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  • Executive summary
China/March 25, 2026/3 min read/rhg.com

Minerals, Metals, and Megawatts: How China’s Power Generation Drives Its Industrial Metals Ecosystem | March 2026 | Rhodium Group

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China's rapid expansion of electricity and concentration of upstream materials production has created a strong pro-cyclical environment that is difficult to compete with and almost impossible to replicate. - Rogan Quinn


Source: Report

Executive summary

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  1. Original source (rhg.com)

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Published
March 25, 2026
Read time
3 min read
Progress0%

China’s dominance of electric vehicle and battery manufacturing, along with surging exports of these technologies, are some of the most surprising and well-publicized global economic trends of the 2020s. But the broader consequences of China’s electrification of both power generation and transportation remain underappreciated by global investors and policymakers. These trends have resulted from Beijing’s expansion of cheap electricity, the agglomeration of upstream materials production, and policies that enabled China to develop a dominant position in green technologies, while maintaining its competitive advantage in manufacturing of almost anything with an electric current: In other words, its emergence as an “electro-state.”

China’s focus on self-reliance in industrial development and the investment-driven incentives of local governments have produced pro-cyclical network effects: Power-intensive industries can thrive and become more efficient, while investments in upstream and downstream industries also accelerate. Nowhere is this more apparent than in metals refining, synthesis, and fabrication, which are low-margin, energy- and capital-intensive businesses.

Some of these developments have been unintended, others have been enabled by Beijing’s policy choices. Local government incentives to invest heavily and a financial system granting cheap credit to state-owned enterprises allowed Chinese energy-intensive industries to develop much faster than the growth of domestic downstream demand. With profits limited in China’s domestic markets, excess production is exported.

Policy choices incentivized fully localized industrial clusters regardless of the costs of maintaining them, and central planners then prioritized the expansion of power supply and grid development to facilitate these investments. The self-reinforcing results have created significant barriers to developing alternative supply chains outside of China for several industrial materials and manufacturing processes. The de-risking path for developed economies in critical materials and related technologies is now steeper and longer than anticipated.

This raises new questions for countries prioritizing the development of manufacturing supply chains outside of China. Demand-side policies, including tariffs and other trade barriers, will be necessary to insulate ex-China markets from competition and incentivize new investment. But minimizing reliance upon Chinese inputs will result in higher costs for manufactured goods, creating a collective action problem.

As a result, companies and governments outside of China are faced with more difficult choices of where to benefit from accessing specialized materials, where to compete with Beijing in developing alternative supplies, where to capitalize upon inputs from China, and where to negotiate access to materials with production that remains concentrated in China. Increasingly, those decisions will be based upon tradeoffs between the perceived security benefits of diversification and the availability of power resources to build alternatives. Every country will determine their own cost-benefit calculations based on different perceptions of security risks. This dynamic makes it far more difficult to obtain multilateral agreement in investing in alternative supply chains.

In aggregate, the pro-cyclical network effects that produced China’s electro-state structure uniquely combine metals processing, power resources, and production of advanced manufactured goods in a way that will be almost impossible to fully replicate in any individual market outside of China. This note details how this process unfolded and the implications for companies, financial markets, and global policymakers.

"Alexander Hamilton called it the ancient dollar it was already an established uh uh unit of measure it was already an established currency well before the United States" Brendan Greeley 00:06:55 https://youtu.be/QiX7KmApTtI?si=cdzwMESLY6t…