Chinese Economics Thread

[Engineer]

Lets get this straight, I never had a issue with China upping the price or restricting the export of REE's.
Its the portraying by some of that nasty West was making China sell these products at a low price, in much the same way as blamining the WEst for China using lead in the paint LOl, As if the Chinese werent doing it before.

China doesn't think the deal is good anymore and wants to exit. It is China's resources and China is merely exercising its rights, and this is what we have been saying all along despite your repeat strawman arguments.

As for lead paint, the Western firms who offshore manufacturing to China are aware of it, so these firms are just as guilty as their Chinese partners for the lead paints. Instead, the blame is put solely on to China by the West because the latter sees it can do no wrong. This has been pointed out by another respected member before.

Despite the spin youve been trying to put into it , the fact remains it was the Chinese who chose to export the REE's into the market at a low price. No one forced them to do so.

Despite the spin you have been trying to put into it, the Chinese government had no control over the rare earth mining industry. This argument of yours is what I have pointed out earlier -- you are treating China as a monolithic block when it actually isn't, as evident by your attempt to fuzzy up the distinction between Chinese rare earth elements suppliers and the Chinese government.

The fact is that even in the early days of the 90's export permits had to be obtained from the (SETC), and the MOFTEC . So if the Mandarins in Beijing didn't like it, they could easily have put a stop to it.

Having to obtain permit is not an evidence that the Chinese government was artificially keeping the price of rare earth elements low, despite what Western governments, news, and people like you are accusing China of doing. Furthermore, another fact which you have conveniently left out is that there were a lot of vendors that did not obtain permits. Chinese government would have stopped it if it has the abilities to, but it didn't, which is a proof that it couldn't.

After all it only took them a few days to halt shipments to Japan earlier i this year. Therefore the excuses you gave for their inability to do so is rather dubious.

You are grasping at straws. Halting shipments in no way proves Chinese government has control over the price of rare earth elements being exported:

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Traditionally, China has struggled to impose its will on the sector, where illegal private production and overseas trade has remained rampant. According to figures from the China Rare Earth Society, 2010 output exceeded production quotas by 40 percent.

And for the record, Japan totally deserved it.

The second thing I had an issue with was using REE's as an enticement to relocate to CHina. This is against WTO rules and as suggested, a thinly disguised attempt at IP theft.

Nope. First, reducing export of rare earth materials isn't against WTO rules, as China is not the only nation that has rare earth elements. As I have pointed out before, Western nations prefer to sit on their own resources rather than extracting them. If they really think China is artificially keeping the price of rare earth elements low, the West could always subside their own mining companies instead of letting them close. This is the West trying to exploit China's resources at next to nothing price. Having no one else to turn to except China for rare earth resources is the West's own damn fault. Secondly, enticing foreign companies to set up refineries in China is not IP theft, and your attempt to equate the two to vilify China is transparent and frankly pathetic. If China meant to do steal IP, it can do so anywhere anytime without giving these foreign companies business in China.

China /Chinalco didnt get screwed, and for the record it was in mid 2009 not 2008 when Chinalco failed its attempt to increase its shareholding in Rio Tinto and theLynas Corp take over bid by other Chinese interests a few months later
The reasons given were of a commercial nature, but IMO you can be pretty sure a China backlash had a part.

Yes but the fantastic part for the West and myself as a shareholder was Japan outflanking China in its bid to increase its shareholding in Lynas Corp. which China wanted Really Really badly In fact it was like a person giving another, a kick in the nuts. Not only would it have been most likely to have been excruciating - but left the nuts stuck in throat thus making the guy speechless.
But I suppose thats what one could expect for being so arrogant. As I said earlier China wanted to be the spoiler in Lynas Corp IMO. Still the games not over and China could bide its time and have another attempt

China gets screwed all the time. Your suggestion that China being screwed as some sort of backlash against China's reduction in the export quota in rare earth elements totally ignored the fact that China's getting screwed is the default outcome. Rio Tinto isn't the first. Back in 2005, China also bidded for Unocal and it ended up the same way, as for pretty much every other Chinese bids in Western countries for companies related to natural resources extraction/refining.

As China is gaining power in its rare earth resources and starting to set the rules, and in a broader view, out performing Western's economies, the West is starting receive its own dose of medicine administered by China. It is pretty clear that the West does not like its own medicine, and from your own responses it is pretty clear that the West still has illusion of having power over China when majority of such power is already gone. It isn't over yet, as there's more to come from China.

Anyway Im bored with correcting you on the same old points so c ya later thanks for letting me play

lol.
For the record, it is me correcting you, but thanks for playing.

 

[bladerunner]

China doesn't think the deal is good anymore and wants to exit.

Ah so you agree ," the girl changed her mind and cried rape."

As for lead paint, the Western firms who offshore manufacturing to China are aware of it, so these firms are just as guilty as their Chinese partners for the lead paints. Instead, the blame is put solely on to China by the West because the latter sees it can do no wrong. This has been pointed out by another respected member before.

Me bad I should have realised that they would have discovered the lead paint when they were investing complaints about the shoddy workmanship.

Despite the spin you have been trying to put into it, the Chinese government had no control over the rare earth mining industry. This argument of yours is what I have pointed out earlier -- you are treating China as a monolithic block when it actually isn't, as evident by your attempt to fuzzy up the distinction between Chinese rare earth elements suppliers and the Chinese government.


Having to obtain permit is not an evidence that the Chinese government was artificially keeping the price of rare earth elements low, despite what Western governments, news, and people like you are accusing China of doing. Furthermore, another fact which you have conveniently left out is that there were a lot of vendors that did not obtain permits. Chinese government would have stopped it if it has the abilities to, but it didn't, which is a proof that it couldn't.

I Gotcha, They could have but didnt want to stop it

Secondly, enticing foreign companies to set up refineries in China is not IP theft, and your attempt to equate the two to vilify China is transparent and frankly pathetic. If China meant to do steal IP, it can do so anywhere anytime without giving these foreign companies business in China.

Tell that to companies that have been burned

China gets screwed all the time. Your suggestion that China being screwed as some sort of backlash against China's reduction in the export quota in rare earth elements totally ignored the fact that China's getting screwed is the default outcome. Rio Tinto isn't the first. Back in 2005, China also bidded for Unocal and it ended up the same way, as for pretty much every other Chinese bids in Western countries for companies related to natural resources extraction/refining.

How can you come to the conclusion that China's being screwed. It was either a case of offer and decline, or subject to approval. Something that China was well aware off.

It isn't over yet, as there's more to come from China.

didn't I just say that
Funny how after China lost out in acquiring the majority ownership of Lynas Corp,in late 2009 the refinery project at Kuanton?/Malaysia ran into delays with protests over health and environmental concerns in early 2010
Hmmmmmm I wonder who's behind the scenes stiring that up. China maybe? after all what's the use of mining for rare earths if one does'nt have a metallurgy plant. Mt Weld might as well be a sand and gravel project for a road development. The Achilles heel for the West is the lack or aging of the metallurgists skilled in the art of R.E. refinining. So time is of the essence. The fund investers in Lynas Corp would bail so quickly, China could probably buy it for a song. Or she could offer to process it back in China for them for a decent amount of REE's for themselves. Which ever way this scenario could have unfolded, it would have been a win win for China. If it wasn't for the fact that I have conflicting interests to China, I would've patted her on the back.

Futhermore regarding the conflict due to oil and gas in the South China Seas and possibly up to the Second Island chain, I cant see the West ever giving over to China. Look at the R.E. located there
.
(Ive forgotten how to post pictures so you'll have to access the link to have a look at the maps/illustrations.

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Deep-sea mud in the Pacific Ocean as a potential resource for rare-earth elements
Nature Geos
Published online
03 July 2011

"......."World demand for rare-earth elements and the metal yttrium—which are crucial for novel electronic equipment and green-energy technologies—is increasing rapidly1, 2, 3. Several types of seafloor sediment harbour high concentrations of these elements4, 5, 6, 7. However, seafloor sediments have not been regarded as a rare-earth element and yttrium resource, because data on the spatial distribution of these deposits are insufficient. Here, we report measurements of the elemental composition of over 2,000 seafloor sediments, sampled at depth intervals of around one metre, at 78 sites that cover a large part of the Pacific Ocean. We show that deep-sea mud contains high concentrations of rare-earth elements and yttrium at numerous sites throughout the eastern South and central North Pacific. We estimate that an area of just one square kilometre, surrounding one of the sampling sites, could provide one-fifth of the current annual world consumption of these elements. Uptake of rare-earth elements and yttrium by mineral phases such as hydrothermal iron-oxyhydroxides and phillipsite seems to be responsible for their high concentration. We show that rare-earth elements and yttrium are readily recovered from the mud by simple acid leaching, and suggest that deep-sea mud constitutes a highly promising huge resource for these elements.

Circles represent DSDP/ODP sites and squares represent the University of Tokyo piston core sites, with colours corresponding to the dominant origin of surface sediments. Open symbols are sites lacking samples from the sediment surface. Contours represent helium-3 anomalies........."

go to the link for a better view of map

 

[Engineer]

Ah so you agree ," the girl changed her mind and cried rape."

Nope, your analogy is still flawed. Like I have pointed out before, the girl changed her mind and expects to exercise the rights to walk out. The partner however, feels he is entitled to sex and thinks the girl owes him. This was pointed out pretty clearly in my previous posts. Applying this to the situation with rare earth resources, China wants out from the deals, but the West thinks it is entitled to access China's resources as if China owes the west. Once again, the key point is China is merely exercising its rights over its own resources.

If anyone is crying rape here, it is the West. "Oh no, they sucker us to get nearly all our rare earth resources from them... they are evil" is that same mentallity, and it is a reoccuring theme in your posts.

Me bad I should have realised that they would have discovered the lead paint when they were investing complaints about the shoddy workmanship.

Their QA department of these companies would have noticed but they would rather save a few more bucks off of what is already offered by the lowest bidders. At the end of the day, if they get caught they could just let China takes the blame, which these firms did so.

I Gotcha, They could have but didnt want to stop it

Nope, you've got it reversed. It was pointed out pretty clearly in my last post that they wanted to but they couldn't; and the proof that they couldn't is that they didn't. Employing strawman isn't going to magically shows your potrayal of China as a monolithic block that had control the price of rare earth elements as true when the facts clearly show that was (and still is) not the case. Nor does the strawman provides the inference to back up your assumption that export permits equate to price control abilities.

Tell that to companies that have been burned

Companies have been burned, so?! It still doesn't mean that making one attractive for foreign firms to set up factories in is equivilent to IP threat. This rebuttal of yours doesn't make your accusation any less false than before. Once again, if China wanted to do IP theft, it could do it anywhere, anytime, without giving these companies any business opportunities in China.

How can you come to the conclusion that China's being screwed. It was either a case of offer and decline, or subject to approval. Something that China was well aware off.

If it is close to a 50/50 chance of China gaining and losing, then I would actually agree with you. There are deals that are nearly finalized, and then suddenly get cancelled. Then there are deals that are actually finalized, but get blocked. Yes, these happen to everybody, but as I have pointed out, with China there is a default outcome. You yourself have provided examples to prove this to be so -- it is considered a success whenever China gets blocked. You want more example? How about Noranda in 2004? Perhaps Potash Corporation in 2010?

 

[A.Man]

If You Can Read Chinese, Please Take A Look This Very Interesting Writing

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[3rdworld]

From: Bladerunner
'Funny how after China lost out in acquiring the majority ownership of Lynas Corp,in late 2009 the refinery project at Kuanton?/Malaysia ran into delays with protests over health and environmental concerns in early 2010
Hmmmmmm I wonder who's behind the scenes stiring that up. China maybe? after all what's the use of mining for rare earths if one does'nt have a metallurgy plant. '

I do live nearby Lynas rare earth plant at Kuantan and found this offensive. The waste product in the production of rare earth contains thorium and Lynas have no plans in the disposal of such radioactive materials other than mentioning that they may pile it up in the factory itself. Our idiot politicians have not considered the effect of the radioactive substance to our health and its disposal. Australians themself even objected to the transportation of the raw materials through their towns (Rockhampton demonstrated against it). You Bladerunner should lobby for the plant to be located in Australia itself. Why benefit other countries with the amount of profits and jobs being generated? You Bladerunner likes to twist things and is pretty offensive. I have met many military officers whilst attending staff college and other courses in Australia and new Zealand and I found them pretty nice people but you are certainly not of the same mould.

 

[lostsoul]

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When asked how those officials from the Middle-Eastern countries view paper money, Rickards responded, “Well, the way I would put it, Eric, it is a joke, but they are in on the joke. They understand the vulnerability of it. They understand the gaming of it and the way paper money is used to transfer wealth from people who don’t really understand it to those who do and are in a position to manipulate it.


But it’s ok if you are in on the joke. You know the old saying, ‘If you are in on a poker game and you don’t know who the sucker is, you’re the sucker.‘ There are always 3 or 4 players who will gang up on one guy and strip all of his chips away. Right now, China is the sucker, they are the ones who have $3 trillion of paper. Nowhere else to go, not enough gold, don’t know what to do and they are completely vulnerable to the United States.


That’s beginning to occur to them and maybe their behavior will change going forward. But the Arabs understand this, they went through this in the ‘70s. They had recourse, they said, ‘Nixon, you want to cut the value of the dollar by 20%? Fine, we’ll quadruple oil prices, your move.‘


In other words they were able and continue to be able to protect themselves from dollar devaluation simply by increasing the price of oil. Then they get the paper money and they buy gold. So they are in on the joke, let’s put it that way. They don’t have any more confidence in paper money than I do, but they continue to participate in it because they benefit from it because they are natural resource players.


China is not a natural resource player in terms of exports, that’s where they are vulnerable and again, they have not diversified their reserves.”

 

[bladerunner]

From: Bladerunner
'Funny how after China lost out in acquiring the majority ownership of Lynas Corp,in late 2009 the refinery project at Kuanton?/Malaysia ran into delays with protests over health and environmental concerns in early 2010
Hmmmmmm I wonder who's behind the scenes stiring that up. China maybe? after all what's the use of mining for rare earths if one does'nt have a metallurgy plant. '

I do live nearby Lynas rare earth plant at Kuantan and found this offensive. The waste product in the production of rare earth contains thorium and Lynas have no plans in the disposal of such radioactive materials other than mentioning that they may pile it up in the factory itself. Our idiot politicians have not considered the effect of the radioactive substance to our health and its disposal. Australians themself even objected to the transportation of the raw materials through their towns (Rockhampton demonstrated against it). You Bladerunner should lobby for the plant to be located in Australia itself. Why benefit other countries with the amount of profits and jobs being generated? You Bladerunner likes to twist things and is pretty offensive. I have met many military officers whilst attending staff college and other courses in Australia and new Zealand and I found them pretty nice people but you are certainly not of the same mould.

Im at a complete loss in determining what your actual point is. What have I twisted? Are you for or against the processing plant?. I could be wrong, but from what you said in your post it sounded as if you weren't to happy with the development with comments such as

"..... Lynas have no plans in the disposal of such radioactive materials other than mentioning that they may pile it up in the factory itself Our idiot politicians have not considered the effect of the radioactive substance to our health and its disposal. "

Or are you offended by my suggestion that China could capitalise on these sentiments for its own agenda thus depriving the local population the luxury of being contaiminated by radio active material.?

Or I ignored the fact that concern about the health hazzards existed long before 2010

 

[Red___Sword]

If You Can Read Chinese, Please Take A Look This Very Interesting Writing

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Not everybody actually appreciate wake-up calls, not even every Chinese webmasters whom, under all kinds of payrolls.

It is their free-will to decide to delete some posts, as of many people's free-will to not to wake up (mostly western people who have colour glasses to the world, esp to China).

 

[lostsoul]

Looks like China is going to go kaboom soon.

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Wonder why China just bailed out its banks, preemptively, on Monday? Here's why. In a report issued by Credit Suisse's Sanjay Jain, the China strategist, who joins such now infamous skeptics as Bank of Countrywide Lynch's David Cui, has revised his base case Non Performing Loan ratio forecast from 4.5%-5.0% to 8.0%-12.0%: a unprecedented doubling in cumulative losses. Why unprecedented? Because as he explains, this could "would work out to 65–100% of banks’ equity." Crickets? Yes, Credit Suisse just singlehandedly said the equity value of the entire Chinese banking system is between 66% and 100% overvalued (with a downside case of $0.00). So for those putting two and two together, on one hand we have the four horsemen of the Chinese apocalypse, already presented visually before by Bank of America, consisting of i) a surge in underground lending, ii) a property downturn, iii) bad bank debt and iv) and "hot money" outflows, and on the other we have the vicious loop of what this means in terms of a central planning reaction. Simply said look for China to scramble to undo all the signals that it had been trying to spark while it was fighting with the Fed-inspired inflation bubble. Only problem is that like in the US and Europe, finding the Goldilocks point where all 4 are in equilibrium will be next to impossible, especially if investors in the country's banks realize the equity they hold is worthless and scramble to get the hell out of Dalian. Then the fears over a parliamentary vote in Slovakia will seem like a pleasant walk in the park.

 

[petty officer1]

News of the week

Here comes the cavalry, hopefully concrete policies can be drafted

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Premier Wen Jiabao has urged stronger financial support for China's small businesses, as the country is currently walking a fine line between fighting inflation and maintaining growth.

Small enterprises should be a priority for bank credit support and enjoy more preferential tax policies, Wen said during visits to east China's economic hub of Zhejiang province on Monday and Tuesday.

Banks should increase their tolerance for the non-performing loan (NPL) ratios of small enterprises, set targets for the proportion and growth of loans to small companies and reduce the cost of securing credit, the premier said.

He also said bank support for small businesses must follow market principles and avoid too much administrative intervention in order to check moral hazards.

His remarks came in light of tightening monetary policies that have bitten into China's small businesses. These companies create 80 percent of the country jobs, but have difficulty securing bank loans, as Chinese banks prefer to lend to larger companies.

Outstanding loans to small firms grew 26.6 percent year-on-year to hit 9.85 trillion yuan (1.55 trillion U.S. dollars) at the end of July, rising faster than the total outstanding loans of Chinese banks, said Xiao Yuanqi, an official from the China Banking Regulatory Commission (CBRC), late last month.

But the situation remains grim, as some cash-strapped companies have shut down and others have resorted to the private lending market, which operates outside of the banking industry and typically features higher interest rates.

Wen said private lending activities should be better guided and regulated in order to play a positive role in boosting the country's economy.

"Effective measures should be taken to contain the trend of usury, crack down on illegal fundraising and properly handle the problems of collateral and capital shortage in order to prevent risks from spreading and evolving on a regional scale," he said.

In Zhejiang's city of Wenzhou, one-fifth of the city's 360,000 small and mid-sized businesses have stopped operating due to cash shortages, according to the city's council for small and mid-sized enterprises.

During his tour in Zhejiang, Wen visited several enterprises in the cities of Wenzhou and Shaoxing and met with local business leaders.

"Small businesses play an irreplaceable role in creating jobs and boosting economic growth," said Wen. "It is of overall and strategic significance to support their development."

China's economy is moving in the direction expected by the government, Wen said. He added that its fundamentals are sound, with a stable economic and financial system and a relatively good employment situation, he said.

"We should maintain the continuity and stability of our policies while giving them more foresight, relevance and flexibility," the premier said.

China has made stabilizing prices a top priority in its macro-economic controls while trying to avoid harming the growth of the world's second-largest economy with its tightened monetary policies.

The CBRC has encouraged banks to set up special operations to ease small firms' financial difficulties and carry out differentiated NPL supervision on loans to small enterprises.

In June, the CBRC said that loans of less than 5 million yuan granted to small companies will not be subject to loan-to-deposit ratio supervision.

Xiao, who is in charge of financial services for small enterprises at the CBRC, said last month that Chinese banks can tolerate an NPL ratio of 5 percent for small businesses, much higher than the current average NPL ratio of 2 percent.

Wu Xianting, deputy director of the PBOC's financial market department, said in August that the number of bankrupt companies in Guangdong and Zhejiang provinces, where many small firms are based, was much lower than two years ago during the global financial crisis.

Higher prices for coal, electricity and other raw materials, as well as rising labor and financing costs, resulted in the closures, Wu said in an online interview.

China saw its consumer price index (CPI), a main gauge of inflation, rise 6.2 percent year-on-year in August, far above the government's four-percent target for the year.

The People's Bank of China (PBOC), or China's central bank, has raised its benchmark interest rate three times this year and increased its reserve requirement ratio six times during the same period.

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Evergrande Fined for Providing Inaccurate Information on $1 Billion Assets

Evergrande Real Estate Group Ltd. (3333), China’s second-biggest developer by sales, was fined for filing inaccurate financial statements and underpaying taxes in a case that highlights accounting weaknesses at the nation’s companies.

Evergrande, one of 114 companies the government inspected, provided inaccurate information on 6.4 billion yuan ($1 billion) of assets in its 2009 financial report, overstated costs and underpaid taxes, the ministry of finance said in a statement, without giving further details on the penalty. The developer said the irregularities came from its Guangzhou unit and they have been rectified in the 2010 statement.

“It’s affecting the credibility or corporate governance image of the company,” said Kenny Tang, Hong Kong-based general manager at AMTD Financial Planning Ltd.

“Because investors are focusing on the earnings growth of the company for valuation, the most important thing is whether the earnings are true.”

Evergrande shares slumped more than 50 percent from their July peak to a 16-month low this month on concern developers face a funding squeeze amid the government’s property curbs. Almost 70 percent of developers said their cash-flow conditions in August worsened from July, independent investment-advisory firm CEBM Group Ltd. said in an Aug. 5 report, citing a monthly survey of real-estate companies in 12 Chinese cities.

Accounting Problem

“Some property developers have the problem of reporting inaccurate revenue figures, overstating costs and delaying or underpaying taxes,” according to the ministry’s statement.

Premier Wen Jiabao said last month the government measures to control the property market are at a critical stage and it needs to focus efforts on curbing price increases in less affluent cities after limiting home purchases in markets including Beijing and Shanghai.

The Guangzhou-based developer was ordered by the government to amend the accounting and pay back the taxes, according to the ministry.

“The accounting reporting at our listed Hong Kong company completely reflects the accurate assets and revenue,” Evergrande Chief Executive Officer Xia Haijun told a press conference in Hong Kong yesterday. “The problem at our Guangzhou unit was only because we didn’t combine the reporting of all its subsidiaries in 2009.”

Chinese developers face an “increasingly severe” credit outlook, which may force them to cut prices and turn to costlier funding sources as sales weaken, Standard & Poor’s said on Sept. 27. A 30 percent decline in sales may leave many developers facing a liquidity squeeze, S&P said after conducting stress tests of the nation’s real estate companies, adding that “the worst isn’t over for China’s real estate developers.”

Shares Surge

Evergrande shares surged 10 percent to HK$2.91 at the close of Hong Kong trading yesterday, after falling as much as 8 percent.

Fewer than half of the 70 cities monitored by the government in August posted month-on-month gains in home prices for the first time, according to Samsung Securities Co. SouFun Holdings Ltd. said residential values last month dropped for the first time in a year.

China’s banking regulator is looking into financing of developers through trust companies as part of a broader evaluation of property loans, a person familiar with the matter said last month.

Greentown China Holdings Ltd. (3900), Hopson Development Holdings Ltd. (754) and SRE Group Ltd. (1207) are among the most vulnerable to sales declines because they lack the ability to refinance large short- term debt, S&P said. Hopson had its credit rating outlook cut to “negative” from “stable” Sept. 22 by S&P, citing its “aggressive debt-funded expansion, weak sales execution record and ongoing corporate governance.”

‘Cautious Attitude’

“Most market players have cautious attitude on private enterprises in mainland China,” said Tang at AMTD. “This case further intensified the worry over Chinese companies.”
Tighter credit conditions have led developers to seek out more expensive forms of financing, including offshore bonds and onshore trust companies, S&P said. Still, these loans may not be available with higher credit risks and deteriorating stock markets, it said.

China’s central bank has raised interest rates five times over the past year, curbed lending to property developers and raised down payments on home loans to tackle asset risks in the property market. The government has also limited purchases of housing in cities where gains have been deemed excessive.

Petty officer1