𝐀 𝐑𝐞𝐟𝐢𝐧𝐞𝐫𝐲 𝐖𝐨𝐫𝐭𝐡 𝐆𝐞𝐭𝐭𝐢𝐧𝐠 𝐑𝐢𝐠𝐡𝐭: 𝐁𝐞𝐭𝐰𝐞𝐞𝐧 𝐚 𝐒𝐭𝐫𝐚𝐭𝐞𝐠𝐢𝐜 “𝐘𝐄𝐒” 𝐚𝐧𝐝 𝐚 𝐋𝐞𝐠𝐚𝐥 “𝐍𝐎𝐓 𝐘𝐄𝐓”
Free Malaysia Today reports that Malaysia and China are exploring a rare-earths refinery on our soil. That is good news—if we are disciplined about facts, law and national interest.
Let’s keep the chemistry to a minimum. Broadly, rare-earth ores fall into two families: hard-rock (bastnäsite, monazite, xenotime) and clay-based laterites (ion-adsorption clays). Malaysia’s policy emphasis and pilots favour the latter, using in-situ leaching, alongside a ban on exporting raw rare-earth materials so value is added at home.
The strategic snag is scale: small number of countries possess know-how, but China dominates separation (refining ore to become elements and commercial rare earth products) at global, commercial scale—especially for the clay-based resources Malaysia prioritises. Hence today’s report: a prospective pathway with Beijing.
I say this with some confidence. I have witnessed, first-hand and without translation, discussions between China's President Xi Jinping and our Prime Minister Dato’ Seri Anwar on critical minerals particularly rare earth—conversations pointing toward a special arrangement aligned with both nations’ strategic interests. A formal carve-out was not expressedly stated, but the direction of travel was clear: find a lawful, and win-win pathway.
China’s 2023 Catalogue of Technologies Prohibited and Restricted from Export (中国禁止出口限制出口技术目录, hereafter to referred to as 'catalogue' ) lists under non-ferrous metallurgy entry 083201J: “稀土的提炼、加工、利用技术,” with control points including “稀土萃取分离工艺技术.” The category is explicitly marked 禁止出口技术 (prohibited export technology)—which means transfers “in any form” (licences, cooperation, services, data packages) cannot be approved.
China’s 2024 Rare Earth Regulation (国务院令第785号) then adds that import/export of related technology, process, and equipment must obey export-control laws. Put together, the default answer to exporting separation know-how is no.
The Export Control Law (2020) defines “controlled items” to include technology and data, and the Dual-Use Items Export Control Regulation (State Council Order 792, in force 1 Dec 2024) makes clear that “export” covers transfers via trade, gifting, exhibition, cooperation, or aid—which in practice can include training, commissioning, remote support and manuals. In short: the law blocks ordinary tech transfer unless Beijing issues a sovereign-level authorisation or amends the catalogue.
In plain terms: the legal reality today is prohibition — but China has already built the legal scaffolding for a sovereign exception. If Beijing wants to green-light a special arrangement with Malaysia, it can do so within its own framework.
𝗪𝗵𝗮𝘁 𝘁𝗵𝗲 𝗙𝗠𝗧 𝗿𝗲𝗽𝗼𝗿𝘁 𝗴𝗲𝘁𝘀 𝗿𝗶𝗴𝗵𝘁—𝗮𝗻𝗱 𝘄𝗵𝗮𝘁 𝗶𝘁 𝗹𝗲𝗮𝘃𝗲𝘀 𝘂𝗻𝘀𝗮𝗶𝗱
The report rightly captures the moment: early-stage talks, with Khazanah in the frame and Chinese state-linked participation—consistent with public signals that Beijing’s help, if any, would be channelled through state actors. But it underplays the crux: without a policy instrument from Beijing, rare earth separation know-how cannot be exported.
That’s not politics; it’s black-letter law. But the politics required to amend their laws and regulations toward a Malaysian carve-out is written all over what they’ve done in the year since the Anwar–Xi bilateral I was honoured to be part of on 7 November 2024.
Don’t get me wrong; by no stretch of anyone’s imagination is Malaysia putting all our rare earth eggs in one Chinese basket. Malaysia has been doing everything possible to engage Europeans, Americans, Koreans, and others—albeit with little to show.
It must be mentioned that Australia’s government has engaged sincerely and consistently at a policy level, but its rare-earth ecosystem is predominantly private-sector led, which limits direct governmental control over corporate decisions. There is no fault to ascribe; it is structural.
By contrast, China as a state actor has both the sincerity and the machinery to place substance on the table, because it controls almost the entire rare earth value chain.
𝗧𝘄𝗼 𝘄𝗼𝗿𝗸𝗮𝗯𝗹𝗲 𝗹𝗮𝗻𝗲𝘀—𝗮𝗻𝗱 𝗮 𝘁𝗵𝗶𝗿𝗱 𝗵𝗲𝗱𝗴𝗲
𝘖𝘱𝘵𝘪𝘰𝘯 𝘈: 𝘉𝘭𝘢𝘤𝘬-𝘣𝘰𝘹 + 𝘧𝘰𝘳𝘦𝘪𝘨𝘯 𝘰𝘱𝘦𝘳𝘢𝘵𝘪𝘰𝘯 (𝘯𝘰 𝘰𝘳 𝘮𝘪𝘯𝘪𝘮𝘢𝘭 𝘥𝘪𝘴𝘤𝘭𝘰𝘴𝘶𝘳𝘦).
Borrow from the ASML model in semiconductors: you may use the machine, but not the know-how. In practice, even servicing and maintenance is licensing-gated. Translated to rare earths, think “equipment + foreign O&M + IP firewalls.”
Caveat: for Chinese rare earth separation, commissioning/training may still constitute a controlled export of technology/services, so this option remains fragile unless China grants an exception.
Russia’s Rosatom nuclear project at Akkuyu, Türkiye is another example: a Build–Own–Operate model where the Russian State Oned Enterprise owns and runs the plant, supplies fuel, and controls sensitive IP, while Türkiye gains the asset and power. A similar BOO-style refinery is structurally feasible—but China’s catalogue still forbids exporting REE separation know-how. Even an Akkuyu analogue would require a legal carve-out.
𝘖𝘱𝘵𝘪𝘰𝘯 𝘉: 𝘚𝘰𝘷𝘦𝘳𝘦𝘪𝘨𝘯-𝘵𝘰-𝘴𝘰𝘷𝘦𝘳𝘦𝘪𝘨𝘯 𝘤𝘢𝘳𝘷𝘦-𝘰𝘶𝘵.
When sensitive tech moves, it usually does so under a sovereign umbrella. See the U.S.–India GE F414 engine co-production, the U.S.–India 123 Agreement on civil nuclear cooperation, or AUKUS, which created AUSTRALIA-UK-US trilateral bespoke legal architecture for naval nuclear propulsion.
For Malaysia–China, the analogue would be a named pilot project with:
(i) a case-specific authorisation or catalogue tweak;
(ii) zero onward transfer of equipment/know-how;
(iii) on-premise compliance monitors;
(iv) data-return/disablement clauses; and
(v) workforce localisation only in non-sensitive roles.
𝘖𝘱𝘵𝘪𝘰𝘯 𝘊: 𝘊𝘰𝘯𝘷𝘪𝘯𝘤𝘦 𝘓𝘺𝘯𝘢𝘴 𝘵𝘰 𝘦𝘹𝘱𝘢𝘯𝘥 𝘪𝘯𝘵𝘰 𝘪𝘰𝘯-𝘢𝘥𝘴𝘰𝘳𝘱𝘵𝘪𝘰𝘯 𝘤𝘭𝘢𝘺𝘴.
Malaysia already hosts Lynas, the world’s largest non-Chinese producer. Asking it to add IAC processing would diversify capability while talks with China mature—subject to AELB and EIA requirements and updated social licence.
Recent licence-condition revisions and clearer regulatory expectations, and the amendment of a key piece of legislation on atomic energy licensing make discussions for diversification more feasible. If the business case stacks up, Malaysia could increase output without additional upstream radioactive residues (as ISL-IAC produces negligible radioactive waste) provided licensing and technical safeguards are met. It’s not a silver bullet, but it’s a hedge we can activate immediately. That's if Lynas is willing and able to invest.
𝗧𝗵𝗲 𝗳𝗲𝗱𝗲𝗿𝗮𝗹–𝘀𝘁𝗮𝘁𝗲 𝗸𝗻𝗼𝘁—𝗮𝗻𝗱 𝗮 𝗻𝗮𝘁𝗶𝗼𝗻𝗮𝗹 𝗮𝗴𝗴𝗿𝗲𝗴𝗮𝘁𝗼𝗿
Let’s be candid: federal ambition without state alignment will stall in courtrooms and state executive councils. A national aggregator—pooling feedstock across states into one negotiating counterparty—remains the cleanest way to deliver scale, discipline environmental practice, and secure the best terms.
But the royalties regime must be convincing. States must receive more and better than under the current race-to-the-bottom model. A redesigned regime would allow states to invest in real enforcement and prospectivity mapping, while the federal level focuses on building markets, attracting technology, and promoting full mine-to-magnet and microchip downstream chains.
Our caucus has argued this for months; the bottleneck is political, not technical.
𝗔 𝗽𝗿𝗮𝗴𝗺𝗮𝘁𝗶𝗰, 𝗠𝗮𝗹𝗮𝘆𝘀𝗶𝗮-𝗳𝗶𝗿𝘀𝘁 𝗿𝗲𝗰𝗼𝗺𝗺𝗲𝗻𝗱𝗮𝘁𝗶𝗼𝗻
Mandate a dual-track negotiation. Track 1: a sovereign pilot with China (Option B), narrow, auditable, and time-bounded. Track 2: a non-Chinese lane (Option C + any other IP, though Lynas is realistically the only option). Malaysia must not be hostage to one gatekeeper.
Codify ring-fenced compliance. Any China-linked plant must have no-onward-transfer clauses, on-prem monitors, data escrow, and automatic suspension for breaches—plus stringent environmental compliance.
Use the national aggregator. States gain revenue certainty and guardrails; the federation gains scale and offtake clarity.
Lock in community dividends. A statutory Rare Earths Community Benefit Fund, funded by a levy on gross revenue (as seen in the Lynas precedent), earmarked for watershed protection, skills, SMEs, and research.
If we do this with clear eyes and steady hands, Malaysia can move from “ore owner” to price-setting processor—without surrendering our laws, our environment, or our leverage. The refinery is not the prize; national capability is. That is the difference between being buffeted by the market, and bending it.
𝐻𝑜𝑤𝑎𝑟𝑑 𝐿𝑒𝑒
𝑀𝑃 𝑓𝑜𝑟 𝐼𝑝𝑜ℎ 𝑇𝑖𝑚𝑜𝑟
𝐶ℎ𝑎𝑖𝑟 𝑜𝑓 𝑀𝑎𝑙𝑎𝑦𝑠𝑖𝑎𝑛 𝑃𝑎𝑟𝑙𝑖𝑎𝑚𝑒𝑛𝑡𝑎𝑟𝑦 𝐶𝑎𝑢𝑐𝑢𝑠 𝑓𝑜𝑟 𝐶𝑟𝑖𝑡𝑖𝑐𝑎𝑙 𝑀𝑖𝑛𝑒𝑟𝑎𝑙𝑠
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