How Foreign Spies Used the Post to Smuggle China’s Rare Earths: A Covert Threat to National Security
On July 18, 2025, China’s Ministry of State Security (MSS) issued a startling revelation: foreign intelligence agencies have been orchestrating sophisticated schemes to smuggle rare earth elements (REEs) out of the country using the postal system. These critical minerals, often dubbed “industrial gold,” are vital for advanced technologies in military, energy, and consumer electronics sectors. The MSS’s announcement, coupled with a vow to intensify crackdowns, underscores Beijing’s growing alarm over the illicit extraction of its strategic resources. This blog explores the tactics employed by foreign spies, China’s response, and the broader implications for global supply chains and national security.
The Smuggling Operation: Tactics and Deception
China, which mines approximately 70% of the world’s rare earths and processes over 90% of heavy REEs, has long been a target for nations seeking to secure these critical materials. The MSS detailed how foreign espionage agencies, collaborating with domestic operatives, exploited China’s postal and delivery networks to smuggle REEs, bypassing stringent export controls implemented since 2023. The tactics were both creative and covert:
Mislabeling and False Declarations: High-purity REEs, such as dysprosium and terbium, were falsely declared as low-value goods like nickel powder or ferrous alloys. This allowed smugglers to evade detection by customs authorities. In some cases, rare earth powders were labeled as “machinery parts” or concealed in water bottles to further disguise their nature.
Concealment in Ordinary Goods: Smugglers hid REEs within seemingly innocuous items, such as mixing rare earth powders with ceramic tile materials or stashing them inside mannequins. These methods leveraged the complexity of postal inspections to avoid scrutiny.
Transshipment via Third Countries: To obscure the origin of the materials, smugglers routed packages through intermediary countries before reaching their final destinations. This technique, known as transshipment, made it difficult to trace the shipments back to China.
Small-Batch Express Deliveries: Foreign agents used express delivery services to ship small quantities of REEs, reducing the likelihood of detection compared to bulk shipments. This approach capitalized on the high volume of postal traffic to blend illicit packages with legitimate ones.
The MSS claimed that these operations were orchestrated by a foreign nation unable to produce its own rare earths, though no specific country was named. Speculation on platforms like X has pointed to the United States, particularly given recent trade tensions and China’s agreement to review REE export licenses following negotiations with Washington.
China’s Response: A Zero-Tolerance Crackdown
The MSS, in collaboration with other government agencies, has taken decisive action to dismantle these smuggling networks. On July 19, 2025, the Ministry of Commerce announced a “zero-tolerance” approach, vowing to strengthen law enforcement against illegal outflows of strategic minerals. A special operation launched in May 2025 has already led to multiple arrests, though exact figures remain undisclosed.
Key measures include:
Enhanced Export Controls: Since April 2025, China has imposed stricter licensing requirements on seven REEs (samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium) and their magnets, critical for defense, energy, and automotive applications. These controls aim to regulate the flow of REEs and prevent unauthorized exports.
Joint Enforcement Efforts: The MSS and other departments have established a joint enforcement and coordination center to combat smuggling, focusing on dual-use items with civilian and military applications. This includes increased scrutiny of postal and shipping channels.
Public Vigilance Campaigns: The MSS has urged Chinese citizens to report suspicious activities related to REEs, framing the smuggling as a “serious threat to national security.” This follows a broader campaign, including a state television documentary aired in April 2024, to raise awareness about foreign espionage targeting China’s strategic resources.
Strengthened Supply Chain Oversight: In May 2025, China announced plans to tighten control over the entire REE supply chain, from mining to processing, to safeguard its dominance in the global market. This includes cracking down on illegal mines and refining operations, which have historically caused environmental damage.
The MSS’s efforts have reportedly “effectively safeguarded China’s resources and national security,” with several smuggling routes disrupted. However, the ministry emphasized that the situation remains “severe,” with smuggling tactics becoming increasingly covert.
Strategic Importance of Rare Earths
Rare earth elements, a group of 17 minerals including neodymium, dysprosium, and terbium, are essential for advanced technologies such as electric vehicle motors, wind turbines, smartphones, and military equipment like missile guidance systems. China’s dominance—controlling over 80% of global supply—gives it significant leverage in geopolitical and trade disputes.
Beijing has historically used this dominance strategically, imposing export bans or restrictions during tensions with countries like the United States and Japan. For instance, in 2010, China halted REE exports to Japan amid a diplomatic dispute, and in April 2025, it restricted exports of samarium and other heavy REEs in response to U.S. tariffs. These actions have heightened global competition for REEs, prompting nations to seek alternative sources or stockpile materials, sometimes through illicit means.
Geopolitical Context: U.S.-China Trade Tensions
The timing of the MSS’s announcement is significant, coming days after China agreed to review REE export license applications following trade talks with the United States. In return, Washington lifted some restrictions on advanced technologies, including AI chips, raising speculation about a potential broader deal between Presidents Xi Jinping and Donald Trump.
Posts on X and reports from Reuters suggest that the U.S. may have been a target of China’s accusations, particularly after unusually large quantities of antimony—a related strategic mineral—were reportedly transshipped into the U.S. via Thailand and Mexico following China’s export ban. However, without explicit evidence from the MSS, these claims remain speculative.
Environmental and Security Implications
China’s crackdown on REE smuggling is also driven by domestic concerns. Decades of unregulated mining, particularly in Baotou, Inner Mongolia, have left environmental scars, including toxic sludge lakes contaminated with heavy metals and radioactive thorium. These environmental costs, coupled with the strategic value of REEs, have prompted Beijing to tighten oversight and clean up the industry, with cleanup efforts costing billions.
From a security perspective, the smuggling of REEs undermines China’s ability to leverage its mineral dominance in global trade. The MSS’s warnings about espionage reflect broader anxieties about foreign infiltration, as seen in past cases like the 2019 arrest of Zaosong Zheng, a Chinese medical student caught smuggling biological research out of the U.S. Such incidents highlight the global race to control critical resources and technologies.
Global Implications and Future Outlook
The smuggling of REEs poses challenges for global supply chains, particularly for countries like the U.S., Japan, and Australia, which are heavily reliant on Chinese supplies. Efforts to diversify, such as Australia’s Browns Range project, face hurdles due to China’s technical expertise in REE processing, which remains unmatched. Japan’s collaboration with Vietnam and Australia’s Lynas Rare Earths are steps toward reducing dependence, but these initiatives will take years to scale.
For China, the crackdown signals a broader strategy to assert control over its strategic resources amid escalating geopolitical tensions. The MSS’s public disclosures and calls for citizen vigilance suggest a long-term campaign to deter both domestic and foreign actors. However, the increasing sophistication of smuggling tactics, as noted by the Ministry of Commerce, indicates that the battle is far from over.
Conclusion
The discovery of foreign spies using China’s postal system to smuggle rare earths highlights the high-stakes global competition for these critical minerals. By employing tactics like mislabeling, concealment, and transshipment, foreign agents have challenged China’s export controls, prompting a robust response from Beijing. The MSS’s crackdown, coupled with stricter supply chain oversight, underscores China’s determination to protect its “industrial gold” and maintain its strategic edge. As global demand for REEs grows, the interplay of espionage, trade negotiations, and environmental concerns will continue to shape the future of this vital industry.
Sources:
- The Indian Express, July 18, 2025
- The Economic Times, July 18, 2025
- South China Morning Post, July 18, 2025
- Bloomberg, July 18, 2025
- The Economic Times, July 19, 2025
- Report.az, July 18, 2025
- China.org.cn, July 19, 2025
- The Straits Times, July 19, 2025
- Nikkei Asia, July 18, 2025
- X Posts by @globaltimesnews, @Defence_Index, @ChinaDaily, July 18-19, 2025
