China’s Critical Mineral Strategy Goes Beyond Geopolitics
Chinese Strategies and Policies in a Nutshell
China’s critical mineral strategies originated in the 1970s with the rare earths industry, which achieved unparalleled scale and efficiency while simultaneously facing challenges, including illegal mining, overproduction, smuggling, depletion of natural resources, and pollution.
A balanced approach emerged to facilitate industrial reforms to protect natural resources and the environment through technologies, innovation and sustainable development.
The fairly recent National Plan for Mineral Resources, 2016-2020, identified 24 “strategic minerals” metallic and non-metallic minerals and energy resources. It also outlined the country’s overarching strategy for the mineral resources industry, combining inward and outward-looking policies.
Inside China, the focus is on fostering mining activities, improving the efficient use and preservation of minerals, upgrading industrial structures, advancing innovation, and promoting a circular economy and the “green development” of industry. Externally, the focus has been on promoting international cooperation in mining in China and abroad.
A Balanced Narrative
Viewing China’s critical mineral strategies exclusively through a geopolitical lens breeds misconceptions and confrontation.
The “de-risking” strategy envisaged in the G7 Hiroshima Leaders’ Communiqué of 2023 is a case in point. Despite being touted as more moderate vis-à-vis the more radical notion of “de-coupling,” there is little daylight between the two approaches. De-coupling and de-risking come to mean the same regarding policy prescriptions and practical outcomes.
However, the development of China’s approach to critical minerals suggests that a more balanced narrative is warranted. That is, the key driver of these strategies has been China’s domestic economic needs and policy priorities.
China’s Economic Pressure
China’s recent use of economic pressure on Australia and Lithuania is difficult to justify. A notable example involving critical minerals occurred over a decade ago when China restricted rare earths exports to Japan during a dispute over the East China Sea.
Contrary to the popular narrative, empirical data has suggested that the restrictions came from China’s efforts to reduce its rare earths export levels and did not target any specific economy.
More recently, China imposed export controls on germanium and gallium. While this measure also generated economic coercion concerns, it was widely seen as a response to US restrictions on advanced chip and other critical technology exports to China. In this context, both sides have taken coercive actions while invoking national security.
The lesson for China from its coercive actions against Australia and Lithuania, is that such actions threaten the global community, provoking strong reactions. The resulting reputational cost for China can, therefore, be disproportionately high.
Moving Forward Through Cooperation
As China remains a key player in the global economy, measures that seek to reform critical mineral supply chains should not exclude the country.
For example, the IPEF Supply Chain Agreement can achieve better outcomes by involving China in developing collaborative mechanisms to tackle supply chain risks, non-transparency, non-market policies and unnecessary trade restrictions.
Alternatively, inclusive fora such as the World Trade Organization can also be used to discuss the same issues.
The prevailing narrative based on geopolitics, which regards China as the risk, can be counter-productive if the goal is to minimize disruptions and uncertainties in global supply chains. A more balanced narrative is the first step towards a coherent, globally coordinated policy response.
Weihuan Zhou is Associate Professor, Co-Director of CIBEL Centre, Faculty of Law and Justice, University of New South Wales.This article is published courtesy of theWorld Economic Forum.
