Rare Earths in Turbulent Eras: Insights from China’s Export Dynamics

This study investigates the connection between geopolitical risk (GPR) and China’s rare earth element export volume (REE). We utilize a rolling-window bootstrap methodology with a Granger causality testing procedure to investigate the dynamic relationship between both variables. It is possible to find predictive relationships in different intervals in this study. There are certain periods where an increase in GPR predicts an increase in REE. Geopolitical risk can cause worries regarding a decrease in supply and lead to precautionary acquisitions, as well as an accumulation of reserves by importing economies. Conversely, an increase in REE can negatively affect GPR. Increased supply leads to decreasing competition caused by the rareness of certain minerals and, thus, reduces the probability that the use of rare earth resources can become a reason for military or political conflict. Therefore, geopolitical tensions may contribute to a short-term increase in China’s exports in the form of increased reserve acquisitions, while stability in REE can help mitigate some geopolitical risks related to resource security. These results offer valuable insights to policymakers concerned with the resilience of rare earth supply chains and to investors developing risk management strategies amid high levels of geopolitical uncertainty.