No one of those developments is enough to derail China's progress toward becoming the world's largest economy, which some observers believe could happen as soon as five years from now. Taken together, however, they pose a real threat to China's economic hegemony, which was supposed to be unstoppable.

Yet another crack in the Middle Kingdom's edifice centers on the issue of rare-earth metals. These mined elements are essential to the production of many high-tech products, including computers, cell phones, hybrid automobiles, flat-screen televisions and wind turbines. China has enjoyed a near-monopoly on the mining and processing of the valuable minerals, with a global market share of 97 percent or more. That position has allowed the country to call the shots when it comes to the exportation of rare earths, and it hasn't been shy about using its power. In 2010, it temporarily halted shipments to Japan, supposedly in connection with a territorial dispute over fishing rights. More recently, China announced new restrictions on rare-earth exports to the U.S. and other countries, claiming concern over the environmental impact of over-mining the elements. That action prompted the U.S., European Union and Japan to file a complaint with the World Trade Organization.

In the end, it might not require diplomatic action to loosen China's grip on the rare-earths market. The U.S. and other countries have begun waking up to the consequences of letting China dictate whether they can have ready access to the valuable materials. Turns out the word "rare" isn't a completely accurate label for the 17 or so elements with odd names like scandium, yttrium and promethium. They are actually found in locations around the world. The trick lies in spending the time, money and resources to develop both mines and refineries.

Getting a mine fully up and running is said to take anywhere from seven to 20 years. But we won't have to wait that long. A number of locations outside China are already making progress toward challenging that nation's effective monopoly. According to an index maintained by the advisory firm Technology Metals Research, there are 35 rare-earth projects in various stages of development, by 33 companies in 13 countries. The most advanced is right here in the U.S. - the Mountain Pass, California mine of Molycorp Inc.

Mountain Pass's experience hasn't been a smooth one. The operation was shut down in the 1990s after radioactive wastewater leaked from a burst pipeline. Molycorp bought the mine from Chevron Corp. in 2008, and has spent years cleaning up the mess and installing new technology to prevent future mishaps.

Gathering the necessary capital was no easy task. Now, the mine appears to be on track to reach its first-phase annual production target of more than 19,000 metric tons of rare-earth oxide by the third quarter of this year. Last March, Molycorp took a big step toward becoming vertically integrated when it acquired rare-earth processor Neo Material Technologies for $1.3bn.

Neither Mountain Pass nor any other developing rare-earth site around the world promises to topple China from its commanding position anytime soon. But change is in the air nonetheless. Paul Martyn, vice president of supply strategy with sourcing and procurement specialist BravoSolution, sees companies making substantial progress toward diversifying the world's supply within the next five years. "It's going to level out a bit," he says, "with upwards of 15 to 20 percent of world mining of rare earths happening in North America." Additional mines in Canada, especially the Nechalacho Project at Thor Lake in the Northwest Territories, should help to boost Western Hemisphere stocks in the long term. Eventually, Martyn sees China's share of the rare-earths market shrinking to 70 percent - still a commanding lead, but not a monopoly by any means.

In the meantime, the rare-earth "crisis" has abated somewhat. Prices soared in the wake of China's announcement of new export quotas, but have begun dropping in recent months. So has demand. Following the Chinese government's price hikes, domestic producers began stockpiling supplies. Martyn says the export restrictions appear to have given birth virtually overnight to a thriving gray market, creating an alternative source of supply under the radar of government regulators. For now, there's enough of the stuff to go around.

Longer term, expect rare earths to play a crucial role in the ability of nations and high-tech producers to compete. Martyn raises the tantalizing prospect of U.S. production helping to spur the revival of domestic manufacturing. Companies have already begun relocating production from China back to North America due to rising wages, high logistics costs and questions about product quality. A steady source of rare-earth metals close to home could accelerate that trend. We tend to dwell on stories about the decline of American economic power. But there's life in the West yet.

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Keywords: High-Tech/Electronics, Industrial Manufacturing, Chemicals & Energy, Aerospace & Defense , Inventory & Optimization, Global Trade Management, Network Design, SC Planning & Optimization, China, Global Supply Chain Management, Supply Chain Analysis & Consulting, Environmental, Supply Chain Security & Risk Mgmt, Legal, Govt. & Regulatory Issues, Rare Earth Metals, Rare Earth Exports, China, China Wages, Yuan Appreciation, Molycorp Inc, US Manufacturing Revival, Near-Shoring, WTO Complaint, Technology Metals Research, Mountain Pass Mine