WEBVTT

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Well, currency isn't the only item up for debate between the U.S. and China.

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Beijing denies it has restricted the export of rare earth minerals to the U.S. and Europe,

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and also denies that supplies have been cut to Japan.

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But as Kyung Lah reports, importers in Japan say after a spat between Tokyo and Beijing, their supplies have dwindled. 

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It looks like ordinary dirt, but this is rare earth, some of the key elements in virtually every high-tech item you own.

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Every single cell phone uses rare earth materials?

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That's right.

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Every single cell phone in the world?

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Indeed.

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Shigeo Nakamura is the president of a trading company that brings in rare earth materials to Japan.

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More than 90 percent of the globe's rare earths are supplied by China.

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Late September, Nakamura says his supply was cut off.

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You're not seeing anything?

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No.

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Nothing?

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Nothing.

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If China stop[s] the supply of the raw material, then you will not use the mobile phone

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and you will not see the TV, and you will not see any refrigerator.

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Rare earth elements are a part of any high-tech assembly line.

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They are used in flat-screen TVs and other electronics,

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and magnetize the hard drives of computers and the motors of hybrid cars,

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namely, the Prius -- all items Japan produces and exports around the world, items that drive Japan's economy. 

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In September, in the wake of a collision at sea between a Chinese fishing vessel and the Japan coast guard,

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multiple Japanese rare earth importers tell CNN that China dramatically slowed exports.

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China denies it stopped exports in retaliation.

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Beijing has been curbing international exports for the last few years amid concerns about supply and growing demand.

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Economist Jun Inoue says this may be coincidence,

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but noted the Chinese government has the ability to flex its political muscle in the world economy. 

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There's a risk that issues that haven't surfaced before could come up as a problem with China in the future, Says Inoue.

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Rare earth made us realize this risk again. We're reminded with this incident that the so-called China risk could happen in reality.

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China risk -- meaning relying too heavily on a country whose communist government can rapidly affect the world economy.  

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U.S. rare earth mines are now working to increase production. Japan is exploring new mines in other countries.

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But it will take years before these mines will effectively diversify China's supply.

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Shigeo Nakamura believes he'll see his China supply resume, because China profits so heavily from the rare earth exports.

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He just hopes it happens soon.

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If it continue[s] the one year or two years, it's quite difficult.

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China vehemently denies it's halted exports of rare earths to any country.

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In a statement to CNN, the government says, "China will continue to provide rare earth to the rest of the world"

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but adds this: "China will also continue to implement restrictive measures on the mining, production and export of rare earth."

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And that needs to be done, says Beijing, to protect exhaustible resources.