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Japan Forward
7 days ago
- Business
- Japan Forward
China's Rare Earth Gamble: A Double-Edged Sword in the Trade War
Since the latest round of the United States-China trade war began, Beijing has wasted no time in playing what it sees as its trump card: restrictions on rare earth exports. Initially, both the US and Europe appeared unprepared to respond effectively, and the Chinese Communist Party (CCP) did gain some short-term leverage at the negotiating table. But how did the CCP secure its monopoly over rare earth minerals? What cost did it impose on the Chinese people? And how can the West break free from this dependence? Although Washington announced a framework trade deal under which Beijing would speed up rare earth exports to the US, the Financial Times reported that China's export controls now extend beyond officially listed rare earths and magnets. Any product flagged with sensitive keywords is being held at customs for extra inspections and third-party chemical analysis. On July 1, US Treasury Secretary Scott Bessent urged China to accelerate rare earth magnet exports, as shipments had yet to rebound to their early April levels. It is clear that the CCP has no intention of abandoning the rare earth weapon. It intends to wield it to the fullest. Beijing's ability to weaponize rare earths rests on decades of strategy. China is now the world's top holder of rare earth reserves. It also ranks first in production, exports, and domestic consumption. Here is China's share across each stage of the global rare earth supply chain. China's share of the global rare earths market at each stage. (©Inconvenient Truths) While rare earths were originally an American domain, things changed drastically. In 1949, the US discovered the Mountain Pass mine, an open-pit rare earth site. Between 1965 and 1985, the US led in rare earth refining and supplied most of the global demand. But aggressive price undercutting by China gradually rendered Mountain Pass uncompetitive. It eventually closed in 2002, citing high costs and environmental issues. Nevertheless, the US retains vast reserves — 13 million tons, or 13% of the global total, according to the US Geological Survey. In China, large-scale rare earth reserves in Inner Mongolia's Bayan Obo region were confirmed in the mid-20th century. Yet it wasn't until the 1980s that the Chinese government began exploiting their potential. In 1992, Deng Xiaoping famously said, "The Middle East has oil, China has rare earths." This declaration unleashed a gold rush of rare earth extraction, with central and local governments, private players, and even criminal gangs diving into the sector. From 1985 to 1998, Beijing further boosted the industry with 13 years of export tax rebates. This policy led to three major consequences: The boom severely damaged ecosystems. In 2012, China issued its only white paper on rare earths, admitting that outdated mining and refining methods destroyed vegetation, caused soil erosion and acidification, and polluted surface and groundwater. One ton of ion-adsorption rare earths generated 2,000 tons of waste. Even modern in-situ leaching methods continue to release ammonia and heavy metals. In some areas, excessive mining has caused landslides, river blockages, and large-scale disasters. In the early 1980s, China produced just 20 tons of rare earths annually. By the 1990s, it had surpassed the US, and post-2000, output topped 100,000 tons—90% of global supply. But global demand couldn't keep pace. Chinese companies undercut each other, selling rare earths like pork. Prices by the early 2000s were just one-fourth of 1990 levels, despite Beijing imposing export quotas from 1998 to 2014. Chaos reigned. From 2006 to 2008, foreign customs data showed Chinese rare earth imports exceeded China's official export figures by 35%–59%. In 2011, the gap reached 120%. Still, Beijing sought to turn rare earths into a strategic asset. In 2010, during the Diaoyu//Senkaku Islands dispute, China imposed a rare earth embargo on Japan — but failed to achieve its goals. Beijing concluded that fragmented industry control weakened its strategy. It responded by accelerating industry consolidation and nationalization. In October 2016, a development plan mandated the integration of China's entire rare earth industry into six state-led conglomerates: Chinalco, Northern Rare Earth, Xiamen Tungsten, China Minmetals, Guangdong Rare Earth, and Southern Rare Earth. This integration was completed by December 2016. On December 23, 2021, Minmetals, Chinalco, and Southern Rare Earth merged to form China Rare Earth Group. On January 1, 2024, it absorbed Guangdong Rare Earth, reducing the six giants to three. By then, Beijing had achieved full control over the industry. New legal frameworks followed. On September 15, 2024, China imposed export controls on antimony. On October 1, the Rare Earth Management Regulations came into effect. By December 1, so did the Dual-Use Item Export Control Regulations . By April 2025, with Trump launching another tariff offensive, the CCP was fully prepared. It immediately restricted exports of seven mid-to-heavy rare earth elements: samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium. The restrictions took effect the same day, leaving no time for a US or global reaction. In April 2025, rare earth magnet exports from China dropped to 3,000 tons — down 43% year-on-year, and nearly halved from March's 5,800 tons. In May, exports plunged to 1,238 tons, a 52.9% monthly drop and a 74% yearly decline — the lowest since February 2020. From January to May, exports totaled just 19,132 tons, down 14.5% year-on-year, the lowest since 2021. The result was a global "rare earth shortage." The CCP had, in effect, declared its dominance over the global rare earth supply chain. Despite its grip on rare earths, the costs for China have been enormous: The 2012 white paper remains largely accurate today. Land is scarred, water is polluted, and recovery efforts are slow and expensive. For every 100 yuan ($14 USD) earned from mining, the cost of environmental restoration might exceed 500 or even 1,000 yuan ($70-$140 USD). A small elite profits while the public bears the burden of a shattered homeland. Although Beijing proclaims market reforms, in rare earths, it has reverted to full state control. Since 2006, total production and separation quotas are set jointly by the Ministry of Industry and Information Technology and the Ministry of Natural Resources. In February 2025, new regulations placed 92% of supply under direct control. Only designated state-run groups may mine or refine rare earths. Others are banned. The monopoly is absolute. Rare earths are not truly rare; many nations have deposits. But the CCP seized control through unsustainable price wars. After the 2010 Japan embargo, the US and others began diversifying. Japan's Hitachi Metals (now Proterial) opened a US factory in 2011 but closed it in 2020 due to cost pressures and US buyer reluctance. The CCP closely watches such moves and floods markets with low-cost supplies to undermine rivals. Now, amid intensifying US-China rivalry, the West is fighting back. The US is now leading an effort to create a China-free rare earth supply chain. Despite China's dominance, prices remain low and profits thin. From 2023 to now, export volume has slightly increased. But total revenues have fallen — showing persistent price decline. China's rare earth export quantity and value, 2020–2024. (©Inconvenient Truths) Beijing's approach — sacrificing the environment and future generations for control — may prove unsustainable. The CCP's rare earth strategy, aimed at global domination, has instead turned into a national liability. Meanwhile, the West is pushing forward. The Donald Trump administration is relaxing regulations and boosting investment in domestic supply chains. Experts see this as a turning point. Even if the CCP were to lift restrictions and flood the market again, the West is unlikely to retreat. Ken Mushinski, CEO of Rare Element Resources, confirmed that America's effort to build an independent supply chain is "100% moving forward." His firm, backed by the US Department of Energy, is building a demonstration plant and expects full commercialization in two to three years. Since January, Trump's second term has seen 11 executive orders supporting mining and refining of critical minerals. In June, the Department of Energy released new NEPA guidelines to simplify permitting. In April, the Department of the Interior included rare earth projects in its fast-track infrastructure list. Still, with China's entrenched dominance, full US self-sufficiency may take 10–20 years. Until then, avoiding Beijing's chokehold remains a constant challenge. Author: Jennifer Zeng Find Jennifer Zeng's articles on JAPAN Forward . Follow her on X (formerly Twitter) and on her blog page, Jennifer's World .
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First Post
08-07-2025
- Business
- First Post
Rare earth and the Indo-Pacific: Why Quad must take lead over China
China's dominance in the rare earth elements supply chain is not geology but geopolitics that has combined industrial policies with frontier engagements, it's time Quad should have challenged it read more Indian External Affairs Minister S Jaishankar, Australia's Foreign Minister Penny Wong, Japanese Foreign Minister Takeshi Iwaya and US Secretary of State Marco Rubio stand together at the start of their meeting of the Indo-Pacific Quad at the State Department in Washington, DC, US, Reuters On June 27, 2025, the United States-China trade war came to a truce after China promised to lift Rare Earth Elements (REE) export restrictions while the US promised to lift restrictions on China. In an era powered by semiconductors and driven by data, the obscure group of 17 elements that constitute the REE are indispensable to clean energy, semiconductors, advanced defence systems, everyday technology appliances, and digital infrastructure, forming the foundation of the very technologies driving 21st-century economies and therefore holding immense strategic value. STORY CONTINUES BELOW THIS AD These elements are not necessarily 'rare' in terms of abundance, but their extraction and processing are highly complex and energy intensive. The transition towards REE is not merely technological but rather geopolitical, as the world is moving towards clean energy, digital sovereignty, and next-generation defence capabilities along with innovations in everyday technology products. The REE has not only become a symbol of national resilience but is also at the epicentre of resource diplomacy, industrial policy, and efforts to decouple from overreliance on singular suppliers. Role of Individual Quad Members The Quad is an alliance of Australia, Japan, India, and the United States formed in 2017 to promote a rules-based Indo-Pacific. Therefore, Quad members should also play a positive role in building a resilient REE supply chain through leveraging their own legislation. India's approach has undergone a significant shift in recent years. India recently launched the National Critical Minerals Mission so as to establish a reliable framework and self-reliance in critical minerals and is working on a Rare Earth Minerals Scheme to counter China's dominance in the REE supply chain. This, combined with India's Production Linked Incentive Scheme (PLI) to enhance India's manufacturing capacity and foster innovation, shows that India wants to be an active participant in building a resilient supply chain. This repositioning helps Asean and Central Asian countries, as India can emerge as a counterbalance to Chinese influence by helping these countries with technology and skill development and investing in connectivity projects. Australia plays a critical role as the Quad's upstream actor. Australia's Critical Mineral Strategy 2023-2030 mimics India's policies of reducing the monopoly of China in the REE supply chain and developing midstream processing and overseas partnerships—the prominent example being developing terbium oxide in Malaysia. The United States too has adopted a multi-pronged approach to REE strategy through the Defence Production Act and the DOE Critical Minerals Hub and by adopting legislation like the CHIPS Act and the Inflation Reduction Act for reshoring manufacturing and reducing Chinese dependence. Japan's experience from 2010 and its diversification of supply chain to reduce rare earth supplies from China, along with its investments overseas in Vietnam, Australia, and India, along with stockpiling, showcases that the Quad has the impetus to lead a resource framework to build a resilient supply chain for REE, even though recently India is attempting its deal with Japan to conserve its own REEs due to China's export squeeze. STORY CONTINUES BELOW THIS AD China's Dominance in REE and Use of Bilateral Relations China produces approximately 70 per cent of the world's rare earth output and controls 90 per cent of the processing. This dominance is not due to a monopoly over reserves but decades of state-led planning. China long ago realised that the control over critical minerals would translate into geopolitical leverage; therefore, they pursued an effective strategy to build dominance in producing and refining REEs. A key enabler of this dominance has been China's deep engagement with its neighbouring country Myanmar, which has rich reserves of dysprosium and terbium. Dysprosium enhances magnets in electric vehicles and wind turbines, serves in nuclear reactor control rods, and improves laser materials, while terbium is used in green phosphors for LED displays, energy-efficient lighting, NdFeB magnets, wind turbines, electric vehicles, sensors, and lasers. The unregulated supply of REEs from Myanmar due to the civil war and impunity with which Chinese companies operate in the Kachin and Shan regions in Myanmar have also contributed to the Chinese dominance in the rare earth supply chain. STORY CONTINUES BELOW THIS AD China is also leveraging its Belt and Road Initiative to access untapped mineral reserves in Central Asia. Central Asian countries are believed to possess REE reserves; however, the data is unreliable and outdated, and in some cases, the data used is that of the Soviet era. These countries suffer from weak institutional safeguards and lack processing capacities, and their economies are driven by raw resource exports. Connectivity constraints further hinder Central Asia's ability to develop their mineral reserves and export them at scale. The region is landlocked, has poor infrastructure, limited cross-border integration, and weak logistics. Consequently, China's BRI, which promises development as well as integration, has positioned them in an advantageous position, as it gives them access and logistics to tap into Central Asia's reserves. China has also expanded its role in the REE supply chain through strategic investments in the Southeast Asian countries of Malaysia, Thailand, and Vietnam, which have substantial reserves of REE but lack production and refining capacities. STORY CONTINUES BELOW THIS AD In Vietnam, which suffers from unreliable data and unclear environmental safeguards, Chinese state-owned enterprises have signed deals to develop Vietnam's REE reserves, which Vietnam has welcomed as it lacks the processing technology. In Malaysia, Chinese have promised Malaysians technology that enhances their REE processing, as Malaysia lacks the capacity to process. Thailand too lacks processing capacities. Therefore, China's dominance in the REE supply chain is not geology but geopolitics that has combined industrial policies with frontier engagements. From taking advantage of the uncertainty in Myanmar, lack of infrastructure and data in Central Asia, and lack of processing capacity in Southeast Asia, China has built its dominance in the REE supply chain. To counterbalance China's dominance in the REE supply chain, the Quad (Australia, Japan, India, and the US) must play a prominent role in establishing a resource mechanism to stabilise the supply chain. Towards a Resilient Supply Chain The recent tightening of REE exports by China is reminiscent of the 2010 episode when China blocked rare earth exports to Japan after a territorial dispute. Although the ban lasted a few weeks, it served as a wake-up call to Japan to reconfigure its supply chain and reduce its dependence on China for REEs. Today, when the world is moving to clean energy and hi-tech defence technologies that are dependent on REEs, the stakes cannot be higher, with one country dominating the REE supply chain. The Quad, comprising Australia, Japan, India, and the US, must lead this effort. STORY CONTINUES BELOW THIS AD Each Quad member brings a distinct strength to spearhead this effort—Australia's vast reserves, Japan's experience in 2010 and processing innovation, India's monazite reserves and emerging manufacturing base, and the US's technical expertise. These complementary qualities, along with belief in a rules-based order and a free, open, and secure Indo-Pacific, make the Quad an alternative to establish a credible resource mechanism to regulate the supply chain, democratise access, and bring transparency to the supply chain. These countries can also play a greater role through the existing Supply Chain Resilience Initiative ( SCRI), which was initiated to strengthen supply chain resilience and mitigate supply chain disruptions. Integrating REEs into their agenda would elevate the Quad's strategic relevance and enhance its operational impact. As REEs become central to clean energy transitions, semiconductors, and hi-tech defence systems, China's monopoly, especially in processing, poses a geopolitical as well as economic risk, as evidenced by the recent export squeeze. STORY CONTINUES BELOW THIS AD Therefore, integrating REEs in SCRI has become a necessity rather than an option. SCRI should be leveraged to harmonise standards, coordinate investments, and foster ethical mining practices in the Indo-Pacific. In ASEAN and Central Asian countries, SCRI and, broadly, the Quad should help with data modernisation, development of processing capacities, technology transfer, and building skill capacity. This would help in reducing dependence on China and establishing a much more resilient supply chain where everyone has access to REEs and where these smaller countries can become credible partners. In Myanmar, an alternative investment framework should be prioritised, as the country is going through a turmoil where both ethnic armed organisations and the government are engaged. There should also be an arrangement for third-country processing of Myanmar's dysprosium and terbium so as to not disrupt the technology sector worldwide. Conclusion China's calculus to dominate the REE supply chain has been deliberate and strategic and has been fostered through not only boosting its own production but also through partnerships that complement industrial policies and frontier engagement. The reaction of the rest of the world has been fragmented, and the 2010 crisis with Japan should have been an eye-opener. However, now it is imperative that the Quad must take the lead to establish a resource framework and leverage its domestic policies to build a resilient REE supply chain that is accessible and transparent. STORY CONTINUES BELOW THIS AD The author is Research Fellow, India Foundation. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect Firstpost's views.

Barnama
30-06-2025
- Business
- Barnama
Ringgit Closes Higher Against Major Currencies, ASEAN Peers
By Abdul Hamid A Rahman KUALA LUMPUR, June 30 (Bernama) -- The ringgit closed higher against the US dollar today, buoyed by improved regional sentiment. At 6 pm, the local note rose to 4.2060/2130 versus the greenback from last week's close of 4.2300/2355. SPI Asset Management managing partner Stephen Innes said improving trade sentiment, spurred by the United States-China framework deal and ongoing negotiations with key Asian partners, has helped reduce risk premiums across the region. 'This has prompted renewed investor interest in emerging markets such as Malaysia,' he told Bernama. Innes noted that with US inflation easing, expectations are rising for more aggressive rate cuts, particularly if a new Federal Reserve chair under the Donald Trump administration adopts a more dovish stance. 'This could place further pressure on the US dollar, and the ringgit's strength today is broadly in line with regional currency movements,' he added. At the close, the ringgit traded higher against a basket of major currencies and its ASEAN peers. It appreciated against the Japanese yen to 2.9156/9206 from 2.9359/9399, enhanced versus the British pound to 5.7597/7693 from 5.8141/8217, and gained against the euro to 4.9290/9372 from 4.9597/9661 last week.


The Star
30-06-2025
- Business
- The Star
Ringgit closes higher against major currencies, Asean peers
KUALA LUMPUR: The ringgit closed higher against the US dollar today, buoyed by improved regional sentiment. At 6 pm, the local note rose to 4.2060/2130 versus the greenback from last week's close of 4.2300/2355. SPI Asset Management managing partner Stephen Innes said improving trade sentiment, spurred by the United States-China framework deal and ongoing negotiations with key Asian partners, has helped reduce risk premiums across the region. "This has prompted renewed investor interest in emerging markets such as Malaysia,' he told Bernama. Innes noted that with US inflation easing, expectations are rising for more aggressive rate cuts, particularly if a new Federal Reserve chair under the Donald Trump administration adopts a more dovish stance. "This could place further pressure on the US dollar, and the ringgit's strength today is broadly in line with regional currency movements,' he added. At the close, the ringgit traded higher against a basket of major currencies and its ASEAN peers. It appreciated against the Japanese yen to 2.9156/9206 from 2.9359/9399, enhanced versus the British pound to 5.7597/7693 from 5.8141/8217, and gained against the euro to 4.9290/9372 from 4.9597/9661 last week. The ringgit also advanced vis-à-vis the Singapore dollar to 3.2986/3034 from 3.3192/3240, escalated against the Thai baht to 12.9356/9627 from 13.0254/0488, strengthened against the Indonesian rupiah to 259.0/259.5 from 260.9/261.4, and rose against the Philippine peso to 7.46/7.48 from 7.47/7.49, previously. - Bernama


New Straits Times
30-06-2025
- Business
- New Straits Times
Ringgit closes higher against major currencies, Asean peers
KUALA LUMPUR: The ringgit closed higher against the US dollar today, buoyed by improved regional sentiment. At 6pm, the local note rose to 4.2060/2130 versus the greenback from last week's close of 4.2300/2355. SPI Asset Management managing partner Stephen Innes said improving trade sentiment, spurred by the United States-China framework deal and ongoing negotiations with key Asian partners, has helped reduce risk premiums across the region. "This has prompted renewed investor interest in emerging markets such as Malaysia," he told Bernama. Innes noted that with US inflation easing, expectations are rising for more aggressive rate cuts, particularly if a new Federal Reserve chair under the Donald Trump administration adopts a more dovish stance. "This could place further pressure on the US dollar, and the ringgit's strength today is broadly in line with regional currency movements," he added. At the close, the ringgit traded higher against a basket of major currencies and its ASEAN peers. It appreciated against the Japanese yen to 2.9156/9206 from 2.9359/9399, enhanced versus the British pound to 5.7597/7693 from 5.8141/8217, and gained against the euro to 4.9290/9372 from 4.9597/9661 last week. The ringgit also advanced vis-à-vis the Singapore dollar to 3.2986/3034 from 3.3192/3240, escalated against the Thai baht to 12.9356/9627 from 13.0254/0488, strengthened against the Indonesian rupiah to 259.0/259.5 from 260.9/261.4, and rose against the Philippine peso to 7.46/7.48 from 7.47/7.49, previously.