The Oil and the Glory

Why is China still hoarding its rare earths?

Is China still sore over the humiliation of tuna fisherman Zhang Qixiong? Is it China’s 32 rare-earth metals exporters — are they, as Chinese Commerce Minister Chen Deming suggests, so wound up over Japan in general that they have decided collectively to strangle Japan’s electronics and hybrid-car industries, as Keith Bradsher and Edward Wong report ...

Herry Lawford via Flickr
Herry Lawford via Flickr

Is China still sore over the humiliation of tuna fisherman Zhang Qixiong? Is it China’s 32 rare-earth metals exporters — are they, as Chinese Commerce Minister Chen Deming suggests, so wound up over Japan in general that they have decided collectively to strangle Japan’s electronics and hybrid-car industries, as Keith Bradsher and Edward Wong report at the New York Times?

China’s ban on the export of the 17 so-called rare-earth metals — indispensable as of now in the manufacture of high-tech products like wind turbines, advanced batteries and flat-screen TVs — has now passed three weeks in length. Chinese Prime Minister Wen Jiabao says this isn’t political: Beijing, he says, isn’t attempting to demonstrate its dominance over Japan. That sounds right. Instead, this looks like standard economics.

What hasn’t received much attention is that, while no rare-earth metals have gone — at least legally — to Japan since Sept. 21, China has continued to freely export finished products such as advanced magnets in which rare-earths are embedded.

Beijing Review has an interesting interview with Lin Donglu, of the Chinese Society of Rare Earths, and Wang Hongqian, of China’s Foreign Engineering and Construction Co. In it, the two men discuss China’s efforts to develop advanced rare-earth industries, and not be simply a raw-materials supplier to the world. They also cite western complaints about China’s hardball incentives for western companies to relocate in China — these companies are facing restrictions on rare earths that they can import, but are offered all the metals they wish, at lower prices, if they move their factories to China.

This may explain the China-Japan rare-earths standoff: Beijing is signaling more forcefully now that, if Japanese companies want broad access to rare earths, they should move to China, or buy their rare-earth components from Chinese companies.

Beijing is telling companies in the rest of the world the same thing: You could be next.

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