Taiwan wants to reduce reliance on mainland China for rare earth minerals. It won’t be easy

The Taiwanese government and private sector are looking for ways to diversify rare earth imports away from China, which holds the world’s largest reserves

But analysts say it will be an uphill battle because the mainland has an advanced processing system, economy of scale and the only known stocks of key minerals

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China holds about 35 per cent of global rare earth reserves, according to data from Counterpoint Research. Photo: Reuters

Published: 10:30pm, 12 Aug 2022Updated: 10:50pm, 12 Aug 2022

Taiwan faces a difficult task avoiding mainland China as a source of rare earth minerals – a building block for consumer electronics – because the world’s second largest economy has an outsize share of global reserves and advanced mining, experts say.

The Taiwanese government has for the past six years urged businesses to reshore production from the mainland or consider alternative bases like Southeast Asia.

It also wants companies to reduce reliance on Chinese rare earth minerals, said Lo Chih-cheng, a legislator from Taiwan’s ruling Democratic Progressive Party.

Researchers on the island, where electronics manufacturing is a bedrock of the US$765 billion economy, are looking into ways to find alternative sources, according to Taiwanese media.

“They’ve been trying to diversify, both the government and private sector, but that doesn’t necessarily mean they’ve been successful,” Lo said.

Taiwan’s deep-seated economic ties with mainland China have been thrust into the spotlight in recent days after Beijing held military exercises encircling the island in response to a visit to Taipei by US House Speaker Nancy Pelosi.

Though Taiwanese firms have reason to quit the mainland, cutting imports of rare earths will be an uphill battle because Beijing commands the world’s largest reserves and has established an advanced processing system, analysts said.

“It is going to be very difficult for Taiwan to reduce its rare earth import dependency on China,” said Amitendu Palit, senior research fellow at the Institute of South Asian Studies with National University of Singapore. “China’s near monopoly in global rare earths production ensures that Taiwan’s manufacturing sector continues to depend on China as the biggest source.”