America Must Cut Its Reliance on China—Now

David Sauer

China dominates the rare earth industry—and has shown it is willing to weaponize its market power to wring concessions from its competitors. America needs a way to fight back.

This week, Xi Jinping will host Vladimir Putin and Kim Jong-un at a major military parade in Beijing, highlighting a growing axis between China, Russia and North Korea—and reminding American strategists that even as America’s strategic rivals are coming together abroad, the United States remains dangerously dependent on them for its supply chains at home.

There is no question that China, now emboldened by visible shows of geopolitical unity with Russia and North Korea, represents the most significant national security threat to the United States. America must therefore rapidly become strategically independent from the Chinese in critical technologies and commodities, as well as offer alternative products to compete against China. Washington needs to ensure that it has secure and unfettered access to important equipment and materials—especially in the realm of telecommunications, semiconductors, rare earth minerals, and pharmaceuticals—to ensure it does not rely at all on the Chinese Communist Party.

America Needs Domestic Competitors to Huawei

Recognizing the strategic importance of cutting-edge technologies, the Chinese have sought to dominate the telecommunications and networking equipment sector. Through the Chinese state-owned firm Huawei, the Chinese government has maintained artifically low prices, among other tactics, with an eye towards infiltrating Huawei-made equipment into 5G and networking infrastructure throughout the globe.  
The first Trump administration wisely banned the use of Huawei equipment in the United States, designated Huawei as a Chinese military company, and spent considerable time and resources to persuade US allies and partners of the intelligence threat posed by using Huawei equipment in their networks. The United States rightly highlighted the potential for back doors that Huawei and China by extension would be poised to exploit to steal data and secrets.

Huawei has nevertheless continued to strengthen its position as a cost-effective, high technology company backed by the full force of the Chinese Government. This is why it has been imperative for the United States to build up strong domestic alternatives. The US government took a step in the right direction earlier this year when it approved Hewlett Packard Enterprises’ (HPE) purchase of Juniper Networks, which went into effect in July following a US government antitrust review. A handful of senators and a former DOJ official have criticized the move, but the reality is that the combination of the two companies gives the new HPE greater scale to compete against Huawei, which should help the United States compete for global influence in digital infrastructure. This is why the intelligence community reportedly urged the DOJ to move it forward.
With the addition of Juniper’s product line, HPE will offer an alternative vertically integrated stack for the full range of networking solutions to global customers. As the new company integrates, HPE may be able to better position itself to compete against Huawei in valuable European, Asian and South American markets. It will be able to offer the highest quality products and expertise—without Huawei’s nefarious integration with the Chinese government.

Breaking China’s Rare Earth Minerals Stranglehold

China has also succeeded in monopolizing the processing of rare earth metals as well as the production of rare earth magnets. Its control of this vital sector of the global economy has already come to haunt the United States. In April, after President Donald Trump moved to impose tariffs on Beijing, the Chinese government retaliated by essentially halting the export of rare earth magnets. The risk to the US economy was significant; American companies scrambled to find scarce alternative suppliers of the magnets, and the Ford Motor Company was forced to temporarily close a factory in Chicago after one of its suppliers ran out of magnets needed to manufacture cars. After the United States and China negotiated a trade truce, Beijing resumed its exports—but notably left them in place for US defense firms. Nor is there any guarantee that China could not resume its embargo at some point in the future, with potentially disastrous effects.
China dominates the rare earth industry, producing approximately 90 percent of the rare earth magnets used in advanced technologies and large manufacturing sectors such as cars, electronics, and renewable energy. Due in part to its weak environmental protection laws, China also controls 90 percent of the world’s rare earth mineral processing capacity. China has wielded its power in rare earth metals in the past, embargoing exports to Japan in September 2010 following an incident near the Senkaku islands. That early export freeze was a harbinger of things to come; it sent a signal to the West that China was prepared to weaponize its dominance in this field to achieve desired policy outcomes.
The Trump administration has rightly recognized the US vulnerability in rare earths and is seeking to improve America’s strategic position in mining and processing rare earth minerals, as well as fabricating rare earth magnets. The partnership between the US Department of Defense and MP Materials, announced in July, is a welcome development in the establishment of an indigenous rare earth metal supply chain.  
The Trump administration has pointed America’s national security strategy with regards to supply chains in the right direction with its policy towards China. It should next implement additional policy measures, in close coordination with the Congress, to build safe and secure supply chains over which the Chinese Communist Party has no influence.

About the Author: David Sauer

David Sauer is a retired senior Central Intelligence Agency (CIA) officer who served as chief of station and deputy chief of station in multiple overseas command positions in East Asia and South Asia. He earned a Master’s degree in international security policy studies from the George Washington University and a Bachelor’s degree in Chemistry from Gustavus Adolphus College.  Mr. Sauer is self-employed and writes and teaches about US national security issues.  

All statements of fact, opinion, or analysis expressed are those of the author and do not reflect the official positions or views of the US Government.  Nothing in the contents should be construed as asserting or implying US Government authentication of information or endorsement of the author’s views.