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Chinese media raise rare earths threats after US ups trade war ante

29/5 2019 15:30

Communist Party mouthpiece warns US not to underestimate China’s resolve to hit back
Comments come after China’s top economic planning agency indicated that government would prioritise domestic demand in rare earths supply

Chinese state media have issued veiled threats that the country could restrict its rare earths exports in retaliation for American controls to cut off the supply of chips and processors to Chinese telecom giant Huawei.

Communist Party mouthpiece People’s Daily warned on Wednesday that the United States should never underestimate China’s resolve in striking back, adding that the US had “completely overestimated its ability to manipulate the global supply chain”.

“The Chinese people would never agree to the US using products made from rare earths exported from China to curb and suppress China’s development,” the newspaper said in a commentary.

“We remind the US not to underestimate China’s ability to defend its rights to development and to remember not to blame anyone for not warning them.”

The comments came hours after China’s top economic planning agency, the National Development and Reform Commission (NDRC), indicated in a late-night statement on Tuesday that the Chinese government would give priority to domestic demand in rare earths supply.

China accounts for 90 per cent of the global supply of the minerals, which are critical to the manufacture of consumer electronics, semiconductors and military equipment.

The statement was the first official comment by the NDRC amid growing speculation that China might weaponise its rare earths in its trade war with the US.

China and the US have battled over trade for nearly a year, casting a long shadow over the world economy and straining ties between the two countries.

Last week, the White House added Huawei Technologies, the world’s biggest telecommunications equipment manufacturer, to a trading blacklist. Several global companies have since suspended business with the Chinese firm, raising fears that the ban will seriously undermine China’s burgeoning chip industry.

Meanwhile official Chinese news agency Xinhua said there were some “delusional” American politicians who thought they could curb China’s rise through limiting technology cooperation with China.

Hawkish state-run tabloid the Global Times ran a separate article saying the comments by the NDRC on Tuesday were a “clear signal” that it was only a matter of time for Beijing to play the “rare earths card” in its feud with the US.

“China understands clearly that the complex global supply chain comprises industries from every country in the world,” it said. “If China cuts off the exports of rare earths to the US ... then China will also suffer but the impact felt by the US would be much more serious.

“We believe if the US continues to pile pressure on us, it would be just a matter of time that we will weaponise our [rare earths exports].”

China was accused of making a similar move in 2010 when tensions with Japan rose over a territorial dispute in the East China Sea.

Observers say Beijing risks undermining its trading reputation and other trading partners might suffer if China restricts exports of the minerals.