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.
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.
The US is worried over increasing influence of China in Africa. China has been investing in Africa for minerals and other resources keeping its own resources untouched. Wikileaks released a cable yesterday on November 9, which revealed how Shell oil company infiltrated into Nigerian government and how US is worried about growing influence of China in Africa. The US ambassador is concerned that China will soon develop strategic relations such as military training and communications development.
A February cables quotes a senior US official in Nigeria’s main city, Lagos, describing China as "aggressive and pernicious with no morals". US diplomatic cables sent from Africa also reveal Shell oil company’s claims that it infiltrated Nigerian ministries. The cable quotes Johnnie Carson, US Assistant Secretary for African Affairs, who had been meeting oil company representatives in Lagos.
Carson says China is in Africa for its own gains. He also opines that China is in Africa for securing votes in United Nations from African countries. Carson’s opinion is that the US is working in Africa to secure democracy and capitalism where as China has authoritarian capitalism. He criticised China for dealing with Mugabe’s Zimbabwe and Bashir’s Sudan.
Another US cable talks about China’s military and intelligence support for the government of Kenya. A Chinese enterprise is said to have won a contract to supply telephone-monitoring equipment to Kenya after bribes were paid while on a trip to China. Its influence in Kenya is said to have grown rapidly, with Chinese involvement in a host of infrastructure projects as well as collaboration with Kenya’s National Security and Intelligence Service.
The secret cables also say that Shell’s top executive in Nigeria at the time, Ann Pickard, told US diplomats that Shell Oil Company has good access to government information. A cable dated 20 October 2009 reveals a conversation Ms Pickard had with the then US ambassador to Nigeria, Robin Renee Sanders.
South Korea’s Yonhap news agency quoted the director of South Korea’s National Intelligence Service as saying that there was a high possibility that the North Korea would make another attack, BBC reported. South Korea is planning another round military drill with the US in this month.
Four people were killed and 18 were injured when North Korea fired dozens of artillery shells on November 23 onto the South Korean island “Yeonpyeong” near maritime boarder of the two Koreas. North Korea said South Korea fired first. South Korea said it fired westward but not northward.
AFP was quoted as reporting by BBC News that China has blocked a formal censure of North Korea in the United Nations for shelling South Korea’s island, which 40 miles away from South Korea but only 7 miles away from North Korea. The news comes at a time when it is revealed through ‘wikileaks’ new set of revelations that China is frustrated with North Korea’s behaviour of acting like a spoiled child to attract the US’ attention by carrying out missile tests in April 2009.
BBC reports quoting unconfirmed reports that Chinese law maker Dai Bingguo was invited to Pyongyang for discussions. Also, an aide to North Korea leader Kim-Jong-Ill was invited to Beijing. China called for immediate resumption of six party talks to diffuse the tension developed after two Koreas exchanged fire few days back. North Korea warned over joint military drill by the US and South Korea that it would respond second time and even third time if South Korean warmongers continued to provoke by prolonging the joint military drill. China also expressed its anger over joint military drill.
Meanwhile, South Korea and the US have decided to continue their joint military drill after a few days gap. The next drill may take place after a few days in December. The present exercises will end on Wednesday, December 01. Separately, South Korea is planning what it calls routine week-long naval live-fire exercises from 29 sites around the country. These exercises will last for several weeks.
China is frustrated with North Korea’s attitude, Wikileaks third despatch reveals. One of the cables released on Monday says, China’s Vice Foreign Minister, He Yafei, told the US charge d’affaires in Beijing that North Korea was behaving like a "spoiled child" to get Washington’s attention in April 2009 by carrying out missile tests. Another cable in September 2009 says Mr He Yafei downplayed the visit of China’s premier Wen Jiabao to Pyongyong saying US deputy secretary of state Mr James Steinberg, “We may not like them… (But) they are a neighbour.” He also said Wen would push for denuclearisation and a return to talks.
Another cable reveals a discussion in February 2010 between former South Korean vice foreign minister Chun Yung-Woo and the US ambassador to Seoul Kathleen Stephens. The minister was quoted as saying that the new younger generation in China would not regard North Korea as a reliable ally and they would not risk another war in Korean peninsula. Ms Stephens added, "The PRC would be comfortable with a reunified Korea controlled by Seoul and anchored to the United States in a ‘benign alliance’ – as long as Korea was not hostile towards China."
Six party talks to defuse the nuclear ambitions of North Korea were stalled in April 2009 after North Korea test fired missiles. The US and South Korea say talks cannot be resumed until North Korea makes a genuine offer on stalling its nuclear tests.
China has called for an emergency meeting of members of the six-party in December, authorised to discuss on nuclear programme of North Korea, to discuss the latest tensions raised in Korean peninsula. Two Koreas, China, Japan, Russia and the US are members of the six-party. The six-partite talks were stalled in April 2009 with the South Korea and the US stating that North Korea should stop pursuing nuclear programme first before resuming the talks.
However, the US and South Korea are said to be less than enthusiastic towards China’s proposal. China says the proposed talks are not the resumption of six partite talks. But, it said there is an urgent need to resume the six partite talks. South Korea said it would review Chines proposals carefully adding that it was not interested in earlier resumption of six partite talks. Japan responded that it would deal with the issue cautiously in cooperation with the US and South Korea.
The tensions rose, when North Korea fired dozens of shells onto a disputed South Korean island from where South Korea test fired a few shots as part of usual military drill. North Korea said it had warned to stop the drills. Now South Korea and the US are conducting joint military drill 125 km south of the maritime border.
China expressed concern about joint military drill by US and South Korea planned for Sunday, November 28. The US’ warship “USS George Washington” housing crew of 6,000 mariners is reaching Yellow Sea waters where the joint military drill is planned. On the other hand, North Korea warned it would wage second and even third of attacks if the warmongers of the South Korea made reckless military provocations again.
China previously criticized the joint military exercises of the US and Japan in South China Sea when potential rift developed between Japan and China after a Chinese trawler driver was arrested by Japan near disputed set of islands on which both China and Japan have claims.
The US is worried that China is increasingly becoming assertive in China Sea waters militarily.
BBC News | 7 October 2010 | 23:33 GMT
Global currency wars pose "a real threat" to economic recovery, the head of the International Monetary Fund, Dominique Strauss-Kahn, has warned. In an interview with the BBC, he said currency disputes showed that countries were not co-operating as well as they had during the financial crisis. In recent weeks both the US and Europe have led criticism of China over its undervalued yuan.
Meanwhile, Japan has been forced to intervene to curb rises in the yen. Separately, Indian Finance Minister Pranab Mukherjee on Thursday warned that imbalances in the global economy have become "not sustainable". But he urged major economies to shun confrontation to avoid a feared currency war.
Mr Strauss-Kahn told the BBC that there were signs that countries were trying to use their currencies "as a weapon". "The willingness of the countries to work together, which was very strong at the climax of the [financial] crisis is not as strong today," he said. "’Currency war’ might be too strong, but the fact the countries want to find domestic solutions to a global problem is really a threat to the recovery."
BBC | 22 October 2010 | 12:21 GMT
US proposals that countries set targets to reduce trade imbalances appeared to be running into opposition at the G20 meeting of leading economies. US Treasury Secretary Timothy Geithner wrote to G20 members on Friday suggesting limiting surpluses and deficits to a percentage of output. But Japan, Germany and Russia expressed opposition to what one delegate called "planned economy" thinking. The proposal is seen as mainly directed at China, which had yet to comment.
Washington has been pressing China for months – without success – to let its currency appreciate. Getting Beijing to tackle its large trade surplus would be an indirect way of forcing the yuan to rising in value.
In his letter to G20 colleagues on the opening day of a meeting of finance ministers in South Korea, Mr Geithner said countries should aim to reduce surpluses or deficits to a targeted share of gross domestic product. US officials said the target would be 4% of GDP by 2015. China’s current account surplus was 4.9% of GDP in the first half.
Japanese Finance Minister Yoshihiko Noda summed up the mood among other big exporters, including Germany, saying Mr Geithner’s proposal was "not realistic". Australian Treasury Secretary Wayne Swan said he was not sure a "one-size-fits-all" approach could work. Tensions over exchange rates are like to dominate the meeting, being held ahead of a summit by heads of state next month.
Reuters | Oct 15, 2010 | 10:09pm IST
The Obama administration plans to delay a decision on whether to label China a currency manipulator, a move long demanded by many U.S. lawmakers but also a potentially big wrench in an important relationship. A Senate aide told Reuters the Treasury Department would hold off releasing its semi-annual report on the currency practices of U.S. trading partners.
It was not immediately clear how long the delay would be. Industry sources had said they expected the report to be unveiled at 1 p.m. EDT (1700 GMT) on Friday. The Senate aide, speaking on condition he not be named, said he was "hearing they will delay its release."
A desire to look tough on "unfair" trade practices before the U.S. congressional election on Nov. 2, in which Democrats are battling to keep control of Congress, could tempt President Barack Obama to cite China for the first time in 16 years.
But concern about angering the largest holder of U.S. government debt and the need for Chinese support on a host of international issues could mean continuing diplomatic efforts that have resulted in a nearly 2.5 percent rise in the value of China’s yuan against the dollar in recent months. It is a fine line and many observers think Obama will opt to play it safe with Beijing and give it another pass.
BBC News | 24 September 2010 | 22:34 GMT
A US Congress committee has approved a bill that would place retaliatory trade sanctions on China. It means the House of Representatives – the lower chamber of Congress – will vote on the bill next week. The bill would allow the US to impose import duties on countries that have fundamentally undervalued currencies. To become law, the bill would also need support in the Senate, which is less certain ahead of mid-term Congressional elections due in November.
The US accuses China of holding down the value of its currency, the yuan, in order to give its exports an unfair price advantage. "China’s persistent manipulation is a major distortion in the international marketplace," said Sander Levin, chairperson of the House Ways and Means committee. "[The yuan] has a major impact on American workers and therefore American jobs. That’s what this is really all about."
The draft legislation would require the US Commerce Department to determine the extent to which a currency is undervalued in any case of unfair trade practices brought to it. In August, the department decided to drop a more general investigation into the value of the yuan, despite deciding that China had unfairly subsidised its aluminium exporters.
The Congressional committee’s decision comes a day after US President Barack Obama spent most of a two-hour meeting with Chinese premier Wen Jiabao in New York pressing for a stronger yuan.
Article first published as Chinaâ€™s Growth Interests US Leaders on Technorati.
US President Barack Obama has changed course, criticizing China for its exchange rate policy. Obama said on Monday that the rapid economic growth of China was in the interest of China. The announcement is interesting, though somewhat contrary to the accusations made against China that it was manipulating its currency value to keep it exceptionally low, making its exports cheaper.
The speech of Mr. Obama was telecast live on CNBC around 10:30 pm IST (GMT+5:30). He was on his way to raise funds for a Democratic Senate candidate for Pennsylvania. He said, in the interview given to CNBC, that China’s strong growth benefited the US. Moreover, he clarified that the US’ growth was also beneficial to China (exports).
The same opinion was acknowledged by the Treasury Secretary Timothy Geithner while giving a report to Congress on Sept. 16, according to Xinhua news agency. He said in his report, “We have very significant economic interests in our relationship with China. A strong and growing China benefits the United States, just as a strong and growing United States is good for China.”
Article first published as Implications of China Monetary Policy on Global Imbalances on Blogcritics.
China’s exchange rate policy has been a contentious issue in the global economy particularly between the China and the West. The West has long been criticizing China for keeping Yuan at an exceptionally lower value. They claim China is in an advantage position due its manipulated lower Yuan value, as it makes China exports cheaper. The US President Mr. Obama accused China as currency manipulator in his earlier days of coming to power.
The West says China had pegged Yuan value to the dollar. Yuan value did not change from its value of ¥6.83 a dollar since July 2008. However, China denied the claim on equal tone and resisted pressure from Obama to raise Yuan value. Chinese Premier Hu Jintao said, “Yuan rise would neither balance Sino-US trade nor solve the [US] unemployment problem,” in April during the NSG (nuclear suppliers group) meet in Washington DC.
Many Economists and analysts suggested to China, it would be fair to share the growth of the economy by appreciating the Yuan value, when China recorded 11.9 percent of growth rate in the first quarter. Nevertheless, China did not find any pressing reasons for immediate appreciation of the Yuan value then.
The US Retaliation
The US Treasury Secretary Tim Geithner postponed submitting his report on whether the China was manipulating its currency value or not, to the Congress in April. It was rather a soft approach by the US, hoping China would reciprocate positively by tightening its monetary policy. It was also a revelation that the US was wary of trade war against China. China invested nearly 70% of its vast foreign reserves in the US Treasury bonds.