Would outsourcing the dirty production combined with a strategic stockpile of processed materials (and some processing capacity) be a smart solution?

Let China process the materials under normal circumstances, but keep 6 months of processed output on hand in case trade is disrupted (trade disagreement, pandemic, war, etc.).

Six months feels insufficient. You'd want several years, at minimum.

I think there are two ways to effectively mitigate this risk: 1) have mining and manufacturing of your own that covers most of your needs, or 2) balanced trade where you get something critical from another country, but they also get something critical from you (and can't easily get it somewhere else).

(Of course when you have very solid allies, you can relax a bit more and rely on them, but you still have to be prepared for a situation where that ally has a shortage and prioritizes their own use.)

China plans in 5 year increments and actually follows through on that.

Waiting out 6 months of production would be easy. And even the threat of interruption would drastically mess with prices.

> Let China process the materials under normal circumstances, but keep 6 months of processed output on hand in case trade is disrupted (trade disagreement, pandemic, war, etc.)

That's not enough of a leeway when dealing with a country who has active land disputes with 2 countries we have a defense treaty with (Japan, Phillipines) and 1 with whom we have an ambiguous defense commitment (Taiwan).

And even the Chinese government knows that countries like the the US will try to stockpile. Almost all processing, mining, and exporting in China for REEs is managed by SoEs and under close monitoring from state regulators.

This is why the Biden admin initiated the Minerals Security Partnership with Japan, India, and Australia.