Abstract
ABSTRACT This paper analyzes the development of China’s rare earths industry, emphasizing the role of state technological initiatives in the country’s transition from rare earth exporter to large industrial consumer of these raw materials. Like other industrial powers before it, China takes advantage of low-cost domestic supplies of strategic raw materials to promote higher value-added manufacturing. We argue that, in the case of rare earths, this strategy has been largely successful, disrupting a classic international division of labor that existed prior to 2000, in which China exported most of its rare earth output to wealthy countries, and transforming Chinese firms into exporters of more sophisticated downstream products.
Highlights
Rare Earths Elements (REE), a heterogeneous group of raw materials widely used in modern technologies, became a critical issue in world trade in the late 2000s as China, practically the world’s only rare earth elements (REEs) producer at the time, slashed export quotas
Rare earths consumption is concentrated in eight market sectors accounting for over 90% of worldwide REE demand: oil refining catalysts, automobile catalysts, glass additives, polishing powders, metallurgy, battery alloys, phosphors and permanent magnets
The conflict coincided with an abrupt halt in rare earth exports to Japan, leading to accusations that China was using its control over REE supplies as a geopolitical weapon
Summary
Rare Earths Elements (REE), a heterogeneous group of raw materials widely used in modern technologies, became a critical issue in world trade in the late 2000s as China, practically the world’s only REE producer at the time, slashed export quotas. By 2005, their share of global production had reached 95% China assumed this dominant position just as world REE demand was increasing with the proliferation of applications in consumer electronics, weapons systems and green technologies. We argue below that this transition was the result of a long-run industrial policy for rare earths and part of a broader strategy to promote higher value-added production and create new advantages in electronics and green technologies. In adopting this strategy, China seems to be following the development path of other large industrialized economies. Rather than rely on raw materials exports, it uses its control over strategic raw materials as a source of geopolitical power and as a basis for industrial and technological upgrading
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