Why China Released Restrictions on Foreign Investment in Rare Earths and Tungsten Smelting?

It is reported that China has released the new Special Management Measures for Foreign Investment Access (Negative List) (2018 version), which greatly opens the market to foreign investment and released measures in 22 areas totally. One of which is: ‘Cancellation of the smelting and separation of rare earths being restricted to equity and contractual joint ventures , and the restrictions on foreign investment in tungsten smelting are eliminated.’ I believe that this news is a big deal for the non-ferrous metals industry in all aspects.

This elimination could confuse a lot people why China released restrictions on foreign investment in tungsten smelting during the China-US trade war. Rare earths and tungsten are important strategic resources for China. Rare earths are called vitamin of industry, while tungsten is called teeth of the industry. Rare earths include 17 kinds of metal elements of the periodic table. They are mainly used in military, metallurgy, petrochemical, aerospace and semiconductor. Tungsten plays its important role in industry as well. It has the property of high melting point and high hardness. It can be used to manufacture light bulb filaments, phosphors, industrial alloy knives, semiconductor chip cathode tube electrodes, large-scale integrated circuit resistor layers, various Thermal sweating materials, tank armor piercing or armor. China has been supplying more than 80% of the world's rare earths and tungsten. These two categories of metals are strategic resources for the country to restrict exports and protection. In 2012, China was slammed into the WTO by Europe, the United States, Japan and other countries. So is the new Negative List 2018 signals that, China is likely to give up control of rare earths and tungsten?

In fact, it doesn’t seem so serious. Over the years, China hasn’t stopped its national policy of the Reform and Opening-up, nor does its commitment to the WTO. China will not stop opening-up, but deepens it. The new Negative List 2018 was released based on this. The areas had been opened this time are all important core areas of China, which demonstrates the country's determination and confidence in the further development of foreign capitals.

So what’s the connection between the Negative List 2018 between China-US trade war? There are voices on the net, says that China has made a wrong decision by releasing the restrictions on rare earths and tungsten during the trade war. Actually that is not correct. We can know from the authoritative media of China that, this country is going to lower the threshold for foreign investment and shorten the negative list of foreign investment, which had been done for many years. In many world-class summits, China has been emphasizing that China will persist in reform and opening up, continue to launch new major measures to deepen the Open-up, and work with countries to create a better future.

China has been trying to attract foreign capitals into China with a better investment market. As everyone knows, since Donald Trump took office, He has been working to promote the dual return of manufacturing and the US dollar, trying to protect and revitalize the US economy. Therefore, a series of actions related to the tax war and the Federal Reserve rate hike. The United States is the hegemony of the world, and every move of the US president affects the gloom of the world economy. In fact, the trade war with China is on the surface to reduce the US trade deficit. The ultimate goal is to limit China's rapid development and maintain its position of world hegemony.

Then, what is the access for manufacturing reflow? It is money. That’s why the United States raises interest rates on the dollar and flow funds from all over the world back to it. Argentina, Italy, Venezuela, Turkey and other countries have fallen. But the biggest goal is China. Since the United States has taken measures, we cannot be indifferent. The exchange rate war is also an important part of the trade war. Therefore, the country suddenly depreciated before the foreign capital outflow. In the past, 6.3 RMB could be exchanged for one dollar. Now it is 6.7 RMB. In fact, it is possible to analyze the trend of the next one. It is possible to slap some more. At the same time, after depreciation, it is more conducive to exports, partially offsetting the role of the US tax increase. It is noteworthy that most of China's rare earth and tungsten are for export.

As for why the restrictions on foreign investment in rare earths and tungsten smelting and separation have been eliminated. The Negative List 2018 mentions the open of foreign investment in rare earth and tungsten smelting, the focus is the word "smelting". In the field of non-ferrous metals, the production of rare earths and tungsten metals needs to go through exploration, mining, smelting and purification. What is really important is the mining process. The release of it won’t really affect China’s control of two important strategic resources, rare earth and tungsten. In the other hand, the industry technology to evaluate, China's rare earth and tungsten smelting technology recovery rate and comprehensive utilization rate is lower than that of developed countries in the West, let go of this field, perhaps introduce more advanced smelting technology, China can learn more Advanced smelting experiences, which promotes the advancement of technology  in the related fields.

After all, the exploration and exploitation of rare earths and tungsten is still banned from foreign investment. In other words, China has not given up on the control of rare earths and tungsten, which is a very important strategic resource. In fact, compared with the United States, China’s comprehensive strength is still lagging behind. Appropriate liberalization of foreign investment in some areas is more conducive to creating a better investment environment and attracting more funds into China. 

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