《Singapore Daily News Oct 4 》China and Malaysia are in early-stage discussions to jointly develop a rare earths processing refinery in Malaysia, according to multiple sources familiar with the matter. If finalized, the project would mark China’s first overseas investment in downstream rare earth processing and could significantly alter the supply chain dynamics in Southeast Asia.
According to sources, China may offer its advanced processing technologies in exchange for access to Malaysia’s underdeveloped rare earth reserves. Discussions reportedly involve a potential partnership between Chinese state-backed enterprises and Malaysia’s sovereign wealth fund, Khazanah Nasional.
Malaysia holds an estimated 16.1 million metric tons of non-radioactive rare earth elements but lacks the full downstream capabilities to refine them. The government has long prohibited raw material exports to avoid losing value-added opportunities and to protect national resources.
This move is seen by analysts as a potential counterbalance to Australia’s Lynas Rare Earths, currently the only major producer of refined rare earths outside China. Lynas operates a major processing facility in Kuantan, Malaysia, and has been a key supplier to the US and other Western markets.
However, the project is still in a preliminary phase, with no formal agreements signed. Major hurdles remain, including:
Long-term stability of raw material supply
Environmental regulations and restrictions on mining zones
China’s internal policy on technology transfer and export controls
Malaysia’s Environment Ministry has made it clear that rare earth mining must avoid sensitive areas such as water catchment zones and permanent forest reserves. Environmental impact assessments (EIA) will be mandatory.
If the refinery is realized, Malaysia stands to benefit by moving up the rare earth value chain — from being a source of raw materials to a hub for refining and possibly component manufacturing. Meanwhile, China’s involvement could indicate a shift in its global resource strategy amid rising geopolitical pressures.