China's $120 Billion Critical Minerals Play Is About Security, Not Hostility

A report by Climate Energy Finance states that China has invested over US$120 billion in global critical minerals since 2023. The report, titled 'Raw Power: China locks-in global dominance of critical minerals,' details the scale of the investment.

The report's findings have prompted commentary on the future of Australia's resources sector and expressions of concern from government ministers regarding supply chain security.

Chinese state media coverage of the investment has emphasised the goal of enhancing supply chain security, according to analysis of reports in outlets such as Caixin and Economic Daily.

China's Stated Rationale for Investment

Chinese state media has reported on the country's investment in critical minerals, framing it as a move to secure supply chains. The stated rationale points to vulnerabilities exposed by global events, including pandemic-related disruptions and geopolitical trade restrictions. The investment strategy involves diversifying sources for key imports, such as iron ore, and increasing domestic processing capacity for materials like lithium, which are essential for industries including electric vehicle manufacturing.

China is investing at extraordinary scale and speed to build out the global mining and processing capacity, supply chain integration and partner nation relationships.

— Tim Buckley, Director, Climate Energy Finance (former Citigroup MD)

The Simandou iron ore project in Guinea is a key example of this investment. The US$23 billion development, backed by Chinese state capital and Rio Tinto, shipped its first 344,000 tonnes to China in January 2026. Projections indicate that by 2029, Guinea will become the world's third-largest iron ore exporter. The project includes dedicated logistics infrastructure to Chinese ports.

Shifting Trade and Investment Patterns

While Australia's exports of iron ore and coal to China reached record volumes in 2025 and two-way trade hit a new high of A$300 billion, underlying investment patterns are changing. Chinese outbound foreign direct investment (OFDI) into Australia has declined by 85% since its 2018 peak, now accounting for 1.5% of total inbound foreign investment. This capital has been redirected to other resource-rich nations, including Guinea, Indonesia, Zimbabwe, Chile, and the Democratic Republic of Congo, funding mining and infrastructure projects.

The shift is also evident in the lithium sector. While Australia accounted for approximately 50% of global lithium production in 2023, China's domestic output has since increased significantly. In February 2026, Albemarle closed its Kemerton lithium hydroxide plant in Western Australia. The company cited market conditions, including the rapid expansion of Chinese processing capacity relative to global demand, as the reason for the closure of the four-year-old facility.

The race to net zero is not only a race for technological innovation, but also for minerals, metals, processing capacity, and industrial control.

— Marina Yue Zhang, Associate Professor, UTS Australia-China Relations Institute

Australia's Economic Structure and Value-Adding

The Climate Energy Finance report highlights Australia's economic model, which is heavily based on exporting raw materials for overseas processing. This structure is reflected in the Harvard Economic Complexity Index, which ranks Australia 105th out of 145 countries. The ranking indicates a high dependence on commodity exports over processed goods. Manufacturing currently constitutes 6% of Australia's GDP.

The Australian government's 'Future Made in Australia' program, with A$81 billion in federal funding and A$6 billion from states since 2023, is intended to increase domestic processing capacity. An example of diversification efforts is the March 2026 partnership between Japan's JOGMEC and Lynas Rare Earths. However, the scale of China's US$120 billion investment in critical minerals since 2023 is significantly larger than Australia's combined federal and state commitments. The development timeline for major projects also differs; the Simandou project proceeded from planning to first shipment in three years, a timeframe often shorter than the approval process for similar projects in Australia.

Analysis of Strategic Implications

According to Tim Buckley, director of Climate Energy Finance, "Australia is sitting on some of the world's most strategically valuable resources at precisely the moment the global economy is reorganising itself around them. But sitting on them is all Australia is doing."

Policy Considerations

Climate Energy Finance analyst Matt Pollard suggests in the report that Australia could adopt a model similar to China's, involving financing projects and securing long-term supply agreements. "A significant strategic shift of how Australia views its national interest and economic security must occur," Mr Pollard wrote.