A masterclass in how not to play your hand.
China’s dominance in rare earths gives it leverage but not absolute power. Each time Beijing tries to use its position for strategic advantage, it strengthens the incentive for others to find ways around it. “The problem for Beijing is that the more it rolls out the big guns of export restrictions on critical minerals, the more it encourages the Western world to bite the bullet and build alternative supply chains,” commodities expert Clyde Russell recently wrote. “China doesn’t even have to fire the cannon, the repeated threat of doing so will be enough to spark the necessary Western investment.” In that sense, Beijing’s latest moves may prove self-defeating, accelerating the very diversification that it seeks to avoid.
History offers a preview. When China abruptly halted rare-earth exports to Japan in 2010 after a maritime dispute, it shocked Japan’s manufacturers, who relied heavily on Chinese supply. Though the ban lasted just two months, it encouraged Japan to change its approach. Tokyo began investing heavily in non-Chinese rare-earth mining projects, in addition to promoting stockpiling, recycling, and alternative technologies. Japan’s dependence on Chinese rare earths has since declined significantly—from 90 percent to 60 percent today—and its total consumption of rare earths is now half of what it was 15 years ago. Beijing’s attempt to exert pressure ultimately eroded its own influence.
