China flexes its muscles by slashing vital exports
China has struck fear into Western governments and electronics giants by slashing exports of a highly sought-after array of metals which are crucial for electronics products ranging from iPads and X-ray systems, to low-energy lightbulbs and hybrid cars.
In a sign of its growing industrial and political clout, China has cut its export quotas for rare earth elements (REEs) by 35% for the first six months of 2011, threatening to extend a global shortage of the minerals and intensifying a scramble to find alternative sources.
Mines in China supply 97% of the world's rare earths, 17 obscure metals which possess various qualities, such as conductivity and magnetism, that make them an essential component in many modern applications such as smartphones, computers and lasers.
Instead of last year's 22,282 metric tons, China's Ministry of Commerce revealed the total for the first six months of next year would be 14,446 tons, split among 31 domestic and foreign-invested companies.
Commentators said the announcement was probably designed to limit the environmental damage caused by the mines while ensuring its manufacturers were able to meet growing domestic and international demand.
However, the announcement caused dismay among Western governments, which have belatedly begun to appreciate that China's stranglehold on elements such as lanthanum, used for batteries in hybrid cars, and neodymium, for permanent magnets in wind turbines, give it immense economic and political power.
Electronics companies could be hard hit by rising prices caused by the export cut, which was predicted by Sony described the move as an obstacle to free trade.