Export restrictions that have pushed prices for the 17 rare earths in markets outside China up to several times the level of prices inside China, giving companies an incentive to move factories to China. These rare earth export restrictions are... about favoring Chinese industry over global industry...
Rare earths are vital to various sophisticated technologies, including smartphones, smart bombs, large wind turbines and electric cars. Tungsten and molybdenum are used to strengthen steel and other industrial materials. China is the world’s dominant producer of rare earths, tungsten and molybdenum, and it has imposed increasingly stringent export taxes and quotas on them for the past two years despite having promised the WTO when it joined in 2001 that it would remove export taxes and quotas on all goods except for a handful of other products.
Such policies are also another reason why China cannot be considered a responsible power. The sanctity of a contract with China is dependent on the whims and fancies of those who rule Beijing. For example, China halted shipments of rare earths to Japan for two months in the fall of 2010 during a dispute over contested islands in the East China Sea. This propensity to employ its trade policy blatantly to arm-twist its trade partners as part of strategic diplomacy is a sign of an insecure superpower.
Such flippant actions are all the more likely with autocratic regimes like China, where domestic pressure is unlikely to play a countervailing role against such whimsical policies. Contrast this with India's U-turn on cotton exports ban due to domestic political opposition.
For a more detailed discussion on China's rare earth's policy, see this.
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