Catastrophe progression method - path (CPM-PATH) early warning analysis of Chinese rare earths industry security

Abstract

China is the only country in the world with a complete rare earths industry supply chain. Therefore, it is a significant case study country to conduct a risk assessment and early warning evaluation of industry security. Industry security refers to a country having the autonomy, control, and development rights over its rare earths industry and a guarantee that the existing or potential rights and interests will remain unharmed. An industry security assessment framework is developed in this study, using 18 selected indicators with regards to four aspects: resources, politics, economy, and technology. The “catastrophe progression method” (CPM) and path analysis method (PATH) were used to identify the early warning status of the rare earths industry and to highlight influencing factors. This paper found that (1) China's rare earths industry is in a “secure” state in general. The security index of the technology subsystem shows a saturated growth of 135.7%; meanwhile, the politics subsystem's security index has a significant declining trend of 21.7%. (2) From 2006 to 2019, the security status of China's rare earths industry experienced three periods of significant fluctuation, which can be summarized as resource-driven, economic-driven and politically-driven respectively. To be more specific, the years of 2006, 2009, and 2012 are important points when the security status of China's rare earths industry underwent significant changes. (3) The security value of subsystem has changed significantly, mainly reflected in the surge of the technology subsystem in 2013 and the sharp drop in the political subsystem in 2017. (4) all the variables considered in the path model influence the security index significantly directly or indirectly or both. The resource subsystem has the largest impact on the security index, followed by the politics subsystem. Finally, based on the above findings and the status-quo of the rare earths industry, we highlight policy recommendations from resources management, international cooperation, market governance, and technology innovation perspectives respectively.