Chasing Rare Earths, Foreign Companies Expand in China

Besides a huge market and inexpensive labor, China’s lure for foreign firms has now been revealed to be its vast holdings of rare earth minerals, essential for manufacturing cell phones, hybrid cars and other electronic products. “Companies that continue making their products outside the country must contend with tighter supplies and much higher prices for the materials because of steep taxes and other export controls imposed by China over the last two years,” reports Keith Bradsher for the New York Times. Bradsher points out that China’s Prime Minister Wen Jiabao, a geologist by training, directs China’s rare earths policy. Business analysts suggest that the policy constraining export of rare earths violates World Trade Organization rules, while China contends the policy, with export taxes as high as 25 percent, is intended to promote conservation. The WTO adjudication process is slow. So for now chemical, glass and other companies save money by building factories in China, while investing in protecting trade secrets from prying Chinese eyes and reducing overall reliance on rare earths. – YaleGlobal