China Extending Footprint to Malaysia, Indonesia in Bid to Control Global Rare Earths Industry
As Southeast Asia is emerging as a key region in the future of global rare earths supply chains, China is upping its engagement in the region, including with Malaysia and Indonesia, and analysts believe Beijing is seeking to influence the region’s development as it is challenged by other players.
In 2023, China produced over 90% of the world’s refined rare earths, while additional production facilities are being developed outside of China. The International Energy Agency (IEA) estimates that the share would drop to around 85% in 2025 and to around 70% by 2035 if planned refining investments in the United States and other nations, such as Malaysia, come into production.
The changing market has shifted Beijing’s strategy beyond domestic production, according to Jack Lifton, co-chair of the Critical Minerals Institute.
“China’s objective is no longer merely to dominate rare earth production at home. It is to control the global industry by deciding which countries receive the technology, technicians and market access required to compete. Malaysia and Indonesia are the test cases,” Lifton told Investing News Network.
Malaysia Pursues Downstream Rare Earth Processing
Malaysia has become one of the most developed rare-earth processing centers in the world outside China through the enactment of policies to develop its own value chain.
China indicated in August 2025 that it would offer Malaysia rare earth processing technology and technical skills. Later, media reports indicated that there were preliminary discussions with Malaysia’s sovereign wealth fund, Khazanah Nasional and a Chinese state-owned enterprise about a refinery to process rare earths.
Lifton said the reported structure suggests Beijing could retain influence over transferred technology, technical personnel and supply arrangements through state-backed partnerships rather than conventional commercial licensing.
Malaysia has also imposed a temporary ban on exports of raw rare earth materials from 2025 through 2027 to encourage domestic processing and higher-value manufacturing.
The policy has brought in a number of international companies. Caraster has announced plans for a rare earth separation plant in Malaysia and Australia’s Lynas Rare Earths and South Korea’s JS Link are working on a 3,000 tonne per year facility to separate neodymium-iron-boron (NdFeB) magnets near the existing plant in Kuantan.
“China has built its success on executing a clear industrial plan. It takes us to be serious about it,” Lynas CEO Amanda Lacaze told AFP.
Lynas operates the world’s largest rare earth processing facility outside China and accounts for roughly 10% of global rare earth production.
Another factor that could affect future cooperation is China’s suspension of certain rare earth technology export controls, introduced in October 2025, which is scheduled to expire on Nov. 10, 2026. Industry observers say Beijing’s next policy decision could determine how readily Chinese technology is made available to overseas projects.
Indonesia Builds Rare Earth Ambitions
Indonesia remains at a much earlier stage of rare earth development.
In February 2026, the government announced that it had found eight potential blocks of rare earth and strategic minerals in various regions, including Kalimantan, Sulawesi and Bangka Belitung. The authorities also set up the state-owned firm Perminas to manage development and further research on processing.
No commercial rare earth mining operations, separation facilities or verified export volumes have been reported in Indonesia this year.
Indonesian officials have identified China, Japan and South Korea as potential partners for technical expertise, although no major Chinese-backed rare earth project has been publicly announced.
Analysts say China’s extensive investments in Indonesia’s nickel processing, battery manufacturing and industrial parks could nevertheless provide an existing foundation if rare earth projects move into commercial production.
Rather than relying on direct ownership, future influence could come through financing, plant operations, technical expertise and long-term purchasing agreements, analysts say.
Rare earth elements are essential for manufacturing permanent magnets used in electric vehicles, wind turbines, consumer electronics and defense systems. Beijing’s export controls introduced in April 2025 disrupted supply chains worldwide, forcing some automakers to reduce production or temporarily suspend operations.
Malaysia and Indonesia are likely to become more important in the world of rare earths as governments look to diversify their supply chains away from China.
The future of these new supply chains, and whether they will be independent or remain tightly coupled with Chinese technology and investments will likely be a key determinant of industry competition in the next ten years.
