China imposes de-facto ban on rare earth, tungsten and molybdenum exports to Japan in September 2010.

Context

In September 2010 it was reported that China’s customs officials had placed an informal ban on the export of rare earths to Japan. The New York Times cited “industry officials” as saying on September 21 that “Chinese customs officials are halting shipments to Japan of tungsten, molybdenum, and so-called rare earth elements, preventing them from being loading aboard ships at Chinese ports”. Additionally, Chinese rare earth exporters were reportedly told to halt sales to Japan. A Chinese government spokesperson, Chen Rongkai, denied that any measure had been imposed. As explained below Japan’ formal complaint to the WTO cited a range of formal and informal export restrictions, ranging from informal export restrictions to licensing restrictions, quantitative limitations and export price maintenance. Japan’s complaint detailed over 30 pieces of Chinese regulations that, together with informal measures, collectively formed a de-facto ban on exports.

The context behind this measure was cited as bilateral tensions over disputed maritime sovereignty around the Senkaku/Diaoyu islands. Notably, it followed Japan’s September 8 arrest of Chinese fishing vessel captain Zhan Qixiong in disputed waters, following a collision between the captain’s boat and two Japanese coast guard vessels. On September 20, China’s Prime Minister, Wen Jiabao, called for the captain’s release, and reportedly threatened retaliation in the event of Japan’s noncompliance. However, China specifically denied that it had used rare earth restrictions as a retaliatory measures,

Impact

In 2010 China was reported to control around 93 per cent of all global rare earth supplies. Japan was the leading importer of China’s rare earths. The BBC reported that Japan had been “[s]haken by the reminder of how dependent it had become on China”. Others, citing Japanese port data both before and after the fishing vessel arrest, have questioned the retailatory nature of the measure.

Responses  

i) Japanese government and industry responses.

The Japanese government said that it had repeatedly requested that Beijing not limit rare earth exports. Japan’s then finance minister, Yoshihiko Noda, told press that “[a] cooling of relations between Japan and China over the Senkaku problem would be bad for Japan’s economy, but it would also be a minus for China”, and called for “both sides (to) respond in a calm manner.”

Notably, on September 24 Japan released the Chinese fishing vessel captain, Zhan Qixiong, with authorities citing in their decision the potential for further deterioration of bilateral relations were Zhan to remain in custody.

Japanese firms had reportedly been stockpiling rare earth materials for two years prior to the imposition of this measure. Additionally, Tokyo responded through a long-term diversification policy, aimed at establishing new sources of rare earths through new mines in sites including Australia, Mongolia, and Vietnam. By 2018, Japan had successfully reduced its dependency on the Chinese market to only 58%.

(ii) Chinese government and industry responses

This measure was reportedly accompanied by a number of other diplomatic and economic tools, including a suspension of ministerial-level diplomatic contacts, the cancellation of a performance in Shanghai by the J-Pop band SMAP, and a partial boycott of Japan by Chinese tourists. 

Reporting suggested that industry executives were informed by the Chinese government that the measure would last until the end of September 2010, with the possibility of an extension to come if the Chinese fishing vessel captain were not released by Japan by that point.

On October 26, 2010, a spokesperson for the Ministry of Foreign Affairs of the PRC officially acknowledged that China intended to control the export of rare earths, stating that it was China’s right to regulate and manage rare earths in accordance with WTO rules and China’s accession protocols.

(iii) Other government and industry responses

The US reportedly responded to this measure with concern about its own dependency on China’s rare earths, with a Pentagon review initiated on whether the US should develop alternative sources. In the New York Times, Paul Krugman called the incident “deeply disturbing” both because “the affair highlights the fecklessness of U.S. policy makers, who did nothing while an unreliable regime acquired a stranglehold on key materials”, and because “the incident shows a Chinese government that is dangerously trigger-happy, willing to wage economic warfare on the slightest provocation.”

WTO Disputes

On 15 March 2012, Japan notified the WTO of its Request for Consultations with China. Japan’s formal request listed a range of formal and informal measures on which Japan’s complaint was based, including export duties, quantitative restrictions, fees and formalities, minimum export price, and other informal export restrictions.

The Panel Report, circulated in March 2014, was the subject to referral to the Appellate Body of the WTO, and the eppeal decision was circulated in August 2014 and adopted by the WTO Dispute Settlement Body at that time.

Status

On September 29, 2010, Reuters cited a Japanese trading firm source as claiming that the ban had ended. However, this may have been premature. Separately (and contradictorily) in November 2010, it was reported that, after a two-month ban, rare earth mineral exports from China to Japan had resumed.

In May 2015, China notified the WTO that it had removed the measures that were found to be inconsistent with WTO rules, within the timeframe agreed by Japan and China.

In 2023, Foreign Policy reported that Japan had “successfully built alternative supply chains” after the incident.

Reference list

BBC News. 2010a. “Japan frees Chinese boat captain amid diplomatic row.” September 24. Available at: https://www.bbc.com/news/world-11403241

BBC News. 2010b. “China resumes rare earth exports to Japan.” November 24. Available at: https://www.bbc.com/news/business-11826870

Bradsher, K. 2010. “Amid Tension, China Blocks Vital Exports to Japan.” The New York Times. September 22. Available at: https://www.nytimes.com/2010/09/23/ business/global/23rare.html

Branigan, T. & McCurry, J. 2010. “Japan releases Chinese fishing boat captain.” The Guardian. September 24. Available at: https://www.theguardian.com/world/2010/ sep/24/japan-free-chinese-boat-captain

King, A. & Armstrong, S. 2013. “Did China really ban rare earth metals exports to Japan?” East Asia Forum. August 18. Available at: https://eastasiaforum.org/2013/08/18/did-china-really-ban-rare-earth-metals-exports-to-japan/

Krugman, P. 2020. “Rare and Foolish.” The New York Times. October 17. Available at: https://www.nytimes.com/2010/10/18/opinion/18krugman.html?_r=1&

Ministry of Foreign Affairs of the People’s Republic of China. 2010. ‘Foreign Ministry Spokesperson, Ma Chaoxu, hosted regular press conference on 26 October 2010’ [2010年10月26日外交部发言人马朝旭主持例行记者会] October 26. Available at: http://ph.china-embassy.gov.cn/chn/fyrth/201010/t20101026_1229809.htm

Nguyen, M. & Onstad, E. 2023. “China’s rare earths dominance in focus after it limits germanium and gallium exports.” Reuters. December 22. Available at: https://www.reuters.com/markets/commodities/chinas-rare-earths-dominance-focus-after-mineral-export-curbs-2023-07-05

Rachman, J. 2023. “Japan Might Have an Answer to Chinese Rare-Earth Threats.” Foreign Policy. April 15. Available at: https://foreignpolicy.com/2023/08/15/japan-rare-earth-minerals-green-transition-china-supply-chains/

Reuters. 2010. “China lifts rare earth export ban to Japan: trader.” September 29. Available at: https://www.reuters.com/article/world/us/china-lifts-rare-earth-export-ban-to-japan-trader-idUSTRE68S0BT/

Reuters, 2010. “China vows not to use rare earths as leverage” October 28. Available at: https://www.reuters.com/article/us-rareearth/china-vows-not-to-use-rare-earths-as-leverage-idUSTRE69R12Y20101028/

Reuters. 2014. “China loses appeal of WTO ruling on exports of rare earths.” August 8. Available at: https://www.reuters.com/article/business/china-loses-appeal-of-wto-ruling-on-exports-of-rare-earths-idUSKBN0G71QA/

WTO. 2015. China – Measures Related to the Exportation of Rare Earths, Tungsten and Molybdenum (DS433)’ May 20. Available at: https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds433_e.htm.