China's strategic ambitions in the global rare earths sector have expanded well beyond its borders, with Beijing now seeking to control which countries receive the technology, technicians, and market access needed to compete — according to Jack Lifton, Co-Chair of the Critical Minerals Institute (CMI). Writing in Investor News, Lifton argues that China's approach to Malaysia and Indonesia are the clearest indicators of this recalibrated policy.

China's Strategy in Malaysia

Malaysia has prohibited exports of unprocessed rare earth material, mandating domestic value addition while remaining open to both Chinese and non-Chinese investment. This has attracted a growing non-Chinese industrial base: Carester and Malaco have announced plans for a Malaysian rare earth separation operation, while Lynas and South Korea's JS Link are proceeding with a 3,000-tonne-per-year sintered NdFeB magnet facility near the Lynas plant.

Yet China, according to Lifton, does not want Malaysia to become a Western or Japanese-sponsored competitor. Instead, Beijing's objective is to make Malaysia a multi-aligned processing centre in which China remains an indispensable participant. Lifton describes this as 'strategic co-option': 'China is saying, in effect, if a rare earth industry is going to develop in Malaysia, China intends to be inside it rather than standing outside and watching it become a competitor.'

The arrangement offers China several advantages. Chinese companies gain access to additional feedstocks without increasing domestic mining pressure. Malaysia can serve markets — including Southeast Asian, Middle Eastern, and some European buyers — that increasingly require nominally non-Chinese production. And Chinese participation reduces the risk of Malaysia becoming an exclusively American-aligned rare earth platform.

Indonesia: A Slower but Significant Front

In Indonesia, China's rare earth footprint is less visible but potentially as consequential. In February 2026, Indonesia announced it had identified eight prospective blocks containing rare earths and other strategic minerals. A new state-owned organisation, Perminas, was assigned to oversee development, alongside parallel research into processing technology. The locations reportedly include Kalimantan, Sulawesi, and Bangka Belitung.

Indonesian officials have openly stated the country needs to master rare earth processing, identifying China, Japan, and South Korea as potential knowledge sources. President Prabowo's government has repeatedly invited foreign investment in rare earth exploration and processing.

Notably, China already holds an extraordinarily strong industrial position in Indonesia through nickel, stainless steel, batteries, smelting, and industrial parks. Rare earths, Lifton argues, could ultimately be attached to that existing Chinese-Indonesian industrial structure — even without a high-profile stand-alone announcement.

The Broader Geopolitical Picture

This comes amid growing global concern over supply chain dependence on Chinese rare earths, which underpin everything from electric vehicle motors to defence systems. Beijing reportedly recognises it may no longer be able to prevent every rare earth industry from developing outside China. Its second-best strategy, according to the analysis, is to insert Chinese technology, state-owned companies, technicians, and commercial relationships into those industries before they mature into independent competitors.

The pattern seen in Malaysia and Indonesia may well be replicated elsewhere, as nations rich in critical minerals seek to build processing capacity and China positions itself as the indispensable partner of choice.