China can potentially lose its diplomatic “card” when dealing with Japan due to its plummeting export of rare earth materials, the lowest in 10 years. Japan is the largest importer of China’s rare earth metals, accounting for 56 percent of the exports which it uses for cars and hi-tech gadgets.
China’s rare earth exports is expected to barely hit 10,000 tonnes in 2012, a far cry from its quota of 30,996 tonnes for this year. This might mean that it may no longer be able to use this advantage in dealing with Japan on bilateral issues, which include the current territorial spat over the Senkaku Islands. China’s exports were highest in 2003 with 74,000 tonnes but has gradually observed to decline. Last year, exports fell to 18,000 tonnes, less than half of its 2010 figures. China’s largest rare earths producer, Inner Mongolia Baotou Steel Rare-earth (Group) Hi-tech Co., has halted its production in an attempt to stabilise the market, according to a Chinese official.
While the global economic slowdown may have caused the gradual decline of rare earth exports, another, more immediate reason is the lessening demand for such resources in Japan. The country has started to research and develop alternative materials and recycling technology in order to minimise the effects of Chinese restrictions on exports like the one that was implemented by China in 2010 in response to an arrest made by Japan against a Chinese trawler captain. There have also been calls in China for even more restrictions in response to the current territorial dispute between the two countries.