Page 186 - 2023 White Paper on the Business Environment in China
P. 186
3 White Paper on the Business Environment in China
economy and escalation of the property market aims to transform itself from the largest producer
crisis tanking demand and evaporating profits. and refiner of rare earth elements to being the
The property sector, which accounts for over one- world's major high value-add manufacturer of the
third of the country's steel consumption, has been clean energy products dependent on rare earth
squeezed by a liquidity crunch and sliding sales since metals and other critical minerals. Rare earth
the end of 2021. This comes amid an ever-expanding elements form an integral part of the modern
mortgage boycott by disgruntled homebuyers over global economy. According to the US Geological
stalled construction projects (Luo et al). Survey, the global output of rare earth elements
in 2021 was about 280,000 metric tons, more than
By the end of 2022, steel inventories were doubling the global output in 2016, and was five
slowly piling up in the warehouses of the country's times the amount produced thirty years ago. From
biggest steelmaking hub, the northeastern city of 1994 to 2008, China’s share of the global output
Tangshan, as well as in the provinces of Jiangsu rose from 47% to 97%. The process of mining,
and Shandong. Demand for steel was falling amid separating and purifying rare earth elements
pandemic lockdowns and crippled construction is not only highly labor intensive but can also, if
activity. Prices of both steel and its main ingredient not managed well, have adverse health effects
iron ore were volatile during the Shanghai and cause lasting degradations to the natural
lockdown but headed on a downward trajectory environment. Behind the headline of China
by June 2022. Weak demand for steel, a bellwether becoming the dominant player in the global rare
of China's economy, also reflected the country's earth market was that the domestic industry was
broader slowdown, though recent data pointed plagued with disorderly development and poor
to some improvement as industrial production management. Persistent issues of smuggling and
rose slightly by 0.7% in May from 2021. Crucially, illegal mining activities, environmental damage
China's steelmaking industry — the biggest in the due to poor mining practice, and the growing
world — hosts extensive supply chains that stretch challenge of ensuring its own domestic needs of
from Chinese blast furnaces to overseas iron ore rare earth run against the central government’s
mines in Australia and Brazil, the biggest suppliers policy perspective that “rare earths are strategic
of iron ore to China. Because of that, any jitters non-renewable resources.” The government
within China can unravel an extensive network introduced a series of measures to overcome
of supply chains, potentially heaping further these problems. In the early 1990s, China started
pressures on existing global disruptions. National to restrict foreign investment, especially in the
daily outputs of intermediary steel products such upstream sector. However, the problem of illegal
as crude steel and pig iron as well as finished mining and smuggling has persisted for many
goods had been rising over the month of May by years into the second decade of the 21st century.
between about 1% and 3%. In contrast, demand, The natural resource–rich areas generally are
while still active, had fallen. That period coincided less developed economically compared to the
with China's biggest citywide pandemic lockdown east-coast provinces. Economic growth is still the
yet in Shanghai. first priority of local governments, even when
the policymakers in Beijing considered policy
Rare Earth Elements transformation. In 2012, the city of Ganzhou in
Jiangxi province needed US$5.8 billion solely for
China is making an unrelenting effort to land reclamation, not to mention health costs and
integrate and upgrade its rare earth supply chain other environmental pollution. In late 2021, three
of upstream mining, processing, manufacturing, of the previous six companies were merged to
and deeper applications. Although it has only form the China Rare Earth Group Co., an industrial
about one-third of the world's rare earth reserves, conglomerate that holds almost 70% of China’s
China now accounts for 60% of global rare earth annual heavy rare earth production quota. With the
mined production, 85% of rare earth processing latest consolidation, the entire rare earth industry
capacity, and over 90% of high-strength rare earth in China (especially upstream and midstream) is
permanent magnets manufactured. In short, China now under two mega-conglomerates, one in the
north and the other in the south (Yao).
186
economy and escalation of the property market aims to transform itself from the largest producer
crisis tanking demand and evaporating profits. and refiner of rare earth elements to being the
The property sector, which accounts for over one- world's major high value-add manufacturer of the
third of the country's steel consumption, has been clean energy products dependent on rare earth
squeezed by a liquidity crunch and sliding sales since metals and other critical minerals. Rare earth
the end of 2021. This comes amid an ever-expanding elements form an integral part of the modern
mortgage boycott by disgruntled homebuyers over global economy. According to the US Geological
stalled construction projects (Luo et al). Survey, the global output of rare earth elements
in 2021 was about 280,000 metric tons, more than
By the end of 2022, steel inventories were doubling the global output in 2016, and was five
slowly piling up in the warehouses of the country's times the amount produced thirty years ago. From
biggest steelmaking hub, the northeastern city of 1994 to 2008, China’s share of the global output
Tangshan, as well as in the provinces of Jiangsu rose from 47% to 97%. The process of mining,
and Shandong. Demand for steel was falling amid separating and purifying rare earth elements
pandemic lockdowns and crippled construction is not only highly labor intensive but can also, if
activity. Prices of both steel and its main ingredient not managed well, have adverse health effects
iron ore were volatile during the Shanghai and cause lasting degradations to the natural
lockdown but headed on a downward trajectory environment. Behind the headline of China
by June 2022. Weak demand for steel, a bellwether becoming the dominant player in the global rare
of China's economy, also reflected the country's earth market was that the domestic industry was
broader slowdown, though recent data pointed plagued with disorderly development and poor
to some improvement as industrial production management. Persistent issues of smuggling and
rose slightly by 0.7% in May from 2021. Crucially, illegal mining activities, environmental damage
China's steelmaking industry — the biggest in the due to poor mining practice, and the growing
world — hosts extensive supply chains that stretch challenge of ensuring its own domestic needs of
from Chinese blast furnaces to overseas iron ore rare earth run against the central government’s
mines in Australia and Brazil, the biggest suppliers policy perspective that “rare earths are strategic
of iron ore to China. Because of that, any jitters non-renewable resources.” The government
within China can unravel an extensive network introduced a series of measures to overcome
of supply chains, potentially heaping further these problems. In the early 1990s, China started
pressures on existing global disruptions. National to restrict foreign investment, especially in the
daily outputs of intermediary steel products such upstream sector. However, the problem of illegal
as crude steel and pig iron as well as finished mining and smuggling has persisted for many
goods had been rising over the month of May by years into the second decade of the 21st century.
between about 1% and 3%. In contrast, demand, The natural resource–rich areas generally are
while still active, had fallen. That period coincided less developed economically compared to the
with China's biggest citywide pandemic lockdown east-coast provinces. Economic growth is still the
yet in Shanghai. first priority of local governments, even when
the policymakers in Beijing considered policy
Rare Earth Elements transformation. In 2012, the city of Ganzhou in
Jiangxi province needed US$5.8 billion solely for
China is making an unrelenting effort to land reclamation, not to mention health costs and
integrate and upgrade its rare earth supply chain other environmental pollution. In late 2021, three
of upstream mining, processing, manufacturing, of the previous six companies were merged to
and deeper applications. Although it has only form the China Rare Earth Group Co., an industrial
about one-third of the world's rare earth reserves, conglomerate that holds almost 70% of China’s
China now accounts for 60% of global rare earth annual heavy rare earth production quota. With the
mined production, 85% of rare earth processing latest consolidation, the entire rare earth industry
capacity, and over 90% of high-strength rare earth in China (especially upstream and midstream) is
permanent magnets manufactured. In short, China now under two mega-conglomerates, one in the
north and the other in the south (Yao).
186
