China’s Fourth Plenum – planning or prepping?
Beijing’s new-found willingness to go head-to-head with the US in its trade and tariff war marks a new, muscular change in mindset
ALL China’s plenums are consequential. But some are more consequential than others. Amid underwhelming macro data, slowing domestic economic growth and quickening tensions with the US, the Fourth Plenum, which convened and concluded on Oct 23, is particularly significant.
Recent plenums have stressed the importance of economic self-sufficiency in general, and in advanced manufacturing in particular. This one was no different. But the key difference this time is the geopolitical backdrop, specifically as it relates to China’s recent shock decision to implement stringent export licensing requirements for rare earth exports.
As China controls about 70 per cent of rare earth mineral mining and 92 per cent of refined production globally, its influence over global supply chains is profound and far-reaching. As of December 2025, global companies wishing to export items which contain even 0.1 per cent of rare earth produced in China (or made using Chinese technology) must declare the proposed end use and obtain a licence from Chinese authorities.
From consumer electronics and medical equipment to clean energy technology and military applications, rare earth metals are as ubiquitous as they are important. If relevant US companies fail to secure China’s approval, there is a real risk that their factories might shutter.
And it’s not just US companies that are affected; according to the European Central Bank, over 80 per cent of major European firms are positioned within just three supply chain nodes of Chinese producers, with companies such as Airbus and BASF relying directly on Chinese inputs.
Inevitably, there is a risk of global pushback and consequence. China’s policymakers will be well aware of this likelihood; hence China’s 15th Five-Year Plan evinced a laser focus on boosting home-made resiliency by supporting private consumption and investing more in key technologies and materials.
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Put simply, it was a prepper’s charter, with a forward-looking, home-grown focus on self-reliance, insulating the economy – as much as reasonably possible – from the volatility of geopolitics and global trade.
Transactional dominance
The new-found willingness by China to go head-to-head with the US in its trade and tariff war marks a muscular change in mindset by Beijing. Perhaps they feel that – for as long as they maintain an iron grip on the production of rare earths and critical minerals – they hold a winning hand? And with just 10 per cent of China’s exports going to the US, there is some evidence that is the case.
Beyond a war of words, the US’ inability to meaningfully counter China’s rare earth gambit suggests there’s some truth to Beijing’s growing transactional dominance (defined as the deliberate use of economic leverage to impose asymmetric costs on global competitors).
But the US has things that China does not: technological superiority; deep, broad and balanced capital markets; and – most important of all – the world’s most valuable consumer market. And as is usually the case, when warring parties need each other, talks are eventually inevitable and some sort of uneasy deal is likely.
Indeed, with President Xi Jinping and President Donald Trump due to meet at the Asia-Pacific Economic Cooperation (Apec) Summit at the end of October, I suspect the current statement will likely resolve in favour of a negotiated settlement. With benchmark equity indices in the US and China also rallying hard, it would seem this is the outcome risk markets anticipate as well.
What if...?
But I can’t help wondering whether China has overplayed its hand. Risk markets may well opt to look through the trade dispute between China and the US, as to do otherwise would require confronting an altogether more dystopian, bipolar world. Trump’s tariffs may have left a sour taste in the mouths of his trading partners; but might China’s actions do the same if – at a whim – it was able to restrict global access to rare earths?
For instance, if China were to restrict access to rare earths, production of high-end semiconductors would presumably cease, thereby denying Beijing the very technology it so desperately needs. Moreover, I wonder how straightforward it would be to enforce rare earth controls. What would happen if large multinationals refused or failed to comply and bought from a third party? And even if restrictions were successfully enforced, what would the consequences be?
I’d suggest that, at the very least, Beijing should expect commensurately limited access to US tech, aircraft, and finance while – simultaneously – alienating third-party firms and countries, such as those in Europe and Asia, which remain reliant on stable supply chains.
Plenum pivot
It’s entirely possible that we will look back on the Fourth Plenum as a geo-strategic pivot. By weaponising its rare earth dominance, Beijing compels global industries – from semiconductors to renewables – to recalibrate, exposing vulnerabilities in Western manufacturing hubs, and potentially yielding (or forcing) concessions from the US at the upcoming Apec Summit.
My fear is overreach. The harder China plays its rare earth card, the more likely it will spur renewed investment into mineral extraction, (frankly) at any cost. Third-party alliances could forge alternative mining corridors in Australia and Africa, eroding Beijing’s rare earth leverage as soon as 2030.
Meanwhile, macro headwinds worsen. Data for Q3 gross domestic product fell to a below-target 4.8 per cent year-on-year, while house prices fell at their fastest rate in 12 months (new -0.4 per cent month-on-month, existing -0.6 per cent month-on-month).
While the Fourth Plenum did not specify a growth target for the 15th Five-Year Plan, it did reaffirm the (expected) “around 5 per cent” target for 2025. Given China’s current – and deteriorating – economic imbalances, my sense is that annual goals can only be achieved by “buying” growth via further stimulus and/or additional monetary easing.
The writer is chief investment officer, Asia, at Lombard Odier
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