Peter Lee recently penned an interesting article in the Asia Times. There has been a lot of posturing and false reports about China’s use of rare earth ban as political leverage against Japan – and maybe even against the U.S. and the E.U. Despite the hot air, none of these reports have been substantiated and most are probably media reports (i.e. propaganda) planted by politically savvy parties.
Japan in particular appears to be deliberately distorting China’s legitimate export control of rare earth starting some 5 years ago to be some sort of new global economic weapon. The truth, as Peter details, is that China is not a cartel on rare earth. Due to market failures of one sort of another, China’s rare earth industry was fragmented into defenseless small operations a decade ago. The structural weakness of the industry has allowed the International Community to exploit China’s rare earth resources over the last decade. Japan may have hoarded 20 years so of supply on the cheap. At the rate the world is pillaging China’s rare earth resources, China may not have any left in a decade. In light of the exploitation, and to conserve China’s rare earth resources, the Chinese government has been steadily (and legally and legitimately) limiting, since at least 2006, the amount of materials that can be exported.
I hear a lot about how the U.S. and others are now going to search around the world for alternative sources of rare earth materials. In my opinion, that cannot come too early! The sooner the International Community weans itself from leaching off China’s rare earth, the sooner we can have better balance in our consumption of rare earth materials.
YinYang says
@Allen,
Indeed, I think there is a lot of propaganda over this issue.
Dan Harris over at the ChinaLawBlog.com has written a while back about China had already planned to scale back the export of these materials too.
“China’s Rare Earths. We Called This One“
jiang says
Of courese, all the countries who desire the rare very much want to stand out and make some sort of bulllock lecture to critize the country, like china, who possess the rare and make them stand in the middle of stage of world and let it as a fault-maker of the human. All the human being knows
xian says
I tend to disregard Peter Lee for his sensationalist and combative tone, I’m surprised Asia Times still lets him write for them. I think “pillaging” and “exploitation” is kind of an overstatement. Buying rare earths from China is a legitimate deal agreed upon by both parties, a poor deal is still a deal, there’s nothing unfair about it. Japan’s stockpiling of rare earths is…. perfectly standard for any nation to hoard things they don’t have, I wouldn’t think much of them if they didn’t have simple foresight.
That being said, rare earth mining is dirty, and not terribly profitable (which is why developed nations don’t mine them). With China’s economic rise it is perfectly natural to cut back on this sector, although the announcement being made right after the Diaoyu island fiasco is probably not a coincidence. As for reporting, well Beijing is obviously not going to come out and announce an embargo. I believe some strings may have been pulled to restrict certain exports, but without an official declaration, everything can be muddled or denied. It is actually very effective realpolitik, and I support all these measures.
Allen says
@xian,
I don’t necessarily disagree with your comment. But I’m curious, do you think we at HH have been “sensationalistic and combative”? (It’s a legit question: while I personally like to rant, I also want what we write to be balanced, insightful, and eventually influential).
xian says
@Allen
No, you guys are alright by me
Allen says
Ok.
Just want to clarify for the record: by my not necessarily disagreeing with xian #3, I meant that I do not necessarily disagree that what is happening to China with regard to rare earth is not necessarily exploitation, but may be merely mercantilism.
Nevertheless, I want to stress: just because something is an expected norm under a mercantilism or capitalism regime does not mean it’s necessarily not exploitive.
As for Peter Lee. I personally think Peter Lee provides a good balance at Asia Times. There is a distinct lack of Chinese perspective presented there. Lots of Indian propaganda … that I would agree.
xian says
@Allen
Yeah, I’ve noticed quite a bit of Indian bias there too, after all ATimes is a SE Asian publication. Although I’m not sure it’d be balanced out by another polarized opinion. I find Francesco Sisci to be the fairest when it comes to China articles.
Regarding exploitation, well I dunno. It’s kinda in the same vein as Western criticism when they say Beijing exploits its own people with cheap labor. It is normal for developing countries to grow with cheap exports, be it labor or resources. I guess whether or not that’s exploitation depends on the observer’s definition.
Allen says
@xian,
This is a difficult question for me, I do admit. I tend to view exploitation by the totality of the circumstances – independent and separate from whether something is legal – part of capitalism or mercantilism.
Is capitalism inherently exploitive? Is globalization inherently exploitive? Have global companies been exploitive? Is the WTO exploitive? Is the Chinese gov’t exploitive of its people – or at least complacent in the West’s exploitation of its own people? (note: of all the profits made in the globalized economy, it is the international companies that reap by far the most of the profit, with only barely above-subsidence profit reaching the people / working class…)
These are food for thought….
I generally do like Francesco Sisci. But more recently (the last few months), he has been a huge let down.
r v says
I find this whole episode ironic.
Wasn’t the West complain even now that China is subsidizing its industries too much and doing too much dumping on the world market.
So now China cuts down its cheap “rare earth elements”, and every one still cries foul.
You know, I’m against extreme policies, but the heck with it. I support China’s cutting of export quota on rare Earth elements.
In fact, I wish China to limit all exports to the any country who complains.
Don’t want cheap Chinese goods in Walmart? Fine, go buy a $100 domestic made toilet seat.
TonyP4 says
China has the right to reduce rare earth export to its advantage, just like OPEC controlling oil. China has been giving a free ride to the world at the expense of its environment.
China uses it as a weapon against the dispute with Japan and/or other countries. Despite the mutually beneficial trade, Japan has been brutal to China in the last 250 years. The role in Opium Wars and the criminal acts in WW2 are just some examples. The two A-bombs should be dropped on the imperial palace, not for the innocent folks.
With the restriction of importing weapons from US, should China do the same in restricting the rare earth that helps US weapons?
Rare earth is available in many parts of the world. They are not mined due to the cost and the environment damages. It is about time China cares about its own environment and charges its minerals as much as the market can bear – it is a free market after all.
All the companies in mining these minerals will enjoy appreciation in the short term. However, it is the riskiest investment by now as we do not know what is the next move by China.
Chinese want to use this strategy to improve foreign investment. WTO cannot accuse China in limiting export of these rare earths as there is no such precedent.
China will and should charge these rare earths at 10% below the closest competitors. If they are more than 10% less, the local governments will step in to protect their industries and/or take actions.