In recent months, Beijing has tightened export controls on dual-use items, like rare earth minerals. This decision brings a historic and consequential Japanese response as America and China’s relationship becomes increasingly antagonistic. This decision appears to be a direct reflection of statements made just days earlier by Japan’s Prime Minister. It raises the ante in the years-long bilateral kerfuffle. The example underscores the challenges of navigating international trade relations and the increasing geopolitical divides at play within the region.
In a further escalation, in recent weeks China has been dragging out the approval processing of applications to export rare earth minerals to Japan. According to industry insiders, new export permits are being held up too, further showing the souring of relations between Beijing and Tokyo. Rare earth minerals are essential in a multitude of high-tech applications, so these controls would be especially impactful on Japan’s manufacturing industries.
The Bayan Obo mine, located in Inner Mongolia, is currently one of China’s largest sources of rare earth mineral. This site also happens to be an important choke point for global supply chains. It is an important source of materials for electronics, batteries, and dozens of advanced technologies. By tightening controls on exports from this mine, China signals its intent to leverage its resources amid escalating diplomatic tensions.
Japan’s Prime Minister recently said things that Beijing is interpreting as hostile. This tension creates a backdrop that makes the current economic prescription seem all the more likely, if not necessary. Analysts believe that these comments have prompted a retaliatory stance from China, illustrating how political discourse can directly impact trade dynamics. As each country tries to navigate its growing tensions with the other, the impact on industries that depend on rare earths may be profound.
Japan’s heavy reliance on Chinese rare earths has alarmed Japanese officials, who fear they are at China’s mercy. With export permits for industrial materials currently prevented from leaving China, Japanese manufacturers risk running out of critical components. Such a situation can substantially increase costs of production. Its ability to undermine supply chains would severely harm a variety of industries that rely on these minerals.