China's Rare Earths Gambit: A Power Play to Shape Global Trade

As tensions escalate between China and the United States, Beijing has taken a bold step to reinforce its dominance over the critical minerals that power modern manufacturing. By introducing a system to control the trade of tech products containing trace amounts of Chinese rare earths, China is flexing its economic muscle in a bid to shape the terms of any trade truce. However, this move risks alienating nations it seeks to court, undermining its image as a reliable trading partner and instead casting it as an industrial juggernaut willing to use its chokehold over minerals for leverage.

Key Takeaways:

• China mines and processes much of the world's rare earths, which are essential for everything from computer chips to electric vehicles and fighter jets.
• The new system requires exporters to seek approval from Beijing to sell products or components that include Chinese rare earths or were made with Chinese rare-earths-related equipment.
• Chinese officials claim the rules are meant to prevent the country's rare earths from being used to develop weapons, but they also give Beijing leverage to selectively turn the spigot on or off for political reasons.
• Beijing has been honing export controls as a tool since at least 2017, with President Xi Jinping scheduled to meet with President Trump next week to discuss trade matters.
• The Chinese controls on rare earths have sparked a backlash from countries including the European Union, with trade chief Maros Sefcovic stating that the move "casts a shadow over our relationship."
• The United States is considering putting restrictions on software exports to China in retaliation, a move that would be done with other G7 nations.
• China's export controls may be part of a broader strategy to deter other countries from reducing their reliance on Chinese supply chains, known as "de-risking."
• Experts say that China's move may backfire and undermine efforts to present itself as a reliable trading partner, a defender of globalization, and a viable alternative to the United States as a global leader.

Statistics:

• 170: The number of foreign companies and business groups that met with Chinese Vice Commerce Minister Ling Ji to discuss reassurances over rare earths.
• 100%: The potential tariff increase on Chinese products threatened by the United States.
• 2010: The year in which China cut off shipments of rare earths to Japan.
• 2017: The year in which Chinese officials began honing export controls as a tool.
• 7: The number of countries in the Group of 7 (Britain, Canada, France, Germany, Italy, Japan, and the United States) that have expressed concern over China's rare earths regime.

Sources:

• "The Long Game: China's Grand Strategy to Displace American Order" by Rush Doshi
• Asia Society Policy Institute's Center for China Analysis
• Center for a New American Security
• RAND Corporation
• Xinhua
• Associated Press
• Reuters
• The New York Times