China and Malaysia Reportedly in Talks for Rare Earth Refining Project

China and Malaysia are engaged in early discussions regarding a rare earth processing project, with Malaysia’s sovereign wealth fund, Khazanah Nasional, likely to partner with a Chinese state-owned enterprise to build a refining plant in Malaysia.

Sources say China is prepared to offer its technology in exchange for access to Malaysia’s untapped rare earth reserves, aiming to curb competition from Australian rival Lynas Rare Earths, which operates a processing plant in Pahang, central Malaysia.

The plan faces several hurdles, including China’s concerns about whether Malaysia can supply sufficient raw materials for the plant and Malaysia’s worries about potential environmental impacts and regulatory challenges, as mining activities typically require approvals from both state and federal authorities.

Malaysia has stated it does not support rare earth mining in sensitive areas like permanent forest reserves and water catchments.

According to Malaysian government estimates, the country holds approximately 16.1 million tonnes of rare earth deposits but lacks the technology for extraction and processing.

The government bans companies from exporting rare earth raw materials to prevent resource depletion, with the sole exception being a pilot mining project approved in 2022 to help establish national guidelines for rare earth mining operations and licensing.