It appears that the battle over rare earth minerals, involving China and many of its export destinations, including Japan and the United States, has intensified.
China cut its rare earths export quotas by 11 percent in the first round of permits for 2011, threatening to worsen a global shortage of the minerals needed for smartphones, hybrid cars and guided missiles.
China’s manipulation of trade matters to expand global influence, once relatively quiet and nuanced, has become overt and plainly confident (or arrogant, as you wish). A change in worldview has occurred within the executive echelons of Party decision-makers — not sudden, but gradual. Often — if we remember our history — it is at times of imagined superiority that so-called Giants make their most self-destructive mistakes.
For this reason, if the rare earth debacle is indeed symptomatic of quaking earth faults within Chinese territory — preceded by many others, including, for example, the prestidigitation which has hidden in plain sight the fundamental bankruptcy of the banking system, the stubborn reliance upon and fear of a free trading Yuan, the inability to stifle inflation, the foolish Nobel reaction, etc. — I am very greatly concerned for the near future.
Less so for the nations temporarily with less supply of rare earths; more so for stability of daily existence for ordinary Chinese, whose life is subject to a “House of Cards” fragility of Party rule often mistaken for a steely authoritarian omnipresence and complete control. One might even hazard the guesstimate that the intelligent engineers promoted five to ten years ago to fix, design and/or build the new Chinese society appear to have fallen from favor or have lost the practical sense that brought them to their executive stations. Chinese authority is moving in another — frightening — direction.
One would expect an immediate US response to this announcement about rare earths, which implies serious ramifications, especially for the production of military hardware. But will it be a mere statement of policy or will serious trade leverage be brought to bear? Or perhaps additional tax and regulatory incentives for the domestic discovery, mining and processing of rare earths?
UPDATE: 12/29/10
Additional reading:
Factbox: How various industries use rare earth elements
US `Very Concerned’ About China Rare-Earth Quotas – USTR Spokeswoman
Australian rare earth stocks on the rise
The China Cuts Rare Earth Export Quotas — Implications for China Feared by AsiaBizBlog, unless otherwise expressly stated, is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.
