Wednesday, May 29, 2019

Crackdown on Smuggling First Step in China-US Rare-earth War
By Hu Weijia
Global Times
2019/5/29 20:57:07

China must urgently intensify its crackdown on the smuggling of rare earths to the US.

China indicated Tuesday night that it will keep options open for using rare-earth minerals as a weapon against the US in an escalation of the trade war provoked by the latter. Once it begins, we believe the country will fully utilize its dominance in the production of rare earths to hit US industries and give the US no chance.

The crackdown on rare-earth smuggling began several years ago and achieved good results. In the early 21st century, small and medium-sized Chinese enterprises as well as foreign companies have been playing an important role in China's rare-earth supply chain. But some of them find loopholes in China's export quota system and smuggle rare-earth minerals abroad.

The State Council, China's cabinet, in 2011 announced the country would need one or two years to curb the rampant smuggling of rare-earth minerals. The government said in 2016 it had established a traceability system to supervise the entire process, from mining to the export of refined goods.

The crackdown on rare-earth smuggling makes it possible for China to weaponize the minerals in an escalation of the trade war. Now China needs to  tighten management of rare-earth enterprises, especially foreign-invested companies, to make smuggling absolutely impossible.

Rare-earth minerals are important strategic resources but China had never thought of using the minerals as leverage to hit the US. The trade war is prompting China to rethink its rare-earth strategy and make quick adjustments. Once merely an economic sector, rare earths have become a counter weapon for China to hit back at the US. There is a lot of work to be done, and cracking down on smuggling is only the first step in weaponizing the sector.

Now may be the time for China to cut the number of rare-earth mining licenses, increase rare-earth imports, and build strategic reserves of the minerals. China reportedly cut imports of rare earths from Myanmar in May, but the trade war is very likely to prompt China to increase its rare-earth imports in the future.

China is busy upgrading its rare-earth sector. If there is a rare-earth war against the US, we have absolute confidence that China will win and deal a knockout blow to the US economy.

The author is a reporter with the Global Times.

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