Chinese Equity Market Momentum Post-Golden Week 2025: Rare-Earth Policy Shifts and Investor Sentiment

China's rare-earth policy shifts in 2025 have reshaped global supply chains and equity market dynamics, with profound implications for investor sentiment. Post-Golden Week 2025, Beijing's strategic tightening of rare-earth controls-from expanding quotas to restricting technology exports-has solidified its dominance in a sector critical to clean energy, defense, and advanced manufacturing. These moves, however, have introduced volatility and geopolitical tensions, creating a complex landscape for investors.

Policy Tightening and Market Reactions

In August 2025, China extended its quota system to include imported rare-earth materials, mandating monthly reporting of supply chain flows to a government platform, as reported in China extends rare-earth controls. This move, coupled with October's export restrictions on rare-earth technologies and military applications, signaled a shift from quantity-based controls to strategic oversight, according to a CNN report. The immediate market response was stark: Hong Kong-listed JL Mag Rare-Earth Co. surged 18%, while mainland-listed China Northern Rare Earth Group (600111) rose 10%, as detailed in Chinese rare-earth stocks surge. By October, these gains had accelerated, with China Northern Rare Earth Group posting a 24% year-to-date increase, driven by praseodymium-neodymium price hikes and reduced input costs, per Rare Earth Stocks 2025.

The centralization of production under two state-owned enterprises further amplified market confidence in large-cap players, as smaller firms struggled with compliance costs, according to Beijing tightens industry control. Meanwhile, global rare-earth prices, such as neodymium oxide, spiked by over 40%, reflecting supply constraints and geopolitical uncertainty, as examined in China's rare-earth export restrictions.

Investor Sentiment and Sector-Specific Impacts

Investor sentiment in the rare-earth sector has been polarized. While domestic producers benefited from policy tailwinds, international firms faced headwinds. For example, U.S.-based MP Materials saw its stock more than double in 2025, but European and Australian peers like Solvay and Lynas Rare Earths faced prolonged supply chain disruptions, per a Discovery Alert analysis. The Morgan Stanley A-Share Sentiment Index, which tracks Chinese equity optimism, dipped to 77% in October 2025, reflecting broader concerns over trade tensions and deflationary pressures in a Morgan Stanley report.

The defense and semiconductor sectors were particularly vulnerable. China's ban on export licenses for rare-earth materials used in radar systems and sub-14nm chips forced global manufacturers to seek alternatives, with U.S. automakers like Tesla accelerating investments in recycling technologies, as reported in a NYT report. This shift underscored the sector's strategic value, with rare-earth equities increasingly viewed as a hedge against geopolitical risk-a role traditionally held by gold or Treasuries, according to a CFA Institute blog.

Geopolitical Leverage and Market Uncertainty

China's rare-earth policies have become a tool in trade negotiations, particularly with the U.S. The timing of October 2025 restrictions, ahead of a potential Trump-Xi summit, highlighted Beijing's intent to leverage its 90% dominance in rare-earth processing, as noted in a CNBC report. While a June 2025 trade agreement temporarily eased tensions-sparking a 158% surge in rare-earth magnet exports to the U.S.-the underlying strategic competition persists, as noted in analyses by Discovery Alert.

This geopolitical chess game has created a dual narrative for investors: short-term volatility from policy shifts versus long-term opportunities in supply chain diversification. For instance, the U.S. Department of Defense's $439 million investment in domestic rare-earth processing reflects a broader trend of de-risking, though capacity gaps remain, according to a BISI report.

Conclusion: Navigating the New Normal

The post-Golden Week 2025 equity market landscape is defined by a delicate balance between policy-driven optimism and geopolitical caution. While China's rare-earth sector offers compelling growth prospects for state-backed firms, global investors must navigate supply chain fragility and regulatory opacity. The key takeaway is clear: rare-earth equities are no longer a niche play but a critical component of portfolios hedging against strategic resource nationalism.

As Beijing continues to refine its control over the sector, the focus for investors will shift from speculative bets to fundamentals-companies with robust compliance frameworks, diversified supply chains, and partnerships in recycling or alternative material R&D will likely outperform. In this new era of resource geopolitics, adaptability is the ultimate competitive advantage.