You can’t fault the Chinese for taking the long view. Nearly twenty years ago, Deng Xiaoping realised the importance of the so-called rare earths, seventeen elements with mysterious um-ending names that are used in many more things than you may think, from power windows in cars to smartphones and computer memories, and even guided missiles. He rightly realised that his country, which holds some 37% of the world's proven reserves, could become the Saudi Arabia of rare earths, turning it into a sort of one-man OPEC.
Rare earths are actually much more democratically distributed around the world than the name suggests. There used to be mines extracting them from Australia through South Africa and Brazil to California. But the Chinese increased production, undercut prices until it became uneconomical for most of the competition to carry on, and account nowadays for 97% of world production. Then they decided to reduce exports.
This raised hackles everywhere. But trust old Adam Smith’s invisible hand to come to the rescue. Increased demand and constrained supplies have made prices shoot up and investors open up their wallets to reactivate old mines and explore new ones. It is only a matter of time and the Saudi Arabia of rare earths will become, well, a sort of Venezuela.
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