China Morning Missive
You’ll have to accept my apologies. In my note the other day I made the claim that in response to American action over Venezuela, Beijing would do nothing and sit idly by awaiting the expected, and dire, second and third order effects of said action. With that outlook a very amateur mistake on my part, as it pertains to China, was made.
Not a mistake, mind you, in terms of the original outlook. It remains the case that Beijing will “do noting” in direct response. You’ll notice here, however, that there’s a vital distinction this time around with the inclusion of the world “direct” and that is what should have been expected and, we now know, was carried out.
Shortly after the weekend’s Latin American activities, China announced that it would be targeting Japan with a series of rare earth export controls. To the uninitiated, the two events would look to have very little connective tissue. There’s been an ongoing, and increasingly heated, exchange between the two Asian nations over the issue of Taiwan. Any decision by Beijing to scale up the fight shouldn’t be seen as a surprising development and the same, too, in deciding to deploy rare earth export controls.
What hasn’t been asked, however, is why would Beijing take such action now?
This latest episode of regional saber rattling began back last November and only now is the decision to apply leverage made. If we look back to the events of 2010 when China and Japan were also entangled in a territorial dispute, Beijing had first used rare earth export controls as a point of pressure and did so almost immediately. I would argue that the difference, today, comes down to a material shift in geopolitical dynamics over the past 15 years.
The gamesmanship here is for this move to act as an application of indirect pressure on America. It might even be a not-to-subtle signal as well.
As is readily known, access to rare earths remains an issue for America and, while there is a delicate truce currently in place, China has various vested interest in Venezuela that are now threatened. Placing export controls on Japan might very well be an artfully telegraphed message to Washington. Beijing will be seeking some form of negotiated settlement over a host of Venezuelan related issues and the move on Japan could indicate that rare earth access remains firmly on the table.
It could also be far simpler. The act of escalation would require at least some level of attention out of Washington and attention is in very short supply at the moment. The art of forced distraction on a rival is an often applied tactic by China. Whatever the case might be, it is, at least from my vantage point, clear that the placement of export controls on Japan is an indirect response to events from this past weekend. Furthermore, albeit depending on how events transpire over the coming weeks and months, additional indirect pressure applied by China should be expected.
Finally, and keeping in mind China’s ever present strategic aim of embedding optionality throughout all decision making, the direct pressure on Japan serves to meet the objective of driving Prime Minister Takaichi from power. An objective I do believe that Beijing views as distinctly possible before the end of this year.
https://www.reuters.com/world/asia-pacific/china-curbs-rare-earth-exports-japanese-companies-after-dual-use-ban-wsj-reports-2026-01-08/
