A Case Study Of Chinese Policy Limiting Exports Of Rare Earth

Meilinda Gregoria Bari, Christalia Sowo, Winarni Trimadani Hondo, Karmelia Sriyani,
Selviana Stefani Djong

International Relations, Universitas Kristen Indonesia, Mayjen Sutoyo St. No. 2, Cawang, East Jakarta 13630,
Indonesia
Email : [email protected] [email protected] [email protected]
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[email protected], [email protected]

Abstract
China is a new super power by showing superiority in several economic sectors, such as
foreign exchange reserves and export values. In 2012, the two sectors became the largest in
the world and one of the largest export commodities in the world. China is the world's largest
producer of rare earth. China produces 27 percent of the world's rare earth production and
continues to rise every year. With the success of the production of rare earth metals in large
numbers, it has made the developments of technology in China rapidly growing to be able to
compete with others. In its use, this rare earth metal element is often used by people every
day as a necessity of life including the memory contained in computers, DVDs, rechargeable
batteries, cellphones, catalytic converters, magnets, neon lights and so on.
Keywords: rare earth, Chinese economy, rare earth metal elements, the United States, Japan.

Abstrak
Cina adalah kekuatan super baru dengan menunjukkan keunggulan di beberapa sektor
ekonomi, seperti cadangan devisa dan nilai ekspor. Pada 2012, kedua sektor tersebut
menjadi yang terbesar di dunia dan salah satu komoditas ekspor terbesar di dunia. Cina
adalah penghasil tanah langka terbesar di dunia. China menghasilkan 27 persen dari
produksi tanah jarang di dunia dan terus meningkat setiap tahun. Dengan keberhasilan
produksi logam tanah jarang dalam jumlah besar, itu telah membuat perkembangan
teknologi di Cina berkembang pesat untuk dapat bersaing dengan yang lain. Dalam
penggunaannya, elemen logam tanah jarang ini sering digunakan oleh orang setiap hari
sebagai kebutuhan hidup termasuk memori yang terkandung dalam komputer, DVD, baterai
isi ulang, ponsel, catalytic converter, magnet, lampu neon dan sebagainya.
Kata Kunci : rare earth, ekonomi China, elemen logam rare earth, Amerika Serikat, Jepang.

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Background

China's economic revival has a very long history until now China has become the
world's most powerful economy. According to the IMF, China is at the top with a value of
GDP of US$25.27 trillion. The rapid growth of the Chinese economy has taken place since
the leadership of Deng Xiaoping, where in 1978 he launched an economic reform program
that combines elements of socialism with a greater role for markets and private ownership.
The farmers were given autonomy in choosing the plants to be planted as well as the ability
to sell crops on the free market. Xiaoping also created an "open door" whereby the barriers to
international trade and finance were lowered, opening China to global markets and foreign
investment (Balaam & Dillman, 2014).

Factories in Guangdong Province produce everything from cheap children's toys to

computer motherboards and then send them all over the world. As a result of the booming
export economy is a massive current account surplus which reached $ 426 billion in 2008.
China has used its surplus to buy US bond bills and accumulate dollar and euro reserves. In
2001 China officially became a member of the WTO, and this had an impact on China's rapid
economic growth. Since that time the economic, trade and industrial activities of China with
the global market have led to a massive expansion of the Chinese manufacturing industry
throughout the world to color the current international political economic system. China is the
new super power by showing excellence in several economic sectors, such as foreign
exchange reserves and export value. In 2012, both of that sectors became the largest in the
world and one of the biggest export commodity ia rare earth. China became the dominant
manufacturer, user, and exporter of rare earth since 1978, also since 1990, China produced 27
percent of the world’s rare earth and it keeps going up every years.

In 1927 China’s scientists discovered rare earths in Bayan Obo and since 1957, China
started the production of these elements. After more eight decades, rare earth resources have
been discovered in 21 of China’s Provinces and Autonomous Regions-Fujian, Gansu,
Guangdong, Guangxi, Guizhou, Hainan, Henan, Hubei, Hunan, Jiangxi, Jilin, Liaoning, Nei
Mongol, Qinghai, Shaanxi, Shandong, Shanxi, Sichuan, Xinjiang, Yunnan, and Zhejiang.
China is the largest supplier of rare earth metals in the world and almost 95% of rare earth
metal supplies are controlled by China (Tse, 2011). With the success of the production of rare
earth metals in large numbers, it has made the developments of technology in China rapidly
growing to be able to compete with others. The high dependence on rare earth supplies from

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China has actually been felt by the market in 2010. China had cut the rare earth export quota
to Japan, and it followed by the heated diplomatic relations between two countries. China
also sees that many companies need rare earth supplies such as, premium gadget
manufacturers, Apple Inc (AAPL.O). The iPhone manufacturer uses rare earth metal in
speakers, cameras, and to make phone vibrate. Therefore China uses the power of rare earth
to influence other countries and make other countries dependent on it, then China made a
policy that benefited the country.

Discussion

What is Rare Earth?

Rare earth metals are the seventeen

rare metals that usually mixed into 200 type
of mineral. Rare earth metals no free
element was found in the layers of the
earth's crust but rather shaped alloy that
forms complex compound. Rare earth
metals are a group of 17 elements-
anthanum, cerium, praseodymium,
REE Periodic Table: The Rare Earth
neodymium, promethium, samarium, Elements are the 15 lanthanide series
europium, gadolinium, terbium, dysprosium, elements, plus yttrium. Scandium is found in
most rare earth element deposits and is
holmium, erbium, thulium, ytterbium, sometimes classified as a rare earth element.
lutetium, scandium, yttrium—that appear in Image by Geology.com
low concentrations in the ground (Reuters, 2019). Despite their name, rare earth elements are
not that rare, but it is just because its existance is unlivenly distributed not in high
concentrations and mixed with other minerals so that the mining, extracting, and processing
is very difficult, requires expensive costs, time consuming and if not carefully controlled it
will be very damaging to the enviroments. Rare earths plays a very important role in the
needs of modern production materials such as in superconductors, hybrid cars, computers,
DVD players, wind turbines, catalysts in cars, oil refineries, monitors, televisions, lighting,
lasers, fiber optics, lasers, and glass polishing.

Several rare earth elements, such as neodymium and dysprosium, are critical to the
motors used in electric vehicles. Other uses of rare earth metals are for nuclear installations,

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these elements usually use in nuclear detectors and counters, also the nuclear control rods. In
addition, it also uses in the defense systems and there is not any defense system in the entire
military equipments that doesn’t have several rare earths in it, such as jet engines, missile
guidance systems, satellites, as well as in lasers. From its benefit, this is why the rare earth
metals become very important for many countries. The super power countries like the United
States and China use these elements for their military equipments (Veolia, 2019).

Rare Earth Elements (REE)

There are seventeen chemical elements that are in the content of rare earths (see table
picture). consisting of yttrium and 15 lanthanide elements (lanthanum, cerium,
praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium,
disprosium, holmium, erbium, thulium, ytterbium, and lutetium). Scandium has most of the
rare earth elements and is often classified as an element of the rare earth itself. All elements
of rare earth are metals and are often referred to as "rare earth metals". With so many similar
properties found in these metals it is often possible to find them together in geologic deposits.
Another name for them is "rare earth oxide" because it is often sold as an oxide compound.

In its use this element of rare earth metal is often used by people every day as a
necessity of life including the memory contained in computers, DVDs, rechargeable batteries,
cellphones, catalytic converters, magnets, neon lights and so on. The soaring demand for
goods which in production uses rare earth metals makes the demand also increases. Unlike in
the past where not many people use mobile phones, but in today's users and enthusiasts of
this mobile device go up high. It shows that the use of soil elements rarely grows following
the increasing number of mobile phone enthusiasts. In addition, other items such as refill
batrei which are also made with compounds from rare earths are also in great demand. Due to
the large number of requests for parts of potential electronic devices such as cellphones,
readers, cameras, and portable computers.

In the future, global demand will greatly increase for the needs of goods such as cars,
energy-efficient lighting, consumer electronics and catalysts. In its development also rare
earth elements are also needed in the needs of medical technology for the use of surgical
lasers, magnetic resonance imaging, and luster tomographic emission position detector as a
requirement that is needed in the medical field. Seeing the number of enthusiasts and

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production requirements needed from rare earth elements from various industries, their
demand will also remain high.
It is known so far that there are more than 100 types of minerals that are owned in rare
earths and among them 14 species that have high content of total% rare earth oxide. The
minerals contained therein are grouped in phosphate, silicate, carbonate, oxide, and fluoride
minerals. In addition, rare earth mineral minerals such as monasite, bastnaesite, zircon,
xenotime are often found in nature.
The Bastnaesite mineral (CeFCO3) is a cerium fluoro-carbonate compound which has
60-70% content of rare earth oxides such as lanthanum and neodymium. This mineral is a
major source of rare earth metals in the world, it is found in kabonatite rocks, dolomite
breccias, pegmatites and amphibian skarn. There is also Monasite ((Ce, La, Y, Th) PO3)
which is a phosphate compound contained in rare earth metals and has 50-70% rare earth
oxide. In general, Monasite is extracted from concentrates resulting from processing of
alluvial tin deposits together with zircon and xenotime. Monasite itself contains thorium
which is high enough to make it have radioactive α rays. Thorium emits low-level radiation
so that even a piece of paper can avoid the radiation that is emitted. In addition there is the
mineral Xenotime (YPO4) is a compound of yttrium phosphate which contains 54-65% of
rare earth including also erbium, cerium and thorium. Xenotime is also a mineral found in
heavy mineral sand, as well as in pegmatite and igneous rock. The last one is zircon which is
a zirconium silicate compound which can contain thorium, yttrium, and cerium.
For the additional metallurgy industry from rare earth metals in making High Strength
Low Alloy (HSLA) steel, stainless steel, superalloys, and high carbon steel. That is because
the properties possessed from rare earth metals can increase the ability of the material to
provide strength, hardness, or increase heat resistance. One example is the addition of rare
earth metals in the form of additives or alloys in magnesium and aluminum alloys, which
increases the strength and hardness of these alloys. In addition to these functions, soil is
rarely used as an activator for catalysts, with a mixture of Chhoride, such as lantanium, while
for oil purification catalysts use neodymium and praseodymium with concentrations between
1-5%. The mixture of rare earth metal chloride is added to the zeolite catalyst in order to
increase the efficiency of the crude oil change and become materials for processing oil. Other
benefits of rare earths are security lamps in mining, paint, glue, jewelry, and automatic gas
lighters. Meanwhile separately for nuclear installations used in nuclear rod control and
nuclear detectors. Yttrium is used as a color ceramic material, an oxygen sensor, and a
protective layer of rust from heat.
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 Spread of the usefulness and potential possessed by soil elements is also rarely found
in granite pathways of type S, alkaline type, or ilmenite series. Granite debinding generally,
this granite has a high content of the metal elements F, Rb, Li, Sn, Be, W, and Mo. Other
elements, namely elements B, Nb, Ta, U, Th, and rare earth elements are also high. The
distribution of the greisen changes is in the edge zone of the body of the granite and rock
walls or surrounding areas that are penetrated by granite. In the body of granitic rocks, the
greisen zone develops with a thickness range of up to 100 meters. The greisen zone is very
rich in the elements it has, namely boron, lithium, fluorine, rubidium and berlium, and is also
characterized by the presence of white mica minerals (rich in lithium), topaz, quartz, fluorite
and tourmaline. In the greisen alteration zone there is an economical material or mineral and
is called a granophile type deposit. The elements of the granophile deposit consist of three
groups including Sn, W, U, Mo groups associated with Nb, Ta, Bi, Ag; rare earths; and the
CO, Cl, F groups, associated with hydroxide and sulfide complexes; and; groups Be, B, Li, P
are associated with Rb, Cs, rare earths.
In sediments the rare earths are divided into two types. The first is the type of perimer
as a result of the magmatig and hydrothermal process, while the secondary type is the result
of a breakdown of primary type deposits. For the type of sekuder consists of two types
namely, alluvial deposits which are the result of erosion and sedimentation of primary
deposits. And also in the form of laterite soils resulting from weathering of primary deposits
or weathering of alluvial deposits. Primary deposits mainly consist of bastnaesite minerals,
the world's largest production from China which is a by-product of iron ore mines. The more
commonly known and cultivated deposits are secondary types. Most of these are monasite
minerals which are the result of overhaul of primary deposits that have been eroded and re-
deposited as sedimentation of rivers, lakes, beaches, deltas, and offshore.

REE has a unique characteristic that is the nature of the elements is difficult separated
difficult to extract, not easy to find the substitution and costly big in its management. In
addition, REE has If the risk has an impact environment so it needs to be healthy-careful in
the management process. The REE application can be divided into four namely: (1) as a
major component in technology products height, (2) weapons and defense systems country,
(3) industry and tools-medical devices and (4) products environmentally friendly energy
technology(UNCTAD, 2014).

China and the Technology, Information and Communication Industry

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 The Chinese government has declared science and technology an industry priority the
country (Hurst, 2010: 22). Even according to Donald et al (2012) the Chinese Government
have The country's priority industries include "guidance" control systems, energy technology,
nanotechnology, space technology, nuclear technology, material innovation, mechanisms
aeronautics and astronautics, computer-based design and manufacturing, and technology
information.

The Chinese government from the beginning has planned the development of
programs and research of high-tech products by launching a program called the 863 program
on March 3, 1986 which aims to accelerate the development of domestic high-tech industries
and reduce the gap between developed countries and China in terms of technological
innovation , followed the developed countries in the field of economy and national security as
well as one of the three steps of the process of modernization of China. This 863 program
focuses on research into the future uses and potential of rere earth both in the military and
civil society. This program lasts for 11 years under the supervision of the Ministry of
Technology and Science with a focus on the Rere Earth Industry.

Changes made both in upstream sector as well as downstream sector shows the efforts
of the Chinese Government to increase the value of its REE products they produce.
Supported by the Chinese Government's REE export restriction policy expects the policy to
promote Chinese producers to use REE for deep consumption country. This is expected to
contribute to growth economy by accelerating the manufacture of high-value products that
are considered more profitable than exporting this REE abroad (Brakelly, t, t: 12). The
purpose The main point of the Chinese government is to use REE only to develop
manufacturing industry in the country so that China can produce high-value products and can
compete in the global market. So it can be seen from the explanation above that there is an
effort to change the production process of the REE production value chain (Kiggins, 2014:
31-32).

History of production and trade

Before 1965 the demand for elements from rare earth was very small. At that time, the
largest supply came from India and Brazil, which was produced by Depocito placer. In South
Africa in the 1950s it was a leading rare earth producer that stored monazite deposits. The

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Mountain Pass mine in Calaifornia at that time produced a small amount of rare earth oxide
from Precambrian carbonatite.

In the mid 1960s, the demand for elements from rare earth increased very rapidly
when color television sets first entered the market. One of the rare earth elements, europium,
became an important material in producing color images on television. An American-owned
mine, Pass Gunung began producing euporium from basnasite which contained about 0.1%
europium. This in turn put the Mountain Pass Mine into a company with rare earth production
in the world and placed the United States as a leading producer.

The title of being the largest producer of rare earth in the world is not always held by
the United States. In the early 1980s China began producing a number of rare earth oxides
and made it replace the US position as the world's largest producer. From the 1990s until the
early 2000s China continued to strengthen its strength in the world market by its production
in oxides from rare earths. China sells the products of their rare earth by giving a low price
tariff on the market, this makes the company from the United States Mountain Pass Main
unable to compete and forced to stop operating its company, as well as other countries around
the world that do not can rival production from China. At the same time, world demand for
rare earth metals also surged. Various products require rare earth metals such as defense,
industry, aviation, and consumer electronics products. This opportunity was utilized by China
as the top position and made a decision to limit exports and prices for rare earth oxides also
rose.

China’s Rare-Earth Policies

As of 1990, Chinese government

declared that rare earth to be a strategic and
protected mineral. Foreign investors are
prohibited from mining rare earths and also are
restricted from participating in rare earth
separation projects except in joint ventures with
Chinese firms. All of these projects required
approval from the State Development and
Planning Commission (SDPC). Since the early 1990s, Minister of Land and Resources
(MLR) had been responsible to improve the production plans for rare earths, include overall

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production quotas for individual Provinces. Provincial governments are responsible for
managing their Province’s allocated quota and for assigning output quotas to individual
mining companies.

Moreover, to setting the production quotas for rare earths, China sets quotas on the
amount of rare earths can be exported. Before 2003, rare earth export quotas were distributed
by the State Economic and Trade Commission (SETC) and Ministry of Foreign Trade and
Economic Cooperation (MOFTEC) after it were determined by the SDPC. After SETC and
MOFTEC were abolished, the Ministry of Commerce (MOC) took over all of the
responsibility for the distribution of rare earth exports. Owing to the increase in domestic
demand, the Chinese government has reduced the export during the past several years. As of
2006, the government allowed 47 domestic rare earth producers and traders and 12 Sino-
foreign rare earth producers to export rare earth products. But the number of permitted
exporters was reduced to 22 domestic rare earth producers and traders and 9 Sino-foreign rare
earth producers in 2011 (Tse, 2011).

In the 1980s China issued a policy to exploit planning in the Mining area which is
related to the country's plan and has great value for national development. This was seen
from 1978 to 1998, rere earth production in China reached 40% of the total REE circulating
in the world and continued to experience an increase in China issued a policy to increase REE
exports in the 1990s. This policy resulted in REE exports becoming low price in the
international market. in the following years China began to realize its increasingly dense
population, thus issuing policies National Plan for mineral Resources Plan which aims to
implement planned regulatory regulations that limit exploitation to tighten access and use of
REE and several other minerals.

China has a monopoly on the availability of 97% of Rare Earth Elements (REE) that
can be produced on earth each year, and the United States is both economically and militarily
dependent on the REE, even though the United States actually has REE reserves in its own
territory. China built its REE processing industry decades ago, although at that time the world
REE market was dominated by the United States, China was able to take over in the late
1990s by flooding the REE market with low-cost REE large-scale mining production owned
by China. then due to environmental damage caused by the REE mining process, the closure
of the United States REE mine was closed. When the United States closed its REE mine, the
consequences were only felt 10 years later, and realized the importance of electronic

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components made from REE in equipment that supports modern human life. America is in a
vulnerable position when it entrusts the availability of its REE to China, this is felt when
China limits its REE exports and can make decisions to stop its REE exports to certain
countries as happened to Japan.

In 2012, China is estimated to have reserves rare earth around 55 million tons, the
largest in the world. Other countries such as Russia and the former Soviet Union only have
reserves of around 19 million tons, the US 13 million tons, India 3.1 million tons, Australia
1.6 million tons, Brazil 0.05 million tons, and other regions 22 million tons. The total
production rare earth which contains 17 important minerals throughout 2011, the largest is
China as much as 150,000 tons, India 3,000 tons, Brazil 550 tons, and Malaysia 30 tons. By
utilizing this amount, China can push economic growth. As we have seen, many products
technology made in China which is fairly sophisticated but at a price sell not so expensive.
With this mastery, China did export quota restrictions rare earth against importing countries
such as, United States, Japan, and the countries of the Union Eropa by 35% in 2011. The
quota limitation then causes it to occur price changes on rare earth.

The Restricting of Rare Earth Export

On September 7th 2010, the Japanese coast guard vessels seized a Chinese fishing
trawler near the Senkaku islands, the disputed islands in the East China Sea. This action
turned out to make Beijing take the decision to temporarily stopping exports of the rare earth
elements to Japan. Japan imported almost 90 percents of the rare earth elements to produce
their various high-tech and because of it many Japan’s manufacturers became panic and
pushing up the rare earths’ prices in global markets. By temporarily stopping the export of the
rare earth elements to Japan, China, emphazised the Japanese government so that a few days
later the Chinese sailors were released by the authorities Japan.

As a controlling country rare earth this is certainly not easy for China where in
connection with the joining of China in the WTO in 2001 indirectly China is required to
follow the regulations that apply in the WTO. China thinks, there is nothing wrong with this
quota limitation. This is done with the aim to protect reserve rare earth which is getting
thinner. Rare earth is an element that is not renewable. Also in its processing, this element
leaves a lot Radioactive waste results from the separation of elements from the mineral core
that it uses a lot of acid. By doing restrictions, indirectly protect the environment. The reason

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is not just accepted by the Americans, Japanese, and European Union countries. They assume
that it is only used as an excuse for China to gain profits from producers domestic. As a result
of these American demands, the WTO declared restrictions the quota carried out violates the
rules of global trade. Based on things China is demanded to stop the quota limitation done.

In the beginning of 2011 the Chinese government establishment quotas on the rare
earth elements to the recipient countries, such as Japan and the United States. Both of these
countries reported the Chinese action to the World Trade Organization (WTO) because it was
clearly a violation of the WTO trade rules. On April 2012, Japan, European Union, and the
United States proposed a complaint because China violated the GATT and WTO Accesion
Protocol. China established export quotas on the rare earth elements to the recipient
countries, such as Japan and the United States. Both of these countries reported Chinese
action to the WTO because it was clearly a violation of the WTO trade rules and they must to
find new sources, reopen domestic mines, and institute recycling programs in order to
dependence on China. Japanese government funneled subsides to the corporations to help
them develop rare earth recycling and signed new agreements with Vietnam, Australia, and
Kazakhstan to open the new mines. Also the United States reopened their old rare earth mine
in Mountain Pass, California that had been closed in 2002 for environmental reasons (Balaam
& Dillman, 2014).

As a counter argument, China thinks that the move is they take related to the export
quota restrictions are still in accordance with regulations in the 1994 GATT. China believes
that the imposition of export quota customs and excise is justified with the exception of
permitted exports in article XX (b) GATT 1994 that export restrictions are carried out as
environmental protection measures. Also in accordance with export exceptions which are
permitted XX (g) GATT 1994 that export quota restrictions be carried out as a step related to
conservation of natural resources and their limitations. The argument by China is still not
approved because of China considered to limit export quota for the purpose of facilitate
access for the Chinese industry itself in the supply of materials rare earth. The United States
believes that China has violated the accession agreement agreed by China when he joined the
WTO in 2001. The agreement contained a list materials which are not permitted are subject to
duties except special items listed. However, rare earth not included in special items which
listed it. Therefore China is not allowed to force it to Impose export restrictions on companies
that have been granted licenses to export materials.

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 China has three types of export quota restrictions rare earth. The first is to require
taxes on all forms of export from the material. Secondly, set export quotas on the amount of
material which can be exported in certain periods. Then the third, establish certain restrictions
on the company that is allowed to export the material rare earth. Other steps taken by China
are related rare earth is closing small forms of mining operations rare earth and consolidate
with a larger party to gain greater control over rare earth China. Then make new regulations
related to protection on the environment. And the last is to do a hoarding system goods in
order to make it easier for China to set prices rare earth and also as a form of guarantee of the
availability of Chinese needs above rare earth in the future.

The policy of export quota restrictions and US dependence on supplies from China
shows the vulnerability of the US in the rare earth metal industry. Moreover, China’s
initiative to use rare earth commodities as a political instrument against Japan has become a
special concern for the US especially when it is associated with the efforts of the global
influence, economic power and technological mastery.

Japan and the United States interpreted that China might will go against the trade
norms in the future. From this case, Chinese government uses control of resources to punish
its rivals and privilege its domestic producers and the dispute reduced Japan’s comfort with
China as a trade partner and turned the Sino-Japanese economic relations to be a mistrust. By
reserving more rare earths for its domestic market, Beijing apparently intends to force
overseas manufacturers who need minerals to move some of their factories to China—thereby
facilitating the transfer of technologies to China from the high-tech company and increasing
the production of Chinese key components used in the electronics and clean energy
industries.

The large amount of rare earth resources owned by China makes it an important asset
and item that is used as an opportunity in any time of negotiations with other countries. due to
the large dependence on rare earth supplies from this country. Having great benefits does not
mean that it is easy to process to get part of every element in rare earth because it is not a
metal that is easy to process. The high cost in the process of refining these metals is also the
reason some countries are slow in their processing. The production of rare earth metals from
China by 81% makes China the largest production of rare earth in the world, whereas China
only has 37% of rare earth reserves compared to the others.

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 Dependence on rare earth supply from China was felt in 2010, where China cut the
quota for rare earth exports to Japan's sakura country because of the relationship between
them which had heated up at that time. This caused protests from Japan to China, but was
denied by China and said that there were rules about the environment that must be followed
by rare earth miners. Besides Japan, the United States is also a country that needs supplies
from rare earth. The need for rare earth originating from China was 80% in 2014 to 2017.
Companies in the US that require supplies of rare earth are also abundant, ranging from
premium gadget manufacturers to making machines that can vibrate cellphones, cameras and
speakers. In making rare earth supplies, weapons are needed to make guidance and sensor
systems.

The need for rare earth is also experienced by the US defense ministry, so it must
import from the country with the world's largest rare earth production, China. This portion of
imports is 1% supplied by the US Department of Defense for military needs. Reportedly with
the large needs of rare earth, the US has anticipated dependence on China, thus making the
US government and companies have stockpiled for the supply of rare earth metals.

Rare land production other than China

Aside from being the largest producer of rare earth in the world, apparently it doesn't
mean that China is the only one that has the wealth of these products. There are several
countries besides China which also produce rare earth. In 2011 mines in Australia began to
produce rare earth oxides, until in the following years 2012-2013 Australia could supply
about 2% to 3% of rare earth production from China. Whereas America produces around 4%
of the rare earth elements in 2013 in the world. In addition, production from other countries
such as Brazil, Thailand, Russia, Malaysia and Vietnam continues to increase. In a survey
conducted by the United States geologists they identified that there were significant mineral
resources outside China. Although known as the largest producer, but China only controls
36% of this production from world reserves. This is an opportunity for other countries to
become important producers because China does not sell material from rare earth below its
production costs. China has also bought rare earth resources from other countries. in 2009 a
Chinese Non-Ferrous Metal Mining company bought a majority stake in Lynas Corporation
which is an Australian company and has one of the highest yields of rare earth elements
outside of China. In addition, China has also bought the Baluba Mine in Zambia.Rare earth

13
production in China can also be dangerous because it is the largest production there and is the
largest in the world.

With the amount requested will also determine the price on the market according to
demand. When the supply of materials is no longer sufficient and the price of goods shrinks.
When returning the price increase of goods, those who will supply the goods will be tempted
to sell. They will see the high prices of these goods as opportunities and efforts to develop
new sources of supply again. If a country controls a portion of production and has a big
decision which is not to get results from its production, then the demand for the supply of a
commodity is very easy to cut off. This situation is very dangerous, mostly for consumers
because it requires fuel and will take a long time to re-develop. This was done by China in
2010. China exports rare earths with its motherland and land. Panic and Purchases Soared.
Regarding several countries that complained about the World Trade Organization on China's
policy on land complaints.

Mercantilism- Rare Earth

In 1990, the Chinese government declared that the rare Earth became a strategic and
protected mineral. Foreign investors are banned for rare land mining and are also restricted
from participating in rare earth separation projects except in joint ventures with Chinese
enterprises. All of these projects are required approval from the Development Commission
and State Planning (SDPC). Since the early 1990's, the Minister of Land and Resources
(MLR) has been responsible for improving production plans for rare soils, including overall
production quotas for their respective provinces. From the statement above, it can be seen
that the Chinese government is selfish, so that they prohibit foreign investors to conduct
mining and limit the amount. This is what China does in accordance with the theory of
merkantialism.

Merkantilism is an economic theory which states that the welfare of a country is

determined only by the number of assets or capital deposited by the State concerned, and that
the magnitude of global trade volumes is extremely important. From the description of this
theory, it can be ensured that China does so for the welfare of its people. The merkantilism is
in principle an understanding of the money-saving, or precious metals that will be forged into
gold or silver money should be made the main goal of national policy, based on this theory
then what is done based on its national interests so that China takes the option to declare

14
scarcity on rare ground so that at the time China's Saam can raise the export quota from rare
land that can raise the economy of China itself. The competitiveness of a country at the time
of international trade, can occur when the country has a national interest and can promote the
national interest by trading with other countries, it is seen from China that has its own
interests.

In our opinion, why is China's rere earth related to mercantilism, because China wants
these countries to depend on their rere earth so that they can freely make policies in
accordance with their wishes. We know that rere earth can be a good economic income and
can also be dangerous because it can be used for weapons. From the explanation above it has
similarities with mercantilism theory.

Realism and Rare Earth

The scientific content and important benefits possessed in rare earth make it very
popular in addition to production from a variety of different industries. By placing the highest
place in the world, China takes hold in its policy regarding the production and marketing of
these rare lands. With the advantages spent in China, it can even compete with other large
countries, even though the United States. Being one of the major consumers of rare earth
products is something that must be requested by the US, the need for land metals also needs
to start from economic, technological, to military needs.

China's strengths make him a bit selfish and cautious in making future decisions and
policies regarding the future of rare earth for the benefit of his country. Because it has great
power in this field, China must prioritize its own interests compared to anyone outside their
interests. It shows that the selfish nature in understanding realism already exists in every
country, in this case is China. In getting more profit, China is willing to cut export quotas to
its exporting countries in order to fulfill its personal desires. This attitude is very reasonable
when viewed from a realist standpoint because it is indeed the interests of themselves that are
the most preferred. Moreover, this is about the relationship of cooperation with other
countries in the rare earth export sector which is fairly large in production.

Actors must also maintain to improve the strength they have, whether it's about soft-
power or hard-power. They are more focused on their interests compared to their ideology.
This view prioritizes interests and how to be able to maximize their strength. A classic

15
thinker of realism, Morgenthau also argues about his views on the nature of pessimism that
humans have in his quote "Politics is the struggle for power over humans, and whatever the
ultimate goal of power is its most important goal and the ways of obtaining, maintaining, and
showing power determine the techniques of action. politics "(Morgenthau, 1965). Aside from
Morgenthau, Thucydides' realist thinker also argued for the justice of his realist philosophy
that it was not the same treatment for all parties, but how to find the right place, and adjust to
the natural reality of different powers. From the fact that the strong do what the power must
do and the weak accept what they have to receive (Thucydides, 1972). Based on the views
expressed by classical realism thinkers, it is stated that each country is responsible for
maintaining the sovereignty and existence of its country through its own efforts. That is
because other countries cannot be relied on because they are based on the realist thought that
other countries are a threat. The high vigilance of the realists gives the impression that is
always suspicious of other countries and does not care about the intentions expressed are
good or bad, but the main thing is the interests and security of the country is maintained.

Economic interests with consideration of profit and loss are decided through political
processes, so that economic interests are no longer the low-level political discussion as
previously assumed. The state, in this case, is a national stakeholder because interest groups
do not play a significant role in China. The assumption is that the state as the main actor
plays an important role in the economic process through its political power. Ownership of
potential natural resources can be considered as ownership of "power". Thus, the limitation of
rere earth exports is an indication of China's desire to dominate its natural resources. Using
the rational concept, the reason why China adopted an earth restriction policy is illustrated by
rational considerations about the fate of the rere earth in the short and long term, including
the consideration of the cost and benefit rere rath itself. Short-term considerations relate to
how to make the price of rere earth, which is a scarce natural resource, go up and long-term
plans to save rere earth so that it does not run out in the future. In addition, rational
considerations regarding profit and loss that will be obtained both in the long term and short
term by the Chinese government.

Conclusion

Rere earth is the main ingredient in the manufacture, production of weapons, and
high-tech electronic devices, the manufacture of weapons and other electronic devices. Since

16
the 1950's China has sought to become an important actor in the rere earth industry and is
now a high-income country and the world's largest revenue, consumption, and exporting
country. China is increasingly asserting its position in the international world by using REE
export restrictions, China wants to establish its superiority and dominance in the international
arena by monopolizing its own natural resources by stopping the export REE, making REE
prices rise to several times because China is a country that has REE resources the biggest in
the whole world. So it can be said that China is not just trying survive by protecting the
natural resources it has but also to reap as much profit as possible from the increase in the
selling price of REE by using its relative power.

In 2011, China produced up to 97% of the world's REE needs. The details of the total
133,000 tons of world REE production, 130,000 tons of REE are from China, with the rest
coming from India, Brazil, and Malaysia. The amount of Chinese production which is 43
times more than the total combined production of these competitors practically makes China
monopolize the availability of REE commodities, where China provides an unusually large
amount when compared to other countries supplying the REE. China has not suddenly
become the world's major REE producer. In terms of supply dynamics, China has only
become the main producer of REE in the last 10 years. Until the late 1990s, the United States
was the main REE producing country, mainly from the Mountain Pass mining area in
California. China's monopoly on the REE market is inseparable from the totality of China to
the REE to create technology, techniques and a trained workforce to effectively and
efficiently mine; extract; separating and processing REE at a cost more affordable than what
can be achieved by other countries.

During the Japan-China conflict that resulted in the termination of China's REE
exports to Japan, there was pressure and efforts from within the United States to immediately
deal with the REE dependency economy. The United States prefers to reopen its REE mine at
Mountain Pass, California due to several reasons such as the potential for uncertainty to re-
emerge if the majority of REE supply comes from abroad, proven reserves at Mountain Pass
are more certain than other potential mines outside the United States. United, the REE mine
at Mountain Pass once supplied almost all of the REEs in the past, a position currently owned
by the Chinese REE mine in Bayan Obou. The development of existing technology is
expected to overcome the environmental pollution of the REE mining process, the reason for
this pollution is in addition to the low price of REE that made the Mountain Pass mine shut

17
down in 2010, China has no significant problems with environmental pollution because
environmental protection regulations in China are not as stringent as in the United States.

The rere earth restriction policy, which was carried out with consideration of cost and
benefit and national interest, was motivated by confusion, economic and political factors. The
Chinese government must bear several costs that are classified as many of them including
costs during the mining process, the impact of severe environmental damage caused by this
mining activity and the price of rere earth which is always at a low price level. The Chinese
monopoly of ownership of rere earth, China will have a strong "Bargaining Position" in the
international world because the dependence of rere earth importing countries such as the
United States and Japan is very high on rere earth.

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