China risks overplaying its hand by restricting rare earth exports

Export restrictions tend to encourage innovations aimed at reduced dependence on such shipments

- NIRANJAN RAJADHYAKSHA

China has once again weaponized its dominant position in the supply of rare earth minerals. It has imposed stringent export curbs on these elements that are critical inputs in a range of industries from automobiles to aerospace and defence. The move comes as a response to US restrictions on the export of semiconductor technology to China.

These battles are being waged against the backdrop of a broader truce in the once-escalating trade war between the world's two largest national economies.

The Chinese chokehold on the supply of rare earth minerals has sent a jolt through many industries in other parts of the world, including India. For example, there are fears that assembly lines in the automobile industry will grind to a halt in the coming weeks unless China starts exporting rare earth minerals again.

This is not the first time that Beijing has restricted the flow of rare earth minerals across its borders. It did so in 2010 after a dispute with Japan on the high seas, and was forced to roll back its export curbs by the World Trade Organization in 2015.

Even though China's export ban was targeted at Japan, other countries naturally saw it as a signal of what could happen in the years ahead.

The effectiveness of any export restriction depends on three factors.