CRITICAL MINERALS China, the United States, and a Critical Chokepoint on Minerals
Critical minerals today are “America’s most dangerous dependence,” in the words of CFR’s Heidi Crebo-Rediker. With near total control of the world’s critical minerals production, China maintains significant economic leverage over access to inputs that are necessary for everything from everyday products like smartphones to advanced weapons systems like the F-35.
To borrow the words of my colleague, CFR Senior Fellow Heidi Crebo-Rediker, in the pages of Foreign Affairs, critical minerals today are “America’s most dangerous dependence.”
With near total control of the world’s critical minerals production, China maintains significant economic leverage over access to inputs that are necessary for everything from everyday products like smartphones to advanced weapons systems like the F-35. A typical gas-powered passenger vehicle can use as many as forty rare earth magnets for its seats, brakes, and other systems; electric vehicles require more. Under the export control regime Beijing rolled out last week, China could restrict global access to critical mineral products, including rare earth magnets, and bring much economic activity to a screeching halt.
China is willing and able to exploit this strategic vulnerability. It has already proven its willingness to use export controls as a tool of economic coercion. Some fifteen years ago, China curtailed rare earths—a subset of critical minerals—to Japan over a dispute in the East China Sea. More recently, China has restricted its exports of critical minerals in response to the United States’ tariffs and export controls.
While China maintains that it’s not a ban, China announced new measures last week that build upon its earlier semiconductor-focused restrictions, extending to products made outside China that have as little as 0.1 percent of Chinese rare earths in them or use mining, separation, or magnet-making technology developed by Chinese firms. That is similar to the United States’ Foreign Direct Product Rule. Moreover, China has insisted that applicants for an export license submit schematics for products that use Chinese-produced minerals, a powerful tool for accessing proprietary intellectual property.
China did not become the dominant player in critical minerals overnight; it was a long march to get there. During his famous 1992 Southern Tour, while visiting Inner Mongolia’s Baotou rare-earth basin, Deng Xiaoping said, “The Middle East has oil; China has rare earths.” Rare earths are actually not rare, and certainly not present in China alone, but ever since Deng noted the importance of such minerals, China has developed a dominant position through decades of concerted industrial policy. For years, the Chinese government invested heavily to support firms at every step of the rare earth refining and production value chain, bolstering its domestic mining, refining, production, and recycling facilities, as well as expanding its network of foreign mines around the world.
