Article first published as Development Model of EMEs Goes Against Environment Protecting Laws on Blogcritics.
Two international conferences aimed at formulating an agreement to be accepted by all countries of the world have failed to achieve their goal. Copenhagen Conference in December 2009 and South Korea Conference in December 2010 have utterly failed due to pressures from multinational companies of the US and the EU, which are mainly responsible for the greenhouse gas emissions and hence for increase in temperature of the Earth planet. Recently, the development model proposed for the Emerging Market Economies (EMEs) by the world’s big powers such as the US, the EU and Japan along with WB and IMF are adding fuel to fire.
Because of the policies of Liberalisation, Privatisation and Globalisation, forced through WB and IMF by the imperialist powers, EMEs have become so by relegating welfare principles of the state capitalism implemented for the so-called benefit of people by the earlier leaders of those countries. As national character of the ruling classes in majority of the EMEs are subservient to the interests of the imperial powers these countries adapted principles of the free market economy with the successful conclusion of the Uruguay Round trade negotiations under supervision of the imperialist countries.
As environmental concerns occupied the main stage in imperialist countries because of the movements of the environmental organisations, such countries have brought tough environment laws that effectively limited the activities of the multinational companies. MNCs of the imperial countries had to curtail their production activities to escape from higher costs emanated from the environment laws. They shifted their production and assembling activities to third world countries to benefit from the absence of tough environment laws along with utilising cheap labour costs available in those countries.
Potential for trade disputes is raising over China’s export quotas of rare earth minerals crucial for manufacturing key electronic parts. China said it would reduce export quotas of rare earth minerals by 35 percent for the year 2011. The US said last week that it would file a case at WTO. Electronics manufacturers are heavily dependent on China’s exports of rare earths, as it owns major part of world’s rare earths reserves. China is estimated to contain almost 90 to 97 percent of world’s reserves of those minerals.
Rare earth minerals are a group of 17 chemically similar elements that include scandium, yttrium and fifteen lanthanides. Elements such as neodymium, cerium and lanthanum are called lanthanides. These elements collectively occupy a close area in the periodic table. These are used for making many electronic goods such as smart phones, monitors of TVs and PCs, hard discs of laptops, condensers, magnets in batteries of hybrid cars and headphones of Apple iPods. It is almost impossible to imagine a world without these electronic goods nowadays.
China has been cutting export quotas of rare earths for last few years, which has become a controversial issue in world trade. Previously China said it was cutting down exports to meet domestic demand. China is also telling that the companies involved in mining and export of rare earths are causing enormous environmental damage. China wants to control excessive mining that became severe especially in Southern China a spokesperson of the Chinese commerce ministry is quoted as saying by BBC news.
China Government is geared up to control inflation in coming months. It intends to control inflation by controlling money supply and lending. Fears of asset bubble and price rise are haunting Chinese government. Analysts are expecting drastic measures from the Central Bank including further rate rises.
China increased interest rate by 25 basis points on Christmas surprising analysts. China inflation has reached 28-month high due to rising food and asset prices. Excess cash in the system is seen as major driver of inflation. The task of taming inflation will be a priority for the Chinese government in the next year, Reuters noted.
A deputy governor of Central Bank, Hu Xiaolian issued a statement on its website on Monday. Hu reiterated the central bank’s determination to drain excess cash from the financial system by using all tools at its disposal such as interest rates, reserve requirement ratios, open market operations and more.
Foreign investors view China’s inflation-controlling measures as a signal for strong growth of Chinese economy. Chinese officials are confident that the growth of Chinese economy is supported by strong and sustained recovery.
China raised interest rate by 25 basis points to 5.81 percent to analysts’ surprise. Many thought China would hold interest rate on the eve of Christmas. It also raised repo rate or deposit rate by 25 basis points to 2.75 percent. China’s rate raise shows that China is committed to fight rising inflation. The interest rate was raised last time on October 19 for the first time after the world financial crisis.
China worries are centred on inflation and property bubble. Food prices are on rise in China threatening widespread unrest. Property rates are also rising threatening to cause a property bubble. China’s rate rise has to be seen in this background. Rate rise also signals that China is confident that its growth gained strong hold.
China inflation was recorded 5.5 percent in November last week. China raised banks’ reserve requirements six times in 2010 restricting them from lending.
China offered to take concerted action to help financial stability of Europe, the countries of which are haunted by sovereign debt crisis since the beginning of 2010. European officials informed that Chinese vice premiere Wang Qishan gave assurances that China was ready to support European efforts for stabilisation, while speaking to the annual China-EU High Level Economic and Trade Dialogue on Tuesday, December 21, as per FT report.
Chinese spokesperson Jiang Yu is today quoted by BBC News as reiterating Chinese vice premiere’s pledge to support the EU to overcome debt crisis. China’s support majorly stems from bond purchases though it did not give specific details of its support. China has been buying bonds of most indebted countries of the Eurozone such as Greece, Ireland and Portugal. Many analysts are forecasting that Portugal may be the next Eurozone country to tap Eurozone stability fund. Spain’s debt costs are also on rise, prompting speculations over Spain’s ability to raise further bond funds.
China’s Prime Minister Wen Jiabao visited Greece in October. He promised to Greece that China would buy Greece bonds and increase their investments in Greece. Similarly, China’s President Hu Jintao toured Portugal in November. During his trip, he said China would take concrete measures to support Portugal that included bond purchases.
The reason for China’s enthusiasm to support EU’s financial stability is obvious. The EU is China’s largest trading partner. Two-way trade between China and the EU in first eleven months of this year stood at $434 billion and that is why Beijing is interested in regional stability. However, bond costs continued to rise during last three months even though China bought public debts of Greece and Portugal. Therefore, it is doubtful that China’s support to Eurozone would be transformed into the fiscal stability of Eurozone and the EU as a whole.
North Korea restrained itself from retaliating South Korea’s life-fire military drill that went on as planned in Yeonpyeong Island, with a small contingent of the US personnel helping the drill. North Korea said the world would now understand who the true champion of peace was and who the real provocateur of a war was.
After the drill, China reiterated both sides to observe restraint and called to prefer dialogue when problem arises. Russia also urged both sides to restrain from provocation as reported by BBC News.
Meanwhile, UN Security Council talks ended without a deal on the weekend, reportedly after China refused to agree to a statement critical of its ally, the North. The US has backed the South’s right to carry out the exercises. Bill Richardson, the governor of New Mexico is in North Korea as an unofficial envoy for the US to soften the atmosphere. CNN reported that northern officials told Mr Richardson they would allow UN nuclear inspectors back into the country, but there has been no official comment.
Japan revealed its intentions to make substantial changes to its defence policies on the pretext of China’s increasing military might and North Korea’s nuclear weapons. Japan has maritime border with China. Japan’s new national defence policy has acquired importance in the wake of recent rise of tensions between China and Japan when a Chinese trawler hit a Japanese petrol boars near disputed chain coral islands on which both countries have ownership claims.
China has been strengthening its military utilising its trade surplus and foreign currency reserves due to which its neighbours such as India with which it has border disputes, Japan with which it has disputes on ownership over coral islands in South China Sea, and Taiwan on which it has ownership claim have rising concerns. The US is also worried with China’s military build-up as it feels China is threatening the US’ interests in South Asia and East Asia regions. The secretary of state for the US Ms Hillary Clinton expressed openly her concerns that China was ascertaining its domination in the region.
Recently, the US conducted military drill with South Korea in Yellow Sea after North Korea fired artillery shells on a disputed South Korea’s island near maritime border. Though, the US said the military drills were part of regular exercises, its main aim was to issue veiled warning to Chinese military, which has been ascertaining its position in the region. The US accused China for not reigning in North Korea’s behaviour during recent tensions in Korean peninsula. It has 50,000 troops stationed in a Japanese island Okinawa and 28,500 troops in South Korea.