[After weeks of thinly veiled threats, Beijing this week openly raised the possibility of withholding rare earths exports to the United States after the Trump administration leveled potentially crippling sanctions against the Chinese telecommunications giant Huawei.]
By
Gerry Shih
 |
|
Miners
are seen at the Bayan Obo mine in Inner Mongolia, China,
on
July 16, 2011. (Reuters)
|
BEIJING
— China is threatening to
play what it believes to be its trump card in the widening trade war with the
United States: rare earths.
China controls about 70 percent of world
supply of these critical elements, which possess magnetic properties and are
required for the manufacture of everything from missile guidance systems to
cellphones to jet engines.
After weeks of thinly veiled threats, Beijing
this week openly raised the possibility of withholding rare earths exports to
the United States after the Trump administration leveled potentially crippling
sanctions against the Chinese telecommunications giant Huawei.
The bilateral moves, taken together, are reinforcing
a sense in both capitals that the world's two largest economies are destined to
unwind a system of mutual economic dependency built over the last three
decades, analysts say.
Trump’s executive order this month abruptly
deprived the Shenzhen company access to operating systems and cutting-edge
semiconductors, prompting China to accelerate efforts to build homegrown
alternatives to Google and Intel.
Likewise, the Chinese threat to cut off
supply of rare earths is encouraging the United States to ramp up domestic
production and source supplies from elsewhere. Although China dominates the
export of rare earths, natural deposits are actually spread around the world,
and some elements are as commonly found as copper.
There are 17 of these elements, with exotic
names like cerium, yttrium and lanthanum, and they are found in magnets, alloys
and fuel cells
Analysts say China’s threat is credible
because it could take years for the United States to ramp up rare earths
production after the domestic industry practically disappeared in the 1990s.
Roughly 80 percent of U.S. imports come from China, according to the United
States Geological Survey.
“A trump card countermeasure would hit hard,
take effect fast, and be something where China has a great say globally —
that's why threatening a rare earths ban makes perfect sense,” said Yao
Xinchao, a professor at the University of International Business and Economics
in Beijing. “There is no way we back down right now, especially considering
that Huawei has fallen victim to U.S. bullying.”
The Department of Defense is now seeking new
federal funds to boost domestic producers and wean off dependence on China,
Reuters reported Thursday.
The comments from Pentagon officials came
shortly after a minister from China’s top economic planning body warned
Washington it would be “unacceptable” for any country to “contain and suppress
China's development using products made by China-exported rare earths.”
The mutual escalations are “a signal to the
rest of the world that you need to reassess your critical supply chains,” said
Fraser Howie, an independent analyst and author of “Red Capitalism.”
The Chinese rare earths threat will likely
only reinforce the position of trade hawks in Washington who argue that “we
need to decouple, we need to unwind 20 or 30 years of global supply chains with
China as the nexus,” Howie said.
China's share of production has fallen from
more than 90 percent a decade ago to about 70 percent today, according to USGS
data.
China used rare earths supply as leverage
once before, in 2010, against Japan during a maritime dispute. Over the past
decade, Australian miners have begun to enter the market, chipping away at
China's dominance.
As of 2018, the top three rare earths
producers were China at 120,000 metric tons, followed by Australia at 20,000
metric tons and the United States at 15,000, USGS figures show.
The drumbeat from Beijing has grown louder —
and clearer — after Chinese leader Xi Jinping was pictured last week on state
television visiting a rare earth production facility in southern China with his
top trade negotiator Liu He.
The People's Daily, the Communist Party's
official mouthpiece, followed up with a stark commentary on rare earths exports
this week that carried a warning for the United States: “Don’t say we didn’t
warn you.”
That commentary surprised China experts
because the People’s Daily, which often signals official positions with subtly
codified language, uses that phrase sparingly: It famously appeared before
China launched border attacks against India in 1962 and Vietnam in 1979.
Despite the bellicose parallels, the recent
commentary did not bear the hallmark of an editorial that was issued from the
highest level of the Communist leadership, noted Bill Bishop, the editor of the
Sinocism newsletter.
Read more:
