I have held off posting on rare earth minerals because Obama had a meeting with China in November then the Chinese Premier came to Chicago recently but there was no news about a deal to solve the trade war so I’m posting this Diary.

In mid-2010, China announced export reductions of 72 percent, Sims says. Then in September, it embargoed rare-earth exports to Japan, following a territorial dispute over small uninhabited islands in the East China Sea.

In December, it set further export cuts of 35 percent.

And on Dec. 30, the People’s Daily, the Chinese Communist Party’s newspaper, hinted at more tightening. It quoted “experts” as saying recent cuts “did not seem deep enough.”

http://www.pittsburghlive.com/x/pittsburghtrib/news/s_720470.html

Why are these islands so important oil and natural gas.

The specific development in dispute is China’s drilling in the Chunxiao field, which is three miles west of the median line, but which Japan contends may be tapping natural gas reserves which extend past the median line. The Chunxiao gas field in Xihu Sag in the East China Sea is estimated to hold reserves of more than 1.6 tcf of natural gas and is expected to become a major producer in the next ten years. Commercial operation was expected to begin in mid-2005 at a production rate of 70 bcf per year, rising to 282 bcf by 2010. Sinopec Star has reserves of 7 tcf of gas, 1.9 tcf of which is held in the Chunxiao area. China has proven reserves of natural gas of about 53.3 trillion cubic feet (tcf). Most of China’s gas fields are in the the western and north-central parts of the country, though offshore basins are becoming increasingly important.

http://www.globalsecurity.org/military/world/war/senkaku.htm

I can find no estimates of how much oil the islands might have but in response to this dispute China temporarily cut off Japan from getting any rare earth minerals last year. Which is there right but tell me why did they cut exports of rare earth minerals to the rest of the world?

The Obama administration has included China’s export restrictions on rare earths in a broad investigation of whether China has violated World Trade Organization rules to help its clean energy exports; the United Steelworkers union has accused China of limiting exports of rare earths to force manufacturers to move their factories to China, an accusation supported by comments in 2009 by Chinese provincial officials saying exactly that.

http://www.nytimes.com/2011/01/21/business/global/21rare.html?src=mv

The  article above suggests one possible motive

China’s control of 97 percent of the rare earth market gives it tremendous power. Over the past year, it has reduced its exports of rare earths, shrinking them from 50,000 tons per year to 30,000 tons. Then in July, the government announced it would export only 8,000 tons for the rest of the year. At the same time, it has raised export taxes for the minerals.

http://www.thetrumpet.com/?q=7576.0.129.0

No rare earth minerals no missile parts, no advanced solar cells, no windmills, Ipods, Missile parts etc. So tell me just what is China doing with all those rare earth minerals they used to export? I can find no mention on the net of China laying off the miners who mine rare earth metals so I assume the Chinese are still mining rare earth metals

Could China be using all its rare earth minerals to green their economy and make it less dependent on oil? If so why keep this a secret unless they plan to short oil futures?

Or maybe China wants to dominate all industries that make products with rare earth minerals and force foreign companies to build their factories that make products with rare earth minerals to move to China?

Also Bill Gates and Warren Buffet are invested in a Chinese made electric car rare earth metals are used in the batteries of electric cars and the motors. The Chinese are paying factories to make these cars, building charging stations for electric cars and installing a smart grid.

With about 35 cars per 1,000 people in China’s 1.3 billion-person population, roughly 80 percent of car sales in the country are currently made to first-time buyers. As Josie wrote for GigaOM Pro (subscription required), this potentially lowers the barrier to adoption of alternative vehicles. Nearly half of the more than 5 million electric vehicle charge point installations anticipated worldwide by 2015 will happen in China, according to Pike Research. In addition, the government-owned utility State Grid Corp. plans to invest $586 million in a smart grid buildout over the next five years.

China has been investing in a green economy across the board, including clean power, energy efficiency and plug-in cars.

http://gigaom.com/cleantech/the-key-to-chinas-electric-car-market-partnerships/

To reach 15 percent of total electricity-generating capacity nationwide by 2020 would require ramping up the industry to build in the neighborhood of 210,000 additional megawatts of wind capacity. It would mean building at twice the pace of the best year wind installations have ever been built in the United States – which was 10,000 megawatts in 2009. Too big a reach? Depends on how can-do we’re really willing to be. The Chinese installed more than 15,000 megawatts in 2010, a 62 percent increase over the previous year. They’re planning to do it again this year.


http://www.dailykos.com/story/2011/1/27/939201/-Sputnik-moment:-Reenergize-America15-20-by-2020

China very well might need all its rare earth minerals if they keep planning on increasing wind production and electric cars.

the best (rough) estimate of annual cost to the U.S. economy due to power outages: $100 billion or nearly 1 percent of the economy (pdf: page 4).  For a fraction of that cost, investment in modernization of the grid (smartgrid and otherwise) would nearly eliminate that cost and provide other benefits (such as more efficient use of energy) that would boost the economy.

http://www.dailykos.com/storyonly/2011/2/5/941435/-Deception-on-Texas-Blackouts-Threatens-American-Prosperity-and-Security

In conclusion China seems to be engaging in a trade war to force foreign companies to build factories in China. They also seem to be greening their country with green power who is to say China won’t increase wind turbine production another 62% the year after next? They are creating green jobs by using government cash to build electric car charging stations and using government cash to make electric cars more affordable. I don’t know how much China will save with a smart grid but we could save 100 billion a year plus create jobs if we followed China’s example. Imagine what $100 billion dollars extra a year would do to jump start the economy?

China may say they support free markets but their government is calling the shots and I wish that America had an economic plan to create jobs, clean energy, electric cars etc like China has. A trained educated government bureaucracy not beholden to political pressure or special interests can implement plans like this FDR, the Sun King, the Prussian Government under Bismark, Egypt building the pyramids all are examples of Government bureaucracy working.

We need an educated well paid bureaucracy not influenced by lobbyists with real power to implement change or at least present options to the politicians and people directly.

Maybe an internet economic simulation could help educate people and politicians  they could run the simulation with various proposals like the ideas China is doing and then see the results. It is amazing to me just how dumb our politicians are whether its global warming, Chicago or Austrian school economics, charter schools etc we need to educate both the people and our ruling class about the issues and real world examples that work (no more NeoHoover nonsense about tax cuts creating jobs!). We need to make learning fun I suggest

A revamped version of Budget Hero on Steriods

http://marketplace.publicradio.org/features/budget_hero/