CISA, China's iron and steel group, asks local steel firms to stop buying from Vale (VALE), Rio...

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newbietech Comments (183)
 
More evidence that China is going to use everything in its arsenal to gain a permanent competitive edge from the capital market dislocations we have recently gone through and which are still ongoing.
China's number one goal to keep for itself all the benefits of its developing markets that it can keep. It doesn't care if the policies it follows to fulfill that goal are capitalist or not.
We need to realize that keeping private (foreign) investments in that country safe for investors is probably number 10 on their priority list. The lack of investor rights in China is why I invest in foreign lands through UMBWX.
4 Apr 2010, 10:50 AM Reply Like

vtorch Comments (264)
 
China refuse to let is undervalued currency appreciate, and the country has used "economic stimulus" (i.e., irresponsible lending) to boost its GDP growth, causing widespread inflation. Now it is crying foul that prices are going up?

Now iron ore. What next? Fertilizer? Copper? Coal? Oil? Anything that the Chinese need and refuse to pay a fair price for? I think iron ore producers should stop importing to China for six months and see who suffers.
4 Apr 2010, 11:01 AM Reply Like

nmelendez Comments (1604)
 
Ummm...that sounds familiar. Oh yea, "We can print as much money as we want." Sound familiar?
4 Apr 2010, 12:32 PM Reply Like

Ricard Comments (3829)
 
The logic here is unsound.

If their currency is undervalued, then by definition they are overpaying for all imports, in this case commodities.

If they do appreciate their currency, commodities and all other imports will only become cheaper and cheaper for them to purchase. In such a scenario, they probably won't be bound (like Japan) to buy non-performing assets across the world - instead they will be hunting for gold, literally, among other commodities, and they will buy it for RMB-denominated fire-sale prices.
4 Apr 2010, 11:10 PM Reply Like

surfgeezer Comments (4842)
 
You are correct, except most commodities are priced in dollars and their largest export market is us by far. So, in effect, their competitors are buying the higher priced commodities in falling dollars but they are still able to price their exports to the US relatively cheaper as other exporting nations do not have the currency lock.
5 Apr 2010, 02:09 AM Reply Like

nmelendez Comments (1604)
 
So they create an exchange with the US of Yuan's for dollar's. Watch everyone buy chinese bonds LMAO :))
7 Apr 2010, 08:06 PM Reply Like

tripleblack Comments (11476)
 
When the yuan is jacked up 5% or so soon, prices will come down for the Chinese companies (about 5%, by an odd coincidence).

This is interesting in that it highlights the complete control exerted by the Communist Party central planners in Beijing via "The List".

This is also a large reason why currency manipulations (or attempts to "correct" them) will not necessarily fix trade imbalances.
4 Apr 2010, 11:12 AM Reply Like

surfgeezer Comments (4842)
 
You're right it doesn't fix all comparative advantages, but it does come closer to free trade theory and 5% is not close to what the problem really is.
5 Apr 2010, 02:12 AM Reply Like

tripleblack Comments (11476)
 
You're correct, something like 40% is closer to reality. But its not logical to look at a centrally planned economy being run to a Communistic geopolitical agenda to act like a free market.

Currency and money supply behavior that have become underlying assumptions for many Western economic models get lost trying to track China. Its not really a case of leveling the playing field, but of doing one of two things:

1. Adopting the same playing rules used by the other side.

2. Using offsetting economic controls to prevent damage to yourself (ie, Krugman's tarrif ideas).
9 Apr 2010, 08:44 AM Reply Like

glennbahia Comments (92)
 
i figured China would organize a response to the miners price gouging. Australians some years back complained about Japan buying up the country . Japan was trying to assure its supply of raw materials by buying producers around the world. Now its China trying to secure its sources in the same manner. China is largely to blame for the rapid recovery in prices after the collapse in late 08/ early 09 due to its stockpiling. But price relief may be on its way anyway- either through a bubble burst in China ( or major slowdown) or some other market driven forces.
4 Apr 2010, 12:01 PM Reply Like

surfgeezer Comments (4842)
 
They put people in jail for publishing material readily available every where else. Good luck on the double dip theory.
5 Apr 2010, 02:14 AM Reply Like

Chandragupta Comments (240)
 
This will work to the advantage of other Iron Ore producers.And it is not clear what China will do after the two months are over. In fact, spot iron ore prices are even higher than the USD 100 - 110 range that the Big Three have been demanding. If the contract system breaks up and all trade moves to spot, it is China which will be the biggest loser.
4 Apr 2010, 01:40 PM Reply Like

zorrow Comments (765)
 
Well, I guess squabbling over resources is better than a dead world economy.
4 Apr 2010, 05:13 PM Reply Like

6.5 swede Comments (81)
 
China started this sequence of events last year when they wouldn't agree to a new benchmark price with Rio Tinto. So instead the Big Three sold iron ore on the spot market. Now this year Vale gets Japan and Korea to agree to a 3 month benchmark at almost the same price as the spot market. Meanwhile China sends four Rio Tinto employees to jail for 14 years. Looks like Vale won and China lost this round.
5 Apr 2010, 12:43 AM Reply Like