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China Plays Hardball With Rare Earth Exports

Rare earth metals are used in the manufacture of many items such as electric cars, computer screens, wind turbines and cell phones, just to name a few. Needless to say, rare earth metals are much-needed and in almost constant high demand. And when businesses need rare earth metals, there’s one country they turn to: China.

China produces 97% of rare earth metals, much of which is exported to Japan. But recent reports claim that shipments of the metallic element to Japan were halted. There are a few theories as to why.

The halting of shipments came, coincidentally (or not), after Japan arrested a Chinese fishing boat captain “whose trawler collided with two Japanese patrol boats off disputed islands in the East China sea.” Now, Japan is accusing China of using the metals, and its near-monopoly of it, as a “bargaining chip.” A claim China denies:

Speaking to a China-European Union business summit in Brussels, [China's Premier] Wen [Jiabao] echoed other Chinese officials in denying Beijing had ordered traders to hold back rare earth shipments to Japan due to a recent flare-up in tensions, the newspaper China Daily reported Friday.

China claims they cut back (denying they halted shipments) because demand for the metals is exceeding supply (a claim that has received much attention lately). In either case, the Japanese are very concerned that cutbacks in exports will hurt their tech-heavy manufacturing businesses. A valid concern indeed.

Risk Management Magazine and Risk Management Monitor. Copyright 2020 Risk and Insurance Management Society, Inc. All rights reserved.

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Emily Holbrook is the editor of Risk Management magazine and the Risk Management Monitor blog.

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