World

China’s Rare Earth Tech: Will Malaysia’s Untapped Reserves Unlock a New Partnership?

China, Malaysia discuss rare earth JV, sharing tech for access to Malaysian reserves, amid global supply scramble.

October 1, 2025, 10:04 PM

Large open-pit mine with heavy machinery on multiple levels

Heavy machinery, including excavators and trucks, operates on the various levels of a large open-pit mine, indicating extensive resource extraction. By MDL.

Executive Summary

The Story So Far

The current discussions between China and Malaysia for a rare earth processing joint venture are driven by a global scramble for diversified rare earth supplies, exacerbated by China’s recent export curbs and its historical dominance in processing technology. China, seeking access to Malaysia’s significant but undeveloped reserves and aiming to counter competitors like Australia’s Lynas, is now willing to share its previously restricted processing expertise, while Malaysia seeks to develop its resources and establish itself as a key player in the critical mineral supply chain, despite facing environmental and regulatory challenges.

Why This Matters

The potential joint venture between China and Malaysia for rare earth processing signifies a notable shift in China’s policy, as it may share its previously restricted processing technology to secure raw materials and mitigate competition. This collaboration could establish Malaysia as a significant global hub for rare earth processing, diversifying the critical mineral supply chain and potentially easing global reliance on a single source, despite facing challenges related to consistent raw material supply and environmental concerns.

Who Thinks What?

China views the potential joint venture as a strategic opportunity to gain access to Malaysia’s rare earth reserves and mitigate competition from Australia’s Lynas, offering its processing technology on the condition of state-linked company cooperation and a consistent supply of raw materials.

Malaysia seeks to develop its untapped rare earth deposits by acquiring essential processing technology and expertise from China, aiming for economic growth while also grappling with environmental protection concerns and the need for extensive regulatory approvals for mining operations.

China and Malaysia are reportedly in preliminary discussions for a joint venture to process rare earths, a move that could see Malaysia’s sovereign wealth fund, Khazanah Nasional, partner with a Chinese state-owned firm to establish a refinery. This potential collaboration, detailed by sources familiar with the talks, would mark a significant shift in China’s policy, as it has historically restricted the export of its rare earths processing technology to maintain its global dominance.

Strategic Implications and Technology Transfer

Beijing’s willingness to share its processing technology is reportedly contingent on gaining access to Malaysia’s largely untapped rare earth reserves. This strategic maneuver is also seen as an effort to mitigate competition from Australia’s Lynas Rare Earths, which currently operates a processing plant in Malaysia’s Pahang state.

Malaysia possesses an estimated 16.1 million metric tons of rare earth deposits but currently lacks the necessary technology for mining and processing. The country has a ban on exporting raw rare earths to conserve resources, with a single pilot project in 2022 being the only exception, aimed at developing national operating guidelines.

Potential Roadblocks and Environmental Concerns

Despite the strategic benefits, the proposed plan faces several challenges. Sources indicate China is concerned about Malaysia’s ability to provide a consistent and sufficient supply of raw materials for the refinery. Malaysia, in turn, is grappling with potential environmental impacts and regulatory hurdles, as mining operations require extensive approvals from both state and federal authorities.

Malaysia has previously stated its opposition to rare earths mining in ecologically sensitive areas, such as permanent forest reserves and water catchment zones. These concerns highlight the complex balance between economic development and environmental protection.

Global Context and Market Dynamics

The discussions occur amidst a global scramble by manufacturers to secure diverse rare earth supplies, following China’s export curbs earlier this year that caused production delays for major automakers and magnet producers. Rare earth elements are crucial components in a wide range of products, from consumer electronics to military hardware, with heavy rare earth metals being particularly vital for clean energy technologies and facing supply shortages.

Malaysia’s Minister for Natural Resources, Johari Abdul Ghani, confirmed in August that China was prepared to offer technical assistance in rare earths processing. However, he noted that President Xi Jinping requested that cooperation be limited to state-linked companies to safeguard trade secrets, emphasizing the preliminary nature of the discussions.

Future Outlook

Should the deal materialize, Malaysia would become one of the few nations to host both Chinese and non-Chinese rare earths processing technologies. The proposed refinery is expected to handle both light and heavy rare earth elements, further solidifying Malaysia’s role in the global supply chain. This development underscores the evolving geopolitical landscape of critical mineral resources and the strategic importance of rare earths in modern industrial and technological sectors.