Chinaâ€™s New Economic Warfare Today, a Japanese prosecutor released a Chinese fishing boat captain who had been at the center of an increasingly nasty dispute between Beijing and Tokyo. On September 7, the captain collided withâ€”and may have rammedâ€”two Japanese patrol vessels in disputed waters in the East China Sea. Japan released the boat and 14 of the crew less than a week after the incident. Tokyo, however, kept Captain Zhan Qixiong in custody, where he remained pending investigation. Beijingâ€™s initial reaction was to issue a series of diplomatic protests, broadcast increasingly harsh statements from the Foreign Ministry, cut off ministerial-level contacts and refused to go forward with a meeting this week between Chinese Premier Wen Jiabao and Japanese Prime Minister Naoto Kan on the sidelines of the opening session of the U.N. General Assembly. Beijing also began to apply economic pressure. The Chinese government discouraged tour groups from going to Japan, cancelled two October concerts in Shanghai by a Japanese pop group and withdrew invitations for young Japanese to visit the Shanghai Expo. And this week it appeared, as reported in the New York Times, that China cut off the exports of certain rare earth minerals to Japan. On Thursday, the Ministry of Commerce denied the existence of such a prohibition. â€œWe did not issue any ban of that sort,â€ said Chen Rongkai, a ministry spokesman, referring to the story carried by the New York paper. Japanese sources, however, reported that the export of rare earths to Japan had, in fact, stopped as did the Times itself in a follow-up story. The last shipments to Japan left Chinese ports Monday or Tuesday. Itâ€™s clear Beijing did not officially prohibit such exports. But that is not what the Times reported. Citing â€œthree industry officials,â€ the paper stated that the ban, which would last until the end of this month, was implemented informally. Tokyo was expected to decide whether to charge the captain by September 29, the date the most-recent detention order was to expire. â€œI was told it was an â€˜unofficial ban,â€™ â€ Dudley Kingsnorth, a senior executive of a rare-earth consultant, told the Associated Press. The executive, also quoted by the Times, said that exporters defying the informal prohibition could lose their all-important export quotas. Beijing, of course, is not going to admit to a formal ban, a clear violation of its World Trade Organization obligations. Instead, it was trying avoid a formal complaint from Japan while at the same time unnerving Tokyo. The Japanese are in fact the worldâ€™s largest consumers of rare-earth minerals. But they have been stockpiling the mineralsâ€”and working on technologies to recycle themâ€”to protect against supply disruptions. Toyota, which depends on these minerals in the batteries for its hybrids, reportedly possesses a one-year supply. The United States, however, has not been so careful, letting the Chinese using predatory pricing to make American mines uncompetitive. As a result, there is almost no domestic production of rare earths in the United States. So Beijingâ€™s cut off of the minerals to Japan highlights Americaâ€™s critical vulnerability. Due to this almost-complete dependence on foreign sources, Molycorp is now looking to reopen its Mountain Pass mine in California and there is growing pressure on Congress to authorize the much-needed stockpiling of strategic minerals. Yet there is a far more important lesson to be learned here. The West had assumed that China could be integrated into the global system of commerce and, once so enmeshed, it would become benign. Yet nine years after the accession to the World Trade Organization, Beijing appears not to have been constrained by its participation in global trade. During this period, China has become economically powerful, and now, it is using that power to achieve geopolitical goalsâ€”in this case to demand from Japan territory over which it has exceedingly weak legal claims. So whatever we may think about free trade or open borders, we have to remember that every economic advantage we extend to China gives its leaders one more tool to advance their geopolitical goals. â€œTaking into account the impact on our citizens and Japan-China relations, our judgment was that it would have been excessive to prolong the investigation and his detention,â€ said Toru Suzuki, deputy public prosecutor at a press conference today. Until now, Japanese authorities had insisted that the prosecutor would make a decision based only on the facts of Captain Zhan Qixiongâ€™s conduct. Beijing hasâ€”once againâ€”learned intimidation works. Who will be its next target?