China is leveraging its near-monopoly on rare-earth processing to pressure Myanmar’s Kachin Independence Army (KIA) into halting its military advance on the strategic town of Bhamo, Reuters has reported. Bhamo lies just 100 kilometers from China’s border and is a key logistics hub for the junta Beijing supports.

According to KIA officials and sources familiar with recent talks, Chinese diplomats warned the rebels in May that continued military pressure would lead to a rare-earth import ban from rebel-held areas. China processes most of the world’s heavy rare earths, including dysprosium and terbium, which are crucial for electric vehicles and wind turbines.

Mineral Power Meets Military Strategy

Kachin state is responsible for nearly half of the world’s supply of these elements. After the KIA took control of the area’s main rare-earth belt in late 2024, they raised taxes and cut output, contributing to a sharp global price surge.

Despite the warning, KIA commanders reportedly believe Beijing is unlikely to enforce a ban due to its own dependency on these minerals. However, exports from Myanmar to China have halved in 2025 compared to last year.

China Supports Junta as KIA Gains Ground

China has backed Myanmar’s military junta since its 2021 coup, even providing drone and air support. The KIA, with an estimated 15,000 fighters, has surrounded most of Bhamo and continues to fight despite relentless airstrikes. Capturing the town would significantly weaken the junta’s control over northern trade and military supply lines.

Beijing also offered economic incentives to the KIA—such as expanded cross-border trade—if it backed off from Bhamo. Analysts say China’s goal is not to resolve the civil war, but to stabilize the region to protect its investments and supply chains.

Global Supply Chain Warning

If China proceeds with cutting off rare-earth imports from Kachin, the global supply could face a deficit by year’s end, warned experts at Benchmark Mineral Intelligence. This would further strain non-Chinese markets already struggling to meet demand.

Satellite imagery reviewed by analysts has confirmed widespread damage in Bhamo from junta airstrikes, including to civilian infrastructure. Locals and activists fear worsening shortages of fuel and medicine as border restrictions tighten.