Rare earths: Will China cut the U.S. off?

Dear Access members,

Greetings from New York, from the whole The China Project team!

The third annual The China Project Women’s Conference has just started. Follow our Instagram channel, our @supchinanews Twitter feed, and the hashtag #SupChinaWomen, for live updates.

A correction: In Friday’s newsletter, we highlighted a story about American fears of Chinese Communist Party influence in New Zealand. Those fears are very real, but the story we linked to is a year old. Our apologies.

We’re keeping the newsletter brief today: A quick rundown of the top China news from the weekend is below. We’ll be back to our regular coverage tomorrow.

—Jeremy Goldkorn and team

1. Rare earth restrictions coming?

Last week, the nationalist rag Global Times published a number of articles that articulated a possible Chinese response to new American tariffs and the measures directed at Huawei: a ban on exporting rare earth elements to the U.S. China is the world’s major supplier of rare earths, which are essential to the production of many electronic products.  

US need for rare earths an ace in Beijing’s hand

Shares of rare-earth producers on Thursday led the stock markets in the Chinese mainland higher after the U.S. decided not to increase tariffs on rare earths and other critical minerals from China.

Why did the U.S. threaten to raise tariffs on “essentially all remaining imports from China” while sparing rare earths? The answer is simple: Without a reliable domestic supply, the U.S. must rely on rare earths from China to supply industries of strategic importance.

The Global Times is not always a reliable messenger of Party intentions, but in this case, General Secretary Xí Jìnpíng 习近平 and his chief negotiator, Liú Hè, have made the threat explicit. The South China Morning Post reports:

In his first domestic trip since the escalation of the U.S.-China trade war early this month, Xi visited one of the country’s major rare earths mining and processing facilities in Ganzhou, Jiangxi Province, state news agency Xinhua reported on Monday.

He also paid respects at a monument in Yudu…marking the start of the Communist Party’s Long March 85 years ago.

But would an export ban on rare earths work? It would cause pain, but perhaps only temporarily, because rare earth elements are not actually rare, they are just difficult to extract. From The Verge:

The whole process is “expensive, difficult, and dangerous,” says former rare earth trader and freelance journalist Tim Worstall. He tells The Verge that, because of this, the West has been more or less happy to cede production of rare earths to China. From the 1960s to the ‘80s, the US did actually supply the world with these elements; all extracted from a single mine in California named Mountain Pass. But in the ‘90s, China entered the market and drove down prices, making Mountain Pass unprofitable and leading to its closure in 2002.

See also:

• Joint venture plans to revive rare-earths processing in U.S. WSJ (paywall)

• Global trove of rare earth metals found in Japan’s deep-sea mud / AAAS

Other U.S.-China news

• DHS warns of ‘strong concerns’ that Chinese-made drones are stealing data / CNN

• An anti-U.S. trade war song is going viral in Beijing / Bloomberg (porous paywall)

• Full-blown trade war will push world toward recession: Morgan Stanley / Reuters

• Surprise attack: CCTV6 unexpectedly airs anti-American movies as China-U.S. trade war intensifies / What’s on Weibo

• Google suspends some business with Huawei after Trump blacklist – source / Reuters

• How stringent export controls on emerging technologies would harm the U.S. economy / Information Technology & Innovation Foundation

• China’s tech transfer problem is growing, EU business group says / Reuters

—–

Our whole team really appreciates your support as Access members. Please chat with us on our Slack channel or contact me anytime at jeremy@thechinaproject.com.

—Jeremy Goldkorn, Editor-in-Chief

BUSINESS AND TECHNOLOGY:

• Pinduoduo
  Ecommerce newcomer Pinduoduo beats market expectations in first quarter / Caixin Live
  “Beating markets’ expectations, the company’s total revenues for the first three months of 2019 surged 228% year-on-year to 4.5 billion yuan ($677.3 million).”

• Smart speakers
  Ni hao, Alexa: China passes U.S. to become world’s largest smart-speaker market / Caixin Live

Just last year, the U.S. was the global leader in shipments of the devices that listen, speak and play audio. But in the first quarter of this year, things changed dramatically.

China shipped more than double the number smart speakers than the U.S. did — 10.6 million units versus 5 million units, a Monday report from market data provider Canalys shows.

• Mobile video games — Pokemon
  China’s NetEase to launch first official Pokemon game in China / Reuters
  “A local version of Pokemon Quest will mark the first official Pokemon mobile game release for China, set to arrive nearly three years after Pokemon Go first hit the global market.”

• Game of Thrones finale delayed on Tencent Video
  Tencent Video delays ‘Game of Thrones’ finale in China, prompts fan uproar / Reuters
  “The Chinese internet giant has heavily censored some Game of Thrones episodes, removing scenes featuring sex and excessive gore, in line with Beijing’s broader push to clean up content seen as vulgar or not in line with its socialist values.”

SCIENCE, HEALTH, AND THE ENVIRONMENT:

• Alternative energy vehicle technology
  China boosts hydrogen fuel cell investment in green energy push / Caixin Live
  “Local governments in China are stepping up support for hydrogen fuel cell projects as part of wider efforts to promote green energy in the world’s largest auto market. Shenzhen-listed Beijing Shouhang IHW Resources Saving Technology Co. became the latest company to receive government backing for a hydrogen fuel cell business when it signed a cooperation agreement with the Datong city government in Shanxi Province.”

POLITICS AND CURRENT AFFAIRS:

• Xinjiang
  Empty Uyghur mosques during Ramadan in China / Milestones Journal
  Darren Byler writes, “Uyghurs from across the region have told me that they have been asked to burn prayer rugs and religious texts, including Qurans, in public displays of loyalty to the state. Uyghurs have been informed that any mention of the name God, including the common phrase ‘God willing,’ any sign of prayer after a meal, even using the common Arabic greeting asalam alaykum can result in detention and interrogation.”
  Pakistan’s silence on fasting ban for China Uyghurs riles activists / Nikkei Asian Review (porous paywall)
  China asks Turkey to support its fight against militants / TRT World

• Spying in Sri Lanka?
  Chinese intelligence agencies operating in Sri Lanka / Colombo Gazette
  “Diplomatic sources said that Chinese intelligence operatives have entered Sri Lanka with or without the direct knowledge of Sri Lanka. China has a large presence in Sri Lanka and it is understood that intelligence operatives have entered Sri Lanka through some of the projects funded by Sri Lanka and through other Chinese companies.”

• Falun Gong in North Korea
  Falun Gong spreading in North Korea despite crackdown / Chosun
  “The controversial Falun Gong spiritual movement that originated in China is spreading quickly in Pyongyang despite a crackdown by an anxious regime, according to sources… One source said more than 100 Falun Gong followers were arrested during a crackdown in Pyongyang last month, but the negative publicity backfired and actually sparked interest in the movement, including from the Pyongyang elite.”

• Canada’s China relations crisis
  Globe editorial: China is changing the geopolitical climate. Canada has to mitigate, and adapt / Globe and Mail
  “Unfortunately, the real People’s Republic of China is not just an economic opportunity. It is also a threat. And that threat is growing. This is no passing storm. China’s rapid rise, even as it remains an unapologetically totalitarian state, is geopolitical climate change on an unprecedented scale. We must think hard about how to mitigate its impact.”

• Pakistan — new threat from Balochistan Liberation Army
  Video from Tarek Fatah on Twitter: “Baloch Liberation Army issues warning to President Xi Jinping of #China: “You still have time to quit Balochistan or you will witness a retaliation from Baloch sons and daughters who will turn Balochistan into your graveyard.”

Context on The China Project: Balochistan Liberation Army attacks Chinese consulate In Pakistan.

• Tehran schmoozes Beijing

FM Zarif meets Chinese counterpart in Beijing / Ministry of Foreign Affairs, Islamic Republic of Iran

Iranian Foreign Minister Mohammad Javad Zarif and his Chinese counterpart, Wáng Yì 王毅, met in Beijing on Friday night to discuss issues of mutual interest as well as regional and international affairs.

During the meeting, both sides highlighted the historic and strategic relationship between the two countries and stressed the need to expand ties in areas of politics, economy, trade, culture, energy, fighting terrorism and other areas of interest.

SOCIETY AND CULTURE:

• Awkward state media responses to Taiwan’s gay marriage legalization
  People’s Daily, China on Twitter: “Local lawmakers in Taiwan, China, have legalized same-sex marriage in a first for Asia, according to local media reports.”
  A response from Taiwan: Ministry of Foreign Affairs, ROC (Taiwan) on Twitter:

• “WRONG! The bill was passed by our national parliament & will be signed by the president soon. Democratic Taiwan is a country in itself & has nothing to do with authoritarian China. @PDChina is a commie brainwasher & it sucks.”  

• LGBT Chinese on live-streaming sites
  Silent for so long, elderly gays livestream at full volume / Sixth Tone
  “A generation that has long kept silent is breaking into song through livestreaming.”

• Accommodating disabilities
  Starbucks opens ‘silent cafe’ in southern Chinese city of Guangzhou / Xinhua via Straits Times
  “Starbucks has opened a ‘silent cafe’ in Guangzhou, where about half of the staff are people with hearing loss, as part of an initiative to support the employment of people with disabilities.”

FEATURED ON SUPCHINA

Zheng Shuyin and Bianca Walkden in controversial finish at World Taekwondo Championships

The World Taekwondo Championships took place in Manchester this week, with several Chinese hopefuls in the hunt for medals. One of them, Zheng Shuyin, reached the heavyweight (+73 kg) final, where she faced Briton Bianca Walkden, who was bidding for her third straight world title. It ended in controversy when Zheng was disqualified for having committed 10 fouls, and Walkden was handed the crown. Also in this week’s China Sports Column: An update on the Southampton Wolves and their Chinese owner, and New Balance knockoff NewBailunLP sponsors the World Curling Championship.

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SINICA PODCAST NETWORK

Sinica Early Access: Chinese Investment: Beyond the USA

This week’s podcast was recorded at the Caixin “Talking China’s Economy: 2019 Forecasts and Strategies” conference in Chengdu in April. Kaiser spoke with Professor He Fan of the Antai College of Economics and Management at Shanghai Jiaotong University, and Michael Anti, CEO of Caixin Globus, which tracks Chinese global investment. They chat about how “globalization,” which once meant “Americanization” to many Chinese, has taken on a much broader meaning as SAFE concerns over capital flight have reeled in the “gray rhinos” after an investment spree, and as a stricter CFIUS regime has made U.S. investments more difficult.

Sinica Early Access is an ad-free, full-length preview of this week’s Sinica Podcast, exclusively for The China Project Access members. Listen by plugging this RSS feed directly into your podcast app.