Rare earths remain 'ace in the hole' in China-US trade war
Source:Global Times Published: 2019/5/29 5:28:38
An official of China's National Development and Reform Commission (NDRC) said on Tuesday that China will not tolerate foreign high-tech products made from rare earths produced in China being used to contain and suppress China's development. "If anyone wants to use the products made from rare earths exported by China to contain and suppress the development of China, I think the people of the old revolutionary base area in the south of Jiangxi Province and the people of China will not be happy," said the official. He made those remarks when asked by reporters if China will use rare earths as a countermeasure against American moves to contain China. Obviously, the response is a strong signal from China to the US.
As the biggest producer of the world's most rare earths, more than 80 percent of the world's annual output, China is the uppermost source of rare earth for Western countries, including the US. About 80 percent of the US rare earth supply is from China. Containing 17 rare metals, rare earths have widespread civil and military uses, such as in cell phones, electric vehicle motors, military jet engines, satellites and laser equipment. That is why rare earths are also known as "industrial catalysts."
Since the US Department of Commerce added Huawei to the "entity list," conjecture quickly spread that China may limit or even stop exporting rare earths to the US. It is believed that if the US increasingly suppresses the development of China, sooner or later, China will use rare earths as a weapon.
China is fully aware of the fact that the global supply chain is exercising its influence over industries of almost every country in the world. If China decides to ban rare earths export to the US, it would produce complex effects, including incurring certain losses on China itself. However, China also clearly knows that the US would suffer greater losses in that situation. Recently, some US media suggested that China's export ban on rare earths would not serve its interests in trade tensions and could even "hurt the country's economy." Those remarks show that the US is deeply worried about China using export bans on rare earth as one of its tactics, which puts pressure on the US.
Despite the existence of rare earth mines in the US, it will take years to complete mining and build up a relatively sound industrial chain. It is also generally believed that the US rare earths inventory can meet its domestic demand only for months. Meantime, compared with other producers like Australia and other US allies, China has great advantages in output and variety. Once China's rare earth supply stops, it will certainly pose a great challenge for the US to face.
Some US media outlets speculated that the US might sub purchase Chinese rare earths from allies, or that China's restriction on rare earths will destroy its reputation as a stable supplier. Such speculation is not logical as the reality is that China-US trade tensions are escalating and China is stepping up its preparations for the challenge. As a powerful country with vast market potential, China has leverage that could impact the global industrial distribution structure.
China does not want to escalate the trade war. However, the US keeps provoking disputes on trade issues. Recently, Washington wielded administrative powers and ordered US companies to suspend business with some Chinese companies, including Huawei, without giving any good reason. In this case, if China does not retaliate against irrational actions by the US, then it is not in line with the basic logic of international relations, nor does it meet expectations of the general public.
Undoubtedly, the US is too powerful to be defeated by one single move. Same with China. It is believed that a prolonged trade war will have an adverse impact on both countries, especially any escalations and non-supply of critical resources. Without being urgently pressed by the US again and again, China has exercised restraint as a preferred choice in coping with trade frictions.
If the trade war continues to escalate, it will definitely trigger a growing chain reaction to global production and consumption. Undoubtedly, the US should be held liable for such a situation because it initiated the trade war, abused international rules, and has put its "America First" policy above international rules and moralities.
An export ban on rare earths is a powerful weapon if used in the China-US trade war. Nevertheless, China will mainly use it for defense. It is not the first choice of China's offensive weaponries. This indicates that China will resolutely defend its core interests and will never bow to pressures exerted by the US. It is sincerely hoped that the US will remain restrained on trade issues and stop upping its stakes ignorantly. Otherwise, the US will see that China has a lot more countermeasures to put to use, and China has the resolution and will to fight to the end.
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