China remains the United States’ foremost geopolitical competitor in the race for critical minerals. In response, Washington has pursued a dual-track strategy: pairing tariffs and sanctions with an increasingly ambitious effort to build joint industrial development programs alongside like-minded partners. The goal is not merely to compete with Beijing, but to construct a parallel, Western-aligned industrial ecosystem capable of reducing dependence on Chinese supply chains.

Just as crucial has been the effort to scale back China’s influence within the United States’ own industrial base. Here, policymakers point to measurable progress. Policies introduced during President Trump’s first term have significantly curtailed Chinese foreign direct investment in the United States, which fell from roughly $45 billion in 2016–17 to under $5 billion by 2025. That decline reflects a deliberate recalibration of economic exposure in sectors increasingly viewed through a national security lens.

Yet China has shown little inclination to retreat quietly. Even as Washington tightens restrictions, Chinese and China-linked entities have grown more adept at navigating around them. Through opaque corporate structures and indirect investment channels, Beijing continues to insert itself into markets and partnerships designed explicitly to exclude it. These efforts are not driven solely by commercial logic; they reflect a broader strategic imperative to maintain leverage in industries that underpin American military power and technological leadership.

Increasingly, this strategy operates in the shadows. Chinese investors have begun embedding themselves in Western-led projects through intermediary firms based in third countries, complicating efforts to track and limit their influence. One recent example highlights the stakes. As part of its diversification push, Washington has partnered with Korea Zinc, a major South Korean refining company, to develop a critical minerals refinery in Tennessee. The project—supported by U.S. Department of Defense funding alongside private investment—is intended to expand access to refined materials and bolster the resilience of American manufacturing supply chains.

But the partnership is entangled in a corporate struggle. Korea Zinc’s chairman, Yun Birm Choi, has been locked in a dispute with the company’s largest shareholder, the Young Poong Group. Seeking to shore up its own declining business, Young Poong has attempted to assert control over Korea Zinc’s operations—and, by extension, its U.S. partnership. To do so, it has enlisted MBK Partners, a private equity firm, to increase its stake in the company.

That is where concerns deepen. MBK Partners maintains significant exposure to Chinese capital. Notably, China Investment Corporation, Beijing’s sovereign wealth fund, is a limited partner in funds managed by MBK. This connection has already drawn scrutiny in South Korea, where policymakers and industry observers have raised alarms about the firm’s ties. Former clients of Korea Zinc have also expressed concern that, should MBK and Young Poong succeed in gaining control, sensitive manufacturing technologies could be exposed to competitors. The implications for U.S. diversification efforts are clear: a project designed to reduce reliance on China could, paradoxically, reintroduce Chinese influence through the back door.

The urgency of diversification is not theoretical. China currently supplies more than 50 percent of U.S. demand for 21 critical commodities, including rare earth elements, graphite, and gallium. This dominance is reinforced through export restrictions that function as both economic and geopolitical tools. Between 2023 and 2024, Beijing imposed controls on gallium, germanium, graphite, antimony, and magnesium—materials essential to high-tech manufacturing and defense systems. Despite ongoing U.S. efforts to source these materials elsewhere, China retains structural advantages, particularly in the processing of lithium, cobalt, and nickel.

Too often, U.S.-China competition in this domain is framed as a commercial rivalry. In reality, it is far more consequential. Critical minerals underpin advanced weapons systems, power grids, communications networks, and transportation infrastructure. Control over their supply chains is inseparable from national security. The Trump administration’s policies have increasingly reflected this reality, emphasizing the risks posed by foreign entities gaining access to sensitive industrial sectors or disrupting key supply lines.

Washington’s response has taken shape through a more proactive “mine-to-magnet” strategy. This approach combines direct investment, grants, and legislative tools—including the Defense Production Act—with efforts to expand recycling and develop alternative sources. The aim is to address bottlenecks across the entire supply chain, from extraction to processing to final manufacturing.

China, however, has not remained passive. Leveraging its dominance in mining and processing, Beijing has sought to undermine diversification efforts abroad. It has imposed technology controls that restrict Chinese firms from supporting foreign projects, effectively limiting the global diffusion of expertise. At the same time, it has flooded markets with subsidized commodities sold at artificially low prices, making it more difficult for Western projects to attract investment and remain financially viable.

These long-standing tactics are now being reinforced by a subtler approach: the quiet infiltration of emerging partnerships. For the United States, the presence of China-linked actors within ostensibly independent projects represents a strategic vulnerability. Both government officials and private-sector leaders face the difficult task of identifying and excluding such actors without derailing the very partnerships they seek to build.

The risks extend beyond Washington. International partners must also scrutinize their own governance structures for hidden ties to Chinese-affiliated entities. Such connections can trigger secondary sanctions, undermine financing arrangements, and jeopardize insurance coverage. In some cases, they can collapse projects altogether, turning promising ventures into liabilities.

The United States has already placed more than a thousand Chinese firms and individuals on various sanctions lists, underscoring the scale of the challenge. But sanctions alone cannot resolve the deeper issue. What is required is a sustained commitment to transparency, rigorous governance, and strategic vigilance.

The stakes are considerable. If the United States and its allies are to preserve their geopolitical position, protect national security, and build truly independent supply chains, they cannot afford missteps. In a global economy where influence increasingly flows through supply chains rather than borders, even indirect exposure can carry profound consequences.