China's Ever Increasing Grip on Rare Earth Minerals, Patrick London

The debates over China's rare earth minerals continued this week and the outlook for consumers does not look promising. Although China claims that the materials will continue to be exported, they will remain tightly controlled. This firm grip on the goods insures that China essentially has total say in a market they control 97% of.

Rare earth minerals are a group of metallic elements that are used in the production of several new technologies such as hard drives, television, catalytic converters and wind turbines.

Several quotas have been implemented on the extraction of minerals in order to assert control over when and how much is being used. The second half export quota for the minerals was reduced by 72%. China claims this reduction is is in response to the factories pollutant output and their desire to keep the levels low. It is no coincidence then that the prices of the rare earths have increased 15 fold since the quotas were imposed in July. According to Li Zhong a deputy manager of Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co. China may even plan to reduce the number of rare earth oxide producers to 20 from 90 by 2015.

China's Commerce ministry said in a statement 10/19/10: "The nation will continue to supply rare earth to the world while maintaining restriction on exports to protect exhaustible resources and ensure sustainable development".

An interesting factor to consider in this equation is that the U.S., Canada and Australia have a wide array of untapped resources from which to draw on. Actually the U.S. was completely self sufficient with rare earth minerals until the 1980s before the lower labor wages made China top dog.  As of 2002 a California based rare earth mine was shut down, but due to the influx of trade disputes will reopen this year according to Molycorp inc., the owners of the mine. This reopening could theoretically create more market competition but will likely not be enough to compete with China.

China is also still creating waves with Japan over their recent political relations ordeal. The exports of rare earths to Japan, one of the world's top importers have recently come under difficult customs duties and delayed shipments. Many speculate that this is directly linked to their recent debate over the governance of the South China Sea. This debate began when a Chinese fishing vessel ran into two Japanese boats and the crew was taken prisoner. China claimed this act to be unlawful and demanded the crews return. After several fiery debates, the crew and captain were returned to China. The question remains however, who has rights to these waters? While Japan has legal control, China still claims dominance. This would likely not be such a hot debate if the waters did not contain vast amounts of potential oil.

Not only has China continued to impose several customs and trade difficulties, they have also begun patrolling the disputed waters. On Sunday, several Chinese boats were spotted by the Japanese coastguard. There were also protests in China and Japan this past weekend over the matter.

Although China continues to be the top producer of these rare earth minerals, their actions may get them into trouble somewhere down the line. Considering their recently imposed quotas, decrease in producers and increasing tensions with one of their largest trade partners, China seems to be creating agitating ripples throughout the market.

Succession for China's political future, Patrick London

Monday marked a decisive moment for the future of presidential leadership in China when vice president Xi Jinping was elected to the position of vice chairman of the Central Military Commission. This move places VP Jinping as next in line for presidency after President Hu Jintao retires. Hu jintao was also given this position three years prior to his promotion. This choice in succession to the presidency has some worried however due to Xi Jinping’s unclear political positions due to past ambiguity.


At 57 years old, Xi Jinping is not a newcomer to the political realm having served in several high ranking political positions throughout China including being assigned as the governor of Fujian province in 2000 and later being assigned as the Party Chief in Zhejiang province.


Aside from his political experience, Mr Xi is considered a “princeling” by being the son of communist party veteran Xi Zhongxun who helped the party rise in the early 1900s. Xi is one of a series of so called “princelings” and is therefore expected to live up to his father’s legacy within the communist party and promote the regime’s standing within China. 


However, Mr. Xi is known for taking the middle ground on many political issues such as “the degree to which even small amounts of political liberalization should be tolerated” thereby making his political aims unclear. Although, BBC reports that many top political leaders have decided to concentrate their efforts:


“Instead of seeking a high rate of economic growth, China's leaders appear to want to close the gap between rich and poor and between coastal and inland areas.”


This shift in focus may be in response to the influx of Chinese citizens openly promoting a democratic takeover of the communist regime. One political activist in particular, Mr. Liu Xiaobo has received a great deal of recent media attention for being awarded the 2010 Nobel Peace Prize. The focus on blurring the boundaries between rich and poor comes at an interesting time considering the current debate over the Yuan’s low market value and China’s reluctance to increase it. If the political leaders do intend to create a more equal wealth basis in China, the decisions surrounding the Yuan will certainly play a critical role in the near future.



Video of Victor Chu chairman of First Eastern Investment Group speaking about Xi’s promotion: http://www.youtube.com/watch?v=tA8mvnnoIDI



http://www.bbc.co.uk/news/world-11564634

http://www.economist.com/blogs/asiaview/2010/10/succession_china

http://english.chosun.com/site/data/html_dir/2010/10/19/2010101900727.html

http://www.ibtimes.com/articles/73173/20101019/china-xi-presidency.htm

China's uproar about Nobel Peace Prize, Patrick London

On monday the Nobel Prize committee named Mr. Liu Xiaobo as the 2010 Nobel Peace Prize winner. It was awarded due to "his long and nonviolent struggle for fundamental human rights in China." The Chinese government however is furious over the decision because they feel Liu is nothing more than a criminal who undermines the Chinese communist regime.

Liu is a long time political activist in China, fighting for democracy and human rights. Last year he was arrested and sentenced to eleven years in prison. Although he had been detained and placed under house arrest several times in the past, his co-authorship of a political manifesto entitled Charter 08 which criticized empirical rule, was what eventually earned him his prison sentence. Liu was also present at the 1989 Tiananmen Square demonstrations in which protestors were fired upon by government troops.

After the announcement that Liu had won the prize, his wife Liu Xia was placed under house arrest. Not only was she detained but three armed guards stand outside her house denying entry to all who come by, including a group of foreign diplomats wanting to congratulate Mrs. Liu on her husband’s award. It is also reported that her phone and internet have been cut off. If Mrs. Liu needs to leave her home, she must do so in a police car.

The Chinese government has not taken this bit of news lightly and has stated that it may interfere with China Norway relations. They have also stressed that Liu getting the award goes against the very ideals the award stands for. Not only has the government issued several statements discouraging support of Liu, they have also been monitoring and banning anybody attempting to get together to celebrate his achievement. Time reports that many of the major cell phone companies have gone so far as to ban text messages containing Liu Xiaobo’s name.

Another major political figure, the Dalai Lama, voiced his opinion on the matter saying that the Chinese government does “not appreciate different opinions". He was also directly involved in the decision to give the award to Liu by co signing an article that applauded "his bravery and clarity of thought about China's future." When asked about her situation, Liu’s wife responded that she hopes the award will bring further awareness to the world and assist in spreading human rights in China.

Video of Liu Xia on her husband’s situation:

http://www.bbc.co.uk/news/world-asia-pacific-11500671

Time: http://www.time.com/time/world/article/0,8599,2024405,00.html

Associated Press: http://www.google.com/hostednews/ap/article/ALeqM5jy5n5CDcoNHrqOk6ZihXwoOSuHxgD9IPREGG2?docId=D9IPREGG2

BBC: http://www.bbc.co.uk/news/world-asia-pacific-11512775

China's rare earth

Rare earths is a term used to refer to a specific set of minerals that are used heavily in the manufacture of modern electronic goods such as cell phones, batteries and computer parts. China happens to be the largest exporter of these minerals. Due to the high demand and the difficulty in extracting these minerals, China finds itself in an interesting position. Being the largest exporter for products in high demand allows them to control most of the market. This being the case, China has slowly been cutting their yearly export quotas which in turn makes the price for these materials increase. In July, they cut it by 40% which caused prices to increase at an unprecedented rate. This year’s sales are estimated at 125,000 tons costing in the neighborhood of $2 billion dollars.

Apparently China justifies this decrease in exportation as an environmental degradation concern but this standpoint has left a few in doubt. In an article in the economist, the author speculates that:

“The real reason is probably to persuade foreign firms to move manufacturing to China before non-Chinese mines are on stream and its market control ebbs.”

This move however may in fact be counterproductive because a slew of new exporters including California are beginning to see a surge in the number of their exports. It will be interesting to see if this will indeed affect China due to 60% of their demand being domestic.

http://www.economist.com/node/17155730

China's rare earth