Christina Lu
Facing a flurry of Western efforts to de-risk critical mineral supply chains, China is racing to tighten its grip on the sector, both by unleashing punishing export curbs to spook competitors and by ramping up global investment.
After a decadeslong push, Beijing dominates the supply chains that turn raw materials, including cobalt and rare earths, into the powerful finished products underpinning missile guidance systems, renewable energies, and electric vehicles. But rising tensions have accelerated Western efforts to slash this dependence. To wean itself off of Beijing, Washington is using the Inflation Reduction Act to catalyze its own industry; European Parliament passed the Critical Raw Materials Act, meant to do much the same. Australia, a mineral powerhouse, announced last month that it plans to double investment in its sector.
China is busy firing back. In its latest warning shot, Beijing further tightened the screws on its competitors on Tuesday by announcing rare-earth export restrictions that would force firms to disclose the resources’ types and ultimate destinations for the next two years. China overwhelmingly dominates the production, refining, and processing of rare earths—which are crucial to everything from F-35 fighter jets and submarine sonar to offshore wind turbines—making the elements, and access to them, a strategic chokepoint.
Even with the entry of new players, Chinese companies are also moving full-speed ahead in securing a raft of new partnerships for minerals like lithium in Latin America and Africa. Chinese investment in overseas mining and metals projects is set to hit a record this year as Beijing moves to reinforce its command of these supply chains, according to a report released by China’s Fudan University in July, although it’s unclear if this momentum will continue into the new year.
“China’s not standing still on these things. They are developing their own investments in infrastructure across the supply chains, including in market development for advanced manufacturing,” said Morgan Bazilian, the director of the Payne Institute at the Colorado School of Mines. “On the minerals and semiconductor side, it looks like they’re not slowing down—and they’re not waiting for the United States to catch up.”
Beijing’s closed the spigots on rare earths before, like during a 2010 trade spat with Japan. But its latest rare-earth export curbs would mark an elevation in its attempt to wield its critical mineral leverage amid its spiraling, tit-for-tat tech trade war with the United States. Last month, China announced export curbs on graphite, a key input in electric vehicle batteries, while citing national security concerns. In July, China retaliated against Western measures by unleashing export restrictions on germanium and gallium, two chipmaking metals.
“I think the message that China is trying to send is don’t try to move forward without us,” said Cullen Hendrix, a senior fellow at the Peterson Institute for International Economics. Beijing wants to “use these export licensing restrictions as a reminder to tread carefully when you try to cut us completely out of the electric vehicle future.”
Alongside Beijing’s latest trade restrictions, Chinese companies are busy securing new agreements across the world, with state media stressing this month that lithium mining is set to become a “focal point” of cooperation between China and Latin American governments. Outside of Latin America, Chinese firms are set to funnel nearly $2.8 billion into tapping Zimbabwe’s potential lithium wealth; other companies are backing an iron ore project in Guinea and weighing a new copper deal in Serbia. China’s Shenghe Resources is set to acquire new shares in rare-earths miner Vital Metals, which is currently developing projects in Canada and Tanzania.
Much of this activity—particularly in Africa and Latin America—is linked to the Belt and Road Initiative (BRI), Chinese President Xi Jinping’s signature foreign-policy initiative that has poured hundreds of billions of dollars into infrastructure projects spanning the globe. At last month’s Belt and Road Forum, which marked the campaign’s 10th anniversary, officials signaled that Beijing will ramp up support for green energy projects under the banner of the BRI.
“China had a huge head start through its Belt and Road Initiative,” said Tom Moerenhout, a research scholar at Columbia University’s Center on Global Energy Policy. “This kind of paved the way now for the companies to take over, and that is exactly what’s happening right now.”
Beijing’s command over these supply chains has long rattled Western countries, who have in recent years ramped up efforts to de-risk ties by realigning trade alongside shared values and geopolitical relationships. That shift fits into a broader redrawing of the global trade map, said Kevin Book, the managing director of Clearview Energy Partners, a consultancy.
“Critical minerals are one part of a much bigger story,” Book said. “The fragmentation of the world is underway, and the repartitioning into new trade blocs seems to be happening—and I don’t think Beijing has received it very well.”
Just days after U.S. Trade Representative Katherine Tai declared that Washington and London had made “significant progress” in advancing a critical minerals deal in late October, Chinese state media struck back, warning that any U.S. efforts were “futile” and would “backfire.”
“Critical mineral agreements by the U.S. and its allies have a limited impact on China’s EV and mineral sectors,” it added.
Given the challenges in establishing the production, refining, and processing capabilities required for critical mineral supply chains, experts say it will be difficult for Washington, Brussels, Canberra, or other players to begin to disentangle from Beijing in the short term. But in the long run, Beijing’s continued weaponization of its supply will likely only expedite countries’ efforts to secure more stable supplies—and cut their dependence on China.
“If you squeeze the balloon, demand is going to go somewhere else. It isn’t always immediate, and it isn’t always easy,” Book said. But “if prices go too high, or if access gets too fragile, the buyers of energy resources and, in this context, critical minerals, will look elsewhere—and they are.”
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