China, along with Malaysia, is in early talks for a project in order to process rare earths, with sovereign wealth fund Khazanah Nasional most likely to partner with a Chinese state-owned firm so as to build a refinery that will be located in the Southeast Asian nation.
If, in case, the joint venture takes shape, it is going to represent a major policy departure for China, which happens to be the top supplier and refiner of rare earths in the world, which has gone on to ban export when it comes to its processing technology in order to protect its industry dominance.
Beijing is prepared to swap its technology so as to access untapped rare earths reserves of Malaysia, looking forward to limiting the competition from Lynas Rare Earths, the Australian rival, which has a processing plant located in the central state of Pahang, as reported by Reuters on October 2, 2025.
Hisham Hamdan, Khazanah’s chief investment officer, did not confirm the talks or plans for the proposed refinery, stating that it is way too early; however, he did acknowledge that rare earths happen to be among the industries that are getting explored by the fund.
He told Reuters in an interview on October 2, 2025, in Singapore that they do many studies on industries, and it is something they are indeed quite happy to explore and help the government with; however, it’s at the government level, so, as per him, that’s as much as they can talk of.
The State Council Information Office of China, which takes care of media queries on behalf of the government, did not respond immediately to a Reuters request for comment because of the National Day holiday.
Sources say that there are roadblocks ahead
One of the Malaysian sources said that the plan did face many roadblocks, such as concern from China about whether Malaysia will be able to supply enough raw material needed for the plant.
Two of the sources confirmed that Malaysia was also concerned about the potential environmental impact along with regulatory hurdles, as the mining activities typically go on to need approvals and licensing from state as well as federal government authorities.
Malaysia confirmed that it did not support the rare earths mining when it came to sensitive locations like permanent forest reserves along with water catchment areas.
There are indeed global manufacturers who are actually scrambling so as to secure alternative supplies of rare earths, after export curbs by Beijing in 2025 led to output delays when it came to major automakers as well as magnet producers.
It is well to be noted that Malaysia happens to have almost 16.1 million metric tons of rare earths deposits, as per the government estimates; however, it lacks the technology to mine as well as process them.
It has also gone on to ban companies from exporting raw rare earths in order to prevent loss of resources.
The only exception was granted in 2022 to one of the pilot mining projects that aimed at helping to set national operating as well as licensing guidelines when it came to extraction of the rare earths.
Lynas, from Australia, which is the largest rare earths producer in the world outside China, has inked a deal in May 2025 with Kelantan, an eastern state of Malaysia, for a future supply when it comes to mixed rare earths carbonate, which is indeed seen as an effort to develop the local industry.
A refinery that is going to handle both types
It is worth noting that the proposed refinery is anticipated to process both light and heavy rare earths, two of the Malaysian sources said. These elements happen to be quite critical to the manufacturing of products, right from cars and mobile phones to even military equipment.
Apparently, heavy rare earths metals, which are used widely when it comes to the development of clean technology, happen to be less common, and some elements face shortages due to high demand.
It was in August 2025 that Malaysia’s minister for natural resources, Johari Abdul Ghani, remarked that China was prepared to offer technical as well as technological assistance when it came to process rare earths.
But President Xi Jinping had asked to limit the cooperation efforts to the state-linked companies in order to protect the trade secrets, the minister said, adding that discussions still happen to be in the preliminary stages and that no deal had been reached.
A successful deal is indeed going to make Malaysia one of the very few countries in the world with both Chinese as well as non-Chinese rare earths processing tech, said the minister.