Did China Test Fire its Resource Weapon?

By Daniel McGroarty

From the heyday of the Cold War to our present-day monitoring of rogue nation nuclear quests, the U.S. and its allies have maintained a technological picket fence to pick up evidence of test firings. In detecting the launch of a new weapon in the past 48 hours, however, NORAD's tracking screens were of no use. The trip wires in this test-launch are cargo shipping agents and port manifests. Their message was mixed, but ominous: China may have just test-fired an economic weapon in the Resource Wars.

A multi-sourced story by The New York Times' Keith Bradsher - fast becoming the first combat-correspondent in the Resource Wars - reported that China had unequivocally blocked exports of critical rare earths resources to Japan, effective immediately. Almost as quickly, Chinese government sources strongly denied Japan had been singled out for embargo.

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The controversy takes place amid rising tensions between Japan and China. The trigger: Escalating tensions over an early-September collision between a Chinese fishing boat and Japanese coast guard vessels in the disputed waters of the East China Sea - claimed by both countries, and prized for vast oil, gas and rare earths riches beneath the sea floor. Japanese authorities have detained the Chinese ship captain; China has demanded his release. Speaking at the United Nations, Chinese Premier Wen Jiabao took a hard line, stating that "Tokyo bears full responsibility for the situation, and it will bear all consequences." Declining to meet with Japanese leaders while in New York, Wen promised "further action."

At roughly the same time, reports began to surface in Asian and Australian industry circles that China had ordered an immediate ban on rare earths exports to Japan.

Japan, which mines no rare earths of its own, hosts an active rare earths refinement industry, fabricating Chinese-sourced metals into industrial products increasingly critical to clean energy, electric vehicle and technology sectors - as well as a range of acknowledged and deeply classified military applications.

The Associated Press quoted a metals industry source as saying China's Japan ban is "unofficial." And with good reason: Anything as imprudent as a formal declaration of trade war with Japan would earn China an immediate trip to the World Trade Organization dock. That's the last thing China needs, as the U.S. and European Union have already lodged a complaint with the WTO over China's export restraints on a range of industrial materials.

As for Beijing's rare earths policy, a Japan ban would signal a China at war with its own past policies: For more than a decade, China has softened the sharp end of its de facto rare earths monopoly, as the Times' Bradsher notes, by building a reputation as a reliable source of rare earths supply - thereby undercutting Western efforts to develop non-Chinese rare earths mines. A ban on exports to Japan would represent a break with that strategy, and a new Chinese willingness to use its resource monopoly to gain geo-political advantage.

The difficulty in separating out just what China did or didn't do may suit Beijing well. At this point, fragmentary reports suggest China intended to revisit any rare earths stoppage at the end of September, weighing world reaction against its impact in Tokyo. Japan, for its part - and in sharp contrast to the U.S. - has been quietly stockpiling rare earths for a several years, so a snap stoppage might not produce an immediate industrial disruption. In the idiom of economic warfare, China's action would be akin to a missile test - providing some "data" on weapon utility, and offering adversaries a salutary demonstration effect.

Daniel McGroarty, principal of Carmot Strategic Group, an issues management firm in Washington, D.C., served in senior positions in the White House and at the Department of Defense.

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