China Can’t Buy Enough Bonds as Dollar No Deterrent
|September 29, 2009||Posted by Jeffery J. Smith under Progress Report, The Progress Report|
China Can’t Buy Enough Bonds as Dollar No Deterrent
Rare Earths are Vital, and China Owns Them All
China Roundup: The environment is bad and could get worse, yet the government seems savvy about money. We trim, blend, and append five 2009 articles from: (1) MarketWatch, Sept 1, on protests; (2) BBC, Sept 27, on lead poisoning; (3) MarketWatch, Sept 24, on rare earths by Myra P. Saefong; (4) BBC, Sept 6, on syringe stabbers; and (5) Bloomberg, Sept 21, on US bonds by Cordell Eddings and Lukanyo Mnyanda.
by MarketWatch, by BBC, by M. P. Saefong, and by C. Eddings & L. Mnyanda
- Thousands of Chinese villagers stage pollution protest
Villagers in southeastern Chinese province of Fujian, involving up to 10,000 people and 2,000 police, went on a rampage over a powerful stench from a wastewater treatment plant, damaging equipment and clashing with police.
- China probes child lead poisoning
Chinese state media say a battery plant in the city of Longyan in the province of Fujian has been closed after more than 120 children living nearby were found to have lead poisoning.
Residents said the government closed the plant after local people approached officials with test results showing lead poisoning in some children.
China has reported a series of such cases:
* Last month, hundreds of children living near smelting plants in Shaanxi and Hunan were found to have excessive amounts of lead in their blood.
* In August, two executives of a manganese smelting plant in Hunan were detained by police after more than 1,300 children fell sick with lead poisoning.
* Earlier, another smelter in northern Shaanxi province was closed after more than 600 children were found to have lead poisoning.
- Syringe stabbers spur protests
China has warned anyone found guilty of stabbing with syringes containing poisonous or harmful substances could face the death penalty. In the western city of Urumqi, at least five people have died this week in ethnic unrest triggered by the stabbings, with thousands of angry Han Chinese staging daily mass protests. Chinese officials have blamed Uighur Muslim separatists for the attacks.
Xinjiang’s population is evenly split between Uighurs and Han Chinese — the country’s majority ethnic group. But Hans make up three-quarters of Urumqi’s population.
China’s Public Security Minister, Meng Jianzhu, has said the syringe attacks were a continuation of unrest in July in which 200 people — mostly Han Chinese — were killed in ethnic riots.
- China deals with shortages by monopolizing
“We are addicted to rare earths as much as we are addicted to oil,” said Byron King, editor of Energy & Scarcity Investors.
Lanthanum, gadolinium, and others are used in glass polishing and ceramics, automotive catalytic converters, computer monitors, lighting, televisions, and pharmaceuticals.
The US, which is a major buyer of rare earths, mined no rare-earth elements last year, USGS said.
China accounts for about 97% of global rare-earth production — 139,000 metric tons of material in 2008 — and it also consumes about 60% of the world’s rare earths.
“China is consuming more of its own rare earths all the time, so it’s exporting less,” said Sean Brodrick of uncommonwisdom.com.
Neodymium is the only element that can create strong permanent magnets. Strong magnets “are critical to the guidance systems of every missile.”
China gained its monopoly on rare earths because it was able to “undercut everyone else’s price over the past decade,” according to Emerging Market Strategies’ Gamble.
The Chinese rare-earth sector also gained a leg up by swallowing some serious environmental consequences. “Many rare-earth elements are very toxic,” said Marcus Hudson, president of a commodity-hedging advisory firm.
Until now, rare-earth production was not very economical, but if prices stay high, we will see many new mines outside of China.
- China cant buy enough US bonds
Even as the dollar falls 15% from its high this year to the lowest levels of the year and the budget deficit tops $1 trillion, investors outside the US bought 43.1% of the $1.41 trillion of notes and bonds sold by the Treasury Department this year, compared with 27.1% of the $527 billion issued at this point in 2008.
Federal Reserve holdings of Treasuries on behalf of foreign accounts rose 16% to $2.07 trillion since the March high. China, the biggest foreign owner of Treasuries, added $24.1 billion in July after net sales of $25.1 billion in June, raising its stake in US government debt 3.1% to $800.5 billion. The countrys holdings have risen 10% this year, after a 52% gain in 2008.
Foreign governments have little choice than to buy Treasuries because they hold so many dollars. The US dollar accounts for 65% of world currency reserves, up from 62.8% in mid-2008, according to the International Monetary Fund in Washington.
A weaker dollar has increased concern among some investors. The US government and the Fed have spent, lent, or committed more than $12 trillion in a bid to revive the economy and credit markets.
However, prices of goods imported into the US tumbled 15% in August from a year earlier, after a record 19.2% drop in July.
Jeffery J. Smith runs the Forum on Geonomics.
A Popular Pacifist Uprising Has Happened Before
Massive riot in northwestern China
Is There a Global Ruling Class?
What are your views? Share your opinions with The Progress Report!