China has leverage it can use by limiting access to its rare earth supplies, but it does not want to sacrifice its reputation as a reliable supplier.
In its high-stakes trade talks with the United States, China has been trying to strike a balance in how it wields its market clout. It controls the world’s supply of rare earth metals and magnets. And it has withheld supplies of the materials — crucial ingredients in everything from cars to fighter jets — as leverage.
At the same time, Beijing knows it must not overplay its hand by pushing Washington so hard that the United States feels compelled to make the long-term investments needed to break its dependence on China.
This delicate dynamic was underlined in an apparent compromise the countries reached on Tuesday in London.
Commerce Secretary Howard Lutnick said China’s negotiators had agreed to resume sending rare earths to American companies. The Chinese government did not confirm this.
But on Wednesday afternoon, the JL Mag Rare-Earth Company, a leading magnet producer in Ganzhou, China, said in a public disclosure that it had been issued licenses by China’s Ministry of Commerce for sales of nonmilitary magnet exports to the United States, Europe and Southeast Asia.
China has a long history of using government policy to control markets, periodically flooding countries with very low-priced Chinese supplies. That has driven many of China’s overseas rare earth competitors out of business.