So the Chinese government wants to sell us renewable energy infrastructure below cost. Sounds great to me.
A PETITION From the Manufacturers of Candles, Tapers, Lanterns, sticks, Street Lamps, Snuffers, and Extinguishers, and from Producers of Tallow, Oil, Resin, Alcohol, and Generally of Everything Connected with Lighting.
In the long run, it may be cheaper or more beneficial to develop a domestic industry in this, with all of the benefits that that comes with, even if the upfront price is higher. It doesn't seem like a good idea to let foreign goods be subsidized to the level where it will kill your domestic industries and reduce your country's ability to operate independently, especially if that's one of the goals of the subsidies.
Will they agree to keep selling at that price for as long as we want to buy, or will they only do it until they drive competition out of business, and then jack the prices up, counting on high barriers of entry from keeping new competition out?
Also, can you find any examples where the strategy you describe has actually worked?
Subsidizing stationary inputs (like roads, power, and pollution sinks) or stuff that's expensive to move (steel, coal, trained workers) is a way to force a country to industrialize. Subsidizing easily exported inputs (like rare earths) is less effective, as it just ends up in your competitors' final products.
Bottom line: The rare earth story only partially supports your point. That said, the lead time for a new mine is 5+ years, and solar manufacturing lead times may be much lower (and thus barriers to entry also lower).
[1] http://www.nytimes.com/2011/11/17/business/global/prices-of-... [2] http://www.metal-pages.com/metalprices/cerium/ [3] http://www.metal-pages.com/metalprices/terbium/
If not, the latter one, since that's how this stuff has always worked. Just smart business for them.