Vietnam Between the Rare Earths Ban and Warships in the Strait: Beijing's Analysis of Hanoi's Ambitions

As 2025 draws to a close under a cloud of deep geopolitical uncertainty, Vietnam has emerged as the boldest actor in Southeast Asia, shaking regional balances with a pincer strategy: on one hand, a total ban on rare earth exports, and on the other, an unprecedented dispatch of warships through the Taiwan Strait. While Western capitals view this as the dawn of a new and solid counterweight to Chinese hegemony, observers in Beijing dismiss the initiative as a pure act of "reflexive opportunism." According to the Chinese leadership, Hanoi is attempting to forcibly accelerate the pace of history, seeking to achieve in just five years the industrial and diplomatic primacy that China spent three decades of methodical development to build.

Hanoi’s strategic objective—to transform its 18% share of global rare earth reserves into a diplomatic bargaining chip for U.S. military protection and advanced technology—is seen in Beijing as a high-risk gamble undermined by structural technical vulnerabilities. In this view, Hanoi possesses the mineral resources but still lacks the chemical "brain" required for complex refining, rendering its naval actions in the Strait little more than a symbolic and choreographic gesture to appease Washington. This systemic dependency, combined with the powerful economic levers Beijing holds over Vietnam’s energy supply and component manufacturing, suggests that Hanoi’s industry could be stifled almost instantly should it cross the red line of Chinese tolerance. Unsurprisingly, Asian stock markets already reflect this fear, signaling a dangerous bubble of expectations that the West may not be able to sustain in the long run, confirming that Vietnam’s rise is, for now, more a projection of external desires than a consolidated industrial reality.

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1. Heavy Rare Earths: The Technical Gap (Vietnam vs. China)

A focal point of Beijing's observation is the actual quality of Vietnamese reserves and its capacity to transform them into high-value-added finished products.

• The HREO/LREO Ratio Gap: While Vietnam boasts immense reserves, China notes that the concentration of Heavy Rare Earths (HREO)—such as Dysprosium ($Dy$) and Terbium ($Tb$), vital for high-performance permanent magnets in EVs and defense systems—is limited to 20%. In contrast, China still dominates the market for ionic clay deposits in its southern provinces, which remain the world’s most cost-effective and accessible source of these precious metals.

• The Separation Barrier: Extracting the mineral is useless without the ability to separate oxides to an ultra-high degree of purity. China holds over 90% of global separation capacity. Without access to specific solvents and cascaded extraction sequences patented by Beijing, Vietnam will remain dependent on Chinese refineries or face years of waiting for Western technologies, which are currently experimental or prohibitively expensive.

  
  

2. China’s Concrete Response to the Export Ban

Beijing does not interpret the Vietnamese ban as a threat to its own supply, but as a challenge to the commercial order that it intends to neutralize with pragmatic measures:

• Strategic Dumping: China can utilize its massive stockpiles to artificially lower global prices of refined products, making Western investments in new Vietnamese mines and refineries financially unsustainable.

• Reagent Restrictions: Refining requires specialized chemical reagents of which China is the leading producer. Beijing could restrict the export of these chemicals to Hanoi, paralyzing any attempt at autonomous Vietnamese processing at its inception.

  
  

3. Breaking Points: Beijing’s Economic Levers

For the Chinese leadership, Vietnam's ambition clashes with a reality of almost total infrastructural dependence, which Beijing can activate at any moment:

• The Energy Lever: Many industrial provinces in Northern Vietnam, home to key tech hubs, depend directly on electricity imports from the Chinese power grid. Beijing considers this a "silent lever" capable of moderating Hanoi’s ambitions with the flick of a switch.

• Intermediate Production: Vietnam is essentially an assembly hub. Over 60% of the components used in Vietnamese exports to the United States originate in China. If Beijing were to disrupt the flow of microchips, technical textiles, or mechanical parts, Hanoi’s entire manufacturing sector would grind to a halt.

  
  

4. Asian Markets Reaction: Volatility and Skepticism

The tensions of late 2025 have shaken the markets, revealing how much investors fear Chinese retaliation:

• VSE (Ho Chi Minh City): The index suffered corrections of 4.5% as soon as rumors of possible Chinese energy restrictions surfaced, erasing gains driven by earlier nationalist enthusiasm.

• SSE (Shanghai) and HKEX (Hong Kong): Shares of leading Chinese rare earth companies gained value, as the market bets on Beijing’s ability to maintain price control and benefit from artificial scarcity.

• Nikkei (Tokyo): Japanese investors, the primary financiers of the Vietnamese mining sector, are showing extreme caution over fears that the export ban could violate long-term supply contracts already in place.

  
  

5. Taiwan and Naval "Political Theater"

The dispatch of warships through the Strait is viewed by Beijing as an act of pure imagery. The Vietnamese Navy lacks the long-range air defense systems or power projection capabilities to seriously concern the Chinese fleet. Navigating the Strait while citing "freedom of navigation" is seen as a way to "plant a flag" and justify military subsidies promised by Washington, but not a sign of actual willingness (or capacity) for confrontation.

Towards 2026: Who Will Be Left "Swimming Naked"?

China remains convinced that Hanoi’s rise is built on fragile foundations. As state-aligned media in Beijing have suggested, when the tide of opportunism recedes, Vietnam’s structural dependence on its great northern neighbor will emerge in full force. Only then will it be revealed whether the country has become a truly sovereign power or remained a disposable pawn on the grand chessboard between Beijing and Washington.