China’s ability to turn supply chains into geopolitical ammunition has moved from strategic theory to real-world practice over the past few years. Once treated as a by-product of economic might, the nation’s dominance over key materials and manufacturing networks is increasingly being wielded as a coercive lever — not through overt military force, but by controlling the very inputs that underpin modern technology, defence and industrial capacity.
Central to this dynamic is China’s grip on rare earth elements (REEs) and other critical minerals that the global economy now treats as indispensable. These 17 metals and their compounds are essential for everything from electric vehicle motors and wind turbines to microchips and precision-guided munitions. China dominates not just extraction but especially processing and refining, with estimates showing Chinese firms control over 90 % of the world’s rare earth processing capacity — a chokepoint that gives Beijing asymmetric leverage over global industrial networks.
In April 2025, Beijing introduced sweeping export controls on a suite of medium and heavy rare earth elements in response to U.S. tariffs — a move that hit sensitive defence and tech sectors hardest. These restrictions applied not only to raw elements but also to materials and technologies further down the supply chain, including those used in magnets and precision manufacturing. Export licenses became mandatory, giving Chinese authorities discretionary control over who gets access and under what conditions.
Such policy shifts illustrate a broader pattern: China’s economic strategy is no longer blind to geopolitical consideration but actively incorporates coercive capability. Export controls are deployed not just as commercial regulation but as policy instruments to influence external actors. A recent analysis commissioned by the U.S. government itself notes that Beijing has “intensified this strategy by prioritizing control over key supply chains… deploying export controls on critical minerals as a coercive tool, including to seek policy concessions in trade negotiations.”
The impact has been more than theoretical. Industries across the U.S., Europe and allied states have faced tangible disruptions. Output constraints and uncertainty over access to rare earths and associated materials have forced companies to reassess global production strategies, while governments have scrambled for alternatives. A report from the European Union Chamber of Commerce found that over 70 % of EU firms in China have re-evaluated their supply chains — often shifting parts of their value chains away from China because of unpredictable export policies and market conditions.
In the U.S., industries as diverse as automotive and defence are feeling the strain. Yttrium shortages triggered by China’s export curbs drove prices skyward and compelled manufacturers like GE Vernova to collaborate with the U.S. government on stockpiling initiatives. The shortages, driven by Beijing’s regulatory approach, have exposed how vulnerable key sectors remain even after years of policy attention.
China’s supply-chain leverage isn’t confined to rare earths alone. Pharmaceuticals have emerged as another potential source of leverage. As of 2025, China supplies a significant share of active pharmaceutical ingredients used in the U.S. and other markets. Analysts warn this dependency could become a strategic tool — a “trade weapon” Beijing may deploy by throttling exports or adjusting production priorities in ways that pressure foreign governments.The strategic use of export controls is part of a broader practice some scholars call “weaponized interdependence” — where economic networks are engineered or exploited to generate strategic advantage or coercive pressure. In this framework, concentrated supply chains become asymmetrical power vectors, granting states that sit at critical nodes the ability to influence the behavior of others without traditional military confrontation. China’s centrality in rare earths and other critical materials perfectly exemplifies this logic.
This leverage has already shaped diplomatic and trade negotiations. In late 2025, after months of export restrictions that rattled global markets, China agreed to ease controls and issue broader licences for rare earth shipments following a summit between President Xi Jinping and U.S. President Donald Trump. The deal underscored how Beijing’s control over supply flows can be deployed as bargaining chips in high-stakes geopolitical engagements.Yet the strategic implications extend beyond short-term bargaining.
These supply dependencies have prompted a broader mobilisation among U.S. allies to diversify away from Beijing’s networks. A coalition of nations, including Singapore, Australia, Japan, South Korea and Israel, launched a coordinated effort to build alternatives in critical minerals and advanced technologies — an implicit recognition that supply chain independence is now itself a core component of geopolitical strategy.
Critics might describe these developments as decentralising the global economy; in reality, they reflect a recalibration of strategic risk. The very concentration that once delivered efficiencies and scale now represents systemic vulnerability: nations tied to Chinese supply networks find their policy choices constrained by the invisible hand of Beijing’s industrial policy. Even when no export controls are in force, the threat of their use shapes corporate planning, government strategy, and defence procurement alike.
China’s economic centrality has been preached as the triumph of comparative advantage. But as recent events have shown, when one supplier holds overwhelming control over materials essential to national security and modern technology, markets become instruments of power — and dependency is transformed from an economic fact into a geopolitical weapon.
References
1. Reuters – China curbs exports of critical minerals, deepening supply chain fears (2024)https://www.reuters.com/world/china/china-curbs-exports-critical-minerals-deepening-supply-chain-fears-2024-2. Reuters – China’s rare earth dominance becomes pressure point in U.S.-China tensions (2024)https://www.reuters.com/world/china/chinas-rare-earth-dominance-pressure-point-us-china-tensions-2024-3. Chatham House – China’s use of export controls and the weaponisation of critical supply chains (2024)https://www.chathamhouse.org/2024/weaponisation-critical-supply-chains-china4. Atlantic Council – Critical minerals and China’s growing leverage over global supply chains (2024)https://www.atlanticcouncil.org/in-depth-research-reports/report/critical-minerals-and-chinas-growing-leverage/5. European Union Chamber of Commerce in China – Business Confidence Survey 2024: Supply chain risk and export controlshttps://www.europeanchamber.com.cn/en/publications-business-confidence-survey-2024#MeKongNews