China increasing economic leverage by limiting 'rare earths' exports

[Chris_]

_{John Pomfret
Washington Post Staff Writer
Thursday, September 23, 2010; 10:36 PM}

China's recent move to limit exports of minerals critical in the manufacture of a vast array of products such as missiles, car batteries, cellphones, lasers and computers is stoking alarm that its domination of the industry could give it enhanced leverage over the United States.

On Thursday, some traders of "rare earths," 17 minerals that are used in small portions in almost every advanced industrial product, reported that China, which controls 97 percent of the industry, had halted the export of anything that contained traces of the minerals to Japan. The Chinese government denied the allegation.

Washington Post

We need more electric cars!  What a piss-poor idea... trading one group of untrustworthy tinpots for another.

[Allentownjake]

This is a giant National Security issue.  The computer you are typing on, the electronics in your car, the guidance system in our missiles, and the government computers that communicate with our satellites do not operate without these metals.  Our country has plenty of them.

China dumped a bunch of this commodity in the market and bankrupted every other firm in the world.  They sold them for less than it cost them with slave labor to mine.  It was a very strategic play with the plan to dominate the market knowing full well what kind of control they would have.  The US electronics and Japanese Electronic industry prevented any kind of WTO or other complaint, because they liked a cheap commodity and they had more power than domestic mining.

We are playing checkers against chess players right now.

[Chris_]

We are playing checkers against chess players right now.

So you keep saying.  I agree with you, but I don't expect anything to be done about it unless America can remain competitive in a global marketplace, and I don't see that happening with the current leadership we have.

[Allentownjake]

So you keep saying.  I agree with you, but I don't expect anything to be done about it unless America can remain competitive in a global marketplace, and I don't see that happening with the current leadership we have.

or the leadership taking over in January.

There is a balance between business and national interest.  Countries that behave the way that China do, deserve to have their goods tariffed to hell.

[NHSparky]

So you keep saying.  I agree with you, but I don't expect anything to be done about it unless America can remain competitive in a global marketplace, and I don't see that happening with the current leadership we have.

ATJ has a point.  My father helped build the cerium facility at Mountain Pass, CA.

To date, it hasn't produced jack because of environmental and tax concerns.

[Allentownjake]

ATJ has a point.  My father helped build the cerium facility at Mountain Pass, CA.

To date, it hasn't produced jack because of environmental and tax concerns.

It wouldn't produce jack shit without those concerns.  China sold the metals at a lower cost than it was to take them out of the ground with slave labor.

This is a practice called dumping.  Generally when one engages in dumping your aim is to bankrupt your competitors in hopes to monopolize the market and charge a higher price later.  Which is what they did, and it was allowed because lobbyist from the tech industry were very happy with cheap rare earth metals at the time.  They aren't as cheap anymore and China uses them as a threat to trading partners.

Guess what China knows economics better than we do.  

[NHSparky]

It's not that they know economics better, they're just more willing to play dirty--short-term gains at the cost of long-term ones.  I've been to China.  Filthy place in the cities; can't breathe, shitty infrastructure, health codes nonexistent, work conditions deadly to say the least.

To this day I still wonder why they got MFN trading status from the Clinton admin, or why the Bush/Obama administrations kept it in place.

I've said before and will say again, they need us more than we need them, bond debt or not.

[Allentownjake]

It's not that they know economics better, they're just more willing to play dirty--short-term gains at the cost of long-term ones.  I've been to China.  Filthy place in the cities; can't breathe, shitty infrastructure, health codes nonexistent, work conditions deadly to say the least.

To this day I still wonder why they got MFN trading status from the Clinton admin, or why the Bush/Obama administrations kept it in place.

I've said before and will say again, they need us more than we need them, bond debt or not.

It appears they are willing to push the issue right now, outright threatening our number one ally in the region with economic Armageddon.

[NHSparky]

It appears they are willing to push the issue right now, outright threatening our number one ally in the region with economic Armageddon.

Yes, they are the second-largest economy in the world, having just passed up Japan for that title.

However, let me know when their GDP breaks 30 percent of ours.

[Allentownjake]

Yes, they are the second-largest economy in the world, having just passed up Japan for that title.

However, let me know when their GDP breaks 30 percent of ours.

They went from nothing to number 2 rather quickly, and it appears they are very hungry.

The next year should be interesting particularly given their aggressive stance, the rush of the federal reserve to devalue our banksters, and our political turmoil...oh and our leaders in both parties are ignorant assholes.

[NHSparky]

They went from nothing to number 2 rather quickly, and it appears they are very hungry.

The next year should be interesting particularly given their aggressive stance, the rush of the federal reserve to devalue our banksters, and our political turmoil...oh and our leaders in both parties are ignorant assholes.

But they're also facing a bubble WORSE than ours...

http://www.grant-thornton.co.uk/thinking/emergingmarkets/index.php/article/how_the_dubai_property_bubble_burst_and_is_china_next/

http://www.csmonitor.com/Commentary/Opinion/2010/0316/China-the-coming-costs-of-a-superbubble

http://www.georgewashington2.blogspot.com/2010/05/is-china-bubble-starting-to-burst.html

And it'll be WORSE for them than it was for us, given that they don't have the infrastructure or social safety nets we do here.

[Allentownjake]

But they're also facing a bubble WORSE than ours...

http://www.grant-thornton.co.uk/thinking/emergingmarkets/index.php/article/how_the_dubai_property_bubble_burst_and_is_china_next/

http://www.csmonitor.com/Commentary/Opinion/2010/0316/China-the-coming-costs-of-a-superbubble

http://www.georgewashington2.blogspot.com/2010/05/is-china-bubble-starting-to-burst.html

And it'll be WORSE for them than it was for us, given that they don't have the infrastructure or social safety nets we do here.

Probably why the tenure has turned very aggressive wouldn't you say.

All those people and spare manufacturing capacity, what is a despot to do with them.

[Carl]

They went from nothing to number 2 rather quickly, and it appears they are very hungry.

The next year should be interesting particularly given their aggressive stance, the rush of the federal reserve to devalue our banksters, and our political turmoil...oh and our leaders in both parties are ignorant assholes.

Tinfoil hat time here...

What is coming up in the next couple of years?
A Presidential election with a possible neutered Chief Executive running for reelection.
One that just happens to have Hillary Clinton in the mix or even more interesting perhaps her as a challenger with all the contacts from Chinagate likely still around.

[Allentownjake]

Tinfoil hat time here...

What is coming up in the next couple of years?
A Presidential election with a possible neutered Chief Executive running for reelection.
One that just happens to have Hillary Clinton in the mix or even more interesting perhaps her as a challenger with all the contacts from Chinagate likely still around.

The GOP has as many china ties as Clinton does.  Papi Bush.  Notice the love fest whenever those two get into a room together.

[NHSparky]

The GOP has as many china ties as Clinton does.  Papi Bush.  Notice the love fest whenever those two get into a room together.

I don't seem to recall Bush giving away the Lincoln Bedroom or nuclear warhead secrets to the Chinese.

[Allentownjake]

I don't seem to recall Bush giving away the Lincoln Bedroom or nuclear warhead secrets to the Chinese.

Papi Bush's longstanding relationship with the Chinese is well documented.  From his weak response to Tianmen to arms and other deals conducted by his administration.

[Carl]

Papi Bush's longstanding relationship with the Chinese is well documented.  From his weak response to Tianmen to arms and other deals conducted by his administration.

Jake,please don`t equate having to take a measured stance regarding China`s civil rights abuses given the political realities of the world with openly soliciting campaign contributions that were illegal with an apparent payoff that could compromise national security.

They are not the same.

[Allentownjake]

Jake,please don`t equate having to take a measured stance regarding China`s civil rights abuses given the political realities of the world with openly soliciting campaign contributions that were illegal with an apparent payoff that could compromise national security.

They are not the same.

I think Papi Bush and Bill Clinton were corrupt and would sell their mother for a quarter.  Sue me.

I think the same about Barack and Bush the son.

[NHSparky]

I think Papi Bush and Bill Clinton were corrupt and would sell their mother for a quarter.  Sue me.

I think the same about Barack and Bush the son.

Sorry, not even close.  Not even in the same ballpark.

Hell, not even the same ****ing sport.

[gurn]

This is a giant National Security issue.  The computer you are typing on, the electronics in your car, the guidance system in our missiles, and the government computers that communicate with our satellites do not operate without these metals.  Our country has plenty of them.

China dumped a bunch of this commodity in the market and bankrupted every other firm in the world.  They sold them for less than it cost them with slave labor to mine.  It was a very strategic play with the plan to dominate the market knowing full well what kind of control they would have.  The US electronics and Japanese Electronic industry prevented any kind of WTO or other complaint, because they liked a cheap commodity and they had more power than domestic mining.

We are playing checkers against chess players right now.

Jake's basically right IMO.

This may create a market opening for alternatives. Or look to that huge mineral field the US found in Afghanistan.
The new hot spot in the world is China/SE Asia. The US needs to stop screwing around in the mid-East.

There will be war with China. Its government is very unstable. Its military has no experience with war
and is now full of young guns who are asserting the military into political decisions.

I have zero confidence Obama knows what the Hell is going on in this part of the world. Hillary has a clue though.

There will be military conflict in East Asia before 2020. Put it in the bank.

[NHSparky]

Unstable how, exactly?  Only if their economy tanks completely (unlikely, more likely a bubble burst like we saw here) would there be any serious threat to the PRC's current political system.

Oh, and there's still plenty of folks in China who have heard a shot or two fired in anger.  They're a decent REGIONAL player, but unless and until they can develop a decent carrier or submarine (unlikely in either case) they're not going to achieve superpower status.

[gurn]

I go there quite a lot. I'm just reporting what I see. Look at the demographics, 200-300 million
extra men in the population. 300-500 million middle class. 800 million to 1 billion in poverty.

And the military has no experience in battle since the brief war with Vietnam over Cambodia.

In that war it spent less than three weeks occupying part of Vietnam before withdrawing.
Vietnam spent the next sixteen years occupying Cambodia. Viewed from that angle,
the Chinese military was defeated in that war.

The civilian control over the Chinese military is very dicey. Recently, a PLA general was complaining
that other countries do not 'respect' the PLA. Can you imagine a US general saying that?

It's a big country. It's a growing commercial power. It's a very dangerous nation though, because
the officers in the PLA have a history of being loose cannons. And I don't think civilian oversight is
strong enough to restrain them.

I could be wrong. But historically, Chinese have been better at fighting wars against each other,
than they have been at fighting other nations. But I have no doubt that the loose cannons in the
PLA are going to war in our lifetime.

[gurn]

Here's an article worth reading. I don't know if the writer is Liberal or Conservative.

He basically sees China correctly though.

Here's a map of China's official claim to the South China Sea.



Basically, Vietnam loses all its coast line. Malaysia loses most of its coast line.
And the US loses the right of navigation.

Can this be finessed? Compromised? Papered over?
No - not without the PLA losing face. And what happens when the PLA loses face?

I see huge problems ahead in the near term - 5-10 years out.

[NHSparky]

Not unless they learn to project power like we can.  Trust me, even with the GW battle group, they'd more than have their hands full.  Also consider that another carrier group can be called from San Diego or Bremerton/Everett and be launching airstrikes at any PLN targets within a week--less, if they don't mind steaming themselves at a flank bell to get there ASAP.

[gurn]

Not unless they learn to project power like we can.  Trust me, even with the GW battle group, they'd more than have their hands full.  Also consider that another carrier group can be called from San Diego or Bremerton/Everett and be launching airstrikes at any PLN targets within a week--less, if they don't mind steaming themselves at a flank bell to get there ASAP.

You're correct. But the problem is - you are not dealing with rational people here.
You are dealing with a PLA who have not experienced war, who have basically
seen only their build-up, who believe that China has a manifest destiny.
And their political bosses seek new resources with desperation.

Unless the consumer society in China can keep expanding, leaders are not confident
they can control their population. At the very least there will be resource wars.

With the old Soviet Union, at least we were facing an adversary who understood the destruction of war.
That's not true here. You are dealing with nationalistic amateurs in the PLA who have a predisposition to compulsive
gambling. An article of their faith is the decline & unfitness of the United States. And they believe the South China
Sea is their backyard pool.

The Soviets at least were realists.  They understood what war was about. Where Russians were fatalists,
Chinese are optimists. Where the Russian vice was Vodka, the Chinese vice is rolling the dice.