China dominates in rare earths, but Japan holds most high-value patents

New Delhi: Most parleys regarding growing dominance of China in international trade, global industrial development and political clout derived from them, usually land in stories about China's dominance in the rare earth industry. But that dominance suffers from a key structural weakness: it is one thing to have control over the sources of rare earths but quite another to turn that to advantage to maintain that dominance.

The reason is one key factor in the equation: patents. Most of the core patents for advanced rare earth functional material technologies are held by the US and Japan, according to a study.

According to a report in the South China Morning Post, the researchers found that downstream products derived from processed rare earths -- including permanent magnets, catalysts, luminescent and polishing materials -- account for more than 80 per cent of rare earth-related patents across the world. And the most commercially important applications in industry are derived from such patents.

Japan retained an overall technological lead in permanent magnets, while the US led in most core technologies related to catalytic materials, luminescent materials and polishing materials, the study states.

China was found to have an edge in only a limited number of technologies in these sectors while continuing to be behind Japan and the US in several critical manufacturing processes and material systems, the report said.

China accounts for about 70 per cent of global rare earth mining and nearly 90 per cent of processing capacity, making it the dominant player in the global supply chain. However, this has not translated into similar control of higher-value technologies built on them, the study observes.

This dominance has long been viewed as a strategic advantage, which Beijing has sought to leverage in its trade and strategic competition with the US.

According to the report, the study attributed the gap partly to China's innovation system, noting that while the country files a large number of rare earth patents, only a relatively small proportion are international patents that have high commercial value.

The research also reveals that many scientific advances have yet to develop into commercially significant patent portfolios as coordination among universities, industry and intellectual property management remains weak.

However, regardless of this handicap, China has been cashing in on its dominance over rare earth as a weapon of modern economic statecraft as it exploits Western dependencies on materials essential for defence systems such as fighter jets and missiles, renewable energy technologies, and electric cars and electronic devices such as smartphones.

(Inputs from IANS)