Good evening. In the 1980s Masato Sagawa, a Japanese scientist and inventor, built a better magnet using neodymium, a rare earth element. His magnets have since become essential components in a range of modern technologies that consumers and governments take for granted, from power steering to iPhones and fighter jets. But, writes Luke Patey in this week’s cover story, it was China rather than Japan or the U.S. that grasped the opportunity arising from Sagawa’s invention. Because China now controls a monopoly over the mining and processing of neodymium and other rare earths, it also dominates the production of industrial magnets. The U.S. and its allies are now struggling to catch up with China in both domains. But Sagawa and other scientists may be able to help, by pioneering a new generation of magnets that are less reliant on rare earths — or better yet are rare-earth free.
Also in this week’s issue: How China became a shopper’s paradise; Eliot Chen reports on the problems in China’s auto industry; Julian Gerwitz discusses Donald Trump’s mistakes and Xi Jinping’s “siege mentality”; and Yun Sun on what China really thinks about Iran.
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Mr. Magnet
In this year’s high-stakes Sino-U.S. trade negotiations, each side has aces up its sleeve. China’s aces are rare earths and rare earth-based industrial magnets, while America’s are the manufacturing equipment and design software needed to produce the world’s most advanced semiconductors. President Donald Trump has recognised as much, boasting in June that “magnets, and any necessary rare earths, will be supplied, up front, by China”. If that proves not to be the case it will be difficult for the U.S. to build up its own rare earth and magnet supply chains — or could scientific advances offer another way out for Washington?
The Big Picture: How Low Can China Prices Go?
Wining and dining in New York demands deep pockets; he or she who picks up the tab will wince when scanning the next credit card bill. In Shanghai, conversely, there is no need to go Dutch. Dean Minello writes that consumer prices in the world’s two largest economies have moved in opposite directions over recent years. While Democrats and Republicans blame each other for the high price of eggs, intense price wars in China’s retail sector have pushed profit margins close to — and sometimes below — zero. This is delighting Chinese consumers, but punishing for Chinese brands and retailers.
EV Price Wars
How will China’s vicious auto price war end? After automakers were summoned to meet with China’s authorities, the industry has pledged to “self-regulate.” But as Eliot Chen reports, a truce in the price war won’t solve the sector’s deeper problems. While consolidation is long overdue, conflicting interests inside China are getting in the way.
A Q&A with Julian Gewirtz
Julian Gewirtz is a Renaissance man who has written acclaimed histories of reform-era China, is a published poet, and served in key China positions on President Joe Biden’s National Security Council and at the State Department.
In this week’s Q&A, Gewirtz tells Noah Berman that Beijing views the Trump administration as “dismantling, fairly systematically, the sources of [U.S.] strength.” He argues that the U.S. needs to stick to its traditional advantages — a deep alliance network and world-leading scientific research. Putting his historian cap on, he also describes the “ferment and openness” of China during the 1980s, and how the “siege mentality” that followed the 1989 Tiananmen Square massacre proved formative for Xi Jinping.
Julian Gewirtz
Illustration by Lauren Crow
Running From Iran
China was swift in its support of Russia’s invasion of Ukraine, both in terms of rhetoric and materiel. But for Iran, another supposed Chinese friend and ally, Beijing offered only words as it was pummelled by the Israeli and the U.S. militaries earlier this month. It is, writes Yun Sun, a clear sign of the Chinese Communist Party’s deep disdain for the Iranian regime.
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