Specifically, China has recently started to enforce stricter export controls on rare earth minerals headed for Japan. This latest move comes in the wake of recent comments from Japan’s Prime Minister, causing Beijing to delay walk applications for these essential raw materials. This change is intended to strengthen controls over dual-use items. At the same time, it underscores the stubborn legacy of suspicion and friction between the two countries.
The busy Bayan Obo mine, located within Inner Mongolia, is one of the world’s largest sources of rare earth minerals. These resources are essential components for the high-tech applications of today and the future, from electronics to renewable energy technologies and military equipment. China plays an outsized role in global supply chains for rare earths. So, anytime it makes a change to its export policies, the impact is felt far and wide.
In China, officials have recently announced a reversal of some measures to tighten controls. They hope to raise more public scrutiny of the export of dual-use items — things that can be used for civilian and military purposes. The further slow-walking of applications for rare earth exports only to Japan indicates that this is a deliberate strategic response to growing diplomatic friction. Japan’s Prime Minister Fumio Kishida on Tuesday made comments viewed as highly critical of China, provoking retaliatory action from Beijing.
New oversight on rare earth exports risks further breaking supply chains. Japanese manufacturers, who depend on the stable supply of these minerals for production, could be hit particularly hard. According to these analysts, Japan may have difficulty finding enough supplies if the situation continues to deteriorate. The US–China rare earth trade is a unique intersection of economic necessity and geopolitical tactics. No one knows its ramifications more clearly than these two nations.
As the dynamics develop, experts and economists are keenly watching to determine the immediate effects on foreign markets. A long enough break in the supply of rare earths could raise their prices. Countries will race to the bottom against each other to win the competition for those alternatives.