It seems that China’s economy is growing faster than any other country in the world. Their gross domestic product (GDP) grows at about 7% per year. However, despite this phenomenal growth, China does have a problem. The Chinese Government realizes that their economy will need more resources to fuel its growth and they have become a world leader in semiconductors. As a result, they have set up the world’s biggest electronic trading center in China.
Then, over the past few years, China and the US have been involved in a rather tense trade war with each other. At the same time, China has been building infrastructure across the board to improve its global economy. So far, despite this, the US has not added rare earth minerals onto its own list of national security materials. Still, there are still other worrying developments.
Last year, China was the largest exporter in the world of rare earth minerals. This included boron, iron, manganese, chromium and other minerals. China was especially busy importing these materials from Brazil, Australia, Canada, Norway and Russia. China’s main beef in this case was the high price it received for the boron.
China’s main argument was that they had developed countries like South Africa, Australia, Norway, and Canada to supply them with the minerals at fair prices. Therefore, China argued, it was entitled to take those minerals for itself. This created a major political and economic problem for the United States, which was trying to clean up its act because of certain Chinese behavior in international business. In addition, China was using these minerals to help make its own industry more efficient. The US was trying to undercut China by putting a hold on its currency, the Yuan, while simultaneously trying to increase its own clean energy supplies by putting solar panels on American soil.
The US took action against China by issuing another trade complaint, claiming that China was again dumping cheap steel onto the international market. The US Commerce Department also filed a complaint with the European Union, saying that China was dumping steel onto its markets. China denied all of these allegations, saying that the items were for re-use in other industries and that the European Union was failing to live up to its own standards. However, the EU did open an investigation into these complaints and is expected to issue a report soon. Meanwhile, the EU levied additional tariffs on certain Chinese products last week, hitting particularly hard a range of computer equipment used in the auto industry.
With the US economy in a turmoil, and European Union nations feeling the pinch of their massive economic debt, China has been busy consolidating its position in the world economy, and this effort has paid off handsomely. China’s economy will continue to expand at a rapid pace thanks to a massive effort to accumulate its own rare-earth’s dominance in the minerals market. China’s government now appears to have realized that it needs to make some concessions to the Western world in order to maintain its expansive market share dominance.
At the center of China’s effort to improve its global image is President Hu Jintao. In an effort to woo more foreign investors and facilitate freer trade, Hu has promoted a “win-win” policy for foreign investments in China. In addition to opening up its country to foreign direct investment, Hu has sought to bolster China’s rare earths market share dominance, which currently stands at over 90%. To accomplish this feat, China has been working overtime to improve its relations with countries like India, Brazil, and South Korea.
If China continues to aggressively pursue its goal of possessing rare earth minerals like gold and silver, it will not be long before the United States, and possibly other countries, start worrying. When the Chinese government starts to control the flow of rare earth metals on global markets, it will cause a severe backlash against the Chinese government and the Chinese monopoly on the rare earth minerals. It may take years, but sooner or later the United States will be forced to reevaluate its relationships with these economically disadvantaged nations, and will have to decide if it wants to continue economic rivalry with China, or work to create better relations to reduce trade barriers that hurt the American economy.