There’s a martial arts technique the Chinese call “Dim Mak” (点 脉). The idea is to strike an opponent at a specific spot with a focused blow that inflicts instant trauma. Done properly, a well-placed hit can cause severe pain, paralysis, or even death. In fact, the Chinese call Dim Mak the “touch of death.”

Peculiarly, Dim Mak is related to another ancient Chinese technique that’s medical rather than martial, namely acupuncture. If you’re unfamiliar with acupuncture, the idea is to find nerves or other body pathways and insert thin needles to channel energy along what are called “meridians.” Done right, acupuncture heals injuries and cures illness. (And it works. I’ve used acupuncture.)

As an outsider looking in, I find this characteristically Chinese. With one hand, acupuncture can heal; with the other, Dim Mak can kill. And it’s our starting point for discussing China’s tight control over global supply chains for critical materials and metals indispensable to modern technology. 

That is, we won’t discuss Chinese martial arts movies, like those starring Bruce Lee, nor will we get into how an acupuncturist can fix your aches and pains. But we will discuss how certain discrete industrial skillsets have geostrategic consequences… And how they are investable.

Welcome to the Periodic Table

Let’s begin with some chemistry, namely, a look at the periodic table.

Periodic table; rare earth elements highlighted. Courtesy KJMagnetics.com.

Don’t worry; this isn’t chemistry class, and there’s no need to solve any math or mass-balance equations. But you need to know that the periodic table is filled with what we call “critical” elements that are essential to modern tech. And that much of the industrial side of the materials and metals here is dominated by China.

Of course, the West – certainly the U.S. – produces iron and steel, as well as copper, aluminum, lead, zinc, and more. Absolutely, the West has mines, mills, refineries, and factories. The West builds buildings, bridges, ships, aircraft, cars, refrigerators, and you-name-it. So, what’s the problem? 

The problem gets us back to that Chinese Dim Mak analogy above (or use the acupuncture side if you wish). Because almost all modern tech requires certain critical elements to work, beyond just steel, aluminum, copper, etc. And China controls many of these materials, in some cases up to 95% of the world's total output. 

That is, critical metals and materials are China’s Dim Mak, the “touch of death” if China so chooses. 

For example, your smartphone contains about 63 out of the 92 elements in the periodic table (give or take an element or two; it depends on the make and model). The touchscreen only works because of an indium paste on the back of the glass. The vibration system requires tungsten. The screen optics use phosphors such as europium and lutetium. The integrated circuits inside contain germanium. And much more, much of it Chinese.

Or consider your car. Depending on the make and model, it may use 40 or more strong permanent magnets – made of neodymium and praseodymium, plus other elements – that do everything from moving the windows and windshield wipers to adjusting the seat to powering the fuel pump or the traction motors for an electric vehicle (EV). No Chinese metals, and your car is just a block of American steel.

On a larger scale, a Virginia-class nuclear submarine has several tons of strong magnets just in the electric drive motors, let alone everything else “electronic” inside the vessel. These systems range from the sonar dome and transceivers to computers, internal gauges, and screens that allow the crew to dive and steer the beast. The torpedoes, too, require critical materials; quite a story.

Estimate of rare earth materials inside a submarine. Credit CRS.

And while we’re talking about submarines, don’t neglect the super-strong steel alloy of the hull itself, made with an assortment of critical elements that add strength and durability to the basic iron metal. Again… Chinese materials, much to the chagrin of people at NavSea who buy these ships for the Navy.

I could go on with nearly countless examples, but you get the idea. And again – I cannot emphasize this enough! – many of these critical elements and materials originate in China. If it’s not the actual ore deposit, then it’s certainly the refinement process and downstream manufacture. China-China-China. There are no two ways around it. And absent Chinese materials, it’s that “touch of death” because the tech won’t work.

China Controls Global Supply Chains 

Nothing about China’s metallurgical dominance is accidental. Since at least the 1960s – during Mao’s Cultural Revolution, no less! – China has had a long-term strategic plan to dominate key segments of the global market for critical materials and metals. Indeed, China’s first national step came in 1963, when the country’s ruling authorities established an institute to study rare earth elements (REEs), namely the so-called “lanthanide” series in the periodic table above. 

Since then, for over 60 years and despite internal political turmoil and every sort of economic and social challenge, the Chinese have focused on dominating global supply chains for a long list of critical items: REEs, as we’ll amplify below, but also other metals like tungsten, antimony, indium, gallium, germanium, and more.

National capability like this begins with human resources, of course. In the 1960s, 70s, and certainly over the past forty years, China sent many of its smartest people abroad to study at then-Soviet (now Russian), U.S., European, Japanese, and Australian universities. Their assignment was to learn everything possible. Just flood the zone, so to speak, with eager and intrepid students. Bring home the knowledge.

Plus, for 60 years, Chinese researchers scoured patent offices across the globe to learn whatever was available in the records. And thus, in recent decades, China has dominated the global patent landscape. In fact, for every U.S. patent on REE tech, China files 30.

Data on global REE patent filings. Credit Congressional Research Service.

Today, China has entire universities focused on REE, as well as other critical metals, mining, metallurgy, refining, processing, and applications of these substances. That is, China has literal armies of scientists, engineers, and technical specialists in many fields; numbers in the mid-hundreds of thousands at least, and likely more.

At a personal level, over the past 20 years, I’ve attended numerous industry and scientific conferences and met many Chinese scientists and engineers who specialize in REEs, and/or a host of other metals. For example, I once met someone and asked, “What do you do?” And he replied, “I study the thermodynamic and quantum properties of lead and bismuth.”

At national political and strategic levels, China has planned its economic dominance from the top down. For example, in 1992, China passed a law designating REEs as “strategic” and barring foreigners from investing in Chinese projects. So, in China today, these kinds of resources are reserved for domestic production and downstream, value-added use.

In fact, China focused its industrial control over metals and materials with the end goal of military purposes. One angle is what’s called the “16-Character Policy” towards critical materials. 

China’s 16-Character Policy. Credit Senate Armed Services Committee.

These characters became national policy in 1992 and remain legal mandates across China, particularly for mines and minerals. The translation is: 

• Combine the Military and Civil.
• Combine Peace and War.
• Give Priority to Military Projects.
• Let the Military Support the Civil. 

I could go on, but by now you get the point. For many decades, China has built up its capabilities and imposed export quotas on REEs and other critical metals. And China’s tight control over production and global sales always favors Chinese interests. 

Of course, China welcomes foreign companies to invest there and utilize its materials, as long as China gets something in return. For example, Apple has spent 30 years building products in China (eg, iPhones). Along the way, Apple and its subsidiaries trained over 25 million Chinese in advanced technical skills and created a vast level of Tier I, II, and III suppliers throughout the nation. (Just in case you wonder why China is so advanced in, say, EVs.)

In another example, in the 2000s and 2010s, much of the global light bulb industry moved to China. This is not because China needs all the world’s light bulbs. It’s because China told foreign manufacturers that if they wanted tungsten for filaments, and later REEs for LED bulbs, they were required to build plants in China… oh, and to teach Chinese engineers and workers how to make the products. 

Name just about any modern technology: batteries, EVs, computers, lighting systems, radars, lidars, robots, drones, AI, quantum computing, space development, and much else… and the foundational materials – exotic items like high-end graphite, or metals like REEs, tungsten, tin, indium, gallium, and much more – are controlled by Chinese producers and suppliers. 

The Western Response

It’s not that some people in the West didn’t see what was unfolding with China and its control over critical materials. Keith Bradsher of the New York Times has long been out in front of the issue. I've written about the situation with Paradigm and its predecessor publishing group since the late 2000s, and I began following this problem in the 1980s when I worked on the staff of the Chief of Naval Operations. 

Still, despite clear indications of what was happening, many Western governments and industry sectors were unmotivated to do anything (i.e., to spend any serious money) despite clear warnings from outside observers, if not intelligence and military services, as well as even National Laboratories like Ames, Los Alamos, Oak Ridge, Livermore, and others. It’s a long, sad tale of frustration.

But in recent years, alarm bells have rung loud and clear. It has dawned on both government and industry that so-called “tech” is just a high-end children’s lemonade stand without the primary materials that go into making the actual equipment, whether it’s iPhones or what are called “exquisite” weapons like anti-missile systems. 

And now, what took China 60 years to build, with great expense, diligence, and focus, the West is trying to compress into maybe five. Yeah… good luck.

The takeaway is that REEs and many other metals and materials are vital to future tech, and without them, the West will not just lag but be unable to move far ahead at all. It’s much like that above-noted Chinese Dim Mak “touch of death” hit, but at an industrial scale. No exotic metals? Then no exotic tech. Game over. 

So yes, China remains dominant, but the good news is that the West is investing and diversifying through redoubled efforts to find mineral deposits and develop mines, mills, refineries, and downstream processing. Money is moving, and at investment levels, there’s high growth potential, along with high risk, so you must always do your homework to find credible projects, government support, and some element of technology advantage.

Finally, China has been working for 60 years to dominate global markets for high-end, critical materials and metals. And the Chinese are quite good, which makes the challenge all the more daunting. But the West – and the U.S. in particular – is working to catch up. And we follow it all here at Paradigm Press.

That’s all for now. Thank you for subscribing and reading.