China reportedly reviews rare earth technology policy

February 19, 2021

Rare earth materials and the technologies to process them may once again land at the center of trade conflicts between China and any country or company that it deems as a threat to state security.

Bloomberg reported that a person familiar with matter has said the Chinese government is currently conducting a review of rare-earths policy and that it could ban the sale of technology to some countries or companies in the future.

Officials view the technology needed to refine and purify the raw materials as a more powerful weapon in protecting state interests than the actual minerals. While China has no plans to restrict shipments of rare earths to the U.S., it is keeping the plan in its back pocket should a trade war break out again, the person said.

China controls the production and processing more than 90 percent of rare earths in the world. The Asian nation is also exploring a ban on rare earths as part of its sanctions on some individual companies, including Lockheed Martin Corp., which violated China’s core interest over arms sale to Taiwan, the person said.

China has a stranglehold over processing. Its dominance would leave overseas industries with few avenues to immediately secure supply if curbs were to be put in place.

The minerals have previously been touted as a possible weapon in the U.S.-China trade war, with Beijing readying a plan in 2019 to restrict shipments to hurt the American economy. The U.S. imports about 80 percent of its rare-earth compounds and metals from the Asian nation, according to government data.

Those curbs were never adopted, though it spurred the U.S. and Europe to seek out ways to cut their reliance on a single supplier. While rare earths are relatively abundant, mine-able concentrations are less common than other ores and countries face hurdles including high costs and environmental concerns in setting up domestic industries.

Donald Trump last year signed an executive order aimed at expanding domestic output of rare-earth minerals, a year after the Department of Defense was ordered to spur the production of magnets. The U.S. has also been awarding contracts and signing investment agreements aimed at establishing its own processing capabilities.

The Financial Times reported that China is exploring whether it can hurt U.S. defense contractors by limiting supplies of rare-earth minerals that are critical to the industry.

 

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