Sunday, March 29, 2009
China has triumphed in a 15-year quest to become the “ultimate monopolist” in the supply of rare earth metals — a dominance that industry experts say could give Beijing control over the future of consumer electronics and green technology.
Industry sources believe that with China dramatically cutting its annual rare earth export quotas, the time may be rapidly approaching when it will be impossible for any company to produce a wind turbine or hybrid electric car outside the communist country.
After a long, relentless campaign of price wars and export quota reductions, more than 95 per cent of the global supply of rare earth metals — a group of 17 “lanthanide” elements employed in hundreds of technologies ranging from mobile phones and BlackBerrys to lasers and aviation — is produced by China.
Although China has the resources and refinery capacity to produce enough lanthanum, terbium, neodymium and dysprosium to satisfy a global demand that is rising at 10 per year, its rare earth export allocation for the whole world this year is expected to be about 38,000 tonnes — less than the quantity required by Japan alone.
Furthermore, as the world tries to make itself more energy-efficient, China's dominant position will become more strategically critical because of the wide range of cutting-edge environmental technologies, such as wind turbines, low-energy light bulbs and hybrid cars, that depend heavily on the rare earth metals.
Jack Lifton, an expert on rare earths, said: “Deng Xiaoping's comment in 1997, where he said that China would be for rare earth metals what the Middle East was to oil, has become a very stark reality. The world has to wake up and start thinking of this group of elements as the ‘technology metals' without which there will be no technology. China is already working out how these metals are going to give its companies a competitiveness that the rest of the world will find very difficult to match.”
China's rising strength in rare earth supply and its apparent willingness to use that as “a 21st-century economic weapon” have triggered what government sources in Tokyo told The Times was an invisible tsunami of panic in Japanese industry, which in turn has called on the Government to fight its corner with Beijing. Japan, which imports nearly 100 per cent of its rare earths from China, sees the group of elements as a probable battleground for future trade wars.
Toyota and other big carmakers are hurrying to secure alternative supplies in Vietnam and Malaysia. Mines in the United States that were forced out of business by price wars may be brought back into use. Yet many industry observers believe that Beijing may engineer a global supply crunch before any serious rival sources become available.
China's strategy, said Yoichi Sato, head of the rare earth division of Mitsui, suggested a complex game being played between Beijing and the world's rare earth consumers. The perceived idea behind China restricting its rare earth exports is twofold. First, it gives its own high-tech industries a chance to flourish and gain a huge competitive edge over rivals in Asia, Europe and the US — a politically useful gambit by a Government whose legitimacy lies in the provision of jobs and economic growth. Second, it may force foreign companies to move their high-tech factories and research centres to China to circumvent quotas, a move that Japanese companies will resist for fear of losing industrial secrets.
Mr Sato also believes that China will seek to use its existing monopoly status to crush any competition that emerges. Although about 42 per cent of worldwide reserves of rare earth ores lie outside China, very few places have significant refinery capacity.
Mr Sato said: “Of course many people are looking at establishing alternative refineries and sources outside China, but the investment is not necessarily a sound one because of the threat of price revenge by China. If new projects emerge, as they have recently in Malaysia and Australia, China could just drop its prices and force rivals out of business.”
Prospects of developing the industry outside China have been hit by a sudden decision by investors in Lynas, the Australian group, to pull funding for a project under which a big refinery would have been built in Malaysia for operation by the end of this year. A company source said that the project, which would have given companies such as Toyota and Honda a welcome diversity of supply, is unlikely now to open as scheduled.
Moreover, China's push to remain the globally dominant player appears to have intensified. Within the past fortnight, a Chinese investment company has acquired 25 per cent of Arafura Resources, an Australian rare earth miner, and last month China Minmetals Rare Earth Company laid out plans to invest $300 million (£212 million) to cement its position as the globally dominant corporate force in the field.
Wednesday, March 25, 2009
* Earnings per share in 2008 rose by 0.09 yuan to 0.33 yuan, the bank said.
* The bank issued 536.8 billion yuan of new loans in 2008, up 14.3 per cent year on year, the ICBC said.
"In an extremely volatile business environment, the bank continued its vigorous profit growth," it said in a statement to the Hong Kong Stock Exchange.
"The bank accelerated its innovation, adjusted its business structure, broadened its sources of income and cut back its expenditures," the statement said.
The bank said its non-performing loan ratio fell to 2.29 percent at the end of 2008 from 2.74 percent a year earlier, the ninth consecutive year that the ratio has fallen, it said.
But ICBC warned in its statement that the coming year would be difficult given the continued impact of the global financial meltdown.
"We must stay alert and think ahead. We are well aware that the bank will face severe challenges in 2009, and at the same time, 2009 presents us with significant development opportunity," the statement said.
Saturday, March 21, 2009
The global financial crisis gives China new strength in the telecom sector, as it prepares to invest heavily in a future standard of 4G
By Robert Clark
Just as the economic crash has amplified China's role in the financial markets, it has also massively increased its influence in the telecom sector.
Tucker Grinnan, who heads HSBC Asia-Pacific telecom research, argued at the Carriers' World conference in Hong Kong yesterday that the center of telecom gravity is swinging to China.
He says China will be responsible for about 50% of global telecom capex over the next two years, spending roughly $50 billion a year.
"This is a remarkable shift in the nature of spending, a slowdown in developed markets and this incredible acceleration in China."
He reminds that a good deal of the spending is driven out of China's own stimulus program, and comes not from the listed vehicles but from the parent companies; in other words, state subsidies.
A portion of this is spending that has been delayed by the industry restructure and because of the continual deferment of 3G.
Nonetheless, the result is that China's views will hold even more sway in global telecom forums. That means 4G and of course that means TD-LTE.
Not even China Mobile and Huawei are enthused about the prospects for 3G TD-SCDMA, says Grinnan. Both agree that its future lies in 4G, and there's no doubting the MIIT's determination to have that adopted as a global standard.
The sheer scale of the capex program means China will have a huge role in determining 4G.
The biggest problem may be the government's own expectations. China Mobile expects at best 145 million 3G TD customers by 2010, with an extremely aggressive rollout. The MIIT is forecasting 200 million, Grinnan says.
Thursday, March 19, 2009
Net profit rose to 112.79 billion yuan (16.50 billion US dollars) in 2008, up from 87.06 billion yuan in 2007, the company said in a statement.
The firm, which has more subscribers than any other global carrier, said it had increased its customer base to more than 457 million, up 23.8 percent on the previous year.
The company's chairman and chief executive officer, Wang Jianzhou, said he was delighted with the firm's 2008 performance, but said it was unlikely to escape the fallout from the global economic slowdown.
"The influence of (the) financial crisis that swept across the globe in 2008 will likely widen and deepen, and its impact on China's economy will continue," Wang said in the statement to the Hong Kong Stock Exchange, where the firm is listed.
"The telecommunications industry will be affected."
He said the firm would be looking to boost its wireless broadband services in the coming year, and would also consider expansion into foreign markets.
"The company will actively search for quality overseas telecommunications assets as investment opportunities and as a way to explore international development," Wang added.
Mobile phone use has exploded in China in recent years on the back of falling handset prices and user charges.
In February, the total number of mobile users in China reached 565 million making it the world's biggest cellular phone market, according to government figures.
Wang said the company had seen strong growth among rural customers during 2008, and had also increased the size of its corporate market.
He also welcomed China's huge economic stimulus package, and said he believed it would have a positive impact on the telecoms sector.
China Mobile's turnover increased by 15.5 percent to 412.34 billion yuan over the 12 months.
It paid a dividend of 1.40 Hong Kong dollars per share (18 US cents), compared to 1.16 dollars the previous year.
China Mobile was in January awarded one of the three licences to run third-generation networks across the country.
Third-generation, or 3G, networks enable faster data transmission and services such as web-surfing and video. They are seen by analysts as another huge potential source of growth in China.
China Mobile was awarded the licence to run the Chinese-developed TD-SCDMA standard for 3G, and its share price initially suffered in Hong Kong on worries about infrastructure costs involved in building the new network.
Analysts were also concerned the Chinese standard would not perform as well as the European and North American standards which were licensed to China Mobile's rivals.
The firm has previously announced plans to invest 58.8 billion yuan this year to build around 60,000 base stations covering 238 cities.
In his statement, Wang said the firm was focused on migrating its customers onto 3G networks without their needing to change SIM cards, mobile numbers or re-registering.
Earlier this year, Wang said factory closures as a result of reduced demand for Chinese-made goods had hit the mobile market, as users had moved back to rural areas and reduced the number of calls they made.
Saturday, March 14, 2009
A general view shows the massive South Pars gas field
TEHRAN (AFP) — Iran's state-owned gas company and a Chinese consortium Saturday signed a multi-billion dollar deal to produce liquefied natural gas in the Islamic republic's South Pars field, a report said.
The deal, worth 3.39 billion dollars, was signed by Iran LNG company with the Chinese consortium for an annual production of 10.5 million tonnes of LNG, the state broadcaster reported.
It did not reveal the name or give any details of the Chinese consortium.
"According to this contract, building gas liquefying lines in phase 12 and another block of South Pars gas field will be handed to the Chinese consortium," the television said. The gas field is located in the Gulf.
It added that the project would be implemented in three years and that an unnamed European firm would join the Chinese consortium in three months.
In January, Iran and China signed a separate 1.76 billion dollar contract for the initial development of the North Azadegan oil field in western Iran.
Western oil companies have refused to invest in Iran because of the controversy over its nuclear energy programme and Tehran has increasingly turned to Asian companies.
Iran holds the world's second-largest gas reserves and has significant economic ties with China -- a veto-wielding member of the UN Security Council, which has imposed sanctions against Tehran over its refusal to halt sensitive nuclear work.
Iran said on Wednesday that French energy giant Total would have no "active role" in developing phase 11 of the offshore South Pars gas field and that a new partner had been found for the project.
The development of South Pars field, which holds about eight percent of world reserves, has been delayed amid a lack of investment in a country faced with severe gas needs of its own in winter.
Monday, March 9, 2009
SHANGHAI (AFP) — China's economy is likely to slow further to 6.5 percent in the first quarter, intensifying deflationary pressures, a government think tank said in a report published on Monday.
First-quarter economic growth will be slower than the 6.8 percent seen in the fourth quarter of last year, the State Information Centre said in a report published in the official China Securities Journal.
The government think tank also forecast the consumer price index (CPI), the main gauge of inflation, would fall 1.0 percent in the first quarter, compared with a rise of 1.0 percent in January.
China has set a full-year inflation target of four percent for 2009.
The last time the monthly CPI reading fell into negative territory was six years ago, when it slipped 0.4 percent in December 2002, according to previous government data.
Producer prices, which measure trends at the wholesale level, may drop 5.0 percent in the first quarter, the think tank said. The producer price index fell 3.3 percent in January.
Sustained price drops are alarming because they often cause consumers to delay major purchases in anticipation of still cheaper goods in the future, putting even more downward pressure on economic growth and prices.
In a separate report, the newspaper quoted Yi Gang, vice governor of the central bank, as saying consumer prices may see year-on-year declines in some months this year.
But he added that China is not seeing a classic deflationary spiral as the economy is still expanding and "the central bank has sufficient monetary tools to address deflation" and curb further price drops.
The government think tank also said exports, a pillar of the world's third largest economy, were likely to fall nine percent in the first quarter to 278.4 billion dollars while imports will drop 25 percent to 198.4 billion dollars.
It said that would lead to a 93.2 percent rise in China's trade surplus in the first quarter to 80 billion dollars.
Wednesday, March 4, 2009
BEIJING (AFP) — China announced its latest double-digit rise in defence spending on Wednesday but sought to soothe concerns in Asia and the United States by insisting its expanding military posed no threat.
The defence budget will grow 14.9 percent for 2009, a parliament official said, maintaining a string of double-figure annual increases, despite a punishing slowdown in the Chinese economy as worldwide demand for its exports sags.
The defence budget has been set at 480.7 billion yuan (70.2 billion dollars), up 62.5 billion yuan from the previous year, said Li Zhaoxing, spokesman for the National People's Congress.
"China's defence expenditure for the year will increase modestly," Li, a former foreign minister, told reporters.
Although the rise is slightly smaller than last year's increase of 17.9 percent, it marks a doubling of the Chinese government's stated defence spending since 2006.
The United States, Japan and their allies have long expressed concern about China's military build-up and what they see as a lack of transparency about the intent behind the expansion.
Many experts also say China's official figure vastly downplays actual spending.
But Li, speaking at a parliamentary press conference ahead of Thursday's opening of the annual legislative session, said such concerns were misplaced.
"China's limited military powers will be solely used for the purpose of safeguarding its sovereignty and territorial integrity," he said.
"This will not pose a threat to any country."
Li emphasised the spending was small for the size of China's population and national territory, accounting for 1.4 percent of its gross domestic product.
This compared to 4.0 percent for the United States and 2.0 percent for the United Kingdom and France, he said.
Li said the increase was aimed in large part at ensuring that living standards for its estimated 2.3 million servicemen and women rise with the rest of society.
However, it would also be used to upgrade the military's information technology and its ability to engage in disaster response and anti-terror missions, he said.
Military facilities damaged by a massive earthquake last May in southwest China must also be repaired, Li added.
"There is no such thing as a hidden military expenditure in China," he said.
However, the budget figure has "little association with reality", said Ralph Cossa, head of the Honolulu-based Pacific Forum of the Center for Strategic and International Studies.
He said actual spending could be three to four times larger.
"What's included in the figure? The transparency of what China is spending this money on is what is really hard to gauge," he told AFP.
The Pentagon in recent years has raised concerns about China's development of cruise and ballistic missiles, its 2007 test of a satellite-killing weapon, an apparent rise in cyber-espionage by China's military, and other issues.
"The real question is: Where is China's military development going?" Cossa said.
"What are its objectives? How many nuclear missiles does it have now and does it plan to have? Things like that."
The general in charge of China's strategic missile force said last month China would accelerate the build-up of its nuclear and conventional arsenal to form a credible deterrent capable of "winning a war."
The declaration by Jing Zhiyuan appeared in an article published in a Communist Party journal.