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Rare earths vs high tech: Long cold war ahead for US, China?

May 23, 2019 05:18 AM

COURTESY TOI MAY 23

Rare earths vs high tech: Long cold war ahead for US, China?
Trump Admin Mulls Blacklisting Another China Co While Beijing Signals It May Use Domination Of Raw Materials Used In Smartphones To Counter US
Chidanand.Rajghatta@timesgroup.com

Washington:

A prolonged and full-blown trade war between the US and China — a thin cover for their struggle for global primacy that Washington is determined to maintain and China wants to break — appears inevitable now. The Trump administration is considering blacklisting more Chinese firms in the strategic high technology space and Beijing in turn has signalled it will now be browbeaten and will hit back.


Ratcheting up its attack on Beijing following its crackdown on the Chinese tech company Huawei, the Trump administration is weighing placing another Chinese firm Hikvision, the world’s largest maker of video surveillance technology, on the Commerce Department’s Entity List, that will subject it to all kinds of sanctions. The ostensible reason for the proposed action against Hikvision is that it supplied surveillance cameras that the Chinese government has deployed throughout the restive Muslimmajority Xinjiang region to combat what Beijing describes as separatist terrorism.

But beneath the veneer of individual action against specific firms, it is becoming increasingly clear that the United States, under President Trump, is making a belated attempt to retrieve what is believes is the ground it has lost to China in the strategic technologies realm. Besides technology denial on grounds that Beijing has been stealing proprietary US material, the Trump administration is also rapidly lowering the boom on Chinese scholars and students, some 300,000 of whom are in America at any given time. China has supplanted Russia as the new Cold War, or Tech War, rival.

China though is signalling that it will not be bullied into submission. In a striking move, Chinese President Xi Jinping toured a rare earth mining facility in China on Tuesday in what was seen in some quarters as Beijing’s readiness to use its domination of raw materials used in hightech manufacturing to counter the United States.

China is the largest supplier of rare earth materials that are used in everything from mobile phones to to guided missiles. By some accounts, if China were to curtail or cut off rare earth exports to the US, the effects could be similar to the oil crisis of the 1970s.

“Rare-earth metals are essential for producing most technological equipment. It is impossible to build a car without cerium, a smartphone without europium, a guided missile without neodymium,” Michael Silver, CEO of the company American Elements that deals with the material wrote in a recent Wall Street Journal op-ed.

Analysts say China has used its near-monopoly over rare earth materials in international disputes before, notably against Japan in 2010, when Tokyo was forced to release the captain of a Chinese ship captain it had detained.

China produces 95% of the world’s rare earths materials although it has only a third of the world’s reserves, a consequence of the US, which used to be the world’s leading producer, ceding its leadership in yet another area.

According to some accounts, China is also considering cutting natural gas purchases from the US as part of its retaliatory measures.

Meanwhile, even as China’s President Xi is rallying his people with nationalistic appeal, warning them to be ready for harder times, American industries are already crying uncle. From shoemakers to apparel sellers, both of which sectors import some 95% of their inventory, American businesses are moaning that the tariff war is going to hurt them badly, even though the Trump administration’s position is that it will hurt the Chinese even more.

Whether the Chinese have the stomach to take the punishment and whether Americans can match that grit is something only time can tell, because eventually, it will be people in both countries who will feel the pinch.

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