China Takes A New Hard Line

Why does the U.S. turn a blind eye to the facts that certain countries opened a number of oil and gas blocks, and issued domestic laws illegally appropriating Chinese islands and waters? Why does the U.S. avoid talking about the threats of military vessels to Chinese fishermen by certain countries and their unjustified claims of sovereignty rights over Chinese islands? And why do they choose to abruptly express concerns on and fiddle with the issue at a moment when regional countries are enhancing communication and dialogue and trying to solve the disputes and calm the situation? Qin asked.

“The selective blindness and expression of concerns of the U.S. side run against the attitude of ‘no position’ and ‘not to intervene’ that they have claimed to hold on the South China Sea issue, and is not conducive to the unity, cooperation, peace and stability in the region,” Qin said.


In the run up to the 2012  generational power transfer in the Chinese Communist Party this Autumn, the Chinese government is adopting a new hard line stance in its international relations. A stance that could easily backfire into creating an international incident or worse, a naval clash that drags in the U.S. Navy. As the power transfer gets closer, the old outgoing leadership has been flexing its hard line credentials, leaving the incoming leadership no room to back down in the years ahead. Already this year China’s gun boat diplomacy in the South China Sea, has seen off the Philippine’s coast guard attempting to stop China’s fishing fleet.

At stake in this  latest tongue lashing of American policy, control over disputed islands in the South China Sea, claimed by China, Taiwan, the Philippines, Malaysia, Brunei and Vietnam. With control goes the right to exploit rich fishing grounds and seek to explore for oil. This last point is particularly relevant to China, whose Middle Eastern oil imports must all presently pass through the U.S. Navy choke point of the Malacca Strait. Any oil found in the South China Sea has a relatively short unrestricted run to South China, well within the range of China’s existing navy and air power.

Whether rising tensions will deteriorate to the point of another unofficial rare earths export embargo, seems unlikely at present, but we can’t rule anything out in the run up to the power transfer in October or November. However, to this old dinosaur commodities trader, it seems unwise of non-Chinese REE end user manufacturers not to be taking full advantage of the existing Chinese REE export quota.

Below, this weekend’s development.

China Says U.S. Sending ‘Wrong Signal’ on South China Sea
By Alex Wayne – Aug 5, 2012 2:05 AM GMT
China said U.S. criticism of its attempt to bolster claims to gas- and oil-rich islands in the South China Sea sent “a seriously wrong signal” to nations embroiled in territorial disputes in the region.

China’s recent actions “run counter to collaborative diplomatic efforts to resolve differences and risk further escalating tensions,” a State Department spokesman, Patrick Ventrell, said in an Aug. 3 statement.

Ventrell’s criticism “completely ignored the facts, deliberately confounded right and wrong” and isn’t conducive to efforts for peace and stability in the region, a Chinese Foreign Ministry spokesman, Qin Gang, said yesterday. China also yesterday summoned Robert Wang, the acting representative of the U.S. embassy in Beijing, to complain about the U.S. statement and request that Wang report Chinese concerns “to the top U.S. leadership immediately,” the ministry said in a statement on its website.

Tensions have been rising in the region as China has sought to establish a city and military garrison in the Paracel Islands and to physically block foreign access to a disputed reef off the coast of the Philippines, according to the U.S. State Department. Vietnam, Malaysia, the Philippines, Taiwan and Brunei also claim rights to islands in the sea.

“What we’re seeing is a significant ratcheting up of Chinese pressure on the region to basically acquiesce that the South China Sea is Chinese territory,” Dean Cheng, a researcher on Chinese political and security issues at the Heritage Foundation in Washington, said in a telephone interview.

China’s assertiveness in the region coincides with preparations for a political and military transition. Communist party leaders are believed to be meeting to select new members for the country’s Politburo and Standing Committee, the nation’s civilian leaders, and its Central Military Commission, which controls the military, Cheng said. In October or November, the full party Congress will convene to select a new president to replace Hu Jintao in a once-a-decade leadership handover.

China strongly opposes U.S. State Department’s statement on South China Sea: FM spokesman
BEIJING, Aug. 4 (Xinhua) — China expressed its strong dissatisfaction and resolute opposition on the press statement released Friday by the U.S.Department of State on the South China Sea, Foreign Ministry spokesman Qin Gang said here Saturday.

The statement “completely ignored the facts, deliberately confounded right and wrong, and sent a seriously wrong signal, which is not conducive to the efforts safeguarding the peace and stability of the South China Sea and the Asia Pacific region,” Qin said in a statement.

China has indisputable sovereignty over the Nansha Islands and their adjacent waters, and has ample historical basis for this, said Qin.

China set up offices in Xisha, Nansha and Zhongsha Islands, which were affiliated to the Guangdong Province, in 1959, to administrate the three islands and their adjacent waters, said Qin.

“Setting up Sansha city is the Chinese government’s necessary adjustment of the current administrative agencies, which is completely within China’s sovereignty,” he said.

It needs to be pointed out that China and regional countries have worked to maintain the peace and stability of the South China Sea, and safeguard the freedom of navigation and trade in the past 20 years, said Qin.

In 2002, China and Association of the South East Asian Nations (ASEAN) countries signed the Declaration on the Conduct of Parties in the South China Sea (DOC), which states that sovereign states directly concerned should resolve their territorial and jurisdictional disputes by peaceful means and through friendly consultations and negotiations, and should not take moves that will escalate and complicate the disputes, said Qin.

However, it is worrisome that certain countries do not respect and abide by the DOC, by undermining the basic principle and spirit of the DOC again and again in a provocative way, said Qin. “This has created difficulties for the negotiation of the Code of Conduct (COC).”

How Does China’s Hard Line Affect Their Rare Earth Element Imports?

China’s 2014 REE import trends have raised concerns about their control over the global rare earth element market. Their hardline policies impact the supply chain, leading to instability and price fluctuations. Other countries are exploring alternative sources to reduce dependence on China for these critical resources.

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