How can “state sector advances, private sector retreats” influence the development of strategic resource? Since 2017, China has become the biggest exporter and importer of rare earth simultaneously. It rebuts the conventional wisdom of comparative advantage theory. A new conundrum needs to be solved – what is the rationale for China to import enormous amount of rare earth while it provides 90% of the global supply? Given that China’s rare earth industry is controlled by state-owned enterprises (SOEs), this paper would employ the theory of state capitalism as the analytical lens. This research argued that the “state sector advances, private sector retreats” is a key component of state capitalism. This thesis aims to provide a new theoretical perspective in understanding the puzzl...[ Read more ]

How can “state sector advances, private sector retreats” influence the development of strategic resource? Since 2017, China has become the biggest exporter and importer of rare earth simultaneously. It rebuts the conventional wisdom of comparative advantage theory. A new conundrum needs to be solved – what is the rationale for China to import enormous amount of rare earth while it provides 90% of the global supply? Given that China’s rare earth industry is controlled by state-owned enterprises (SOEs), this paper would employ the theory of state capitalism as the analytical lens. This research argued that the “state sector advances, private sector retreats” is a key component of state capitalism. This thesis aims to provide a new theoretical perspective in understanding the puzzle through the lens of “state sector advances, private sector retreats” perspective. And how it provided profound effects on the development of the industry. Via field research and official data, I demonstrate that (1) the structure and phenomenon of the Chinese rare earth industry, which is contradictory to official data; (2) the advance of SOEs stagnated the development of the industry, especially the high-end application; and (3) what galvanize China to export rare earth to other states, and to import rare earth back to China.