Two articles in Wall Street Journal (“Israel-Iran Conflict Spurs China to Reconsider Russian Gas Pipeline” on June 24, 2025 and “China to Block Its Rare Earth Experts from Spilling Their Secrets” on June 25, 2025) highlight actions planned/taken by China after considering the geopolitical landscape due to recent global events. China's strategic positioning in the global economy is increasingly influenced by current geopolitical tensions, particularly those involving the United States and its allies. The news articles relate to energy and rare earths sectors. Following up on my earlier two posts, I will focus in this one on the energy and rare earths sectors within the second largest economy of the world.
Chinese Energy Sector
China’s energy sector is undergoing a significant transformation as the country balances its reliance on conventional energy with ambitious goals for renewable and clean energy. Coal remains a dominant energy source, making up about 60% of China’s electricity generation. However, the government is gradually reducing coal dependence by improving efficiency and transitioning to cleaner alternatives, in response to environmental concerns and carbon reduction targets.
China has become a global leader in renewable energy, particularly in solar and wind power. It is the largest producer of solar panels and the world leader in wind energy, with substantial investments in both onshore and offshore wind farms. Hydropower also plays a major role, with China hosting the world’s largest hydropower projects. The country aims to increase its renewable energy capacity significantly, targeting 20% of its energy consumption from non-fossil fuels by 2025, and carbon neutrality by 2060.
In addition to renewables, China is heavily investing in clean energy technologies like nuclear power, hydrogen, and energy storage. Nuclear power capacity is expanding, and the country is exploring next-generation nuclear technologies. Hydrogen, especially green hydrogen produced via renewable energy, is a growing focus. China is also a global leader in battery manufacturing, supporting the widespread use of renewable energy through advancements in energy storage solutions.
Energy security remains a critical concern due to China’s growing reliance on imported oil and natural gas. The Wall Street Journal article titled “Israel-Iran Conflict Spurs China to Reconsider Russian Gas Pipeline” points to a geopolitical realignment consistent with PESTEL analysis. China is considering revising the stalled “Power of Siberia 2” project due to concerns of reliability of oil and gas from Middle East. The Belt and Road Initiative and investments in energy infrastructure worldwide further reflect its strategy to secure energy supplies. China’s energy policies are influenced by global geopolitical factors, necessitating diversification of energy partnerships and resources. As the country continues its energy transition, technological innovation and international cooperation will be key to achieving a sustainable and secure energy future.
Chinese Rare Earths Sector
China’s rare earths sector plays a central role in the global supply chain, as the country dominates the production and processing of these critical materials. Rare earth elements (REEs) are essential for a wide range of technologies, including electronics, renewable energy systems, defense, and electric vehicles. According to the U.S. Geological Survey and corroborated by multiple reputable sources, China holds an estimated 37% of known global reserves (roughly 44 million tonnes out of a total ~110 million tonnes worldwide) and produces around 60-69% of the world’s rare earths, making it the largest player in this market.
The country has invested heavily in rare earth extraction and processing technologies, which has enabled it to maintain a commanding position in the global market. Most of China’s rare earth production is concentrated in the Bayan Obo mine in Inner Mongolia, one of the world’s largest deposits. Additionally, China’s rare earth sector benefits from a well-developed processing infrastructure, which adds significant value to raw materials before they are exported.
In recent years, China has focused on diversifying its rare earth supply chains and reducing its dependence on foreign countries for key raw materials. However, China’s dominance has led to geopolitical tensions, particularly with the U.S. and other Western countries, which are working to secure their own rare earth supplies. As a result, China has occasionally used rare earth exports as a leverage in trade disputes.
To maintain its competitive advantage, China is increasingly focused on expanding its rare earth recycling capabilities and improving the efficiency of rare earth extraction from secondary sources. Additionally, the country is advancing technologies to use rare earths in high-performance applications, such as electric vehicles, wind turbines, and advanced military equipment.
Looking forward, China’s rare earths sector will likely continue to face growing competition from countries like the U.S., Australia, and Japan, who are developing their own production and processing capabilities. China’s future strategies will likely include strengthening domestic mining regulations, pursuing international collaborations, and further advancing recycling technologies to ensure a sustainable and secure supply of rare earths. The article titled “China to Block Its Rare Earth Experts from Spilling Their Secrets” puts spotlight on the significance of knowhow as a strategic level in this geopolitical landscape.