Friday, October 22, 2010
China: "You started it, America"!
It has been for some periods that the world has tried to push China in raising its currency. Last month, the US imposed tariffs on Chinese tires. China, in response, announced tariffs on the US chickens. Now, there are increasing indications that China will be cutting off supplies of 17 rare earth minerals to the western countries. While these minerals are crucial to many high-tech products, including aircraft, wind turbines, and electronic cars, the more threatening concern is that China produced 97% of them. Although the US has reserves to supply the global needs for a century at current demand levels, it is interesting to see how the trade war would proceed in the future.
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3 comments:
I think a currency and trade war is especially dangerous with China considering how much we borrow from them. Can we afford to keep up the battle?
China needs U.S. consumption and the U.S. needs Chinese investment. Sounds like a perfect relationship, but the fairytale seems to be near its end. As other countries develop and produce more of the world's products, maybe China will be less of a powerhouse production center. At that point, China may become less export-oriented and allow their the yuan to appreciate. Until that happens, there will be debates and arguments over what China should do.
Maybe the U.S has been a global power for so long that it can't stand the rise of another. From a China's standpoint, it's totally reasonable for what it has done to help its economy and create jobs. The U.S has been dependent on imports for so long so that now it struggles against China's reaction. Just think of this, the U.S is whining because cheap exports from China threatens American jobs. But now China cuts back on exports to the US, people complain they're a bully and monopolizing the supply chain. The fact is that restoring these rare earths mines in America will create JOBS!
As for China, think it cuts back on exports of rare earth mineral to make sure its own factories will have plenty of supply in the future, which will keep it from having to import those minerals from other countries, which would increase costs,and which would, in turn, make it less competitive in the world market.
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