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Technology & Innovation

Is China Cheating the World Markets?

The desire to create competitive industry better explains Chinese behavior than the conventional wisdom of an unapologetic mercantilist power throwing its weight around.

What’s the Latest Development?

China has a near-monopoly on the mining of rare earth metals which are irreplaceable in the manufacturing of high-tech devices like mobile phones and electric car motors. So when it announced a reduction in its export quotas of rare earths, returning to near-2010 levels, the U.S. and E.U. cried foul. They argue that China is withholding the metals from world markets to give its own industry an advantage. Last year, China cut off rare earths exports to Japan following a diplomatic row. It currently faces sanctions from the W.T.O.

What’s the Big Idea?

To avoid a harsh ruling from the W.T.O., which is investigating the merits of China’s export reductions, China claims it is curtailing harmful environmental practices that are concurrent with mining and exporting rare earth metals. Damien Ma, a China analyst at Eurasia Group, doubts those environmental claims, but he also doubts China has malevolent motives. Rather, he says, China is driven by domestic demand for rare earth metals, a demand which is visible in the five-plans recently released by the government. In the plans, the government emphasizes the construction of a high-tech industry which relies heavy on rare earth metals. 


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