China is Seeking to Establish a Strategic Lock on Key Raw Materials

How China Plans to Leapfrog the American Economy (and it’s Not What You Think)

May 24, 2011

Market Oracle - ...China is seeking to establish a strategic lock on key raw materials.

Like Indium. And antimony. Beryllium. Gallium. Germanium. Tungsten. Lanthanum. Tantalum. Neodymium. Niobium. Rhenium. Cobalt. Tantalum. Even familiar platinum, silver, and chromium. Even humble graphite.It plans to build itself an economy powered by this energy and then just sit back and watch the United States run out of gas.

This strategy doesn’t only consist in establishing a monopoly on key raw materials, though this is its hardest point of ultimate leverage. China also aims to dominate the industries that convert these materials into green energy products. It is using price competition to squeeze out the American solar industry, for example, which it hopes to dominate as Japan now dominates consumer electronics

If China’s master plan reaches even partial fruition, it will gain a gigantic economic advantage over the U.S. Americans will be left struggling with $10/gallon gasoline and its likely inflationary and recessionary consequences. Our living standard will be hobbled for decades.

And if China’s master plan reaches its full fruition, the game is simply over for us as a superpower. Indeed, under some scenarios, it may well be over for us as a developed nation.

This is grand strategy on a civilizational scale.

It is possible that economic and military decline will prove mutually reinforcing. If the world decisively moves—as it is already gradually moving—away from market allocation of natural resources to political allocation and so-called resource nationalism, then the inability to project sufficient power to guarantee access to key resources will itself curtail that access, weakening the economy that supports that military strength.

There is a huge controversy right now about whether China is sincere about cleaning up its environmental act. The authors argue that in significant part, it is indeed, as evidenced by the fact that China is now the world’s largest producer of green energy technologies.

But they’re not doing it because they’ve joined the Sierra Club. They’re doing it for the same reason they do everything: because it is a component of their plan for advancing national power.

Beijing makes plans in very long increments. They, unlike our own election-cycle worshiping rulers, think through where they want their country to be 100 years from now.

This is why China is busy economically colonizing Africa—now home to an estimated one million Chinese workers—and is making fools of us in Afghanistan, where American military power is currently protecting huge Chinese investments in coal, copper, and other resources.

We, on the other hand, sold off most of our own strategic minerals reserve in 1992, confident that the end of history had arrived and the Soviet Union was the last enemy we would ever face.

We allowed Molycorp’s Mountain Pass mine in California’s Mohave desert—historically one the entire world’s largest sources of rare earths—to be shut down by cheap Chinese competition. We almost allowed China to buy this mine outright in 2005, when it was owned by a subsidiary of Unocal petroleum. We didn’t. So there may be hope for us yet.

Congress passed a strategic minerals bill, the Rare Earths and Critical Materials Revitalization Act, in 2010, albeit a tiny sop compared to Beijing’s grand strategy on the issue. Australia similarly checked a Chinese buyout in 2009.

Read more here and here.