China has immense influence in technology supply chains due to the fortunate coincidence that its territories contain most of the rare earths needed to manufacture electronics and batteries and that it dominates industries that make them operational.
China reminded the world of that fact after Australia’s Resources Minister Madeleine King gave a speech on Tuesday, in which she pointed to China’s dominance:
King further noted that China produced 168 kilotons of rare earth oxide equivalent in 2021, while the second largest producer — the US — produced 43 kilotons. China also dominates the rare earth magnets industry, producing 174 kilotons in 2021. The second most productive producer in the world, Japan, controls less than nine percent of the market.
“It is a fact that the scale of Chinese production and demand has played a key role in bringing down the cost of crucial technologies such as solar photovoltaic, batteries and electric motors,” the minister said. “But this level of concentration in the supply chain, regardless of where the concentration points are, creates significant vulnerabilities that have become all too evident in recent years.”
The minister called for diversification of rare earth supply chains. She noted that Australia is accelerating the development of its own sizable deposits and is in discussion with Japan, the United States, the United Kingdom, the European Union, the Republic of Korea, India “and many others” about how to access them.
Speak with BloombergKing added that even with the initiatives outlined above, China will remain the world’s dominant source of all things rare earth.
Beijing took note of King’s speech and remarks, and Foreign Ministry spokesman Zhao Lijian responded by saying, “Critical mineral resource countries must play a positive role in keeping relevant industrial and supply chains safe, secure and stable.”
“No one should use the economy as a political tool or weapon, destabilize global industrial and supply chains, or beat the existing world economic system,” he added, before declaring China will do its part to “make the world economy and international trade stable.” hold and diversify.”
And indeed, China will – as long as it makes sense.
But current Chinese policy has adopted the notion of “dual circulation” – a plan to boost both exports and domestic consumption so the country is less reliant on exports to grow.
There may come a time when China feels it can prioritize local rare earth consumers. Consider electric vehicles – a technology recognized as a major contributor to decarbonizing the global economy. Rare earth exports could make it harder for nations to meet emissions reduction targets, even as the economics of fossil fuel dependency become onerous.
And then there are the billions that the US and Europe have invested in chip manufacturing facilities that rely on the availability of rare earths.
China has not yet said it could use shock and ore tactics. And it is currently prevented from running export-oriented industries so that its people can have jobs – and the Communist Party can deliver on promises to improve living standards.
But King and Zhao’s comments make it clear that if China wanted to, it could wreak havoc on global supply chains. Just as the US has done to China by restricting imports of many advanced technologies. ®
https://www.theregister.com/2022/11/03/china_rare_earth_supply_chain/ China memorializes world shock and ore may damage tech supply chain • The Register