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Nearly every rare-earth magnet in the world is made in China. These small but powerful magnets are critical components in everything from electric motors and wind turbines to guided missiles. Motors that rely on them move robot arms, propel electric cars and turn drone propellers.

On July 10, 2025, the Pentagon bought into MP Materials, which operates a California mine and is building plants that turn its metal into magnets. This was a deal to expand production, not a bailout. Its sales were rising, and its shares had more than doubled in the year before the deal.

Earlier Pentagon awards and contracts had helped pay for separating the metals. This time, $400 million of preferred shares, a ten-year price floor and a guaranteed buyer would help a working company build more of what the country needs.

Almost every time Washington has bought into a company, it was to save it: the banks and railroads of the Depression, Chrysler in 1980, AIG and General Motors during the financial crisis, the airlines in 2020. One deal in the new wave still fits that mold. Intel’s came four weeks after the company reported a $2.9 billion quarterly loss.

Washington has also invested on a large scale to build new industrial capacity. In 1940, fifteen months before Pearl Harbor, it created the Defense Plant Corporation to build factories for a war it had not entered; the factories were built and sold off afterward. In 1980 it set out to establish a synthetic-fuel industry with price guarantees and promised purchases; almost none of the promised fuel came, and Congress shut the program down in 1986.

In May 2015 China's State Council published a plan, Made in China 2025, that named the ten industries the country meant to lead: information technology, robots and machine tools, aircraft, ships, trains, electric cars, power equipment, new materials, medicines and medical devices, and farm machinery. Then the state bought in. Government-backed funds took stakes in private companies by the thousand.

The buildout began before the plan. In its 2022 report, the International Energy Agency counted more than $50 billion invested in new solar manufacturing capacity in China since 2011, ten times Europe’s total. China’s manufacturing strength now spans several industries. In 2025, it made more than four in five of the world’s battery cells.

Mining is only the first step in making a rare-earth magnet. China mined about seven in ten of the world’s rare earths in 2024, but made 94 of every hundred sintered rare-earth magnets. New mines alone cannot supply finished magnets. That also takes processing plants and magnet factories.

From January 2025 through July 30, 2026, Washington had announced thirty-nine deals worth $27.7 billion, by the Council on Foreign Relations’ count, in rare-earth magnets, the minerals under them, chips, quantum computers, nuclear reactors and oil. The tools are the ones in China’s kit: a floor price, a guaranteed buyer and a government shareholder. Those deals do not reproduce China's five-year plans, state-owned enterprises, directed bank lending or the scale of its industrial investment.

The government's 433 million Intel shares came from grant money it had already promised the company and carry no board seat. MP’s floor is $110 a kilogram. When a quarterly benchmark price falls below it, the Pentagon pays the difference for each kilogram of the covered rare-earth material MP produces. That gives investors a more predictable income stream to finance new American production in a market dominated by Chinese supply.

MP expects its combined magnet capacity to reach 10,000 tonnes a year in 2028. Buying a stake takes less time than building the industry around it.

On June 22, 2026, China’s Ministry of Commerce put MP Materials on its own export-control list.

Treasury Secretary Scott Bessent has explicitly linked government stakes to competition with China. Asked about those investments, he told CNBC, “When you are facing a non-market economy like China, then you have to exercise industrial policy.”

China’s manufacturing scale extends well beyond magnets. It accounts for roughly a third of global manufacturing value added, compared with about a sixth for the United States. A 2019 comparison found that China also devoted nearly four times as much of its economy to industrial support.

In quantum computing, Washington is trying to preserve an American lead by helping companies build the factories the industry will need. In May, Commerce proposed $2.0 billion for nine companies, in exchange for minority stakes.

Most of the proposed money would help IBM and GlobalFoundries make quantum chips. IBM’s $1 billion would establish a new subsidiary making superconducting wafers used to build quantum processors. GlobalFoundries’ $375 million would support a foundry serving several competing approaches to quantum computing. The other seven proposed awards target unresolved engineering problems, spreading the investment across technologies whose commercial futures remain uncertain.

These awards would help turn laboratory advances into components that companies can manufacture reliably and at scale. By September 8, GlobalFoundries and four other recipients had signed awards; four, including IBM, still held letters.

Washington’s ownership policy also reaches beyond American factories. On August 31, the White House announced a 35 percent stake for the Pentagon in the parent of North American Blue Energy Partners, which operates Venezuelan oil fields. It said the stake came at no taxpayer cost. The agreement also gives the State Department the right to buy a fifth of the company’s oil production at cost.

Separately, Chevron’s Venezuelan joint ventures plan to invest more than $7 billion over five years, aiming to more than double their oil production.

Washington is becoming a shareholder in industries it considers essential, adopting a form of state investment China has used for years. The shift is worth watching beyond each new deal announcement. It will take years to see whether that backing produces more reliable supply, and whether the companies can sustain it through price swings and changes of government.

Anthony

The Luniter Observatory

Research and educational analysis only — not financial advice. Every investment carries risk.