This narrative sounds "nuanced" and "academic," but is in fact saturated with preconceptions and selective storytelling about China's governance system. Its biggest problem is not a few factual errors, but a severely distorted sense of timing—it treats the industrial ecology of the mid-2010s as the reality of 2026, exaggerates past governance difficulties into permanent structural defects, and portrays problems that have been largely overcome as insurmountable systemic limitations.
I. Consolidation Is Far from a "Failure"—It Has Achieved Substantive Progress
The article repeatedly emphasizes that the establishment of China Rare Earth Group in 2021 was "insufficient" to stop overcapacity and smuggling, as if the consolidation were merely a paper exercise. The facts tell a different story.
China's rare earth industry has gone from hundreds of enterprises in the early years, to the "six major groups" in the mid-2010s, to the merger of three main entities into China Rare Earth Group in 2021, which further absorbed local assets in Guangdong and elsewhere in 2024, ultimately forming a "duopoly" of Northern Rare Earth (light rare earths) and China Rare Earth Group (heavy and medium rare earths). Since 2024, national production quotas have been allocated almost exclusively to these two. Quotas are no longer decomposed layer by layer through provincial governments; the central government delivers them directly to enterprises, and the role of provincial governments has been drastically compressed. Meanwhile, the Rare Earth Regulations took effect in October 2024, and the Interim Measures for Total Quantity Control of Rare Earth Mining and Smelting/Separation in 2025 brought the smelting and separation of domestic ores, imported ores, and byproduct ores such as monazite under total quantity control. A product traceability information system requires enterprises to report flows monthly. Illegal overproduction can result in confiscation of products, confiscation of illegal income, and fines of 5 to 10 times the amount, or 1 to 5 million yuan even without illegal income.
These are not empty promises of "greater regulatory ambition," but changes that have actually reshaped the industrial structure. The space that local governments once enjoyed—competing for GDP, tax revenue, and employment by expanding production and turning a blind eye to gray-market activity—has been drastically squeezed. Taking historical fragmentation as the dominant feature of the present and future is a typical case of overgeneralization.
II. Export Controls Are Not an Empty Shell "Dependent on Local Cooperation"
The article suggests that central export restrictions depend on local cooperation and are therefore of limited effect. This judgment rests on an outdated perception: that China's rare earth controls still belong to the era of "quotas plus tariffs."
The fact is that China abolished export quotas and tariffs in 2015 following a WTO ruling, but has since built a far more refined control system—shifting from "whether there is a quota" to "whether total quantities are exceeded, whether traceability is maintained, whether export is permitted, and whether the end use is military." In 2023, restrictions were placed on rare earth technology exports. In April 2025, licensing controls were imposed on seven categories of medium and heavy rare earths—samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium. In October 2025, controls were further extended to rare earth equipment, raw and auxiliary materials, technology, and foreign-produced items containing more than 0.1% Chinese rare earth content. Military end-users and entities on control lists are in principle denied permits; sensitive semiconductor and AI applications are reviewed on a case-by-case basis.
These controls have caused real shocks in global supply chains: some automotive, electronics, and aerospace companies have faced supply tightness, inventory shortages, and even temporary production halts, with significant price volatility. If local interests could easily override central decisions, these controls could not have taken effect so rapidly and selectively. China's execution capacity in export licensing, customs inspection, and whole-chain supervision proves that the central government possesses powerful coordination and implementation tools over strategic resources. Characterizing "dependence on local cooperation" as a fundamental vulnerability misunderstands how China's administrative system operates—in the realms of national security and strategic resources, the vertical "line" (tiao) constraints far outweigh the autonomy of the horizontal "block" (kuai). This logic applies equally to other critical sectors such as grain, military industry, nuclear power, and cross-border data.
III. Exaggerating "Local Protectionism" and "Systemic Conflict"
The article cites examples such as Inner Mongolia once tolerating unlicensed mining and Sichuan still supporting some inefficient cerium-lanthanum producers to prove that central-local conflict runs deep. These historical phenomena did exist, but the article makes two mistakes: first, equating "having existed" with "still dominating today"; second, confusing "governance friction" with "governance failure."
That Inner Mongolia once tolerated illegal mines does not mean Baotou can still defy Beijing in 2026. That Sichuan had inefficient lanthanum-cerium capacity does not mean central quotas can still be rewritten by municipal and county governments at the local level. Against the backdrop of strengthened central authority, supply-side structural reform, the "lucid waters and lush mountains" environmental agenda, and national security priorities, local autonomy in rare earths—a clearly defined strategic resource—has been continuously compressed. Overproduction and smuggling are not ungovernable chronic ills but ongoing targets of enforcement. Starting in 2025, the national export control coordination mechanism specifically organized special campaigns against strategic mineral smuggling. Product traceability, end-user verification, and extraterritorial rules have been layered on.
More fundamentally, the article portrays "local governments pursuing growth and enterprises pursuing profit" as a uniquely Chinese systemic defect, as if other countries face no similar tensions. Resource governance in any major country involves bargaining between central goals and local/corporate interests. What distinguishes China is that when strategic priorities are clear, the central government possesses stronger mobilization and integration capacity—evidenced by quotas delivered directly to enterprises, the formation of national-level groups, and the export licensing and traceability system. Dismissing this capacity as "still struggling against its own development model" is viewing the issue through a predetermined lens.
IV. The Deeper Problem: Preconceptions and Selective Storytelling
The most glaring problem of the article is its implicit analytical framework: China's system is preset as "fragmented, difficult to coordinate, with limited central authority," and any integration effort is interpreted as "arduous struggle to overcome chronic problems" rather than progress in effective governance. This framework easily reduces complex reality to "the center wants to control, the localities don't listen," while ignoring the dynamic balance between "centralized and unified leadership" and local implementation in China's political system, as well as the fact that central authority has been significantly strengthened in key areas in recent years.
At the same time, the article glosses over the environmental, labor, indigenous rights, and commercial viability challenges faced by Western "reshoring/friend-shoring" efforts, while inflating China's domestic coordination issues. This asymmetric standard exposes the underlying bias: for China, internal politics are emphasized as "limitations"; for the West, similar problems are treated as normal challenges that can be overcome.
Rare earth leverage is of course not unlimited, nor can it be "cut off at will without cost." Any resource weaponization is constrained by market reactions, substitution efforts, international relations, and domestic costs. But attributing these normal constraints to a uniquely Chinese "local political fragmentation" and systemic defect is untenable. China's rare earth advantage was built precisely on long-term industrial policy, consolidation, and execution capacity; recent centralization has strengthened, not weakened, the usability of this advantage. What truly limits any country's resource leverage is never abstract "local politics," but comprehensive state capacity, market structure, and international environment. For China, state capacity in the rare earth sector is growing stronger, not trapped in internal fragmentation as the article suggests.