The global push, particularly in Western nations, towards advanced technology in the defense sector is amplifying the realization that critical supply chains run through China. For defense strategists, this reliance becomes a roadblock on the path to critical mineral independence. Jacob White, Sprott’s Director of ETF product management, discussed China’s monopoly in rare earths with Bloor Street Capital. This, in effect, gives investors the chance to capture growth in ex-China opportunities.
China's Rare Earth Dominance
The scope of China’s dominance in rare earths is staggering. It essentially makes Western industrial frameworks highly susceptible to sudden supply disruptions
“China definitely does dominate,” White said during the interview with Bloor Street Capital. “They account for about 69% of global rare earth mine production. They have 91% of rare earth refining and 94% of rare earth magnet manufacturing.”
China’s dominance shifts the investment thesis for rare earths. Not only are these elements essential for consumer electronics production; they are foundational to guided missiles, stealth aircraft, and smart grids. When export controls occur, supply chain resilience pivots from a being a corporate logistics hurdle to a national security issue.
“That’s a problem for a couple of reasons. One: these strategic sectors do not want to rely on China,” said White. “Western militaries do not want to rely on rare earths from China, as they risk exposure. Two: because China has historically and continues to weaponize its control and stranglehold over the world’s rare earth supply chain. For example, they placed export restrictions on rare earths to Japan in early 2026. They’ve added U.S. defense and aerospace companies to export control lists in 2025 and imposed significant export controls on seven of the 17 rare earth elements today.”
Ex-China ETF Opportunity
Given the implications White mentioned , this offers a compelling entry point into the rare earths value chain. In particular, capital is rapidly flowing into ex-China mining operations, domestic refining infrastructure, and localized magnet manufacturing facilities. As Western governments deploy subsidies to support domestic and alternate supply chains outside of China, the companies leading this effort are transforming from speculative mining plays into highly strategic, long-term secular growth engines.
That said, one fund that offers a compelling opportunity is the Sprott Rare Earths ex-China ETF (REXC). REXC provides investors with pure-play exposure to rare earths by maintaining a targeted 95–96% allocation to rare earth companies. The fund invests across the entire supply chain, including exploration, mining, and the critical downstream separation and refining processes. To mitigate exposure to China, the fund intentionally excludes Chinese companies, aligning with the strategic re-shoring efforts of Western allies.
Summarily, REXC offers investors a targeted way to capitalize on the structural demand for rare earths while mitigating the geopolitical risks that could affect the supply chain.
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