China and Malaysia are currently engaged in preliminary negotiations on a joint project for processing rare earth elements, Azernews reports.

Malaysia's sovereign wealth fund, Khazanah Nasional, is expected to become a partner with a Chinese state-owned company in this venture.

According to Reuters, citing anonymous sources,“If this joint venture goes ahead, it would represent a significant policy shift for China, which is both a major supplier and processor of rare earths. Previously, China prohibited the export of recycling technology to maintain its global dominance in this sector.”

It is reported that Beijing is willing to share its advanced processing technology in exchange for access to Malaysia's untapped rare earth reserves. This move is seen as a strategic effort to reduce competition from the Australian company Lynas Rare Earths, which operates a processing plant in Malaysia's Pahang state.

However, sources reveal that the project faces several challenges. The Chinese side is reportedly concerned about whether Malaysia can reliably supply enough raw materials for the plant, while Malaysian officials express worries about potential environmental impacts and regulatory hurdles.

Attempts to obtain official comments from both Malaysian and Chinese authorities were unsuccessful.

If successfully finalized, this agreement could position Malaysia as one of the few countries outside China to possess Chinese rare earth processing technology - a potentially transformative development in the global rare earth industry, critical for the production of electronics, electric vehicles, and renewable energy technologies.

MENAFN03102025000195011045ID1110145075