China's Rare Earth and Japan
The case presents the ongoing geopolitical struggle between China and Japan. The essence of the China-Japan conflict lies in the struggle over natural resources - rare earth elements (REEs) and suspected oil deposits in Senkaku Islands - and related territorial disputes concerning the sovereignty over the Senkaku Islands which are resource rich and near key international shipping routes. Even though quite a few countries in the world possess REEs, China possesses over 95 percent of the industrial production capacity for these elements, thus creating a global monopoly (Humphries, 2010). Most of the global REE supply-chain is controlled by China through the production of REEs on its territory or through the purchase of mineral rights from other parts of the world, such as Africa. As shown in the case, this generates a situation of REE dependency for states such as Japan and the U.S., which are both very influential on the world arena, and which consequently leads to important geopolitical frictions. Moreover, China shows a tendency to constrain its exports of REEs as part of its foreign policy, or as argued by other scholars, as an attempt to meet its increasing domestic consumption geared towards the production of technological items such as cell phones, computers and military weapons. China needs REEs to sustain economic growth, stimulate job creation at home and reduce its vulnerability to fuel shortages or price shocks (C ceres and Sophal, 2012). The shortage of REEs on the world market creates the problem of rare earth asymmetry, which affects the relationship among countries and firms at the international level. The case depicts the subtleties of the China-Japan politico-economic relations and discusses the involvement of other important actors, such as the US and the EU, in the struggle for resources.