The seemingly calm trade war between China and the United States has reopened after news broke that Beijing is "seriously considering" restricting exports to the United States of rare earths - 17 chemical elements used in high-tech consumer electronics and military equipment, the editor-in-chief of China's Global Times newspaper has revealed.
A senior official from China's National Development and Reform Commission told Xinhua news agency that Beijing will prioritise domestic demand for rare earths, but will satisfy reasonable demand from other countries. Also, the Ministry of Industry and Information Technology already proposed last month a project to control the production and export of 17 rare earth minerals in China, of which the Asian country controls about 80 per cent of the world's supply.
Although the official from China's national planning agency did not directly answer whether Beijing would restrict rare earth exports to the United States, Global Times editor-in-chief Hu Xijin wrote on Twitter: "As far as I know, China is seriously considering restricting rare earth exports to the US. China may also take other countermeasures in the future".
Beijing's control of rare earths threatens to become the new sticking point between the two powers. In a November report, Zhang Rui, an analyst at Antaike, a Chinese government-backed consultancy, said that US arms manufacturers could be among the first companies affected by any export restrictions. In particular, such restrictions could directly affect technologies vital to the manufacture of a number of sophisticated weapons, including the US F-35 fighter jet. In addition, rare earth minerals are also critical to the manufacture of products such as smartphones, electric vehicles and wind turbines.
Chinese President Xi Jinping visited a rare earth company in southern China this month, state media reported, prompting a surge in producer shares on speculation that this was a clear indication that Beijing was considering using the chemicals in the trade war against the United States.
For its part, the Pentagon has been concerned about the US's dependence on China for these lands. In recent months, the Pentagon has signed contracts with US and Australian miners to increase its onshore refining capacity and reduce its dependence on Chinese refiners.
Yet some experts argue that limiting these exports could have the opposite effect that China is seeking. They argue that it would motivate Beijing's rivals to ramp up their own production capacities and undermine China's dominance in the industry.
China's dominance in rare earth mining, while under threat, maintains a virtual monopoly status in the refining process that turns ores into materials ready for manufacturers. The Asian giant controls about four-fifths of the world's rare earth refining capacity. Ores mined in the US must be shipped to China, as the country does not yet have its own refining capacity.