The Real Reason Why High-Tech Manufacturing Moved To China

The reason why China is so dominant in high tech manufacturing is not because of low labor costs or lax environmental regulations. The true reason is a whole lot less intuitive than you might think.

The name of the game? Rare Earth Elements.

There are government-subsidized regions of China that have their singular purpose as mining the full spectrum of lanthanides.

But why?

See, they have this special type of electron cloud orbital called the F class orbital around the atomic nuclei. To simplify why this is important, it's kinda like special LEGO blocks that allow you to make stuff you weren't able to before, like specific wavelengths of cool laser light, or maybe you wanna amp up your semiconductors and stuff. Okay so maybe not exactly LEGO. But still. Very important. Other than building lasers? Guidance systems, LCD screens, you name it. It involves at least trace amounts of lanthanide materials. Tiny earbuds? Neodymium magnets.

Quick history lesson: In the 1980s the US decided to class any material that had over 0.1% Thorium by weight as a nuclear source material (plutonium and uranium are nuclear source materials), so any mining company bringing up ores with a high quantity of Thorium now have a huge liability on their hands that is remarkably expensive to get rid of. This is a problem, because ores that have all the lanthanides tend to also have more than 0.1% Thorium. Thorium is pretty common, the US government basically has to pointedly ignore that many mining operations in other sectors bring up ore that passes this limit, else there might not be any mining at all.

Back to the REE mining companies: With this constraint, their options are either to go bankrupt (as many have) or to solely mine the lighter couple of the lanthanides which are also the most abundant and least profitable yet have low Thorium content in the ore, which invariably means those companies go bankrupt too just at a slower rate.

Deng Xiaoping. Big dude in China. Seen the successes of special economic zones in China, like Shenzhen? That's his work. However his family have been similarly influential. Around the same time, they saw the REE and tech production markets as an opportunity and no joke, literally published in the Chinese newspapers their plans to corner the high tech manufacturing market by going full ahead into the mining and refinement of rare earth elements, to subsidize their entire REE mining sector so they can turn 5 billion in REEs into 7 trillion in value-added goods. You'd think someone in Washington or Langley might've raised some red flags about this.

Jump to today: Now China produces like 98-99% of the world's rare Earth elements.

Their dominance has gotten to the point that they have been using it as a mallet to quell opposition from foreign countries, "if you don't do x we won't export y to you" which then destabilizes their high tech manufacturing -- they've already done this to Japan in 2012.

Whenever a high tech manufacturing plant is being proposed, the financeers of the project will not allow it to be built outside of China because an irregular/non-guaranteed supply of the elements required to build LCDs or wind turbines can bankrupt a factory. The monopoly is so strong that companies essentially have to agree to give away their older IP after a certain amount of time of manufacturing in China, just so they have the privilege of securing stable Chinese REE supplies.

The Obama administration tried to get the WTO on them but that was a lost fight, as China simply dipped their REE production slightly and internal demand met internal supply and they just went "lol sorry we don't have anything extra" and the end result was there was even less to go around.

And China isn't this shiny bastion of yttrium that nobody else has, it's simply that this Thorium source material legislation was adopted across the West. It's kind of insane really, as Thorium has a half-life of 14 billion years (practically not radioactive) and being an alpha emitter means a piece of paper can stop the radiation that comes off it. It's not even water-soluble which is completely unlike the other actinides, and resists weathering.

This is why the US and the West has hamstrung their economic development?

Here's the mad part: There was a rider on the NDAA introduced that would stop classifying mined ores with high thorium content as source material and would establish a thorium bank where all thorium "waste" would be stored safely and could be used for future projects like energy -- an opening for a Th-MSR project too -- thereby allowing proper REE mining in the US by removing that huge expensive liability.

But the Department of Defense (well, someone high up the food chain) injected itself into the process and said they wanted the bill killed. The reason why, as is hypothesized, is that someone in the DoD is trying to hide their criminal incompetence, because of China's dominance on REEs it has meant that state secrets of the US in the design of weapon systems have been given to the Chinese out of necessity because they have all the REE IP and manufacturing capabilities to build the guidance and vision systems for weaponry aaaand that's actually illegal. They have a constitutional obligation to not do that.

Private companies are chomping at the bit to build their high tech manufacturing anywhere but China if it's possible, but there just isn't a path forward for such a move yet. The country that finally rectifies this huge oversight will rake in incredible economic growth as a result.

Now it's up to us to make it happen.