China ready to hit back at U.S. with rare earths
http://www.hrlnews.com/2019/05/china-ready-to-hit-back-at-us-with-rare.html
President Xi Jinping’s visit to a rare earths plant last week had
sparked speculation that China would use its dominant position as an
exporter of rare earths to the United States as leverage in the trade
war.
Rare earths are a group of 17 chemical elements used in everything
from high-tech consumer electronics to military equipment. The prospect
that their value could soar as a result of the trade war caused sharp
increases in the share prices of producers, including the company
visited by Xi.
While China has so far not explicitly said it would restrict rare
earths sales to the United States, Chinese media has strongly implied
this will happen.
In a commentary headlined “United States, don’t underestimate China’s
ability to strike back”, the official People’s Daily noted the United
States’ “uncomfortable” dependence on rare earths from China.
“Will rare earths become a counter weapon for China to hit back
against the pressure the United States has put on for no reason at all?
The answer is no mystery,” it said.
“Undoubtedly, the U.S. side wants to use the products made by China’s
exported rare earths to counter and suppress China’s development. The
Chinese people will never accept this!” the ruling Communist Party
newspaper added.
“We advise the U.S. side not to underestimate the Chinese side’s
ability to safeguard its development rights and interests. Don’t say we
didn’t warn you!”
The expression “don’t say we didn’t warn you” is generally only used
by official Chinese media to warn rivals over major areas of
disagreement, for example during a border dispute with India in 2017 and
in 1978 before China invaded Vietnam.
In its own editorial on Wednesday, sister paper the Global Times said
an export ban on rare earths “is a powerful weapon if used in the
China-U.S. trade war.”
“Nevertheless, China will mainly use it for defense,” it added,
noting that while China might incur losses from a ban on exports, the
United States would suffer more.
The paper’s editor had said on Twitter late on Tuesday that Beijing
was “seriously considering” restricting rare earth exports to the United
States.
China has used rare earth sales to exert pressure in past diplomatic disputes.
In 2010, Beijing cut rare earth export quotas after a Chinese trawler
collided with two Japan Coast Guard ships near uninhabited islands in
the East China Sea that both countries claim.
In 2012, Japan, the United States and European Union complained to
the World Trade Organisation (WTO) over the restrictions. Two years
later, China was rebuked by the WTO for citing environmental reasons to
justify the quotas. It ultimately scrapped its export quota system after
losing the case.
Chinese trade experts say if Beijing moves forward with new
restrictions on rare earth exports to the United States, it will likely
follow Washington’s example and use national security as a
justification.
China has repeatedly criticized Washington for what it says are
abuses of national security exceptions at the WTO, including this week
when, according to media reports, it accused the United States of
breaking rules by blacklisting Huawei Technologies Co Ltd, the world’s
largest telecom network gear maker.
But China for years has used national security considerations to
block major U.S. technology companies, including Google and Facebook,
from operating in its market.
Such restrictions have in recent years fueled calls from within some
parts of the U.S. business community for Washington to pursue more
reciprocal policies with Beijing.
Shares in the company Xi visited last week, JL MAG Rare-Earth Co Ltd,
surged another 10 per cent to a record high on Wednesday, having
gained 134.1 per cent in May alone. China Rare Earth Holdings Ltd
soared more than 40 per cent, while Australia’s Lynas Corp, the only
major rare earths producer outside of China, climbed as much as 14.6 per
cent
China accounted for 80 per cent of rare earth imports between 2014
and 2017 by the United States, which has excluded them from recent
tariffs along with some other critical Chinese minerals.
Beijing, however, has raised tariffs on imports of U.S. rare earth
metal ores from 10 per cent to 25 per cent from June 1, making it less
economical to process the material in China.
Some trade analysts expect an acceleration in bringing fresh rare
earth mining capacity on line in California and Australia if China uses
its dominant position in the market for diplomatic advantage.
Reuters
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