China, Malaysia in Early Talks on Rare-Earth Refinery

China and Malaysia are holding early discussions to create a joint rare-earth processing refinery in Malaysia, with sovereign fund Khazanah Nasional likely to partner a Chinese state-owned firm.

Beijing is reportedly willing to provide processing technology—a marked policy shift from past restrictions—in exchange for access to Malaysia's untapped rare-earth deposits, a move aimed in part at checking competition from Australia’s Lynas. The proposed facility would handle both light and heavy rare earths, producing intermediates such as mixed rare-earth carbonates used by manufacturers of electric motors, magnets and electronics.

Sources warn the plan faces hurdles: concerns over whether Malaysia can supply sufficient ore, environmental and licensing barriers across federal and state authorities, and Malaysia’s existing ban on raw exports (with a narrow 2022 pilot exception). Malaysia estimates about 16.1 million tonnes of rare-earth resources but lacks large-scale mining and processing capabilities.

Officials say President Xi favors limiting technical cooperation to state-linked entities to protect trade secrets, and Malaysian ministers describe talks as preliminary. If completed, the joint venture would be one of few projects combining Chinese processing know-how with non-Chinese industry participants in Southeast Asia.