Beijing Hints at Restrictions on Rare Earth Exports: An Intangible Battle

Beijing Hints at Restrictions on Rare Earth Exports: An Intangible Battle

Beijing Hints at Restrictions on Rare Earth Exports

An Intangible Battle

Beijing is set to restrict the export of rare earth to the United States. Definitively, a rare earth element is a set of 17 chemical elements widely used in high-tech devices including computer memory, rechargeable batteries and mobile phones.

The National Development and Reform Commission of China (China’s top state economy planner) On May 28 responded positively to the related issues of the rare earth industry. It said that if the rare earth products exported by China are used to curb the development of China, the Chinese people will remain “unhappy” at large. A senior official from this department told the Xinhua news agency (China’s national-run news agency) that Beijing would give domestic demand priority for rare earth, as opposed to meeting the demand from other countries.

Although the official at China’s national development planner did not answer as to whether or not Beijing would restrict rare earth exports to the United States,  the People’s Daily (a publication of the central committee of the Chinese Communist Party) issued a statement the following day, insinuating that the Chinese people will never agree to the United States use of China’s rare earth products to curb China’s development.

The article was published nine days after Xi Jinping visited the rare earth enterprises in Jiangxi. President Xi Jinping visited the plant accompanied by his chief trade negotiator Liu He, adding suspicion that the strategic materials could be weaponised in the US-China tit-for-tat trade war.

It is suspected that Beijing officially announced the opening of a rare earth war. The rare Chinese old saying of “don’t say I didn’t warn you” was used by this newspaper in 1962 before China went to war with India and was made in address in more recent times.

Global Times editor-in-chief Hu Xijin commented, “Based on what I know, China is seriously considering restricting rare earth exports to the US … China may also take other countermeasures in the future.”

China’s Trump card in the Trade War

After Beijing announced a countermeasure against tariffs on the United States, Trump made another heavy punch on Chinese telecom giant Huawei by putting the company in the US national security list. British chip design company Arm, Google and other more than 20% of US technology firms have announced that they will stop trading with Huawei.

According to Jin Canrong, all electronic circuits need non-ferrous metals. The raw materials for non-ferrous metals are rare earths. China’s rare earth production currently accounts for 95% of the world’s total output.

Jin Canrong, the deputy dean of International Studies School at Renmin University of China, said that China has three trump cards to defeat the United States in the trade war. One of them is to cut off the rare earth exports to the United States. The other two are selling US Treasury bonds and restricting American companies in China.

China accounted for 80 percent of rare earth imports in recent years by the United States. Beijing has raised tariffs on imports of US rare earth metal ores from 10 per cent to 25 percent effective from June 1, making the US  less economical to process the raw material in China.

China’s rare earth market is dominated by several major producers, including China Northern Rare Earth Group,  Xiamen Tungsten, Minmetals Rare Earth and Chinalco Rare Earth & Metals.

It halted exports to Japan after a maritime dispute in 2010, disrupting supply lines for major manufacturers like Toyota and Panasonic, although the consequent spike in prices of rare earths saw a flurry of activity to secure supplies in the rest of the world, which would be the risk again if Beijing follows through its threat of retaliation.

The US is preparing for the Rare Earths restriction in advance

In fact, the US began strategically accumulating rare earth elements and using rare earth elements as early as 2010 when China used rare earth as a weapon against Japan. At present, only the Mountain Pass rare earth mine in California excavates rare earths in the United States, but due to environmental protection, the annual output of 50,000 tons of rare earths is shipped to China for processing.

In order to further reduce the dependence on China’s rare earths, Lynas Corp Ltd(ASX: LYC) has signed a memorandum of understanding with rare metals from Blue Line Corp to set a joint venture in Texas.

In essence, the US Senate has passed a bill to give support to domestic rare earth production. A number of waste recycling companies in the US are also actively developing new technologies in an attempt to more efficiently recycle rare earth metals from used products.

By Frank Zhang

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