The Power of Withholding: Rare Earth Quotas and Informational Statecraft in China

Abstract Why would Beijing abandon three decades of transparent rare earth quota announcements and switch to nondisclosure? This paper argues that withholding information, rather than reducing supply, has become China’s preferred way to manage its dominant role in the rare earth industry. We develop a signaling model in which nondisclosure itself creates coercive leverage: by hiding quotas, Beijing forces foreign governments and companies to view uncertainty as a worst-case scenario, leading to precautionary stockpiling, diversification, and industrial policies, even without explicit restrictions. This results in a pooling equilibrium, where both strong and weak types of China use opacity, and outsiders respond as if China is strong. Empirically, the study creates a new dataset of quota announcements from 1990 to 2025, showing how nondisclosure has been linked to price swings, precautionary stockpiling, and policy actions in the U.S., Europe, and Japan. The contribution is threefold: it broadens signaling theory by demonstrating how silence functions as a strategic signal, explores the market effects of opacity, and situates China’s rare earth strategy within the broader context of U.S.–China economic and technological competition.