Critical Matters: U.S.-China Rivalry and the Geopolitics of Critical Minerals

• In Event: Sino-American Competition

Abstract

Since 2022, two developments have transformed the geopolitics of critical minerals. Russia’s invasion of Ukraine and the subsequent energy crisis catapulted the popularity of electric vehicles. Furthermore, more than 140 nations have declared their intention to net-zero emissions in the coming decades. The rapid expansion of the electric vehicle market and the growing importance of renewable energy in meeting net-zero emissions goals have heightened the demand for critical minerals, such as lithium, cobalt, and nickel. According to the International Energy Agency, realizing carbon neutrality by 2050 demands a sixfold increase in the supply of critical minerals. As for the global supply chains for these minerals, China has emerged as a major powerhouse in mining, processing and producing most of these critical minerals, often commanding more than half of their global production. The United States has responded with its own set of initiatives aimed at neutralizing China’s dominance over critical minerals and securing the diversified supply chains for them. As such, geopolitical competition over critical minerals has become the latest chapter in the broader U.S.-China rivalry.

This paper explores the transition from a market-based approach to a geopolitically-driven way to secure these essential materials and examines the broader implications of the geopolitics of critical minerals for the energy transition and the intensifying rivalry between Washington and Beijing. Various theoretical approaches are helpful in conceptualizing global competition over critical minerals. For instance, realism would expect a zero-sum game between the United States and China. Policymakers and pundits have thus called for greater investments in nations with critical minerals and collaboration with allies in securing key minerals. In contrast, liberalism would assume the possibility of cooperation between the United States and China over ensuring the stable global production and supply of critical minerals. In fact, some analysts point to the need for greater collaboration between the two nations given China’s dominance over the processing and production of key minerals and the possible backlash from protectionism over these materials.

However, signs of neomercantilism and resource nationalism are unmistakable. Instead of working with other global partners, Beijing tends to view critical minerals as key geopolitical leverage over other nations and a major tool in its competition with the United States. Since the days when China suspended the export of rare earth materials to Japan during a territorial dispute in 2010, the possibility of China cutting off the supply of critical minerals to other nations has remained a major concern. As Beijing unveiled export control on rare earth materials and graphite, the U.S. government has launched the Minerals Security Partnership (MSP) to lessen its dependence on China and coordinate its strategy with its allies in Europe and Asia. In particular, the Biden administration has been working closely with Australia and the United Kingdom on securing the supply chains of critical minerals, signing a multitude of deals with both allied nations, including an “Atlantic Declaration” for cooperation over critical minerals, clean energy and AI. Meanwhile, China has been consolidating its ties with countries in the Global South, in particular the Democratic Republic of Congo, Zimbabwe and Indonesia.

However, the US efforts to cut China off from the global supply chains of critical minerals could backfire. Despite the greater use of “friend shoring” and the Inflation Reduction Act, the United States lacks a coherent industrial policy over critical minerals, which is also at odds with Japan and South Korea’s state-led industrial policy towards these minerals. In addition, some of U.S. allies in Europe and Asia are reluctant to join a highly exclusive coalition over critical minerals for fear of alienating Beijing further. Hence, they call for “de-risking,” rather than “decoupling” from China when it comes to commercial ties, including ones over key mineral production and supply. Moreover, different approaches to labor and environmental standards between the United States and China concerning the mining and processing of critical minerals could hamper Washington’s global efforts to build a coalition over these minerals while allowing Beijing to secure more deals for these crucial materials for the energy transition and carbon neutrality.

Author

• Il Hyun Cho, Lafayette College