final applications, photos and even drawings of sensitive components, such as drone engines. In some cases, refusal to provide information considered sensitive resulted in license denials, reinforcing the perception of political and strategic use of trade rules.

The opacity of the licensing process is a central point of criticism. Surveys of European companies in China show that a significant portion report a “lack of transparency” and “unclear requirements” on the part of the Chinese ministry, which encourages companies to hand over information to try to secure approvals. Many describe the ministry as a “black box”, where requests remain in pending status indefinitely, with no predictable criteria. In practice, this increases Beijing’s discretionary power and amplifies the deterrent effect on businesses that may contradict Chinese strategic interests.

Domestically, the use of this “raw materials weapon” is aligned with Beijing’s central economic policy objectives. The study recalls that official documents, such as the 15th Five-Year Plan and the White Paper on national security, emphasize the search for technological and industrial self-sufficiency, at the same time as the rest of the world’s dependence on China deepens.

Commercial reaction

Exports at below-market prices, combined with strong state support, are described as instruments to sustain domestic economic growth and gain leverage in global chains.

For Europe, the report’s message is clear: it is not just about “diversifying” suppliers, but about gradually dismantling the structural dependence on chains dominated by China.

The authors argue that, alone, policies to encourage mining, refining and recycling on European soil will not be sufficient if final products continue to compete, without protection, with Chinese manufacturers intensive in subsidized raw materials. The absence of coordinated responses between the EU, US, Japan and other partners amplifies vulnerability and fragments Western bargaining power.

Therefore, one of the main recommendations is to combine industrial policies with more assertive trade defense instruments. The study advocates the use of broad tariffs, safeguard measures and “Europe and trusted partners” requirements in public procurement of raw materials-intensive sectors – such as automotive, medical equipment, wind and chemicals. The idea is, at a minimum, to compensate for factors such as artificially devalued currency, massive subsidies and joint venture requirements that favor Chinese companies and distort global competition.

In practice, these measures would have two functions: protecting European end-user industries from asymmetric competition with Chinese competitors and, at the same time, creating stable demand for new mining, refining and component manufacturing projects outside of China. The study recognizes that this tends to increase short-term costs for European manufacturers, but maintains that, without this “cushion” of public policies, it will be impossible to finance, on a scale, alternative chains of critical raw materials. In other words, the choice is between paying more now for resilience or risking much more costly shocks in the future.

In its final assessment, the report concludes that Europe and its partners need to treat dependence on rare earths, gallium, germanium and other critical inputs not as a technical supply problem, but as a strategic economic security challenge. This implies greater transparency about risks, coordination between allies, firmer use of commercial instruments and, above all, political willingness to face the distortions generated by the Chinese development model.

Without this, the study warns, Beijing will continue to have a silent, cheap and extremely effective “weapon” to influence industrial and geopolitical decisions in Brussels, Washington, Tokyo and other decision-making centers.

*Text constructed with the help of artificial intelligence tools