China Intensifies Rare Earth Trade War against USA & Its Allies

Hightlights

• China accuses the US of coercive practices, intensifying the rare earth trade war.
• China’s State controls rare earths with new management regulations.
• China implements traceability systems to monitor the use of exported rare earth materials.

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China’s media alleges the United States and its ecosystem of allies engage in both “coercive and bullying practices” leading China to implement its’ December 2023 export ban of rare earth extraction and separation technologies. According to this particular vantage, partners left out of the U.S. ecosystem are left with no recourse but to further depend on China. Of course, China has all but monopolized the rare earth refining market which its media do not address. The Chinese are doubling down to up the ante, pointing the blame on the United States for “coercive bullying” in the rare earths sector.

Trade War Intensifies

In China already a mixed communist and capitalist economy leans way to the former rather than the latter when it comes to rare earth minerals. For example, as reported in China Daily the State has completely taken over the management of the rare earth markets on behalf of China.

In China there are three layers of national government including the State, the Military and the Party. The State is the bureaucratic function, the different functional administrative agencies and in this case the State Council, China’s Cabinet promulgating the Rare Earths Management Regulations (opens in a new tab) in June. This initiative declared that because rare earths, including rare earths reserves, are State assets, the State controls the systems and processes associated with these rare earths, including, interestingly enough, a product traceability information system to keep track of which industries the importers are using the Chinese products in. In this way China will be able to identify and potentially penalize those that are misaligned with their state-driven mandate.

So, does this mean China is implementing a product traceability information system to keep track of which industries the importers are using the Chinese products in?

Yes.

So as a refresher what are the rare earths that fall under as State assets?

At least the 17 metallic elements are necessary components of more than 200 high-tech products, ranging from defense products such as electronic displays, guidance systems, lasers, and radar and sonar systems, as well as smartphones, computer hard discs, electric vehicles, flat-screen monitors and TV sets as reported in China Daily (opens in a new tab). Importantly China Daily is the publicity arm of the Chinese Communist Party.

China controls about 40 percent of global reserves, while producing about 60 percent and processes nearly 90 percent of the world’s rare earth elements.

What’s China’s other posturing?

The officials running this State-controlled rare earth sector boast of “patented core rare earths extraction and separation technologies, making it the only country capable of separating all the 17 rare earth elements from other minerals on an industrial scale. In short, China is a global rare earths refining hub.”

What else is China accusing the USA of doing?

According to the Communist Party controlled media—and we must be very mindful of that ownership structure and possible biases—China is claiming that the United States continues to interfere more in the functioning rare earths market than China itself. Even though China over the past couple decades invested heavily to essentially monopolize as much of the sector as possible.

For instance, China boasts regardless of the ban on the export of extraction and separation know-how, plus restrictions on rare earths exports, “the supply of the metallic elements in the global market has remained stable, because, unlike the United States, China is not using the restrictive measures as a weapon to target other countries.”

But actually, China has been using its State-controlled programs for a couple decades to completely dominate the sector, and of course this reality does not make its way into the Communist-controlled media.

What is China’s advantage according to its media platform?

The United States, according to this media platform, has not been able to accelerate its research and development sufficiently to catch up with China’s extraction and separation technologies.

How is China positioning itself with low-and-middle-income countries or LMICs?

While Mongolia, India, Vietnam and Malaysia now pounce on the rapidly growing rare earth market, and the potentially disrupted supply chain, China is banking that they will remain in control of the processing and refining, while those previously cited countries focus on exploration and exploitation of rare earths.

So, is China essentially calling out America’s subpar capability to separate, process and refine?

Yes. While the four nations cited above are also under pressure by the U.S, such as Malaysia which Rare Earth Exchanges analyzed yesterday, according to propaganda from the Communist Party “the US can provide these countries with little technological help to extract, separate or process the metallic elements. The countries are also worried about the US imposing sanctions and/or higher tariffs on their goods if they turn to China for solutions.”

Citing Malaysian Minister of Natural Resources and Environmental Sustainability Nik Nazmi bin Nik Ahmad (opens in a new tab) who said on this subject “In processing, mining, a lot of technology is held by China. In many aspects they are the most competitive.”

As Rare Earth Exchanges reported yesterday Malaysia will have a difficult time untangling itself from China economically however there could be huge wins for the nation in the future should they be able to do so.

While Malaysia is trying to hedge its bets working with multiple nations on the rare earth agenda, the Chinese state-controlled media declares the Malaysian side’s latest complaint indicates, it is the US’ coercion and bullying that are preventing the development of several countries’ rare earths industries.

So, does this mean China is tightly controlling any exports of technologies deemed “restrictive” such as separation and refining technology?

Yes. Plus they have developed a system that they claim can trace what countries are using Chinese processed goods where, and in what industry.

Rare Earth Exchanges will continue to monitor this unfolding situation, working to provide as objective and unbiased reporting as possible. We have reported substantial advancements in technology in the West, including America.