China could unleash a trump card in the tech Cold War
- China's position as a leading supplier of rare-earth elements is a secret weapon if trade war hostilities continue.
- China is a dominant supplier of the materials, which are critical for the manufacturing of many high-tech products.
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esolution to the trade hostilities between the US and China remains elusive. Rare earths represent a critical component for the manufacturing and development of hi-tech products such as smartphones and electric vehicles.
China is the leading supplier of rare earths and accounts for 78% of global production, according to a report from Bank of America Merrill Lynch. Should tensions surrounding the trade war escalate, China's control of the elements could represent a key source of leverage in negotiations, the bank said.
In a sign of China's focus on the issue, President Xi Jinping last week visited a rare-earth magnet factory. Notably, Xi was accompanied by Vice Premier Liu He, who has been leading trade negotiations with the US.
Rare earths c
minate supply through a confluence of factors. These include a long-term focus on raw-material extraction by China, which has classified the materials as a strategic resource.
In addition, Chinese supply pushed prices lower in the 1990s, reducing the focus of Western mining firms on the sector. Finally, political considerations played a role in the shuttering of mines such as the Mountain Pass mine, which represented a key source of US rare earths.
"Higher global demand for the raw materials has been accompanied by rising concerns over supply security, partially because China is dominating global production," the BAML report concluded.
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