China's rare earth policies: economic statecraft or interdependence?

Abstract

This study is about discovering to what extent China uses its rare earth element policies as a tool of economic statecraft. With Chinas virtual monopoly on this resource and the United States increasingly growing demand, it is necessary to examine how China intends on using its economic power. The study builds a comparative framework using both structural realism and neoliberal institutionalism, by identifying theory predictions in terms of Chinas strategic intent and the specific policies it might employ in the rare earth element sector. Specifically, the study finds that Beijing has and will continue to use its rare earth policies as a tool of economic statecraft, but with restraint. Despite its present reliance on economic interdependence with the United States, as China continues to modernize the structure of its economy, more statecraft interventions will likely occur. Beijing was successful in utilizing its rare earth policies as a tool of economic statecraft both by influencing the behavior of its international and its domestic commercial actors. China will leverage its near-monopoly on the rare earths industry by continuing to aggressively employ policies that meet its long-term strategic objectives.