China has taken its rare earth control strategy to new heights with China Rare Earth Group seeking a controlling stake in Shenghe Resources, according to latest reports from Reuters. The state-owned company is in talks to acquire Shenghe Resources, a Chinese rare earths company that currently owns a 3% stake in US-based MP Materials. This potential acquisition would bring one of the remaining major Chinese companies involved in rare earth mining and refining with some private ownership under state control, further consolidating the sector. The talks have been underway since earlier this year, though it remains unclear when a deal could be announced or completed. If successful, the acquisition would give Beijing tighter control over rare earth elements used in electric vehicles, wind turbines, electronics and defence equipment.
China has significantly escalated its control over critical rare earth materials, with Beijing now controlling roughly 70% of global mining, about 90% of separation/processing, and more than 90% of high-performance magnet manufacturing, according to latest reports. In August 2025, Li Chenggang, Beijing's chief trade negotiator, warned that if the United States continued tightening controls on advanced technologies, China would restrict exports of the metals that make those technologies possible. Within weeks, Chinese ministries began slowing export licenses for certain alloys and magnetic materials, sending nervous tremors through markets from Tokyo to Detroit. This represents a deliberate shift from economic cooperation to strategic leverage, with each new bureaucratic delay serving as a reminder that dependency is a policy choice.
China's consumer spending showed significant weakness in August, with retail sales rising only 0.4% year-on-year, according to reports from CNBC TV18 and the National Bureau of Statistics. This performance fell short of economist expectations in a Bloomberg poll that had forecast a 0.8% gain, and represented a decline from July's 0.6% growth rate. The National Bureau of Statistics (NBS) acknowledged that the economy remained 'stable' overall in August, but noted that the negative impact from external environment is deepening and the imbalance between strong supply and weak demand remains prominent domestically. The latest data reveals a widening divergence between industrial production and domestic demand, highlighting the persistent challenges facing consumer-facing sectors.
Fixed-asset investment declined 7.2% in the first eight months compared to the same period last year, steepening from an earlier 6.7% decline and slightly exceeding expectations, as reported by CNBC TV18. However, industrial output provided some positive momentum, growing 5.2% in August and accelerating from July's 4.5% gain, which beat the 4.8% consensus forecast. The NBS characterized the industrial output performance as a bright spot amid broader economic challenges, with the latest data showing industrial production quickening from 4.5% to 5.2% year-on-year. However, credit expansion missed forecasts sharply, with new bank loans totaling just ₹60 billion yuan versus roughly ₹400 billion yuan expected. As per recent reports, this figure alone does not mean that China's economy is collapsing, but it does show that the economy's growth engines are not operating at the same speed.
Despite domestic consumption challenges, China's exports, particularly high-tech, semiconductor and AI-related products, remained strong, with high-tech exports increasing by 42.9%, according to latest reports. This export strength contrasts sharply with the weakness in domestic demand and property sector performance. The urban unemployment rate ticked up to 5.3% in August from 5.2% in July, as reported by the National Bureau of Statistics, while property investment slumped 19.9% in the first eight months of the year. Unless economic momentum improves in coming months, policymakers are likely to face growing pressure to deploy additional stimulus measures.
The rare earth control escalation represents a fundamental shift in China's economic strategy, moving from market participation to strategic leverage over critical materials that power modern technologies. Beijing's logic is simple: coerce early, not late, by testing Western vulnerabilities before open conflict. This economic coercion is not separate from Beijing's territorial ambitions, but a prelude to them, seeking dominance in both the Taiwan Strait and global flow of strategic materials. The NBS acknowledged the need for policy adjustments, with authorities warning of the acute supply-demand imbalance at home and the persistent operational difficulties businesses face. Beijing is beginning to dial up fiscal policy after months of deep contraction in public spending, as reported by CNBC TV18, though reversing the decline in government expenditure may require time.
