The collapse of trade negotiations last month and the Commerce Department’s restrictions on U.S. suppliers of Huawei, as well as its placement on the entity list, have strengthened a view in China that the United States intends to contain China’s rise. China is gearing up for a long-term struggle with the United States over trade, technology, and economics, and wants to demonstrate that it’s ready. Noticeably, on the same trip that Xi Jinping made to JL MAG Rare-Earth Co. in Jiangxi province in mid-May, he also visited the starting point of the Long March, a foundational myth in the history of the Chinese Communist Party (C.C.P.) and symbol of the Party’s ability to withstand great hardship.
In threatening to restrict the export of rare earth metals to the United States, China wants to demonstrate that it has leverage over the United States and an ability to respond with commensurate countermeasures if the need arises. China knows that the United States depends on China for rare earth metals. The United States sources about 80 percent of its rare earths imports from China, and the metals have been noticeably absent from the U.S. tariffs on Chinese imports, including the pending U.S.$300 billion. In this way, Beijing wants to show that it cannot be backed into a corner, and that any attempts to pressure China will fail.
Threatening to restrict rare earths exports to the United States does send a message, but it might not be the message China wants to send. Some Chinese interlocutors in Beijing have told me a circulating theory that the United States requested Huawei CFO Meng Wanzhou’s detention to goad Beijing into overreacting. While not a mainstream view, it shows that even in China there is an understanding that these sorts of retaliations may backfire. Reactions like the arrest of the two Canadian citizens or a ban on rare earth metals exports transform China from the victim to the aggressor.
Although it is understandable why the C.C.P. wants to show that it can strike back, this reaction could prove counterproductive to China. The move is likely to further aggravate tensions, harden the lines dividing the two countries, and empower those in Washington calling for decoupling. None of this is in China’s interest.