In January 1992, during his tour of southern China, Deng Xiaoping stated that just as ‘there is oil in (the) Middle East, China has rare earth’. Today, the stark reality of that statement is evident as technology becomes increasingly reliant upon those resources. Consequently, that becomes a geopolitical issue; while China remains the world’s manufacturing hub, it also has the power to manipulate and ultimately weaponise, both economically and militarily, the supply of rare earths.
China also controls around 80 per cent of global rare earth elements processing. Chinese facilities produce rare earths, trace quantities of which are used around the world in items such as smartphones, electronic appliances, electric vehicles and in military applications, such as missile guidance systems. Thus, just as with its other geopolitical contests, China’s ability to acquire and control these resources becomes vital to its quest for geopolitical hegemony.
Beijing’s control of the global REE supply is an Achilles heel for other states, especially the US amid its ongoing trade war with China. Apart from a brief diplomatic spat between China and Japan in 2010, involving the detention of Chinese fishermen, which led to China reducing its REE exports to Japan, the US and the European Union by around 40 per cent, there are scant examples of the weaponisation of these commodities. Nonetheless, China could choose to use its resources as a bargaining chip with other countries. Those countries, in turn, are thereby forced to diversify their rare earth supplies by sourcing them from countries other than China. The recent visit by US Commerce Secretary Wilbur Ross to Australia for discussions on creating a joint strategy between the two countries on rare earth and critical minerals, serves to underline the importance of REE to global market stability.
This paper will explore how China has strategised its monopoly on rare earth commodities and the impact of that action at the geopolitical level. Second, it will examine how countries such as Australia and the US may navigate around that monopolisation, which will also have implications at the political level. It will also examine, lastly, what impact the discovery of significant REE deposits outside China will have on the global rare earth market.
- As it possesses some of the most abundant deposits, China was, by the 1990s, already set to be the world’s largest producer of rare earth elements (REEs).
- China is able to maintain a monopoly on both supply and demand, which could potentially be used as the determining factor in its trade war with the US.
- The important lesson learned from the 2010 REE embargo, for both China and the rest of the world, is that it is possible to diversify the sources of REE supplies.
- Possessing mine-side supplies is only half of the equation; innovation and the creation of more processing facilities are required to counter a monopoly of REEs.