China expands overseas mining stakes, tightening grip on critical minerals

China is mobilizing state-linked companies to take bigger ownership stakes in mines overseas, seeking to strengthen its stranglehold over the metals vital for electric vehicles, semiconductors and jet engines

The state-led push could give Beijing greater leverage over global supplies of critical minerals and who gets access to them, analysts say.

“China is rolling out a state-coordinated global mining strategy” to replace firm-level decision-making, said Dan Wang, China director at Eurasia, adding that the model would allow for larger, better-aligned global mining investments.

In April, a dedicated overseas bureau was set up to oversee investments abroad by central state-owned enterprises. Several government agencies, ministries and policy banks have been mobilized to steer overseas mining deals.

Later in July, a mining investment vehicle was created to coordinate overseas deals, advising Chinese companies on compliance, risk management, and market conditions as they face growing geopolitical tensions and regulatory hurdles abroad.

The push for greater centralization could curb disorderly competition among Chinese firms and strengthen their hand against Western competitors and newer entrants, such as Saudi Arabia and India, Wang said, though a longer review and approval process could also raise corruption risks and weigh on investment returns.

Chinese firms have invested heavily in overseas mining for two decades, making big bets in places avoided by Western miners, from Tajikistan to the Democratic Republic of Congo. The push has gained urgency as governments increasingly view critical minerals as a source of geopolitical leverage.

Chinese mineral acquisitions abroad reached $8.8 billion in the first three quarters this year — already the highest annual total since at least 2018, according to a Rhodium Group report released Wednesday.

“Acquisitions have mostly been concentrated in minerals that China lacks domestically,” said Armand Meyer, senior research analyst at Rhodium, naming lithium, nickel and cobalt during the electric-vehicle boom in the mid-2010s and gold in recent years.

Outbound investment in upstream critical minerals will likely roughly double from the 2021-2025 period, according to Eurasia, as China doubles down on overseas push to secure access and reserves that it lacks domestically.

Beijing treats 70% import dependence as an implicit red line – which puts copper, lithium, cobalt, nickel, bauxite and iron ore under a hard national security constraint to expand supply abroad, Wang said.

Even where reliance is lower, Beijing wants more. For gold, which sits within the 50% “safe” range, the government still seeks additional access to high-grade resources, Wang said. That pursuit of scale and “ultimately geopolitical strength” could override decisions over investment risk and profitability, she added.

But the push is facing growing resistance as host governments demand more local processing, a stage China dominates and has turned into a key supply-chain chokepoint. More resource-rich countries are restricting exports of unprocessed minerals and requiring foreign partners to refine them locally.

Countries have long shipped rare earths to China for processing because refining carries high environmental costs, allowing Beijing to build out massive processing capacity across the country. The U.S. has abundant supplies of rare earths, but it relies on China to refine them.

China now produces about 92% of the world’s refined rare earths, according to the International Energy Agency.

That gives Beijing the ability to withhold supply or flood the market to influence prices and project power, said Brad Handler, director of Energy Finance Lab at the Payne Institute. “If a rival builds a new refinery, China can produce more, oversupply the market and push prices below economic levels,” he said.

China has curbed exports of seven medium and heavy rare earths since last year, requiring exporters to obtain licenses.

Japan has been among the hardest hit, reportedly coming within months of running out of yttrium. The element, used for screen displays and semiconductors, is produced as a byproduct during the extraction of other rare earth metals.

China’s exports of yttrium oxide to Japan collapsed to 4,000 kilograms in September from 51,000 kilograms a year earlier, according to Chinese customs data. And the oxide’s price reportedly surged to about $1,150 a kilogram outside China — roughly 179 times its level two years earlier — compared with about $9 a kilogram inside the country.

Japan spent 16 years building stockpiles after China’s 2010 restrictions, yet “there is virtually no yttrium or lutetium separation capacity outside of China,” Bedford said.

But Chinese companies have adapted in recent years, ramping up greenfield investment and setting up processing capacity near the mines, instead of outright acquisitions, according to Rhodium.

“That is most visible where host governments require local processing,” said Meyer, pointing to Indonesia’s ban on nickel ore exports that has led Chinese firms to build smelting and refining capacity in the Southeast Asian country, instead of shipping them back to China.