The China Thread

[Zanza]

China has the entire supply chain under control, mines, refineries, equipment. It is not impossible to do all of that elsewhere, but rate earth metals is actually not a huge business moneywise. Six and a half billion dollar globally last year. I doubt anybody will invest into it privately.

[Iormlund]

I suppose any pain China could cause would be short term as its not the minerals themselves they dominate but the processing of them- and this entirely due to reasons of economics.

Refining has a big environmental impact.

[crazy canuck]

China has the entire supply chain under control, mines, refineries, equipment. It is not impossible to do all of that elsewhere, but rate earth metals is actually not a huge business moneywise. Six and a half billion dollar globally last year. I doubt anybody will invest into it privately.

China does not control the supply chain.  It controls small percentage of the world reserves. A number of private entities have and continue to invest in it in Canada. And it is big business in Australia (which is where most of the action internationally is located).

[The Minsky Moment]

China does not control the supply chain.  It controls small percentage of the world reserves. A number of private entities have and continue to invest in it in Canada. And it is big business in Australia (which is where most of the action internationally is located).

Thank goodness America has taken such care to maintain excellent relations with both those nations.

[crazy canuck]

China does not control the supply chain.  It controls small percentage of the world reserves. A number of private entities have and continue to invest in it in Canada. And it is big business in Australia (which is where most of the action internationally is located).

Thank goodness America has taken such care to maintain excellent relations with both those nations.

Yep.

[HVC]

China does not control the supply chain.  It controls small percentage of the world reserves. A number of private entities have and continue to invest in it in Canada. And it is big business in Australia (which is where most of the action internationally is located).

Thank goodness America has taken such care to maintain excellent relations with both those nations.

America is a big chunk of land. With trumps new presidential powers he can just write an executive order and strip mine Arizona if he wants to. Who's gonna stop him? The courts?

[Zanza]

From what I understood, even Canadian or Australian rare earth metals are refined in China. The refinery capacity is an even bigger bottle evk than mining deposits. It's super dirty too.

[crazy canuck]

From what I understood, even Canadian or Australian rare earth metals are refined in China. The refinery capacity is an even bigger bottle evk than mining deposits. It's super dirty too.

It really depends on what rare earths you are talking about. France and the US are the main export destinations for our Lithium for processing. And we also make use of it ourselves for our own lithium battery production, most of which also gets exported.

We process other rare earths such as neodymium, praseodymium and samarium, and the capacity has ramped up now that the Chinese restrictions on their exports present opportunities to capture their export markets.

And for a very long time (decades) germanium has been processed as byproduct of a zinc smelter operation here in BC.

I could go on, but you get the point that it is not accurate to generalize when talking about rare earths. For example the zinc smelter operations are not "super dirty". The good people of Trail BC would have a word or two with you if you walked into their town saying that.

[grumbler]

It really depends on what rare earths you are talking about. France and the US are the main export destinations for our Lithium for processing. And we also make use of it ourselves for our own lithium battery production, most of which also gets exported.

We process other rare earths such as neodymium, praseodymium and samarium, and the capacity has ramped up now that the Chinese restrictions on their exports present opportunities to capture their export markets.

And for a very long time (decades) germanium has been processed as byproduct of a zinc smelter operation here in BC.

I could go on, but you get the point that it is not accurate to generalize when talking about rare earths. For example the zinc smelter operations are not "super dirty". The good people of Trail BC would have a word or two with you if you walked into their town saying that.

Yes. A number of countries have been developing processing facilities.  The US has a big new plant in Hondo Texas that's already processing light REMs and starting to refine heavy REMs. There's a facility on-site at Mountain Pass that can do both, as well.  In addition, recycling REMs from batteries is a known technology, just not economically viable.

All of this isn't globally significant, but, combined with US government REM stockpiles, robs China of much of its long-term leverage and some of its short-term leverage.

Though, with our luck, Trump will DOGE all of the US REM mining and processing subsidies.

[Sheilbh]

From what I understood, even Canadian or Australian rare earth metals are refined in China. The refinery capacity is an even bigger bottle evk than mining deposits. It's super dirty too.

Indnonesia's an interesting example where, given their dominance in graphite extraction, they've actually basically blocked the export of raw graphite and are instead requiring refinement to happen domestically. It's often still Chinese money (I think legally required to be a JV) building the factories in Indonesia and there's a skill transfer involved too. But an interesting - and in that sector - successful way of moving the overall economy up the supply chain to a higher value export.

I think Indonesia's trying to do similar things with other minerals - but I think there's some doubt on whether it'll work as I understand Indonesia's market dominance is lower for other minerals so China (or other refiners) would be more able to just shop somewhere else.

But I'd be surprised if other developing and economies with a big extraction sectors, especially if they're dominant in a mineral, weren't looking at the Indonesian example (and they should).

But also I think it's part of a wider political challenge - which I think Indonesia solved with that graphite policy - of how you get enough economic and political benefit from extraction to cover the costs (including environmental). I think it's really striking that the recent pink wave in Latin America is now largely opposed to extractivisim which is exactly what funded the first pink wave's policy achievements (like Lula's Fome Zero) because the social and environmental impact is really significant.

But I also think there's something to us not doing this on refining - I remember mentioning it before but in the last Parliament Labour had a position that simultaneously supported nationalising a steel mill to ensure continued steel production in the UK while, at the same time, opposing the contruction of a coal mine explicitly proposed to produce coke for domestic steel. I don't think that's just a Labour or Britain problem - I think there's a bit of a cognitive dissonance on this stuff more broadly. More broadly I think in the last 40-50 years not many Western politicians gave any thought to things like supply chains, or geopolitics or energy, until covid and Ukraine (and the ones who did were probably dismissed as eccentrics).

[Jacob]

NYT Article on the global realignment of Chinese trade flows

China Is Unleashing a New Export Shock on the World
As President Trump's tariffs close off the U.S. market, Chinese goods are flooding countries from Southeast Asia to Europe to Latin America.

Two decades ago, China shocked the United States with its ability to make and ship things fast and inexpensively on a scale never before seen. The resulting surge of exports reshaped America's economy and its politics.

Today, a new China shock is cascading across the globe from Indonesia to Germany to Brazil.

As President Trump's tariffs start to shut China out of the United States, its biggest market, Chinese factories are sending their toys, cars and shoes to other countries at a pace that is reshaping economies and geopolitics.

This year so far, China's trade surplus with the world is nearly $500 billion — a more than 40 percent increase from the same period last year.

As the world's two superpowers duke it out over trade, the rest of the world is now bracing for an even bigger China shock.

"China has loads of things that it needs to export, and whether or not the U.S. puts tariffs on China, it's pretty much impossible to stop the shifts in flows," said Leah Fahy, a China economist at Capital Economics.

The flood of exports from China is the consequence of government policy and a slowing domestic economy. To soften the blow of a real estate crisis that reduced the wealth of millions of households, Beijing has for several years been shoveling money into its manufacturing sectors, which are making far more things than there is demand for at home.

China's global market share for all categories of goods has risen sharply, according to an analysis by Ms. Fahy. This will continue despite the tariffs because Beijing is unlikely to change the course of its export-oriented policies.

By diverting the flow of its stuff to Southeast Asia, Latin America and Europe, China has already eased the economic effect of a plunge in demand from the United States. But it puts China in potential conflict with trading partners that are also facing pressure from Washington.

Mr. Trump is threatening steep tariffs for the same countries that are being inundated with more Chinese goods, like Vietnam, Cambodia and Indonesia. Those tariffs have, for now, been put on pause for negotiations. Some countries have benefited from an increase in investment by foreign companies that are trying to shift production from China as quickly as possible.

Others have also been able to reship some Chinese goods by exporting them to the United States. But if they cannot negotiate the tariffs much lower, homegrown companies in countries facing severe U.S. tariffs in Southeast Asia and elsewhere could be crushed by competition from Chinese companies.

As much as Mr. Trump has disrupted trade with tariff levels not seen in a century, the drastic shift in China's exports was building long before he took office in January.

China's property crisis — a glut of housing, plunging prices and widespread bankruptcies — began to reverberate through the economy in 2021. China's policymakers wasted no time diverting cheap loans away from developers to exporters and manufacturers, a move that eventually offset the collapse in construction, which at its peak contributed to one-third of economic growth.

For Beijing, it was a tried-and-tested move: Throw money at the problem.

"They often overinvest to get the scale first, and then the process is aided by government policies," said Tommy Wu, an economist at Commerzbank. "That contributes to why we have this problem today."

China had already embarked on a domestic industrial policy in 2015, known as Made in China 2025, to make higher-skilled, more valuable goods like sophisticated computer chips and electric vehicles. That initiative led the United States and Europe to raise tariffs on electric cars, solar panels and other high-technology products.

But China's drive to boost manufacturing since the property market collapse has gone much further. Even while making more advanced products, Chinese manufacturers doubled down on making tchotchkes, the kinds of cheaper things that China excelled at making two decades ago. China rewrote the playbook, confounding economists.

"China is not developing the way economic theory suggests, and now we are faced with a new model," said Priyanka Kishore, an economist in Singapore, referring to the traditional trajectory of economies that move away from low-end manufacturing as they become more mature and developed.

"This is a challenge because it exacerbates pressures on the rest of the world," Ms. Kishore said.

With tariffs starting to realign trade flows and supply chains, the economic effect is beginning to show.

In Germany, where shipments of Chinese goods last month rose 20 percent from a year earlier, companies have expressed concerns to Mr. Wu, the economist from Commerzbank. Carmakers feel it most acutely.

China has made 45 percent more electric vehicles this year, even as Chinese companies are engaged in a vicious price war at home because of flagging consumer appetite. Exports of electric vehicles have soared 64.6 percent this year, according to the Chinese Association of Automobile Manufacturers.

Countries that have borne the brunt of the jump in Chinese imports have also seen sharp declines in their own manufacturing, leading to job losses and bankruptcies.

In Indonesia, garment factories are closing, citing their inability to compete with cheaper clothes from China. Some 250,000 people lost their jobs in the garment industry in 2023 and 2024, said Redma Gita Wirawasta, the chairman of the Indonesian Filament Yarn and Fiber Producers Association. Thai auto parts manufacturers have shut down because of Chinese electric vehicles. Brazilian carmakers have called on the government to initiate an antidumping probe into Chinese cars sold in the country.

For most countries, there are two options. The first is to do nothing and watch manufacturing get hollowed out, said Sonal Varma, the chief economist for Asia, with the exception of Japan, at Nomura, the Japanese bank.

The other option is to raise tariffs and use other protectionist measures in specific sectors, just as the United States has done with China. This risks the ire of China, which uses trade and investment as leverage in its diplomatic overtures, or the United States.

"Supply chains are getting bifurcated along geopolitical lines," Ms. Varma said. "It has become a lot more difficult for countries to decide: Who do you align with?"

It's interesting to potentially be holding the short end of the stick of the kind of free trade dynamics that were the foundation of the centuries of European and American dominance.

[Sheilbh]

Yeah - and this is why I think the "pivot to China" as an economic solution to the US is a challenge because I think you'd basically be voluntarily hollowing out whatever domestic industry you have and exposing yourself to a dependence on an alternative regime that is, at the very least, no more benign than Trump.

I'm not sure what the answer is, but there's certainly not an easy option.

There may be areas where the trade off is worth it - I'm sympathetic on EVs, for example, because I think energy transition is an urgent priority globally.

Obviously I would say this as a left-winger with Third Worldist sympathies, but I do think we need to be thinking in terms of activist developmental states - and I'm not sure that sits easily alongside globalisation or, particularly, the free flow of capital which underpins it

[crazy canuck]

There was an article in the Globe a couple of days ago reporting the dramatic effect this has had on the Port of Montreal.  A huge increase in traffic from China and a huge increase in destinations other than the US.

The port of Vancouver has not seen as much as a change because we were already dealing mainly with Asian ports.