China RE in Vietnam; Neo sell China Assets; Canada puts 100% Tariff on China EV; Backdoor Listings from Hell: USA Rare Earth & Tactical; Reporting Season for RE Companies; RE Prices Up;
Rare Earth 3 September 2024 #155
Farewell to the true Gentleman of Rare Earth
A quick note
Apologies in advance, since rare earths are so politically charged, politics take again a good portion of this post.
While it would be suicidal for China’s rare earth industry if restrictions were imposed on relevant exports, the western China containment policy is having an impact and a cornered China may begin to act differently than would normally be expected.
China has a history of biting the hand that feeds. The Sino-Soviet Split and resulting reduced aid from the USSR led directly to failed self-sufficiency policies in China and famines. Important resources needed to be diverted to the military, too, and eventually there was even armed conflict with the USSR (Zhenbao Island Incident March, 1969, and Xinjiang in August of the same year).
Then and now for China it is all about political principle. And, as Prof. John Mearsheimer, the author of “Can China rise peacefully?”, says:
Politics trump economics.
Trade war
It seems that full-blown trade war becomes more likely. China is under pressure and here is why.
WTO
Basically, China insists on having open access to foreign markets but does not reciprocate in kind. At the expiry of the grace period in 2016 China made adamantly clear that it has absolutely no intention to fully implement the commitments and expectations of its WTO accession protocol of 2001 and still demanded to be determined a market economy.
Current economic challenge
China has a history of exporting itself out of a domestic economic dips, but doing so absolutely requires free access to foreign markets.
And China’s main markets, those which no nation built on exports can do without, are stalling. That is a problem.
Significant supply chains in China cater exclusively to exports. So if exports are falling, the impact is much larger than may be anticipated. Many more jobs and salaries are depending on export than statistics may suggest.
Exports of goods and services (current US$) - China:
Failing policy
In order to reduce export dependence, the strategy has been to change China to a consumption driven economy since 2013. It is failing.
Households and NPISHs final consumption expenditure (% of GDP) - China:
For comparison with a consumption-led economy: The Households and NPISHs final consumption expenditure (% of GDP) of the U.S. is consistently 60-70%.
Bloomberg has the sentiment numbers which align:
Import reliance
There is another element.
Long ago China’s government followed the advice of experts, that feeding China’s growth on domestic raw material resources would not be sustainable, in some raw materials not even medium term.
It also saw clearly that investment in development of foreign resources would not be at the scale that China requires. China’s growth would be throttled, if China would not invest abroad itself.
Growing western reluctance of accepting Chinese resource investments forces China to go for “exotic” suppliers. Otherwise, who in his right mind would invest in copper mining in Afghanistan? It is stone-cold-crazy.
China Imports of Goods and Services (current USD):
In rare earth China developed a high level of reliance on Myanmar, of all countries, and what is going there on you can read further below.
Belt & Road
Along with the realisation that large scale foreign investment in resources abroad were needed, also infrastructure to handle the logistics of raw materials needed to be build. Enter China’s Belt & Road infrastructure investment initiative since 2013.
Nota bene
It is certainly not that China’s main export markets have a history of being glowing examples of free trade nations/blocs.
It is not about proving who is right and who is wrong, either.
What we are witnessing now is simply a test of strength. And that must not deteriorate into a hot war between nuclear armed nations.
Recent diplomatic activity with China commensurates with the recognition of this risk.
Open Season
Every week, China's Ministry of State Security releases more alarming tales about malicious foreigners and "hostile foreign forces" intended to stir-up xenophobia among the Chinese populace.
Rewards - one may say “bounties” - are offered for reporting “acts that endanger national security.” How such “acts” are defined remains in the eyes of the beholder. It is determined by the “relevant authorities” according to the direction the wind is blowing.
In effect this means “open season” on foreigners and dissenters in China for literally anything (in China it is even illegal to be disrespectful of a national hero under the Law on Protection of Heroes and Martyrs).
All this while the top calls for furthering international people-to-people exchanges and opening up.
Here the webpage anyone can use to report anonymously about anyone and anything she/he bears grudges against, bilingual, Chinese and English:
European Union
Resisting the new green colonialism
Despite EU Commissioner Ursula von der Leyen’s assertion in her speech on June 16, 2022, that “the idea of spheres of influence are ghosts of the last century,” it appears that Africans are still operating within the sphere of the EU. It is clear that the EU, especially Germany, is pushing for a green hydrogen economy where they dominate the value chains and technologies while externalizing the socio-environmental costs to the peripheries (i.e., the Global South). This can be seen as a new form of energy imperialism, where European countries, or more broadly, the imperial cores, aim to use the continent as a battery for their needs.
EU countries continue to have an essential need to extract resources and wealth from their peripheries, especially from Africa. The raw materials these regions possess, combined with an undervalued and disciplined labor force, continue to sustain the so-called developed world while causing a massive flow of wealth and resources from Africa to Europe.
In a nutshell.
We expect the EU to be an example and do also domestically what it expects of others to do. Else the EU would be practising resource colonialism, the last thing EU politicians would like to stand for.
The EU should do the right thing, deregulate and educate its people, that they can’t approach challenges with the mentality of a stubborn 4-year old.
//Politics
China’s largest rare earth supplier
China’s deadly divide-and-rule tactics in Myanmar risk shock waves across region
Like the vanquished British imperialists it so reviles, Beijing is playing a duplicitous game of divide-and-rule, covertly backing ethnic groups where they control border areas in order to secure its investments and geostrategic interests. Radio Free Asia reported that Chinese artillery opened fire on junta forces inside Myanmar this month in defence of an insurgent base. It wasn’t the first time.
It is also reported that October’s offensive, known as Operation 1027 and led by the Three Brotherhood Alliance, a coalition of northern ethnic militias, some with communist sympathies, was coordinated with China’s security services – even as Beijing, along with its Russian ally, continued to supply arms to the junta. In return, the alliance promised Beijing it would crack down on billion-dollar Myanmar-based online scams and people trafficking from China.
Of course this begs the question, if anyone else is active in Myanmar, such as certain three-letter-agencies. The Interpreter opines:
At present, however, there is no evidence of that happening. Experienced observers who have been monitoring the arms inventories of the PDF and EAOs have identified three main sources of their arms, and none of them include foreign governments. Instead, they identify the EAOs themselves, the Thai black market and the PDF’s own arms factories. There has also been a trickle of weapons from private groups of supporters overseas.
Should the junta, or its partners such as China or Russia, hear of any clandestine support to the opposition movement, they would make it known very quickly. That too has not happened.
Nonetheless, current developments seem to serve U.S. interest of denying China access to the Bay of Bengal and the Indian Ocean via Myanmar.
Disaster in Myanmar’s Civil War
Wary of Trump, US minerals projects rush to close government loans
Biden's DOE has awarded nearly $25 billion of conditional loans
Sources say some loans won't be finalized before January
Domestic projects key to energy transition could be frozen
Under President Joe Biden, the U.S. Department of Energy's Loan Programs Office (LPO) has awarded nearly $25 billion in conditional loans to 21 companies, including Li-Cycle, ioneer, Lithium Americas, Redwood Materials and others planning to build facilities that recycle batteries or process lithium and other minerals for use in electric vehicles. Such conditional loans still need final approval, which takes time.
Is there any rare earth company in the U.S. that has not received pledges of support from the US government?
As far as DOE’s LPO is concerned, we did not find anything rare-earthy in it.
Keep reading with a 7-day free trial
Subscribe to The Rare Earth Observer to keep reading this post and get 7 days of free access to the full post archives.