The peculiar China-Japan spat over a collision at sea seems to be winding down as Japan just today decided to release the Chinese fishing boat captain without trial, ostensibly bowing to Chinese pressure. But as with all disputes between these two Asian countries, this episode was not without high drama and gamesmanship. And I'm not talking about the rhetorical assertiveness on the Chinese part or the Chinese official press appealing to emotions with stories of how the boat captain's grandmother passed away during the current Moon Festival (traditionally an important holiday when families are supposed to gather).
No, one of the more interesting issues emerging from the dispute is whether China used "economic coercion" to punish Japan and escalate the matter. I'm talking about rare earth elements again, with widely reported news--most notably in the NYT--suggesting that China banned the export of the rare earth minerals to Japan specifically. As I wrote in my previous post on EVs, rare earth elements (yttrium, dysprosium, lanthanum, etc) are key ingredients in batteries for EVs as well as other high-tech components and even missiles. Given the expansive universe of Japanese high-tech sectors, Japan depends on China for the bulk of its RE supplies. Now, China produces roughly 95% of global RE supplies, but has only about 1/3 of the world's total reserves. Having such immense control over a particular resource naturally leads to suspicion, especially among buyers, that China could wield "supplier leverage" to manipulate prices and supplies, much like how a cartel would behave.