Sharply raising the stakes in a dispute over Japan’s detention of a Chinese fishing trawler captain, the Chinese government has blocked exports to Japan of a crucial category of minerals used in products like hybrid cars, wind turbines and guided missiles.
Any high-tech manufacturers with part of their supply chain in Japan will be very concerned about this news. Toyota's strategic plan of ensuring it can obtain sufficient rare earths for its projected Prius sales is now in doubt.
The ongoing China-Japan spat is about more than just China's assertion of historical hegemony in Asia. The China Development Research Foundation, a Chinese government think tank, published a report concluding that the urbanization of 400 million migrant workers over two decades will cost $300B per year. This commitment to development is absolutely essential if China is to maintain its internal stability. China has a short window in which to decide how it will pay for the infrastructure improvements it needs to meet the rising expectations of its people. Its options include offshore resource development in places like the East China Sea. Alternatives to that option include curtailing the amount of money China spends buying U.S. Treasury bonds.
This development gives renewed urgency to U.S. efforts to develop alternative sources of rare earths from Mountain Pass, California and elsewhere.
