The Secrets And Shortcomings Of China's Mammoth Rare Earth Industry

Analysis: China's approach to rare earth mining is putting it at odds with the WTO. China's Economic Observer outlines where China's gone wrong, and what it needs to do to set the industry straight.

Rare earth oxides
Rare earth oxides
Chen Jibing
BEIJING - The World Trade Organization's Dispute Settlement Body declared last week that China's restrictions of its rare earth exports violate the promises it signed when it joined the WTO. But the rare earth dispute, which began in the summer of 2009, is not just about China.

Two years ago, various Western countries appealed to the WTO about China's export restrictions on nine kinds of raw material including bauxite, coke, and fluorspar. Insiders knew this was just a way for the United States, European countries and Japan to test the waters. Their real goal is the rare earth elements.

The WTO will establish a very important precedent if, in the near future, it also judges China to have violated the regulations about rare earth exporting. This would be the biggest defeat China has suffered since joining the WTO in December 2001.

In response to the WTO's adjudication on the appeal filed by the United States, Mexico, and the European Union, China's Ministry of Commerce responded by saying that China has in recent years strengthened its management of high polluting, high energy and resource consuming products. These measures may affect both domestic and foreign users, but it corresponds to the goal of sustainable development advocated by the WTO.

Zhong Shan, Vice Minister of Commerce, has said that China will follow the regulations of the WTO and continue to improve its rare earth export policy. Clearly, China should seek a more moderate alternative.

Disputes between China and the West over rare earth are not new. But it came to a peak in the second half of 2010 over the Sino-Japan dispute called the "Diaoyu Islands collision". Japan is the world's biggest rare earth importer, with nearly all coming from China. Many major western media therefore speculated that China was controlling the export of rare earth elements to achieve its political ends.

US Secretary of State Hillary Clinton even publicly called for the United States and its allies to reduce dependence on Chinese rare earth production, and said that "This is a wake-up call for us." It's probably the most forthright speech by a high-ranking official from the West. In order to eliminate the world's misconceptions, Wen Jiabao and other Chinese officials have repeatedly said over the past year that China will not prohibit or restrict the export of rare earth, and that rare earth issue should not be politicized.

Rare earth is the collective name for 17 kinds of metals, including lanthanum and gadolinium. They either possess strong magnetic force or can enhance other metals' high temperature capabilities. These elements are commonly used in all industries, and in particular, cutting edge fields like new energy sources and high-tech products. Many observers warn that the modern economy cannot function without rare earth.

China's "oil"

Currently, China as a near monopoly on the global supply of rare earth elements. It produces 95% of the world's supply - and consumes half of it. Twenty years ago Deng Xiaoping quipped: "The Middle East has oil, China has rare earth."

Although they are dubbed "rare," these resources are not in fact all that scarce. A lot of countries have these elements. China's reserves are just 40% of the total global reserves. The fact that they are rare in other places is because other countries are unwilling to extract them because of the high cost.

There are a number of reasons China controls the export of rare earth materials. Contrary to what most Western analysts claim, "political motivation" is not one of them. China's market dominance can instead be explained by the fact that the exploitation and processing of rare earth cause serious air, surface water and soil pollution. Over the past dozen years, the supply of rare earth has exceeded demand. The Chinese supplier had no control over its pricing, thus the price has been very low.

There are other reasons as well. It is said that if China continues its exploitation at the current speed, its reserves in medium and heavy kinds of rare earth will be exhausted in 15 to 20 years. Thus it too will need to import them. Finally, China would rather encourage foreign companies that need rare earth to move to China instead of just selling them cheap raw materials. This will help to create employment and economic development in Inner Mongolia. It could also help upgrade China's manufacturing industries.

All these reasons are justified because no country is obliged to sacrifice its own interests for the benefits of other countries. This is why the WTO adjudication is very unfair to China. Still, there is no denying that the Chinese government has committed considerable mistakes in defending its legitimate interests. To a very large extent, these mistaken measures have put China in an embarrassing predicament.

First and foremost is the mistake of issuing export licenses with declining quotas. The second error was to force numerous private mining companies to shut down. China tried to integrate extraction firms and processing companies into two respective conglomerates, one in the North and the other in the South. China's third mistake was to establish a so-called system of reserves.

These policies are doing more harm than good. Not only are export quotas and rising tariffs likely to conflict with the WTO's rules, but they are also detrimental to the healthy development of the sector.

For instance, an export quota pushes up the price of rare earth elements in the international market, and because the production capacity hasn't been reduced domestically, national and external prices differ. The results are twofold: the illegal transfer and sale of export licenses, and the smuggling of rare earth elements. According to some credible estimates, more than 30,000 tons of rare earth elements were smuggled out of the country last year.

Even greater harm lies in the fact that the government has taken control of what were originally private extraction and processing operations. Past experience tells us that the existence of a state administrative monopoly is the biggest obstacle to promoting China's market-oriented reforms. It's also impossible to expect these state-owned enterprises to promote the protection of the environment or to pursue technical improvements.

The best way to safeguard the national interest through the rare earth policy is to raise the production cost of rare earth elements in China through legal and policy guidelines. Thus market forces will voluntarily reduce its supply and exports. So-called cost-raising requires a much higher threshold of rare earth production and demands, and more severe standards of environmental control. It also means improved safety standards and higher compensation to local residents for local environmental pollution.

For a long time, China's rare earth materials have been sold cheaply as the cost of production has been shared by the whole of society. As long as the government converts these exterior costs into economic costs that are borne by enterprises, then the price of rare earth will automatically go up. That is how China should lay down its rare earth policy.

Read the original story in Chinese.

Photo - wikimedia commons

Keep up with the world. Break out of the bubble.
Sign up to our expressly international daily newsletter!

Art installation "Greetings From Giza" by French artist and photographer JR faces the pyramids of Giza in Egypt

Anne-Sophie Goninet, Jane Herbelin and Bertrand Hauger

👋 你好*

Welcome to Tuesday, where violence erupts after Sudan's military coup, Australia finally gets onboard with climate change goals, and Harrison Ford stars in Raiders of the Lost Credit Card. From Bogota, we also see what the capture of drug kingpin Otoniel means for Colombia, a country long stained by cocaine trafficking.

[*Nĭhǎo - Mandarin Chinese]


Saving the planet is really a question of dopamine

The elite of the ecologically minded are set to descend on Glasgow next week for the Cop 26 conference on climate change. But beyond debating policy prescriptions, French daily Les Echos explores the role our own brains have on making the right choices for the planet:

Almost every week, a new scientific study alerts us to the degradation of the environment. And yet, we continue not to change anything fundamental in our systems of production and habits of consumption. Are we all suffering from blindness, or poisoned by denial?

In his popular books Le Bug humain (The Human Bug) and Où est le sens? (Where is the Sense?), Sébastien Bohler, a journalist in neuroscience and psychology, provides a much more rational explanation: The mechanism responsible for our propensity to destroy our natural environment is in fact a small, very deep and very primitive structure of our brain called the striatum.

This regulator of human motivation seems to have been programmed to favor behaviors that ensure the survival of the species.

Since the dawn of humanity, gathering information about our environment, feeding ourselves, ensuring the transmission of our genes through sexual intercourse and asserting our social status have all been rewarded with a shot of dopamine, the "pleasure hormone."

Nothing has changed since then; except that, in our society of excess, there is no limit to the satisfaction of these needs. This leads to the overconsumption of food and addictions to everything from sex to social media — which together account for much of the world's destructive agricultural and energy practices.

No matter how much we realize that this is leading to our downfall, we can't help but relapse because we are prisoners of the dopamine pump in the striatum, which cannot be switched off.

According to Bohler, the only way out is to encourage the emergence of new values of sobriety, altruism and slowness. If adopted, these more sustainable notions could be recognized by the striatum as new sources of dopamine reward. But there's the challenge of promoting inspiring stories that infuse them with value.

Take the photo-collage exhibition "J'agis ici... et je m'y colle" ("I'm taking action here... and I'm sticking to it"), a collection of life-size portraits of residents committed to the energy transition, displayed on the walls of the French coastal city of La Rochelle.

Backed by the French National Center for Street Arts, photographer Martin Charpentier may be employing artistic techniques, but he's also tinkering with neuroscience in the process.

Stefano Lupieri / Les Echos


• Sudan in chaos following military coup: After Sudan's military seized power from the transitional government, defiant anti-coup protesters have returned to the streets of the capital city Khartoum, for a second consecutive day. At least seven people have been killed and 140 injured. Coup leader General Al-Burhan has announced a state of emergency across the country, while the military cut off access to the internet and closed roads, bridges, and Khartoum's airport. Washington condemned the coup and suspended aid, and the U.N. Security Council was expected to discuss Sudan behind closed doors later today.

• Egypt lifts state of emergency in force since 2017: Egyptian President Abdel Fattah el-Sisi, announced the end of a four-year-old state of emergency, undoing powers that had given the government sweeping authority to quash protests, make arrests, search people's homes without warrants, and control everyday life in the most populous Arab country.

• Platforms take down Bolsonaro video linking vaccine and AIDS: Facebook, Instagram and YouTube have removed an anti-vaccine video from their respective platforms posted by Brazilian President Jair Bolsonaro. Beyond blocking the video, in which Bolsonaro falsely linked the COVID-19 vaccine with developing AIDS, YouTube went further and suspended the far-right leader for a week.

• COVID update: The U.S. will launch a new travel system on November 8, imposing new vaccine requirements for most foreign national travellers and lifting severe travel restrictions over China, India and much of Europe. Meanwhile, authorities in northern China are reimposing lockdown, and other emergency measures as COVID-19 infections spread to 11 provinces.

• Australia pledges net zero emissions by 2050: As one of the world's largest emitters of greenhouse gases per capita and a major exporter of fossil fuels such as coal, Australia has finally committed to becoming carbon-neutral by 2050. This is a target already adopted by most nations heading to next week's COP26 international climate conference, but that Australia had so far refused to pledge.

• Japanese princess loses royal status over wedding: Japan's Princess Mako married her boyfriend Kei Komuro, giving up her royal status. Under Japanese law, female imperial family members lose their status upon marriage to a "commoner" although male members do not.

Raiders of the Lost Credit Card: A tourist returned the credit card of American actor Harrison Ford, who had lost it in Sicily while shooting scenes for the latest Indiana Jones movie.


"Out of control," titles German daily Süddeutsche Zeitung, reporting on the release of a series of articles by a consortium of 17 U.S. news outlets, called the "Facebook Papers," that reinforce whistleblower Frances Haugen's claims that the social media giant is prioritizing profits over the well being of its users and society.


$1.01 trillion

After striking a deal to sell 100,000 electric vehicles to car rental firm Hertz, Elon Musk's Tesla has joined Apple, Microsoft, Amazon and Google's Alphabet in the club of companies that have reached a $1 trillion valuation.


What the capture of a drug kingpin means for Colombia

While the capture of Otoniel, Colombia's most wanted drug trafficker, made global headlines, Bogotá daily El Espectador writes about the significance of the news for a country that has battled narcotrafficking for decades.

👮 The arrest of the Colombian mobster Dairo Antonio Úsuga David, a.k.a. "Otoniel," is a victory for Colombian intelligence, law-and-order forces and the broader fight against crime. Details of the eight-year-long pursuit of the head of the Gulf Clan, of the tireless and meticulous work, testify to the capabilities that the police and army have managed to develop in the fight against the narco-trafficking that has long been a stain on Colombia.

🇨🇴🇲🇽 Otoniel is responsible for a criminal organization with more than 3,800 members and influence on 12 departments and 128 districts in Colombia (though data from the Bogotá-based Peace and Reconciliation Foundation counts 211 districts). The Gulf Clan sends half the drugs going out of Colombia, and is the main exporter to Mexico. Its ties to the Mexican cartel chief Joaquín "el Chapo" Guzmán are well-documented — and Otoniel had aspired to fill the power vacuum left by Guzmán's capture.

⚖️ Some have observed that the ensuing power vacuum will engender more violence, which is true. But we are, in any case, far from eliminating drug trafficking in Colombia or cutting its tentacles across public life. That shows the limitations of the hard-line response to drugs, when we have seen it is not enough. Still, it is essential in any fight against crime for the state to show its operational capabilities. The message is clear: not even drug overlords are above the law in Colombia.

➡️


"I love Mako. I would like to spend my one life with the person I love."

— Kei Komuro said during a news conference after his wedding with Japan's Princess Mako, the niece of the current emperor and the sister of the likely future sovereign. The princess lost her royal status as a result of her marriage with Komuro, a "commoner."


An art installation "Greetings From Giza" by French artist and photographer JR faces the pyramids of Giza in Egypt, as part of the 2021 exhibition "'Forever Is Now," the first international art exhibition to take place there — Photo: Balkis Press/Abaca/ZUMA

✍️ Newsletter by Anne-Sophie Goninet, Jane Herbelin and Bertrand Hauger

Send all commoner and royal well wishes to Mako and Kei — and let us know what the news looks like from your corner of the world!

Keep up with the world. Break out of the bubble.
Sign up to our expressly international daily newsletter!