World Economics - Insight , Analysis and Data

World Economics - Insight , Analysis and Data
Recent Developments on the Rare Earth Front
Robert Looney
World Economics, March 2011

Chinese actions in the rare earths market have raised a number of concerns about the country’s motives in restricting exports. One theory is that the country simply wants to ensure that it has adequate supplies for its future expansion into a number of energyefficient, and high-tech sectors using large amounts of this resource. Another view is that the country is practising a new type of mercantilism – leveraging the country’s current near monopoly over the resource to coerce using firms to locate in China and transfer their technology to Chinese firms: technocratic mercantilism. An analysis of China’s recent actions, together with empirical work suggesting a severe technological readiness lag, lends some support to the mercantilist interpretation.
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