The recent rise of China as a superpower has reshaped the geopolitical landscape, but an often-overlooked aspect of this rise is its dominance in the domain of critical raw materials. These materials, essential for a plethora of high-tech products, green energy solutions, defense applications, and more, are cornerstones of the modern global economy. China’s position in this sphere does not just imply economic leverage but strategic dominance.
Critical raw materials like cobalt, germanium, and rare earth elements (REEs) are integral components in products we use daily, from smartphones and electric vehicles to solar panels and advanced defense systems. These materials, while rare, underpin technological advancements and green energy shifts that are propelling economies and nations forward. The European Union alone has identified 30 such critical resources that are deemed vital for defense, renewables, robotics, and batteries.
Global production and access to these materials are restricted, controlled by a handful of nations, but China has managed to gain control over two-thirds of these resources.
This isn’t mere happenstance but the result of a long-term strategy where China has not only focused on mining these resources but also refining and processing them. Their strategic investments in the mining and processing industries give them significant market share and expertise, embedding China deeply in the global supply chain.
China’s forward-looking approach, particularly in securing battery metals for the burgeoning electric vehicle market, further exemplifies its strategic intent. They dominate in the production and consumption of essential minerals for electric cars, such as graphite, copper, nickel, manganese, cobalt, lithium, and REEs. While China itself is not rich in certain minerals like cobalt and lithium, its proactive stance ensures it holds sway over global processing capacities for these minerals.
China’s position of strength is not just an economic asset but a geopolitical tool. Recent actions have demonstrated how Beijing can use this dominance as leverage against other nations.
In 2023, China took a page from Russia’s playbook, using its raw materials as Russia did with gas. Beijing announced that export licenses would be required for gallium and germanium, both of which are indispensable for green energy, tech, and defense.
This move rang alarm bells in Western capitals since even a 30% cut in gallium supply to the US could substantially impact GDP growth. However, leveraging commodities in such a way also comes with potential blowbacks, and the long-term implications of such tactics can be unpredictable.
The EU, in its interactions with China, has been wary of this dominant position. The bloc had labeled China as a systemic rival back in 2019 and has been keen to “de-risk” its economy to reduce its dependence on China, especially given the latter’s assertive stance and perceived shift from “reform and opening” to a phase of “security and control”. As China allegedly seeks a systemic change in the international order with itself at the center, the appeal of free markets and open trade may be challenged by Beijing’s focus on military, tech, and economic security.
China’s categorization of “strategic” and “critical” raw materials further provides insights into its ambitions. An official catalogue was established in 2016, listing 24 “strategic minerals”. Different regulations and policies have been crafted for these minerals, with a clear objective to bolster China’s domestic supply capacity.
China’s raw material dominance gives it an upper hand in trade negotiations. Countries dependent on these materials are economically vulnerable to supply disruptions, making them more likely to acquiesce to China’s demands in broader trade agreements. With major control over the supply, China can manipulate global market prices of these materials, affecting industries, stock markets, and even GDP growth of countries, as seen in the gallium example, where even a 30% cut could significantly impact the US economy. Industries globally may find themselves tethered to China’s pricing and supply whims, potentially hampering innovation and research and development efforts. The lack of a guaranteed stable supply might deter investments in certain sectors, stunting growth.
Beyond just economic influence, control over raw materials offers China considerable geopolitical sway. It can forge alliances, cementing its leadership role in the global south, particularly with countries rich in these materials but lacking the infrastructure to exploit them. As seen with the EU’s response to China’s dominance, nations are reassessing their strategic narratives. They are caught in a quandary, trying to balance their need for these materials with their political stances on issues like human rights, free markets, and open trade. Control over raw materials can be wielded as a tool of diplomacy. By granting or denying access, China can incentivize countries to align with its political or diplomatic positions, impacting global diplomatic dynamics.
China’s dominance in the domain of critical raw materials is not merely an economic achievement but a clear manifestation of a broader strategy. The nation’s proactive approach in securing, refining, and processing these materials offers it substantial geopolitical leverage. While countries and economic blocs like the EU are becoming increasingly aware of the implications of this dominance, the challenge lies in diversifying sources and reducing dependencies. In a world moving towards green energy and high-tech solutions, the battle for control over these critical materials will undoubtedly shape the geopolitical narrative in the years to come.
Dr. Zukun Lyu is a research scholar in the Department of Political Science at the University of Siena. She has been to national and international conferences and written 21 research articles that have been published in international journals.