【By Observer News, Xiong Chaoran】"Now, with China's control over the rare earth supply chain, it has gained leverage in the trade war with the United States." On August 5, Hong Kong's South China Morning Post reported this view.
The report pointed out that rare earths are used in various fields from automobiles to medical equipment and wind turbines. China controls about 60% of global rare earth mining, more than 85% of rare earth processing, and more than 90% of permanent magnet production, which puts the United States and other Western countries at a disadvantage. Many countries are now striving for supply chain diversification, trying to reduce their reliance on China.
Analysts said that although these countries are pushing forward multilateral efforts, they mainly rely on diplomatic means, and lack the investment or technical expertise needed to escape China's supply. Some experts also pointed out that establishing an alternative supply chain is much more complicated than expected, and even in the long term, Western countries may find it difficult to close the gap with China.
"While the world is struggling to catch up with China's past achievements, China is moving toward tomorrow's technological advances," experts said. China's dominant position in the rare earth field is the result of decades of strategic investment. No country in the Western world can truly achieve diversified commercial applications of rare earths. The scale of this market is too large, and China's leading advantage is simply too big.
Rare earths waiting for export in Lianyungang, Jiangsu, photo by the author
Illaria Mazzocco, Deputy Director of the China Business and Economics Program at the Center for Strategic and International Studies (CSIS), said that the U.S. and other countries have been seeking to diversify rare earth supply for years, but this challenge has always been difficult to overcome. The key issue is that most solutions require long-term planning, while the threat of Chinese export restrictions is imminent.
In addition to finding solutions on its own, the U.S. has also tried to get allies to take other measures to break China's dominance in the rare earth field.
For example, the U.S. led the establishment of the "Mineral Security Partnership" (MSP) in June 2022, also known as the "Metal NATO," which includes 14 partners such as Japan, South Korea, India, the UK, and Australia; in June of this year, the G7 announced a new action plan on critical minerals; and in July, the QUAD launched an initiative aimed at achieving diversification of critical mineral supply chains.
Despite the seemingly strong momentum, analysts believe these efforts may not be sufficient to challenge China's long-standing dominance in the industry.
"Multilateral initiatives such as the G7, QUAD, and MSP are still largely in the diplomatic stage," said Gracelin Baskaran, Director of the CSIS Critical Minerals Security Program.
Hu Xinyue, Senior Analyst at the China Program of the S. Rajaratnam School of International Studies at Nanyang Technological University in Singapore, pointed out that it is unclear whether the MSP is a viable alternative to China's supply, as the partnership has limited investment and lacks technical expertise. She added that environmental issues are a major obstacle for partner countries in rare earth mining or production capacity. In addition, the time required to start and operate a mining project in the U.S. is another obstacle. These projects need to obtain licenses and complete construction before production can begin, which may take as long as 16 years.
The South China Morning Post noted that some developing countries with rare earth resources are now entering the front lines of this rare earth competition, with Chinese and Western investors vying for these resource-rich developing countries.
For example, Vietnam has the second-largest known reserves of rare earths in the world, accounting for 19% of global reserves, second only to China. In 2023, Vietnam signed an agreement with the U.S. to strengthen cooperation on rare earth technology, aiming to enhance the strength of Vietnam's rare earth industry and attract foreign investment. On the other hand, China Rare Earth Group is seeking cooperation opportunities with Vinacomin, the Vietnam Coal and Mineral Industries Group. In the joint statement between China and Vietnam released in April, the two countries mentioned "exploring cooperation on critical minerals under the premise of compliance with each country's laws and regulations and industrial policies."
Additionally, Myanmar is the third largest producer of rare earths in the world, after China and the U.S. The Kachin State in Myanmar has some of the world's largest heavy rare earth mines, and these mines' products are exported to China for processing. Just last week, Reuters cited four informed sources who said that the Trump administration is currently discussing several proposals that could significantly change the U.S.'s long-term policy towards Myanmar, with the core goal being to weaken China's dominant position in the global rare earth supply chain and "cut off" Myanmar's rich heavy rare earth resources from the Chinese supply chain, instead using them for U.S. strategic purposes.
Jonathan Hykawy, President of Stormcrow Capital, a Canadian company specializing in stock research on rare earths, said that China can offer these countries more than the U.S., including its market size and geopolitical stability.
"The current administration of the U.S. president (Trump) seems to be using uncertainty and turmoil as a kind of negotiation strategy, but in the face of uncertainty, it is difficult for all parties to make investment decisions," he said: "The U.S. also makes it harder for other countries to see it as a friend and ally, which opens the door for China to gain international support."
Notably, just as China announced new rules to strengthen export control on certain rare earth-related items, the West continues to hype up the topic, especially exaggerating the "threat" of China's rare earth exports to the Western defense and military sectors.
The Wall Street Journal reported on August 3 that a manufacturer providing drone parts for the U.S. military had to delay orders for up to two months in order to find non-Chinese sources of rare earth magnets.
According to industry insiders, the price of certain materials needed by the U.S. defense industry has now risen to more than five times the level before China introduced restrictions. Some companies have stated that the recent quote for samarium has surged to 60 times its normal price. Samarium is a key material for fighter jet engines. U.S. suppliers and defense executives complain that all of this is increasing the cost of the defense system.
Some comments point out that the shortage of critical minerals highlights the U.S. military's reliance on China in the supply chain. Although U.S. companies have been working for years to find alternative sources for these minerals, some rare elements are too niche for the West to produce in an economically feasible way. Some U.S. companies have warned that if the supply of critical minerals cannot be restored, they will face reduced production.
In fact, China has repeatedly emphasized that rare earth-related items have dual-use attributes, and implementing export controls complies with international practices. At the same time, considering the reasonable needs and concerns of countries in the civilian sector, China has legally approved a certain number of compliant applications for the export of rare earth-related items.
Xinhua News Agency commented that China's goal is "regulating exports" rather than "prohibiting exports," "promoting convenient and compliant trade" rather than cutting off normal commercial exchanges. Instead of falling into anxiety about "de-coupling and breaking the chain" or "strategic weapons," it would be better to focus more energy on understanding and adapting to China's new governance rules, and through sincere dialogue and cooperation, jointly ensure that this key resource continues to contribute to global technological advancement and green transformation within a peaceful and sustainable framework.
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Original: https://www.toutiao.com/article/7535033127501054518/
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