Dear Reader,
This week I read something, that I personally did not know. It is about the country, which is in the centre of discussion almost every week – China.
We all know the growing importance and power of this country, but did you all know that this country has the monopoly of rare earths with exotic names like Dysprosium, Yttrium, Terbium and Neodym, which are essential commodities for the high-technology industries to produce Smartphone’s like our precious Blackberry’s and IPhone’s, hard drives, electric vehicles, catalysts and are also used in laser technology or wind turbines?
(Source: USGS)
To be more specific, China controls 97% of the worlds export of rare earths.
The country is cutting back the exports for this rare material for about 40% since the beginning of 2010. According to the government further restrictions are planned for 2011. Since the cutback prices for this precious material have risen tremendously by 2000%. This could be reflected on rising prices for high-tech products in the long term.
(Source: resourceinvestor)
China always knows how to use this kind of advantages for its own good….
…BUT the European Union, United States and Japan, who are mostly affected by this, are considering to interfere. Regarding to the WTO, China is breaking an important rule for global free trade - Setting export quotas are prohibited.
Especially Germany is really concerned about the situation, as the industry heavily relies on these rare earths.
In my opinion, China is seeking to use its monopoly position for political leverage. For example exports set out broadly to Japan in September, as the dispute between Beijing and Tokyo over the collision of a Chinese fishing boat with a ship of the Japanese Coast Guard in a disputed sea area flamed up. Germany accuses the country of using its dominance deliberately. “They are trying to keep the valuable material internally,” says Minister of Trade and Commerce Rainer Brüderle.
Most industries will be out of the rare earths very soon; therefore it would be of high importance that the WTO would intervene to prevent booming prices and dangerous conflicts between the most important industrial countries in the world.
(Source: WTO)
China doesn’t see any contradiction to the WTO rules primarily justified on environmentally protection and a consolidation of its raw material industry.
However, I think that this story will be coming to an end very soon, as China cannot afford this kind of conflict. The government is already denying any definite plans to cut its export quota for the next year.
There is no such thing,” Jiang Fan, deputy director general of the department of foreign trade at the Ministry of Commerce, told Bloomberg News. “I haven’t heard any policy that China will reduce rare earth exports by 30 percent next year.”
E.V.
Sources:
1. China Digital Times
2. FAZ
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