China emphasizes its importance in the rare earths market: what are the rare earths and what is the role of China?

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What are rare earths? Could China cut off its export trade with the United States?

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In 2017, China was responsible for producing around 81% of the entire global supply of rare earths, mainly through its mining facilities in Inner Mongolia.

China holds 36.7% of world reserves.

Australia is the second country in terms of production, with 15% of world production.

During the last year, a trade war between China and the United States was fought with tariffs, bans, arrests, retaliations and various threats.

The US basically accuses Beijing of unfair practices, theft of technological property, forced technology transfer, espionage, imbalance in the trade balance, and various other more or less legitimate reasons.

Many of the accusations against China have been shared by other partner countries, but for geopolitical or more strictly economic reasons it has always been preferred to maintain a soft approach with the Chinese giant, which remains a sort of Eldorado for the foreign companies that manage to access to the local market.

China also is still the factory of the world, although in recent years some productions have been transferred abroad.

But China remains above all the main producer of the so-called rare earths, indispensable for the production of technology.

From 2010 China has constantly reduced the amount of rare earths extracted and ready for export, officially to preserve the limited quantity and to protect the environment.

Beijing over the two following years effectively reduced the amount of materials extracted by closing various mines.

The United States and Japan confronted China in 2012, accusing Beijing of artificially reducing exports.

These restrictions resulted in the weakening of some industrial sectors abroad, and the relocation of operations to China.

The restrictions, however, were not effective as hoped by the Chinese government, as in 2012 new sources became available in other countries such as Vietnam (from 2010), Malaysia, the United States, and Canada.

In the following two years, there was a drastic drop in the price of dysprosium oxide (from $ 994 per kilo in 2011 at $ 265 per kilo in 2014).

In August 2014, the WTO eventually accused China of breaking free trade agreements, forcing the removal of restrictions.

China in January 2015 removed all quota restrictions but did not remove the restriction on export licenses.

We are getting to the present day.

Xi Jinping this week has made two symbolic gestures: he laid a wreath at the monument of the Long March that cemented Mao’s rise to power, and visited a company specializing in rare earth mining in Jiangxi Province, JL Mag Rare-Earth, accompanied by Vice Premier Liu He, who is conducting these rounds of negotiations with the US.

The visit follows the recent inclusion of Huawei in a blacklist.

The Chinese technology giant is a symbol of PRC innovation, also because it was founded by a former engineer of the People’s Liberation Army.

The Ace in the hands of Beijing

The state-owned media Global Times said Xi’s visit had “offered huge support to the critical industry that has been widely viewed as a form of leverage for China in the trade war with the US.”

Previously, Global Times said US demands for rare earth minerals were “an ace in Beijing’s hand.”

“It will take many years if the US wants to rebuild its rare-earth industry and increase its domestic supply to reduce its dependence on China’s minerals.

That’s long enough for China to win a trade war against the US, during which time China’s monopoly on the production of rare earths will help Beijing control the lifeblood of the US high-technology sector.

It will test China’s wisdom in deciding how to fully utilize its advantage in rare earths. ”

The problems of the rare earths are their extraction and their refining, which are from an environmental point of view, devastating.

Rare earths also differ from other resources such as coal or oil, because they do not require a large and constant supply.

Many of the products made with rare earths require a modest quantity.

For this reason, they have also been called “the vitamins of modern technology”.

The United States has large reserves of rare earths and new deposits have been identified in Japan, Southeast Asia, Australia, and Africa.

Some companies like Apple recently begun to innovate how they use rare earths, recycling rare earth materials from old products.

Source: wikipedia, cnn, financial time , global times

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