China cutting rare earth export quotas?

China has officially declared that they are going to cut their rare earth export quotas by more than 11% next year which will be terrible for the countries importing these goods from China. China produces the most rare earth materials, approximately 97% to be exact, and by cutting the number of exports, goods such as hybrid cars will be harder to make and it will shift the supply curve causing less supply to be produced.

The decision to cut these supplies may also damage U.S. relationship with China, which has already been hurt from situations such as arguments over human rights, Tibet, Taiwan, and other events. The current leader of China, Mr. Hu Jintao, will come to America to talk about situations with President Obama to sort things out. Hopefully their meeting will make things better rather than making the situation between U.S. and China worse because it wouldn't be smart to create tensions between China and America.

This year, China has already started to cut the amount of exports it has by 40%. Cutting it down by 40% has already hurt he trade relationship between the United States, Europe, and Japan. According to the people in China, they decided to cut the amount of exports for environmental reasons, have supplies for themselves for projects they are currently working on, and also so they can have more control over the prices of their exports.