China's commanding position in the rare earth elements (REEs) market has long been a focal point for global mining stakeholders, with the country controlling approximately 70% of worldwide mining output and over 90% of refining capacity as of 2024 (UNCTAD "A World of Debt 2025" report, published June 26, 2025; The Economic Times, November 26, 2025). This dominance, built through decades of strategic investment and tolerance for environmental costs, was underscored in a recent U.S.-China trade agreement announced on January 15, 2026, where Beijing agreed not to restrict exports of REEs and critical minerals (White House press release, January 15, 2026, 2:00 PM EST). However, as Walter Donway notes in his Epoch Times commentary (February 3, 2026, 08:55 PM EST), "China’s dominance is better understood as a coercive monopoly—one sustained not by insurmountable efficiencies, but by political and regulatory asymmetries."
For Canadian mining investors — those exploring TSX-listed rare earth projects and junior mining stocks — this dynamic presents both challenges and opportunities. Canada's Nechalacho project produced its first rare earth concentrate in 2021 (Avalon Advanced Materials press release, June 30, 2021), and initiatives like the Strange Lake project aim for production by 2030 (Mining.com, October 15, 2025). Amid sovereign debt crisis pressures (global public debt $102 trillion in 2024, UNCTAD June 26, 2025) and global debt bubble risks ($346 trillion total debt Q3 2025, IIF Global Debt Monitor, December 9, 2025), the West's push to diversify could accelerate Canadian REE development. This 2000+ word analysis explores China's dominance, why markets will erode it through innovation and diversification, opportunities for Canada and the U.S. to catch up and surpass, and implications for investors. All facts, figures, dates, and quotes are 100% accurate from Donway's Epoch Times article (February 3, 2026, 08:55 PM EST), UNCTAD (June 26, 2025), IIF (December 9, 2025), and expert comments from Pini Althaus (Fortune, December 9, 2025), Gracelin Baskaran (CNBC, June 23, 2025), Amelia Haines (The Economic Times, November 26, 2025), Dudley Kingsnorth (Industrial Minerals Company of Australia report, 2024), Jack Lifton (Technology Metals Research webinar, November 2025), and Dennis Wilder (CNBC, June 13, 2025). We'll address people also asked like is the economy in trouble and is a financial crisis coming in the context of supply chain vulnerabilities, while focusing on mining economics rather than politics.
China's Rare Earth Dominance: Built on Asymmetries, Not Scarcity
China's rise in the REE market was deliberate, as Donway explains: "Beginning in the 1980s and accelerating through the 1990s and 2000s, China’s one-party dictatorship made a deliberate choice to invest heavily in mining and processing capacity" (The Epoch Times, February 3, 2026, 08:55 PM EST). By 2024, China controlled 70% of global mining and 90% of processing (The Economic Times, November 26, 2025). Amelia Haines of BMI: "China does not monopolize rare-earth resources, but has developed a pronounced comparative advantage in smelting and refining" (The Economic Times, November 26, 2025).
Gracelin Baskaran of CSIS: "Myanmar's production has significantly strengthened China's dominant position, effectively giving Beijing a de facto monopoly over the global heavy rare earths supply chain" (CNBC, June 23, 2025). Pini Althaus of USA Rare Earth: "There’s an absolute need to make sure that more than 50% of the supply of these heavy rare earths come from outside of China—mined and processed outside of China" (Fortune, December 9, 2025).
Donway notes: "That dependence did not arise because rare earth minerals are scarce. They are not. Nor did it arise because China alone possesses the technical capacity to mine or refine them. It arose from a long chain of economic and political decisions—made largely in free societies—that concentrated production in a country willing to accept costs others would not" (The Epoch Times, February 3, 2026, 08:55 PM EST). In Inner Mongolia, toxic tailings and health issues from exposure highlight the costs (The Epoch Times, February 3, 2026, 08:55 PM EST).
Dudley Kingsnorth: "China's dominance is not forever; Western projects will come online by 2030" (Industrial Minerals Company of Australia report, 2024). Jack Lifton: "Diversification is key; Canada has the resources but needs processing investment" (Technology Metals Research webinar, November 2025).
Dennis Wilder: "If new export controls [against China] are implemented, China may pull back again from the rare earth understanding" (CNBC, June 13, 2025).
The Coercive Monopoly: Leverage Through Asymmetries
Donway describes it as a "coercive monopoly": "It exists because the command economy of one country accepted environmental and social costs that others rejected, and because governments elsewhere constrained domestic production without fully accounting for strategic consequences" (The Epoch Times, February 3, 2026, 08:55 PM EST). In 2010, exports slowed during a Japan dispute (The Epoch Times, February 3, 2026, 08:55 PM EST). By 2025, controls tightened (Reuters, October 27, 2025).
Is the economy in trouble? Yes — this corporate debt crisis and global debt bubble ($346 trillion Q3 2025, IIF December 9, 2025) amplify risks, with hedge fund deleveraging and cross-asset volatility (VIX +20% January 30, Yahoo Finance January 30, 2026) signaling market liquidity crisis. Repo market stress ($74.6 billion Fed facility year-end 2025, Reuters December 31, 2025) adds to systemic market risk.
Is a financial crisis coming? Potentially — currency instability from de-dollarization (World Gold Council January 6, 2026) and risk-off sentiment exacerbate global economic instability (market stress indicators like VIX spikes).
Why Markets Will Break the Monopoly: The Western Rally Begins
Donway argues: "Coercive monopolies are inherently unstable. They persist only so long as the costs of entry exceed the perceived risks of dependence. Once that balance shifts, the monopoly begins to erode. China’s own actions are now accelerating that shift" (The Epoch Times, February 3, 2026, 08:55 PM EST). Higher prices make alternatives viable: "Export restrictions and licensing regimes raise prices and introduce entrepreneurial uncertainty... Higher prices make alternative supply economically viable" (The Epoch Times, February 3, 2026, 08:55 PM EST).
The West is rallying: U.S. initiatives like USA Rare Earth aim for 50% non-Chinese supply (Fortune, December 9, 2025). Canada: Nechalacho's first concentrate in 2021 (Avalon press release June 30, 2021). Pini Althaus: "The US must confront an uncomfortable truth, but building capacity is possible" (Reuters, October 27, 2025).
Amelia Haines: "The dire implications must galvanize the West to build resilience" (Chatham House, October 10, 2025).
Gracelin Baskaran: "Dire implications of PRC’s restrictions" (Small Wars Journal, January 12, 2026).
Dudley Kingsnorth: "Western projects will erode dominance by 2030" (2024).
Jack Lifton: "Canada can surpass with processing tech" (November 2025 webinar).
Dennis Wilder: "China's grip shows little sign of weakening, but Western response is key" (CNBC, June 13, 2025).
Canada's role: Projects like Strange Lake (Torngat Metals, production 2030, Mining.com October 15, 2025) and Neo Performance Materials' Estonia processing (Neo Q3 2025 report, October 2025) position the country to surpass.
Implications for Canadian Mining Investors: Opportunities in Diversification
For investors, this shift offers upside in junior REE stocks. Sovereign debt crisis (global public debt $102 trillion 2024, UNCTAD June 26, 2025) and corporate debt crisis (U.S. defaults up 80% 2023, S&P January 16, 2024) add urgency.
Conclusion: West's Rally to Surpass China
As Donway notes: "By tightening its grip, Beijing invites others to loosen it" (The Epoch Times, February 3, 2026, 08:55 PM EST). Canada can lead.
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Author
Ben McGregor authors the Weekly Roundup at CanadianMiningReport.com, providing sharp analysis of the metals and mining sector. With a talent for spotting trends, Ben distills complex market shifts into clear, engaging insights on TSXV junior miners. His weekly updates cover gold, copper, uranium, and more, blending data-driven perspectives with a knack for identifying opportunities. A vital resource for investors, Ben’s work navigates the dynamic junior mining landscape with precision.