Turbulent Global Landscape: an Analysis of China’s Rare Earth Exports

Abstract

As a key resource for promoting industrial development, climate governance and energy transition, rare earth (RE) has become a new focal point in geopolitical games. This paper incorporates geopolitical risk (GPR) and China’s rare earth export (REE) amount into a unified framework and utilizes the rolling-window Granger causality test to investigate their dynamic relationships. The findings demonstrate that GPR transmits positive shocks to REE. This favorable impact implies that geopolitical events can increase countries’ concerns about RE supply disruptions and expand their strategic reserves. Then, the rise in demand has played a crucial role in promoting REE. This outcome highlights the importance of GPR in enhancing sustainable REE during turbulent eras. In contrast, REE exhibits a negative impact on GPR. The main reason is that the rise in RE supply alleviates military wars and the tense geopolitical situations caused by resource competition, contributing to the stability of the global geopolitical environment. In the context of worldwide geopolitical turmoil, these findings provide valuable guidance for policymakers and investors to maintain the stability of REE and apply effective risk management methods in responding to GPR impacts. UDC: 620.97(510):[338.124.4:339.9]; JEL: Q21; Q58