*ISLAMABAD – The US has hit China where it hurts by going after its telecomchampion Huawei, but Beijing’s control of the global supply of rare earthsused in smartphones and electric cars gives it a powerful weapon in theirescalating tech war.*
A seemingly routine visit by President Xi Jinping to a Chinese rare earthscompany this week is being widely read as an obvious threat that Beijing isstanding ready for action.
However, analysts say China appears apprehensive to take such a route justyet, possibly fearful of shooting itself in the foot by hastening a globalsearch for alternative supplies of the commodities.
While Chinese official sources released no comments by Xi during hisinspection, his public appearances are usually larded with politicalmeaning, and this week’s stop is viewed as no exception.
“This is no accident, this didn’t happen by chance,” said Li Mingjiang,China programme coordinator at the Rajaratnam School of InternationalStudies (RSIS) in Singapore.
“At this moment, clearly the policy circles in China are considering thepossibility of using a rare earth exports ban as a policy weapon againstthe US.”
The United States last week threatened to cut supplies of US technologyneeded by Chinese telecom champion Huawei, which Washington suspects is inbed with China’s military.
The US move has fanned speculation that Xi could impose retaliatorymeasures and in an indication of the importance of rare earths to the US,Washington did not include them in a tariffs increase on Chinese goods thismonth.*China has leverage*
China occupies a commanding position, producing more than 95 percent of theworld’s rare earths, and the United States relies on China for upwards of80 percent of its imports.
Rare earths are 17 elements critical to manufacturing everything fromsmartphones and televisions to cameras and lightbulbs.
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That gives Beijing tremendous leverage in what is shaping up largely as abattle between the US and China over who will own the future of high-tech.
“China could shut down nearly every automobile, computer, smartphone andaircraft assembly line outside of China if they chose to embargo thesematerials,” James Kennedy, president of ThREE Consulting, wrote Tuesday inNational Defense, a US industry publication.
China has been accused of using its rare earth leverage for politicalreasons before.
Japanese industry sources said it temporarily cut off exports in 2010 as aterritorial row flared between the Asian rivals, charges that Beijingdenied.
In 2014, the World Trade Organization ruled the country had violated globaltrade rules by restricting exports of the minerals.
The case was brought by the United States, European Union and Japan, whichaccused China of curbing exports to give its tech companies an edge overforeign rivals. China has cited environmental damage from mining and theneed to conserve supplies as the reason for any past limits on output.
While disruptive, any leverage gained from a supply block may beshort-lived, experts said.
“This would accelerate moves to find alternative supply sources,” saidKokichiro Mio, who studies China’s economy at NLI Research Institute.-APP/AFP
