The US House of Representatives Select Committee on the Chinese Communist Party released a report on Wednesday accusing the CCP of implementing a coordinated, decades-long plan to manipulate the global critical minerals market. The report alleges that China aims to use its dominant position in the market as an economic weapon to expand its manufacturing industry and enhance its geopolitical influence.
The 52-page report highlights Beijing’s view of minerals as strategic resources for geopolitics, rather than typical commodities. This strategic approach can be traced back to Deng Xiaoping’s 1992 statement: “The Middle East has oil, China has rare earths.”
Chairman of the committee, Republican Congressman John Moolenaar, warned that every American relies on minerals manipulated by China for its own benefit, from cell phones to fighter jets. He emphasized the need for swift action against China’s predatory practices that have led to unemployment, mine closures, and jeopardized national security.
The report exposed how the CCP weaponizes mineral resources on a global scale through national financial support and laws. It revealed that Beijing has provided billions of dollars in subsidies, including zero-interest loans, to state-owned mining giants to acquire mining assets globally.
This massive investment allows China to dump products at production costs below market rates, squeezing out Western competitors. With China being the world’s largest rare earth processor, the US and its allies struggle to determine true metal prices.
Lawmakers also raised concerns about potential Chinese influence on important international exchanges. The report pointed out challenges in accurately reflecting global supply and demand on exchanges like the London Metal Exchange (LME) after its acquisition by the Hong Kong Exchange in 2012.
The report mentioned an incident where LME canceled nickel contract trades, seen as a key example of Chinese influence on global pricing mechanisms. The actions aimed to ensure a Chinese company did not face substantial debt, thereby avoiding bankruptcy.
Despite the response from an LME spokesperson emphasizing transparency in pricing, the CCP’s legal framework allows Beijing to manipulate prices based on its economic and national security interests.
The report highlighted the CCP’s use of the Price Law enacted in 1997 to maintain downward pressure on prices. The law essentially prohibits the publication of prices deviating from the government’s desired values.
In terms of strategic objectives, the report outlined the CCP’s systematic weakening of competitors and distortion of global mineral markets to achieve dominance. Its tactics are particularly evident in the rare earths and lithium markets.
For rare earths, the CCP followed a three-step strategy over decades involving enticing Western companies, undercutting market prices, and using market influence as a geopolitical weapon, such as the 2010 rare earth export ban against Japan.
Regarding lithium, since 2021, the CCP has coordinated actions to artificially suppress global lithium prices. Whenever prices rise, the Chinese government intervenes to bring them back down.
The report proposed 13 policy recommendations urging the US government to intervene with a multi-faceted approach to tackle these challenges. Key suggestions include establishing a Critical Minerals Czar, creating a Strategic Resources Reserve, implementing price protection mechanisms, enhancing international cooperation, establishing a National Rare Earth Center, supporting domestic magnet manufacturing and innovation, and accelerating the development of alternative materials to reduce dependency on rare earth resources.