WSJ reports -

'Beijing’s power brokers like to say the U.S. is no longer a model for China to emulate, especially since the 2008 financial crisis. Turns out, it still is learning from Washington–specifically, how to beat America at its own game.

For years, the U.S. has used its chokehold on advanced semiconductors to constrain the tech ambitions of a Chinese leadership bent on challenging American power. Now, Beijing is crafting a strategy that looks uncannily familiar to the U.S. playbook, almost page for page.

China’s weapon of choice? Rare earth elements, a suite of critical minerals that the country dominates and is essential for everything from your laptops and electric vehicles to advanced missile systems.

In an announcement last week that marked a significant escalation of the geopolitical rivalry, China’s Ministry of Commerce unveiled sweeping measures to tighten control over these resources. This isn’t merely tit-for-tat. It carries an important message to the White House, and the West overall, that China is using its own strength against them, putting into practice the old Chinese axiom, “师夷长技以制夷,” or learn the tools of barbarians to control barbarians.

The U.S. playbook, specifically the “small yard, high fence” strategy championed by Washington officials, is simple: identify a narrow set of critical technologies (the “small yard”) and protect them (the “high fence”). It’s meant to be a surgical strike, not a trade war carpet bombing.

The Long Game

Now, China is building its own yard and its own fence, though potentially much bigger and higher, with implications that could shake the global economy. The parallels are so stark, they feel like a deliberate echo.

Jacob Gunter, an analyst at the Mercator Institute for China Studies in Berlin, highlights the following similarities:

The Long Arm of Beijing. America’s “Foreign Direct Product Rule” (FDPR) lets it control certain foreign-made goods if they’re produced with U.S. tech. Well, China just unveiled its own version. Beijing is now claiming jurisdiction over products made anywhere in the world if they contain even a tiny fraction—a 0.1% de minimis threshold—of Chinese rare earth value. It’s the same long-arm logic, a much larger scale.

A "Chinese Persons" Rule. Washington has barred “U.S. persons” (citizens, green card holders, etc.) from helping China’s advanced chip industry. In a mirror-image move, Beijing is now prohibiting “Chinese persons” from working on any part of the rare-earth value chain overseas without government permission.

Targeting the Crown Jewels. The most blatant copy is aimed squarely at America’s technological lead. China's new licensing requirements specifically target R&D and production of advanced semiconductors (14nm and below) and AI with potential military applications.

Again, Gunter points out, this looks very similar to the various measures the U.S. has imposed on China on semiconductors and AI technology that could have military uses.

So, will China’s strategy be as effective as America’s? Probably not, at least not yet.

“It took decades for the U.S. to craft its tools and to become efficient at using them, and even then they are not watertight,” Gunter says. China, by comparison, is just starting to build that muscle.

But for Beijing, the journey of a thousand miles begins with a single step. And for the rest of the world, the most immediate question is whether other countries–especially U.S.'s allies in Europe and Asia–will once again be caught in the crossfire of the U.S.-China power struggle.'

Who wins in this contest? It is an explicit example of the crucial role governments play in the competition between nations for dominance and wealth so may be difficult for Libertarians to even contemplate. Thoughts?