In 2010, because of a geopolitical incident between China and Japan, seventeen elements of the periodic table known as rare earths became notorious overnight. An “unofficial” and temporary embargo of rare-earth shipments to Japan alerted the world to China’s near monopoly position on the production and export of these indispensable elements for high-tech, defense, and renewable energy sources. A few months before the geopolitical confrontation, China had chosen to substantially cut export quotas of rare earths. Both events sent shockwaves across the markets, and rare-earth prices skyrocketed, prompting reactions from industrial nations and industry itself. The rare-earth crisis is not a simple trade dispute, however. It also raises questions about China’s use of economic statecraft and the impacts of growing resource competition. A detailed and nuanced examination of the rare-earth crisis provides a significant and distinctive case study of resource competition and its spill-over geopolitical effects. It sheds light on the formulation, deployment, longevity, effectiveness, and, perhaps, shortsightedness of policy responses by other industrial nations, while also providing an example of how China might choose to employ instruments of economic statecraft in its rise to superpower status.
