China, Rare Earth Elements, and US-Sino Relations

Last month, a major rift between Asia’s two largest economies broke out because of a fisherman, one Zhan Qixiong.  The Recorded Future timeline below shows the story as events have been reported by online media.

Going through the events on the timeline, we learn that on September 7, a Chinese fishing trawler collided with two separate Japanese Coast Guard ships about forty minutes apart. The ship was fishing in waters rich in oil and natural gas controlled by Japan but long claimed by China.

The Japanese Coast Guard detained Zhan, the Chinese trawler’s captain. In response, Chinese Prime Minister Wen Jiabao a week later called for the captain’s release and threatened further actions. The next day, China arrested four Fujita employees — all Japanese nationals — for entering and videotaping a restricted military zone. A few hours later, reports came out that China would block all exports to Japan of rare-earth elements. These reports were later denied by the Chinese commerce ministry, claiming the stoppage of shipments was caused by a Chinese holiday. Still, by Saturday of that week, Japan had agreed to release Zhan Qixiong.  The timeline view clearly lays out what happened over the course of the month, event-by-event.

China flexing its muscles, coincidentally or not, came a few weeks after it overtook Japan to become the world’s second largest economy. This new position of economic strength has allowed China to play tough in many areas, including their near-monopoly on producing rare earth elements. Rare earth elements are 17 elements found in the periodic table that are vital to the manufacturing of electronics, batteries, engines, and other miniaturized high-tech components.

We can use Recorded Future to research the multiple ways China is using its stranglehold on rare earth elements. To begin, the first search done is to look for quotations containing the words “rare earth”.  The first hit is a link to an article in which Jiang Zemin, the former Chinese president, is quoted as saying that China must use its advantage in rare-earth resources to create “economic superiority”.

The next step is is a co-entity search involving the country China and the free text “rare earth”.  This is what we learn:

We find that the West was initially happy to give China this market, as they were able to extract a great amount at a low cost because of cheap labor and lax environmental concerns.  All the other mines closed down, though, and now China’s dominance in the market puts the world at a critical point.

To see how this could effect international relations with the only economy larger than China, we do a co-entity search for “rare-earth”,Pentagon.

The China-Japan dispute caused the Pentagon to focus on the US dependence on China for rare-earth elements.  Following those links, we learn that until around 1990, the U.S. was self-sufficient and the world leader in producing and refining rare earth elements.  Within a decade, though, the US became reliant on China for more than 90% of its use.

These elements are used not only in everyday items Americans have become dependent on, such as cell phones and televisions, but in items that the Pentagon is dependent on, such as smart bombs and radar.  This Business Week article in particular laid out in detail the perils of being too dependent on China for these vital elements.

The United States is already dependent on the Middle East for oil, perhaps the most vital resource of the past century.  Just as America begins to look at alternative fuels, it has become dependent on another area of the world for another vital resource, perhaps the most vital over the next century.

China has already proven that they are not afraid to use their monopoly to push their neighbors into getting what they want.  With Chinese demand growing internally, fewer deposits will be left to be exported, leaving the American military and the global market for electronics in the back of the line.  Time will tell how this plays out.

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