Page 230 - 2019 White Paper on the Business Environment in China
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9 White Paper on the Business Environment in China
2.6 Resources and Industrial Materials
Background levels four times that of the US. From 1970 to 2008,
China’s per capita consumption of materials grew from
The United States has a critical minerals problem. one third to over one and a half times the world’s average
Historically, resource conflicts have often levels. Domestic consumption of natural resources per
centered on fuel minerals, particularly oil. Future resource capita increased at almost twice the rate of the whole
conflicts may, however, focus more on competition for of the Asia Pacific region due to massive investments in
nonfuel minerals that enable emerging technologies. urban infrastructure, energy systems and manufacturing
No nation has all of the resources it needs domestically. capacity (China Outpacing).
International trade may lead to international competition
for these resources if supplies are deemed at risk or Gas and Oil
insufficient to satisfy growing demand, especially for
minerals used in technologies important to economic China allows oil product exports via two routes—the
development and national security (Gulleyet al.). As the processing trade route and the general trade route—and
United State Geological Survey reveals, the US relies issues separate quotas for each. Under the processing
on Chinese imports for at least 20 minerals and has trade route, there are no applicable taxes on the product,
little or no capacity to mine, refine, and process its own but almost no flexibility to the exporter. The exported
minerals from start to finish. A 2018 Executive Order product has to have been refined from imported crude
claims this “strategic vulnerability” poses a significant oil, must come from a specific refinery that has been
national security risk since critical minerals are the allocated an export quota, and the seller of the crude
building blocks for military equipment. From minerals oil must be the buyer of the oil product, although it can
that are ubiquitous in the supply chain, such as copper resell it to others. Under the general trade route, state-
and steel, to those that are very specialized—like rare owned trading companies are free to export oil products
earth elements and beryllium—America’s technological from the domestic market, regardless of whether they
superiority hinges on maintaining reliable access to have been produced from domestic or imported crude
key materials. Unfortunately, America’s critical minerals oil (Zhou).
problem has gone from bad to worse. The nation’s only
domestic rare earth producer was forced into bankruptcy Independent oil refineries import and process almost
in 2015 after China suddenly flooded the market with a fifth of the 9.57 million barrels of crude oil that China
rare earth elements. Adding insult to injury, the mine brings in daily. But that profitable corner of the world’s
was then two years later for US$20.5 million to MP Mine largest oil importer is now cringing under new tax policies
Operations LLC, a Chinese-backed consortium. This same that Beijing hopes will slim down the competition to
mine is exporting critical minerals to a processing plant state-owned refineries. The number of private refineries
in China—because the United States cannot process or in China has massively shrunk over the past two decades
refine these materials at commercial scale (Green). as state owned Sinopec and China National Petroleum
Corporation (CNPC) have grown. From more than 200
By 2013, China had surged ahead of the rest of the private refineries in 1995 to less than 20 today, the
world in material consumption, but also was among market has seen increased mergers and closures of
the most successful in improving resource efficiency, China’s independent refineries. A new consumption tax
according the United Nations Environment Program of US$38 per barrel on gasoline and US$29 on diesel
(UNEP). The report found that China’s growing affluence was announced in March 2018. Some of these smaller
has made it the world’s largest consumer of primary refineries were already showing signs of stress and began
materials (such as construction minerals, metal ores, fossil importing straight-run fuel oil, the residue left over from
fuels and biomass), with domestic material consumption crude oil distillation, to cushion the margins. On the
230
2.6 Resources and Industrial Materials
Background levels four times that of the US. From 1970 to 2008,
China’s per capita consumption of materials grew from
The United States has a critical minerals problem. one third to over one and a half times the world’s average
Historically, resource conflicts have often levels. Domestic consumption of natural resources per
centered on fuel minerals, particularly oil. Future resource capita increased at almost twice the rate of the whole
conflicts may, however, focus more on competition for of the Asia Pacific region due to massive investments in
nonfuel minerals that enable emerging technologies. urban infrastructure, energy systems and manufacturing
No nation has all of the resources it needs domestically. capacity (China Outpacing).
International trade may lead to international competition
for these resources if supplies are deemed at risk or Gas and Oil
insufficient to satisfy growing demand, especially for
minerals used in technologies important to economic China allows oil product exports via two routes—the
development and national security (Gulleyet al.). As the processing trade route and the general trade route—and
United State Geological Survey reveals, the US relies issues separate quotas for each. Under the processing
on Chinese imports for at least 20 minerals and has trade route, there are no applicable taxes on the product,
little or no capacity to mine, refine, and process its own but almost no flexibility to the exporter. The exported
minerals from start to finish. A 2018 Executive Order product has to have been refined from imported crude
claims this “strategic vulnerability” poses a significant oil, must come from a specific refinery that has been
national security risk since critical minerals are the allocated an export quota, and the seller of the crude
building blocks for military equipment. From minerals oil must be the buyer of the oil product, although it can
that are ubiquitous in the supply chain, such as copper resell it to others. Under the general trade route, state-
and steel, to those that are very specialized—like rare owned trading companies are free to export oil products
earth elements and beryllium—America’s technological from the domestic market, regardless of whether they
superiority hinges on maintaining reliable access to have been produced from domestic or imported crude
key materials. Unfortunately, America’s critical minerals oil (Zhou).
problem has gone from bad to worse. The nation’s only
domestic rare earth producer was forced into bankruptcy Independent oil refineries import and process almost
in 2015 after China suddenly flooded the market with a fifth of the 9.57 million barrels of crude oil that China
rare earth elements. Adding insult to injury, the mine brings in daily. But that profitable corner of the world’s
was then two years later for US$20.5 million to MP Mine largest oil importer is now cringing under new tax policies
Operations LLC, a Chinese-backed consortium. This same that Beijing hopes will slim down the competition to
mine is exporting critical minerals to a processing plant state-owned refineries. The number of private refineries
in China—because the United States cannot process or in China has massively shrunk over the past two decades
refine these materials at commercial scale (Green). as state owned Sinopec and China National Petroleum
Corporation (CNPC) have grown. From more than 200
By 2013, China had surged ahead of the rest of the private refineries in 1995 to less than 20 today, the
world in material consumption, but also was among market has seen increased mergers and closures of
the most successful in improving resource efficiency, China’s independent refineries. A new consumption tax
according the United Nations Environment Program of US$38 per barrel on gasoline and US$29 on diesel
(UNEP). The report found that China’s growing affluence was announced in March 2018. Some of these smaller
has made it the world’s largest consumer of primary refineries were already showing signs of stress and began
materials (such as construction minerals, metal ores, fossil importing straight-run fuel oil, the residue left over from
fuels and biomass), with domestic material consumption crude oil distillation, to cushion the margins. On the
230
