China Bashing over REEs—Justified or Not?


"Is China really the 'bad guy' in REE that a lot of media makes them out to be?"

There is an interesting debate going on right now in one of the rare earth community networking groups of which I am a member. The debate centers on this question: "Is China really the 'bad guy' in REE that a lot of media makes them out to be?" Of the 5 comment responders, 4/5 answered "no, not really"; I, being the fifth respondent, said: "I think some China bashing is absolutely justified."

The world of REE (rare earth elements and rare earth metals) is not quite the same thing as the world of industrial metals. Yet an outside observer of Chinese policies in regard to good old-fashioned industrial metals (e.g., steel, aluminum, etc.) tell a very different story, one where I would argue some China bashing is not only fair, it's justified.

Now that is not to say that the U.S. sits here blameless. We do not. The federal agricultural subsidies we provide domestic farmers look an awful lot like the tactics Beijing deploys to boost its own heavy industries, including steel production.

But this article from AMR's Kevin O'Marah explains some of the concern over China. Kevin points to the following six factors, which should give pause to any global procurement manager considering China as part of a supply chain:
  1. Capricious trade rulings—"Prohibitive export tax," export tax/rebate/VAT schemas deployed by China to encourage/discourage certain imports/exports.
  2. Rampant IP piracy—China is known for stealing technology know-how. Credible industry sources advise that China has hacked into computer systems of major U.S. producers, specifically to steal trade secrets.
  3. Exchange rate by fiat—Nobody can convince me that China's currency freely floats or is somehow "not manipulated."
  4. Poisons, pollution and contamination—The lead poisoning fiasco last year and the cadmium fiasco this month.
  5. Rare earth chokehold—The only way to "secure" supplies is to set up an operation in China, but who's to say it won't one day get expropriated by the Chinese government?

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