Why America’s Point Man On China Is Running Into a Wall

Last month preliminary briefings were held for senior officials, including a highly skeptical Vice President Dick Cheney. The full analysis did not come until Nov. 27; Bush was briefed the next day. Republicans on intelligence committees vowed to investigate; hard-liners suggested U.S. agencies were snookered by Iranian disinformation. Not so, says a senior intelligence official. "We're confident. We stand by our analysis and tradecraft."

--Mark Hosenball

Commodities: The Metal Kingdom
What's the most exceptional ingredient in your PC, iPod, cell phone and digital camera? Rare earth. The rare earth industry (including minerals and oxides like indium, tungsten and dysprosium) is worth $1 billion and poised to grow by 50 percent in the next three years as high-tech devices become more ubiquitous. And, surprise: China has a stranglehold on it. While China imports nearly every other important commodity, it currently supplies about 97 percent of rare earths, thanks to a crafty state decision to develop the industry.

Chinese export quotas and taxes to control rare earth supply, along with increased demand, have propped up prices, expected to increase 10 to 20 percent annually for the next five years. Companies are racing to develop reserves in the U.S., Canada and Australia, but production cannot meet demand.

That has outsiders worried. The United States recently said its supplies of rare earths used to make LCD TVs, catalytic converters and pace-makers were potentially at risk. The military is also concerned about supply critical to defense. This year Japan declared it would begin stockpiling minerals indispensable for its automotive and high-tech manufacturing. Last month, Japan's minister of Trade urged China to ease its grip, then visited Africa in search of alternative sources. Whatever happens, China won't be hurting—it sits on 31 percent of known reserves, the highest proportion in the world.

--Patrick Falby