Next China: A Dish Served Rare

(Bloomberg) --

Get ready to hear a lot more about rare earths.

China accounts for about 80% of U.S. supplies of these minerals, which are essential for many smartphones, batteries and motors. That makes them a handy trade-war weapon and one Beijing has been accused of deploying before.

One misleading thing about rare earths is that they aren't really that rare. They can be found in many parts of the world, but the environmental and financial cost of processing them has resulted in China becoming the dominant supplier. Even the sole U.S. mine for rare earths sends its materials to China for processing.

If the trade war forces the disintegration of the supply chain, the shortfall in supplies of rare earths to the U.S. or semiconductors to China will cause significant pain for both countries.

President Donald Trump was in Japan this week, where he said the U.S. wasn’t ready to make a deal and that tariffs on Chinese goods could rise even more. Two days later, China brandished rare earths as a weapon — one that would put everything from Lockheed Martin's F-35 Joint Strike Fighter jet to guided missiles and lasers in the firing line.

Reaching a settlement, especially with the voice of hawks on both sides getting louder, appears ever more challenging. Not all hope is lost, though. Two TV hosts on both sides of the conflict showed it's possible to have a civil conversation about it.

Defiant Huawei

Huawei founder Ren Zhengfei doesn't want to get involved in politics with  Donald Trump. If the U.S. president called, "I may not answer," he told Bloomberg. Then again, "he doesn't have my number." His company is asking a U.S. judge to rule that a ban on its gear violates the constitution and sets a "dangerous precedent," while U.S. companies like Apple and Nike brace for China's wrath. In Japan, Huawei was struck another blow when long-time customer SoftBank chose Nokia and Ericsson as vendors for its next-generation wireless network. Chinese President Xi Jinping tried to strike a positive note, calling for global tech cooperation after the ban was announced.

Alibaba Mega-Deal

Alibaba is considering raising $20 billion via a second listing in Hong Kong after a record-breaking 2014 New York debut, people familiar said, giving Hong Kong a second chance to land the record-breaking deal that got away. It’s hoping to avoid repeating the high-profile flops of Uber and Lyft. Luckily it has two things going for it: a profitable business and a history of returns for stock investors.

Bank Takeover

China’s first government takeover of a bank in more than two decades jolted the country’s financial sector and set investors on edge. Baoshang Bank, once seen as a model for funding regional economies, is one of many smaller Chinese lenders that obscured its exposure to risky borrowers by tapping into the country’s shadow-financing system, analysts said. Central bank chief Yi Gang later sought to reassure the public, saying policy makers are "fully capable" of managing risks at small and medium-sized lenders, as the PBOC pumped more cash into the market.

Yuan Watching

It's been a miserable month for the Chinese currency, pressuring officials to rethink how much they care about defending 7 a dollar. The top banking regulator warned traders of a "huge loss" if they short the yuan, though that didn't stop one fund manager from sticking to her bet. At least there was some relief: the Trump administration refrained from labeling China a currency manipulator for another year.

Billionaire Batons

And finally, the last of Hong Kong’s "Big Four" property dynasties is handing over the reins to a younger generation, completing a flood of successions at family empires worth $109 billion. Lee Shau Kee, the city’s second-richest man, will be succeeded by his two sons, Peter and Martin. Lee, who will still advise his sons on major matters, said elder son Peter will focus on Henderson Land Development Co.’s mainland China business while younger son Martin will take care of the Hong Kong assets. A devout Buddhist who never married, Peter stands in sharp contrast to Martin, whose partner is a former actress and model. “They have different personalities," their father said.

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With assistance from Bloomberg