China’s grip on critical mineral supply chains is tightening. Decades of state-backed investment has given the country huge influence over the global market, from refined battery metals to unprocessed rare earths. But as geopolitical tensions escalate, western governments are seeking out innovative financial instruments to secure longer-term supply – and export finance is front and centre. John Basquill reports.
China’s dominance of the critical minerals market goes beyond being a domestic mining powerhouse. The country extracts just 8% of the world’s copper, 5% of its nickel, 1.5% of cobalt and 13% of lithium, International Energy Agency (IEA) data shows.
Yet through a combination of huge investment in overseas mining projects and a vast domestic processing industry, the country has grown to become a near irreplaceable supplier to the rest of the world.
It holds a 40% share of the global processing market for copper, 35% for nickel, 65% for cobalt and 58% for lithium, the IEA says. In the case of nickel, research by non-profit organisation C4ADS has found Chinese companies also have a stake in around 75% of production in processing giant Indonesia.
These metals are vital components for the energy transition due to their use in electrification, clean energy generation and battery production, and Beijing’s ready access to them is propelling the country’s sustainability efforts.
In 2023, the IEA finds China was responsible for more than 60% of the world’s solar and wind power expansion, boasted around half of all global installed capacity for hydrogen production, and accounted for 55% of domestic battery demand, largely due to a thriving electric vehicle market.
At the same time, China dominates the global market for both extraction and processing of rare earth metals, many of which are also essential for use in industrial processes and electronics.
A European Commission study published in 2023 found the country provides at least 80% of the world’s germanium, tungsten, magnesium, gallium and numerous other raw materials.
China has achieved this imperious market position thanks to a decades-long strategy built on state-backed financial backing for securing raw material supplies.
This strategy is analysed in a February 2025 report by AidData, an international development research lab housed at William & Mary’s Global Research Institute in Williamsburg, Virginia.
The report estimates that between 2000 and 2021, Beijing provided nearly US$57bn in aid and subsidised credit for transitional mineral operations in the developing world.
Initially, this support was largely channelled through the Export-Import Bank of China and the China Development Bank, which together provided nearly US$32bn in credit for transitional mineral operations during that period, it finds.
But over time, financing has increasingly come from state-owned commercial banks rather than export credit agencies (ECAs) or development finance institutions, with transactions structured more as syndicated lending facilities than bilateral loans.
Crucially, state-supported Chinese financing for minerals projects is typically extended through joint ventures and special purpose vehicles, rather than as public and publicly-guaranteed debt – the mechanism usually deployed for Chinese developing market lending.
This approach uses offtake agreements to ensure those Chinese entities have access to metals produced from mines, which they can then sell on to buyers in mainland China.
As a result, Beijing “is locking in long-term access to the substantial ore reserves that its domestic mineral processing firms and battery production firms require”, the AidData report says.
A challenge to the western world
China’s long-term strategic approach has led to a situation where the western world is highly reliant on Chinese imports for industrial processes – a growing concern at government level, particularly in the US.
In the US, China currently meets more than 50% of demand for a group of 24 critical minerals and more than 90% for rare earth metals, according to a report published by a US government select committee in December last year.
Yet these flows are under threat. The gradual escalation of political tension between the US and China has caused ripples in the critical minerals market, with China issuing export controls or licensing requirements on numerous materials, including gallium, germanium, antimony, graphite and tungsten.
The US is pursuing plans to source alternative sources of supply – while also growing its domestic industrial base, one of the central tenets of Donald Trump’s presidency. Efforts to diversify supply chains are also underway across Europe, as well as in political allies such as Australia and South Korea.
However, those ambitions face a major obstacle: securing financing for overseas mining projects that can compete with the hefty backing already on offer from Chinese state-owned enterprises.
Washington, DC-based research organisation Safe, which specialises in supply chain policy and US economic security, estimates that by 2030, more than US$30bn in investment will be required to meet US and allied countries’ demand for critical minerals.
But according to the US, competing on a level playing field is far from straightforward.
China “deliberately manipulates the market to maintain its dominance and weaponises supply chains for its strategic advantage”, the US select committee report says.
“It uses price controls, vertical integration and substantial barriers to entry to preclude competition from resilient, US-led supply chains.”
Safe says China’s “systematic market distortions… fundamentally alter critical minerals project economics” by lowering prices, encouraging volatility and controlling chokepoints.
“These factors allow state-owned enterprises to operate, often at a loss, in high-risk areas and offer artificially low prices for raw and processed critical minerals through employing low labor, environmental, and human rights standards,” it says in a report published in January.
For western commercial banks, providing financing for mining projects in this economic environment can be a high-risk endeavour, says Yann Ropers, global head of natural resources at Deutsche Bank.
“For mines or deposits outside of the Chinese sphere of influence, if you’re not well positioned on the cost curve, execution risk is certainly an issue,” Ropers tells GTR. “That has been seen in the nickel markets, for instance.”
By nature, mining projects typically take several years to reach maturity, and so require long-tenor facilities. But volatile or unpredictable pricing makes that prospect a challenge for lenders.
“Many metals critical for the energy transition are actually oversupplied at the moment, meaning prices are quite low, like with lithium for instance,” Ropers says.
“That means when you look at new deposits financing, you need to assume a much higher price than the current one. It’s a bit of a headache to find the right assumptions under which we can lend to a project, or calibrate risk appetite for mining despite long-term demand growth expected from the energy transition.”
A new era for export finance
Faced with an increasingly urgent need to secure long-term critical mineral supply and aware of the barriers faced by commercial lenders and investors, western governments are leaning more heavily on ECAs as a tool for mobilising private capital while mitigating risk.
ECAs have long been involved in financing critical mineral projects, particularly in the Asia Pacific region, but in the western world, a growing number of initiatives are underway to deploy ECA support in innovative ways.
Increasingly, ECA-backed facilities are being structured not around a domestic firm’s export potential but rather to secure imports. Support is now being extended to companies with off-take agreements for materials sourced from overseas mines.
The Export-Import Bank of the United States (US Exim) announced in January the launch of its Supply Chain Resilience Initiative, described as a “bold new financing tool” to support domestic manufacturers.
US Exim says the initiative is a departure from its typical modus operandi, whereby financing is linked to US exports of goods and services.
“Here, Exim’s financing is tied to our import authority and the financed amount depends on the amount of the off-take contract between the foreign project and the US importer,” it says.
Crucially, support is available only if the project is not owned or controlled by Chinese entities, and does not already have a “significant” number of Chinese customers.
Across the Atlantic, UK Export Finance (UKEF) has also announced measures to support critical mineral imports. Under a scheme unveiled in October, companies supplying the UK can apply for a special credit guarantee in order to help access financing from commercial lenders.
Speaking to GTR on the sidelines of UKEF’s annual trade and export finance forum in February, chief executive Tim Reid said the initiative is providing support “not on the basis of UK content in the project, but in terms of UK off-take of critical minerals”.
“It’s one step removed,” he said. “The export link is that many of these critical minerals are working their way into the supply chain, not for products that are getting made just for the UK market, but for the export market.”
ECAs from all over the world are also increasingly looking to respond to the threat from China by collaborating with each other.
In September, the Minerals Security Partnership – a coalition of 14 countries including all G7 states, Australia, India and South Korea as well as the European Union – said it would launch a finance network incorporating domestic ECAs as well as development finance institutions.
Kurt Campbell, US Deputy Secretary of State, told attendees at a launch event in New York that “financing is the essential, missing and necessary ingredient” in tackling lagging investment and over-reliance on China.
The project, led by the US government in partnership with Safe, is the largest joint effort between ECAs in the critical minerals sector.
Abigail Hunter, executive director of Safe’s Center for Critical Minerals Strategy, says a collaborative approach between agencies in like-minded countries has significant potential to bridge financing gaps in mining projects.
“By leveraging a combination of debt and equity tools and engaging in co-financing arrangements, these agencies can enhance regional, technical and due diligence expertise while sharing best practices to improve execution speed,” she tells GTR.
Hunter notes that China’s cost-of-capital advantage “undeniably makes its financing attractive to countries in Africa and Latin America”.
“However, offering competing capital from western markets allows host countries to secure better terms and reduce reliance on a single player,” she says.
“While western governments and private sectors may not match China’s low-cost financing, they offer distinct advantages: high standards, rigorous due diligence and a stronger likelihood of operational success.”
Werner Schmidt, Deutsche Bank’s global co-head of structured trade and export finance, says collaboration is particularly helpful for more complex projects.
“Different ECAs offer a wide range of tied and untied products that can help support supply chains within a project or strategic commodity inflows, closely aligned with their respective governments’ policies,” he tells GTR.
“And if there is a long-term ambition to make Europe more independent from other regions of the world, I believe there will be a whole lot of collaboration and alignment needed across different ECAs. There is an understanding that one country cannot succeed on its own.”
Limitations and leadership
The Minerals Security Partnership has had some success in supporting projects, even before the launch of its financing network.
The Safe report lists 13 projects that have been announced publicly across Australia, Angola, Canada, Czechia, DR Congo, Mozambique, Tanzania, the UK, the US and Zambia, with a particular focus on germanium, gallium and graphite.
But an approach incorporating multiple ECAs, development finance institutions and commercial lenders remains a tall order.
“Significant challenges remain, including differing risk appetites, mandates and operational capacities,” says Safe’s Hunter.
“Achieving meaningful collaboration requires clear leadership – someone must take on the majority risk and structure the deal in a way that others can follow. Without this coordination, the full potential of such partnerships may remain untapped.”
Some of these obstacles exist at the national level.
One of Safe’s findings in its January report highlighted a structural challenge within US Exim’s charter: the full value of a co-financed project counts towards its portfolio limit, even when other ECAs share the financing burden.
This means it risks hitting its ceiling quicker and “making it unattractive to partner with other ECAs to finance critical minerals projects”, it says.
There are wider barriers too. Safe notes that many projects are not mature enough to meet the requirement for ECA financing, yet lack the access to capital needed to reach that stage.
And although ECAs can help de-risk a transaction, banks seeking agency support will still need to make a thorough assessment of a project’s longer-term performance risk.
Deutsche Bank’s Schmidt says: “If there is a feasible project but there is not enough liquidity for purely commercial financing solutions, or very long tenors required, export finance can come in with solutions to fill the gap.
“However, if the project is something we wouldn’t normally touch because of risk concerns, ECA cover does not help. Typically, ECAs would require that we only introduce projects that are commercially feasible but where they may help to bridge the gap in terms of providing additional liquidity or tenor.
“Ultimately ECA schemes are support instruments and not a subsidy.”
And China’s strategy goes far beyond low-cost, state-backed financing for critical minerals.
Its influence stems from bringing other benefits to borrowers; Safe’s Hunter says its ability to “bundle mining investments with large-scale infrastructure through the Belt and Road Initiative” has made its facilities highly attractive to developing market borrowers.
Ropers of Deutsche Bank says this approach means China has been “extremely consistent in securing oil, gas and agri commodities as well”.
“They have been able to undercut in terms of pricing, but they have provided the full package to the various countries they’ve invested in, and that goes beyond the question of ECA involvement,” he says.
“ECAs are great facilitators, and it’s great to see them stepping into this sector, to make Europe more competitive.
“However, the European Union and member countries need to define strategic priorities, gear support instruments – such as ECA schemes – towards such priorities, and lay out expectations and provide incentives to attract capital and liquidity from the financial sector.”
