Chips and Chains: Can China Secure Critical Minerals?
China dominates rare earths and lithium, but geopolitics threatens supply security.
✍️ Maria Lopez – Global Commodities Analyst with focus on Asia-Pacific
The Resource Foundation of Tech
Semiconductors, EVs, and renewable energy — the three pillars of China’s future economy — all rely on one thing: critical minerals. From lithium and cobalt for batteries to rare earth elements for chips and defense hardware, these resources are the hidden backbone of modern technology.
China’s current advantage is dominance. It controls around 70% of global rare earth processing and holds significant sway in lithium refining. But reliance on overseas sources for raw supply — from South America to Africa — leaves Beijing exposed to geopolitical risk.
The question is whether China can secure its mineral chains in a world increasingly marked by competition and fragmentation.
Rare Earth Dominance
China’s rare earth monopoly has long been a strategic card. While countries like the U.S. and Australia have reserves, China controls the processing capacity that turns ore into usable materials. This processing chokehold means that even rivals often depend on China for finished rare earth products.
But cracks are forming. The U.S., EU, and Japan are investing in alternative supply chains, funding processing plants in Australia and Canada. Meanwhile, Western firms are forming alliances to reduce reliance on Chinese refiners.
Lithium and the EV Race
Lithium is central to EV batteries, and China’s dominance here lies not in mining but in refining capacity. Chinese firms such as Ganfeng and Tianqi Lithium have secured stakes in mines across Chile, Argentina, and Africa, ensuring steady supply.
Still, risks loom. Resource nationalism in producer countries could disrupt deals. Chile and Bolivia are tightening rules on foreign operators, while African nations increasingly demand value-added processing at home. For China, this complicates its role as the global EV powerhouse, just as exports to Europe surge.
Cobalt and African Ties
Cobalt, essential for high-energy batteries, is another weak link. More than 70% of global supply comes from the Democratic Republic of Congo (DRC), where Chinese companies have invested heavily in mining operations.
But political risk is high. Western governments are pressuring for stricter supply chain standards, citing human rights and environmental concerns. This scrutiny puts Chinese firms in a defensive position, balancing local realities with global expectations.
Strategic Responses
Beijing is responding with a three-part strategy:
- Diversification – Investing in mines across Latin America, Central Asia, and even exploring Arctic routes.
- Recycling – Boosting R&D into battery recycling technologies to reduce dependency on raw imports.
- Innovation – Accelerating research into sodium-ion and solid-state batteries, which require fewer scarce minerals.
This strategy reflects a broader shift: China knows resource dominance today does not guarantee security tomorrow.
Financial Layer: Risk and Hedging
The mineral challenge is not only geological but also financial. Prices for lithium, cobalt, and rare earths are volatile, swinging with demand and policy shifts. Chinese firms are experimenting with commodity-backed digital settlement systems to hedge risks in cross-border trade.
In some pilot cases, fintech platforms have used blockchain to streamline contracts and payments between Chinese refiners and African miners. By linking trade flows with digital tokens or reserve-backed instruments, they aim to make supply chains more transparent and less exposed to shocks.
Though still experimental, these financial tools highlight how minerals and money are increasingly intertwined in the global economy.
Outlook: Chains Under Pressure
China’s dominance in critical minerals is real but fragile. As rival powers build alternative supply chains, Beijing faces the challenge of defending its lead without overplaying its hand.
Success will depend not just on owning mines but on sustaining trust with suppliers, innovating substitutes, and building resilient financial infrastructure to manage volatility.
For global readers, the stakes are clear: the chips that power AI, the batteries that drive EVs, and the magnets inside wind turbines all depend on the minerals under China’s watch. The future of technology is inseparable from the fragile chains of critical resources — and the contest over who controls them.
