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Balancing acts: EU’s Critical Raw Materials Act and its impact on China-EU economic relations

Experts from China have expressed concerns over the European Union’s (EU) recent move to seek alternatives to China’s raw material supplies, suggesting that it could strain economic and trade relations between the two entities. The EU’s adoption of the Critical Raw Materials Act (CRMA), announced by the European Council, aims to ensure a secure and sustainable supply of critical raw materials necessary for various sectors including green and digital transitions, as well as defense and space industries.

The CRMA sets ambitious benchmarks for the EU’s consumption of raw materials, emphasizing local extraction, processing within the EU, and increasing use of recycled materials. This strategic shift intends to reduce dependence on single mineral import sources and challenges China’s role as a major supplier.

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Yang Chengyu, an associate research fellow at the Institute of European Studies of the Chinese Academy of Social Sciences, highlights the potential impact on China-EU economic cooperation. He notes that the CRMA could intensify competition for critical mineral resources, creating a collision between China and the EU. Moreover, the regulation is perceived as having strong ideological undertones.

Despite the EU’s efforts, experts point out that China retains a strong position in critical mineral mining, processing, and manufacturing. For instance, China dominates the refining of rare-earth elements, cobalt, nickel, and lithium globally. This dominance positions China as a crucial supplier to the EU, particularly in the green sector.

Given China’s significant production capacity and technological advantages, the EU’s pursuit of alternatives to Chinese raw materials may lead to increased costs. Yang suggests that the EU could struggle to bear these rising costs, given China’s economic competitiveness in green transformation and product manufacturing.

In essence, while the EU’s CRMA aims to diversify raw material sources, it risks straining economic ties with China and escalating competition for critical resources. China’s stronghold in the global supply chain for green industries underscores its importance to the EU’s transition efforts, potentially complicating the EU’s pursuit of self-sufficiency in raw materials.

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