Report Finds U.S. Vulnerability to China’s Dominance in Rare Earths
China dominates the market for strategic rare-earth minerals. Rare earths are metals used in a variety of advanced technologies, such as computer screens, weapons, and electric vehicles.
A report by Horizon Advisory, an American consulting firm, asserted that China formulated its rare-earth industry with years of state subsidies. The firm cited government documents, Chinese new reports, and academic research primarily funded by government grants or published by Chinese experts. The research concluded that China views these natural resources as a geopolitical weapon, preparing to use these metals as leverage against the West, such as trade disputes with the US.
“China’s rare earths positioning both implicates and threatens the entire global system,” said Horizon’s report.
Last year, the Chinese government funded a report on rare-earth policy, which said “China will not rule out using rare earth exports as leverage to deal with the situation,” in reference to the escalating U.S.-China trade war. According to a new report in China’s Inner Mongolia Autonomous region, the primary source of the country’s rare earths, China spent the average equivalent of $175 million a year there in subsidies between 2015 and 2018. In 2015, the regional industry’s total profit only reached $170 million.
Nathan Picarsic, co-founder of Horizon, explained the research conclusions that China values its rare-earth dominance for geopolitical values over commercial gain. “They’re not concerned with economic return in many of these cases,” he said. “They see controlling this type of [industry] as a path to win without fighting.”
Horizon’s research findings add credibility to the long-held Western perceptions of China’s strategy. In light of the U.S.’s dependence on China for rare earths, the Defense Department implemented a new effort to bolster the U.S. supply chain. Grants will help develop a processing facility at the sole rare-earths mine in the U.S., a new plant was proposed for Texas.
During a Senate Energy and Natural Resources Committee Hearing on Wednesday, the congresspeople discussed mineral supply chains and national security. Chairman Lisa Murkowski asked panelists about the effect of China cutting the U.S. from its rare earths and other valued resources. Simon Moores, managing director of Benchmark Mineral Intelligence, an industry price reporting agency and data provider, replied: “I think the consequences of a long-term cutoff of some of the critical materials that we’ve discussed today would just be disastrous for the U.S. economy. The threat of China…is becoming more and more evident every day even during this pandemic.”